The Economic Health of BRICS – Part 2/7

January 12, 2012

China’s banking system has undergone significant changes in the last two decades and is functioning more like western banks than before but remains owned by China’s government.

That is a significant difference. For example, in America, there are no government owned banks but the public sector insures any risk taking the private sector banks take.  This means that private sector banks may lose trillions and the government will step in, as Washington D.C. did in 2008, and go deep into debt to save the banks from drowning and taking America and the West’s economies down with them into a black hole.

The biggest difference between the west and China is the money trail.

In America and the west, most people borrow from private banks to buy private property and when the value of the property drops, as it has in the United States, and the borrowers walk away letting the bank reposes a property that is worth much less than the loan amount, much of the money is gone—when the house sold, the equity went to the previous owner and any mortgage that existed was paid off. The US government made no money on the deal (property tax goes to state governments).

It doesn’t work that way in China because the banks are owned (and controlled) by the central government and so is the land. A better idea of the difference between buying private property in the west and government owned property in China comes from Global Property Guide.com that says, “The slowdown (drop in property values in China) follows market-cooling measures first introduced in April 2010. The campaign intensified in 2011. The down payment for first-time buyers’ mortgages was increased to 30% from 20%, and for second homes rose to 60% from 50%.”

By comparison, in America, down payments may be as low as no money down or 3.5% and as high as 20% depending on the loan and the qualifications of the buyer/s.

Continued on January 13, 2012 in The Economic Health of BRICS – Part 3 or Return to Part 1

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Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

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The Economic Health of BRICS – Part 1/7

January 11, 2012

In 2001, Jim O’Neill, the chief economist for Goldman Sachs, coined the BRIC acronym to represent the combined economies of Brazil, Russia, India and China. He was also so bold as to predict that by 2032, or sooner, the BRIC would overtake the six largest western economies (which includes America) in terms of economic might.

Then in 2010, South Africa joined the BRIC turning that acronym into the BRICS.

In fact, the International Monetary Fund (IMF) has predicted that China, a member of BRICS, will beat the United States as the world’s largest economy by 2016 with a GDP of $19 trillion compared to $18.8 trillion for the US.

There are about seven billion people on the planet and almost half live in Brazil, Russia, India, China, and South Africa. The US, by comparison [I prefer factual comparisons over opinions], holds less than 5% of the world’s population. However, I thought I’d throw in this comparison as a footnote. The King’s College of London reported that in 2009, “More than 9.8 million people are held in penal institutions throughout the world… About 2.3 million were in the US,” which means 23% of the total global prison population was in America.


About prison slavery in the United States.

Did you pay attention?  A country [the US] with less than 5% of the global population has 23% of the  global prison population.

By comparison, the five BRICS countries [without the freedom American citizens seem to enjoy] has almost half of the world’s population but only 35% of the global prison population.

What does that tell us—that the more freedom and wealth a country has, the more crooks it grows and attracts?

Anyway, the world’s combined GDP, according to The World Bank was more than $63 trillion (US) in 2010. The GDP of the US was $14.6 trillion, while the BRICS’ combined GDP equaled about $11.6 trillion (US).

Recent drops of property values in China, sometimes reaching 50%, caused dire predictions in the Western media that China’s economy would soon crash and take the BRICS down with it causing their economies to suffer as well.

However, it is best to understand China’s economy and banking system to see if this wishful thinking on the part of China’s Western critics is valid.

Continued on January 12, 2012 in The Economic Health of BRICS – Part 2

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Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

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Chicken Little-Henny Penny says, “China’s Bubble is Bursting!”

May 17, 2011

The Chicken Little-Henny Penny story is a fable about a chicken that believes the world is ending. The phrase “The sky is falling!” features prominently in the story and is now a common idiom indicating a hysterical or mistaken belief that disaster is imminent.

Chicken Little’s warnings or predictions of calamity, especially without justification, dates from 1895.

Because of this, the tale has become politicized and one example appeared on ZeroHedge.com when Tyler Durden submitted this post, “Chinese Real Estate Bubble Pops: Beijing Real Estate Prices Plunge 27% In One Month”.

Durden writes, “Prices of new homes in China’s capital plunged 26.7% month-on-month in March, the Beijing News reported Tuesday, citing data from the city’s Housing and Urban-Rural Development Commission.”

Durden says, “IF” the pummeling in the Beijing real estate market shifts to other cities not only is the Chinese tightening regime over, but the SHCOMP (?) in the next few weeks could get very interesting as people understand the world’s biggest marginal bubble has popped.”

“IF” I had a dollar for every time I’ve read a “Sky is Falling” prediction of China’s economy, I’d take my wife out to dinner, shopping at Nordstrom’s and a movie on the weekend.

China’s real estate market only represents about 15% of China’s GDP while in America, that number is more than 70% of GDP, which explains why America is in the cellar with its economy and China is still growing but just slower.

Meanwhile, Tory Capital.com reports “China’s First Quarter 2011 GDP Rises 9.7 Percent,” while Mostly Economics.com compares that to the US annual rate of 3.1%.

A better, possibly more informed comparison between China and America’s economies may be found at Heritage.org where Derek Scissors, Ph.D. writes, “Its (China) raw population means that the PRC will likely pass the U.S. at some point after a resumption of market reform.”

However, Scissors says for that to happen, “The 2012 Communist Party Congress (must) nullify actions by the 2002 Party Congress and restore Deng Xiaoping’s economic model—this would enable roughly two more decades of rapid growth, perhaps in the 7 percent to 8 percent range, then gently decreasing to the 5 percent to 6 percent range over time. China would then surpass the U.S.” as the world’s largest economy.

Back to Durden’s Chicken Little-Henny Penny statement. The drop in “new housing prices” in Beijing may be a response to complaints from the people that prices were out of reach of many. Instead of a bubble bursting, the Party may have let some air out so it would not explode as it did in the US in 2008.

Discover The Fear of Mao Buying the World

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

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