Joel Shapiro ‘Untitled’Much has been made of the ‘announcement’ of China’s economy surpassing Japan’s. This was made by ‘experts’. You can come to your own conclusions:
SHANGHAI — After three decades of spectacular growth, China passed Japan in the second quarter to become the world’s second-largest economy behind the United States, according to government figures released early Monday.
The milestone, though anticipated for some time, is the most striking evidence yet that China’s ascendance is for real and that the rest of the world will have to reckon with a new economic superpower.
The recognition came early Monday, when Tokyo said that Japan’s economy was valued at about $1.28 trillion in the second quarter, slightly below China’s $1.33 trillion. Japan’s economy grew 0.4 percent in the quarter, Tokyo said, substantially less than forecast. That weakness suggests that China’s economy will race past Japan’s for the full year.
Experts say unseating Japan — and in recent years passing Germany, France and Great Britain — underscores China’s growing clout and bolsters forecasts that China will pass the United States as the world’s biggest economy as early as 2030. America’s gross domestic product was about $14 trillion in 2009.
“This has enormous significance,” said Nicholas R. Lardy, an economist at the Peterson Institute for International Economics. “It reconfirms what’s been happening for the better part of a decade: China has been eclipsing Japan economically. For everyone in China’s region, they’re now the biggest trading partner rather than the U.S. or Japan.”
Does a tree grow in China? Would you want to live there?
– When currencies are adjusted for exchange value China surpassed Japan’s GDP several years ago. If the yuan is adjusted 30% upward China’s GDP becomes $1.72T for the quarter.
– GDP is at bottom meaningless, particularly China’s where output ‘factors’ are simply made up. An ‘honest’ GDP measures money transactions and ignores externalities.. China copied the US development model and pretty much ruined its own country! They have ‘money’, ‘Reserves’, ‘wealth’ and ‘Treasuries’, but what have they lost?
– At issue is which country reaches the storm drain first? Japan, China or the US? America is hindered by a broken political system that is co opted by (inept) business interests. The US is also culturally backward. China is hindered by an overwhelming lack of domestic aggregate demand– it is both an ongoing recession (bailed out by Europe and the US on a continual basis) and a nascent depression (considering the amount and depth of social dissatisfaction with the status quo). Both China and Japan are hindered by adherence to the defunct Anglo- American industrial efficiency model which is absolutely dependent upon cheap resource inputs such as oil. The greater (and more current) the (mal)investment in the model the more severe the consequences of that model’s breakdown.
Since much of Japan’s and the US’ ‘investment’ is well in the past (our infrastructural backwardness is actually an advantage) and China’s so much in the present (empty new cities) the likelihood is that China will be forced to an accounting first and to the greatest degree. This is the same situation as existed in Japan at the time of the Plaza Accord when Japanese (mal)investment in excess capacity led to both a gigantic bubble then a crash that is ongoing since 1990.
What happens next? Japan will likely lead the US back to the soil (de- industrialize) while China hyperinflates then dissolves in a series of civil wars (many factions backed by the adventurous US military).
Unlike Japan which is culturally cohesive, China is an involuntary amalgam of disparate and somewhat adversarial ethnic groups (think Tibet) held together with police- state repression and ‘growth’ baling wire. How would the Uighurs ‘develop’ over the next ten years with a CIA- supplied weapons pipeline?
Like Jim Chanos and others I dislike China’s development. It is too focused on mercantile industrial- output advantage at the expense of everything else. China’s 3000 year culture has been tossed into the dumpster for the USA- plastic Disney version. With the emphasis on for- money development there is less in the way of a ‘Plan B’ when the money system develops hiccups … which it is now in the process of doing.
These are the consequences of a systemic cultural fraud. We can call it the Jay Gatsby Disease: that we can burn the candle at both ends and spend our waking moments telling ourselves we can do it forever.