CapitalistImperialistPig

Krugman's latest target is China's banking policies. Here he repeats John Hempton's claims that they amount to a kleptocratic theft of savings. Hempton basically argues that China has turned financial repression — controlled interest rates on deposits, which ensure a negative real rate of return — into a giant engine of kleptocracy. The banks extract rent from depositors, transfer those rents on to state-owned enterprises in the form of cheap loans, and then the Party elite essentially embezzles the money. Underlying the whole system is a high savings rate that Hempton attributes to the one-child policy. Actually, if he’s right about the demographic underpinnings, there’s a time bomb lurking in the system quite aside from his concerns about inflation running too hot or too cold: eventually, and as I understand it fairly soon, those older Chinese who have been frantically saving because they don’t expect enough grandchildren to support them will become net dissavers, pulli...

After decades of explosive economic growth, China is feeling its oats and starting to throw its weight around . No more Mr. Nice China seems the order of the day, so it issues threats against any US action to reduce our massive trade deficit, reasserts old claims to Indian territory, and beats up on Japan. The West, and the world, made a gigantic bet that if China were brought into the world economic and political community it would learn to play nicely - whatever that means. China has changed itself from a decrepit socialist basket case into an marvel of state capitalism, but it has kept the same old Communist Party apparatus in firm charge. The leaders decided to abandon the Party's rationale for existence but kept the power. That totalitarian grip is evident in the paranoid and vicious reaction to the selection of Liu Xiaobo for the Nobel Peace prize. So why, exactly, did the US and the world tolerate and encourage the emerging superpower and allow themselves to become so d...