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http://www.forbes.com/sites/panosmo...s-brewing-crisis-is-a-thousand-times-greeces/
Investors fixated on the Greek crisis in recent years have missed another crisis brewing in China, which is a thousand times worse than Greece’s.
China is the world’s second largest economy, still growing by 7% (officially) and with plenty of foreign currency reserves. Greece is a tiny economy floundering in the swamp of its worst depression since the 1930s, barely holding on in the Eurozone.
Country Population GDP Index of Economic Freedom Ranking Ease of Doing Business
Greece 10.81 million $238 billion 130 61
China 1.367 billion $10.436 trillion 139 90
Source: Tradingeconomics
But the two economies have one thing in common.
In the last four decades, they share a semi-Soviet economic model whereby a large part of the economy has been under the direct or indirect control of central and local government, constraining economic freedoms (see table).
In both countries government has been active in “strategic sectors,” telecom, utilities, transportation, and energy — as regulator, owner, financier, entrepreneur, and manager.
The active government involvement in these sectors has helped keep inefficient enterprises afloat, though more in China, where the government is the outright owner of State Owned Enterprises (SOEs), Town Village Enterprises (TVEs) — producing goods as varied as steel, laundry powder, aluminum and toilet paper.
Investors fixated on the Greek crisis in recent years have missed another crisis brewing in China, which is a thousand times worse than Greece’s.
China is the world’s second largest economy, still growing by 7% (officially) and with plenty of foreign currency reserves. Greece is a tiny economy floundering in the swamp of its worst depression since the 1930s, barely holding on in the Eurozone.
Country Population GDP Index of Economic Freedom Ranking Ease of Doing Business
Greece 10.81 million $238 billion 130 61
China 1.367 billion $10.436 trillion 139 90
Source: Tradingeconomics
But the two economies have one thing in common.
In the last four decades, they share a semi-Soviet economic model whereby a large part of the economy has been under the direct or indirect control of central and local government, constraining economic freedoms (see table).
In both countries government has been active in “strategic sectors,” telecom, utilities, transportation, and energy — as regulator, owner, financier, entrepreneur, and manager.
The active government involvement in these sectors has helped keep inefficient enterprises afloat, though more in China, where the government is the outright owner of State Owned Enterprises (SOEs), Town Village Enterprises (TVEs) — producing goods as varied as steel, laundry powder, aluminum and toilet paper.
Simply put, one arm of the government lends funds to another arm of the government, and everyone is happy, until someone must pay the bill. Then the situation turns ugly.
That’s what happened in Greece in 2011, when the country’s semi-Soviet model collapsed, taking down a large and corrupt government that lacked the resources to finance its multiple roles in the economy. That’s how Greek pensioners ended up in long lines outside ATM machines.
Things are even worse in China when it comes to the potential of a systemic risk crisis.
Government-owned banks lend money directly to government owned corporations, which usually function as welfare agencies; and to land developers, who are behind the country’s “investment” bubble, one of the engines of the Chinese economy.
Now, think about the size of the Greek economy vis-à-vis the size of the Chinese economy. You can see why China’s financial crisis could be a Greek-style crisis on a grand scale, unsettling world financial markets, as the country’s regime will try to export that crisis through currency devaluations.
Investors around the world just got a taste of what that means for currencies, commodities, and equities.
Investors fixated on the Greek crisis in recent years have missed another crisis brewing in China, which is a thousand times worse than Greece’s.
China is the world’s second largest economy, still growing by 7% (officially) and with plenty of foreign currency reserves. Greece is a tiny economy floundering in the swamp of its worst depression since the 1930s, barely holding on in the Eurozone.
Country Population GDP Index of Economic Freedom Ranking Ease of Doing Business
Greece 10.81 million $238 billion 130 61
China 1.367 billion $10.436 trillion 139 90
Source: Tradingeconomics
But the two economies have one thing in common.
In the last four decades, they share a semi-Soviet economic model whereby a large part of the economy has been under the direct or indirect control of central and local government, constraining economic freedoms (see table).
In both countries government has been active in “strategic sectors,” telecom, utilities, transportation, and energy — as regulator, owner, financier, entrepreneur, and manager.
The active government involvement in these sectors has helped keep inefficient enterprises afloat, though more in China, where the government is the outright owner of State Owned Enterprises (SOEs), Town Village Enterprises (TVEs) — producing goods as varied as steel, laundry powder, aluminum and toilet paper.
Investors fixated on the Greek crisis in recent years have missed another crisis brewing in China, which is a thousand times worse than Greece’s.
China is the world’s second largest economy, still growing by 7% (officially) and with plenty of foreign currency reserves. Greece is a tiny economy floundering in the swamp of its worst depression since the 1930s, barely holding on in the Eurozone.
Country Population GDP Index of Economic Freedom Ranking Ease of Doing Business
Greece 10.81 million $238 billion 130 61
China 1.367 billion $10.436 trillion 139 90
Source: Tradingeconomics
But the two economies have one thing in common.
In the last four decades, they share a semi-Soviet economic model whereby a large part of the economy has been under the direct or indirect control of central and local government, constraining economic freedoms (see table).
In both countries government has been active in “strategic sectors,” telecom, utilities, transportation, and energy — as regulator, owner, financier, entrepreneur, and manager.
The active government involvement in these sectors has helped keep inefficient enterprises afloat, though more in China, where the government is the outright owner of State Owned Enterprises (SOEs), Town Village Enterprises (TVEs) — producing goods as varied as steel, laundry powder, aluminum and toilet paper.
Simply put, one arm of the government lends funds to another arm of the government, and everyone is happy, until someone must pay the bill. Then the situation turns ugly.
That’s what happened in Greece in 2011, when the country’s semi-Soviet model collapsed, taking down a large and corrupt government that lacked the resources to finance its multiple roles in the economy. That’s how Greek pensioners ended up in long lines outside ATM machines.
Things are even worse in China when it comes to the potential of a systemic risk crisis.
Government-owned banks lend money directly to government owned corporations, which usually function as welfare agencies; and to land developers, who are behind the country’s “investment” bubble, one of the engines of the Chinese economy.
Now, think about the size of the Greek economy vis-à-vis the size of the Chinese economy. You can see why China’s financial crisis could be a Greek-style crisis on a grand scale, unsettling world financial markets, as the country’s regime will try to export that crisis through currency devaluations.
Investors around the world just got a taste of what that means for currencies, commodities, and equities.
BBC documentaries are great for studying all kinds of propaganda done with sophistication be it social, political, historical, religious, environmental, artistic and everything else. But only if one knows how it works, otherwise the gullible might get converted.
