Roubini: Next Stop On Global Train Wreck Is China

Clusterstock:

Nouriel Roubini has been quiet for a few days, but you didn't think he was getting bullish, did you? Of course not. In fact, now that a global systemic financial crisis appears to have been narrowly averted, he has turned his attention to the next land mine: China.

China, says Nouriel, is at risk of a hard landing (which, for China, would mean a slowdown of growth to 5%-6%). The cause? The US consumer, of course.

That recent uplift in global stock prices? A "sucker's rally." The recent economic news in the US? "Worse than awful."

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Comments

[emerywood]

When it comes to stock prices, Roubini is right. The world markets follow the U.S. stock market.
In fact, the U.S. stock market has fallen less. But, the Chinese economy may not drop as much
as the U.S. because their exports are worldwide and their currency is not rising . Their internal consumption is actually slowly increasing and their savings rate is much higher than ours.

[BethStuart]

Roubini is a respected source while Blodget is not. As I recall, Blodget was barred from the securities business for life. I think most people would prefer to hear from Roubini directly instead of having him filtered through Blodget.

[KillTheMessenger]

Honestly, I can do without either. And so can you all.

;-)

[robinhood1]

If China is involved in a fiscal train wreck who will buy our Federal debt and at such low interest rates (around 4% or less)? Will the Federal Reserve just monetize it and pretend no one notices?

[KillTheMessenger]

China is not "involved". Don't worry about them. They have a huge momentum going. If you want to worry about something, worry about the US. And, to answer your question, yes, we will keep printing money because if all you have is a printing press then the whole world looks like it's inflation proof.

[FDRJFKLBJ]

I still rather be invested in China and other Asian nations than the bankrupt United States.

China will bounce back quickly and go on to superpower status while the United States will be crumbling from a $40 trillion debt and a currency that will be practically worthless.

[KillTheMessenger]

A "hard landing" for the Chinese at 5-6% growth will still keep them way ahead of the world. It will change nothing about their ability to reorganize their massive workforce from a semi-agrarian to an industrial economy, it will ease their energy and environmental problems considerably and free up resources to optimize their future growth even further.

Anybody who thinks a slowing Chinese economy is bad for China hasn't done their homework.

[joebaggadonuts]

IMHO China needs to continue to grow fast or sell a different model to its citizenry. Did you see this? http://chinadigitaltimes.net/2008/11/government-official-attacks-11-year-old-girl/ And recall their incredibly apt response to the recent large earthquake.

Think about it for a minute. Chicom control is tenuous. They fear loss of control and they will lose it if there is enough corruption to push the populace to assert itself. Hu is a very strong leader, but even he can fail if the consumption model isn't shared by enough of the populace quickly enough. This is a risky moment for them too.

[Paul]

I agree - this could be political dynamite for China.

We can change our President every 4 years - what about the frustrated Chinese?

Hard to see a good outcome - the US consumer is tapped out and we will be buying more stuff at garage sales than even at Wal-Mart.

[KillTheMessenger]

I thought about it for about three seconds and it occurred to me that you may know nothing about China except for what Rush told you on the radio. But maybe I will give my Chinese friends a good laugh by showing them what you wrote.

:-)

[dgscol]

Risk models at AIG were set to favor transfer of capital to China, and the bailout is for keeping Chinese growth moving. The government should provide a model model. and companies that deviate too much should be examined.

What else would stop our financial sector from being Shanghai'ed?

[Sundialsvc4]

Quite obviously, the only trading relationship that can be sustained for any length of time is a trade based upon mutual opportunity realized between two equally-strong partners. Trade can never be "one at the expense of the other." Furthermore, "a 10,000-mile-long supply chain with no reasonable second-source" is and always has been insane.

The Good Book cautions us against "planting the shallow ground," yet in many ways this is exactly what we've done. As the legendary parable foretold, the seed sprang up quickly! But... not thirty years later... what have we now? We have only begun to glimpse the extent of what we all knew: that this was heavily based on lies and trickery, and it reached all the way to the top branches of our Government and for a considerable distance to either side.

We can never solve this problem by shuffling more non-existent money around. We should not "bail out" criminals with the public debt. We should not seek "solutions" on balance-sheets. America must rebuild her own internal infrastructure... dust off those machines that are still CLOSE BY... train her workers again. America must say, as she once not too long ago did say: "We Can Do It!"

[RabidRightRebel]

What this analyst fails to comprehend is that China has a huge surplus that it can spend in China on infrastructure, if its economy slows. That of course will mean less money to fund the US deficit. Sadly the legacy of the incompetent Bush Administration will be with us long after the fool is out of office.