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Monday, August 21, 2023

2023-08-21

 ** denotes well-worth reading in full at source (even if excerpted extensively here)


Economic and Market Fare:



U.S. inflation numbers continue to come in nicely, but the data on wages still suggest that the recent disinflation should eventually reverse even without new supply shocks.




Yardeni: Upside Surprises

The economy isn't landing; it's flying high. Following better-than-expected July reports for housing starts and industrial production this morning, the Atlanta Fed's GDPNow tracking model raised Q3's real GDP growth rate to 5.8% (saar) from 5.0%, after raising it from 4.1% yesterday on a better-than-expected July retail sales report (chart). Consumer spending and residential investment are now tracking at 4.8% and 11.4%. ...









China Watch:

Kelton: Evergrande and Country Garden
A brief note on what's happening in China.


#67: China's property woes are far from over.

....... We have been reading about China’s property failures for the past two years, and despite ominous headlines, there have been few knock-on effects internationally. For global markets, it is easy to assume that concerns are overblown. But I don’t think they are.

Two years ago, at the earliest stages of the Chinese property crisis, I fell into a rabbit hole of research, tracking bond prices of little known developers and writing impassioned screeds on Twitter (endorsed by Michael Burry).

I wasn’t drawn to the subject because some big company overseas was going bust, but rather because the largest industry in the world was going bust. The estimated value of the Chinese property market exceeded that of the U.S. stock market and had served as the primary engine of economic growth in China for two decades. Enormous sums of debt were backed by speculative and unsustainable property prices. ............




........................... This lopsidedness would be socially unbalanced, but it would not be a source of crisis were the regime willing to settle for more reasonable growth rates. But it is not, so it compulsively and repeatedly opts for debt-financed investment and to ensure that this takes place the regime is repeatedly drawn to interfere. It is the lopsided political economy and the regime’s growth priorities not the CCP’s compulsive authoritarianism or Xi’s third term that are the drivers of intervention.

Investment-led growth would not a bad thing so long as China still needed basic infrastructure. Thirty years ago China was still desperately in need of infrastructure, which is why China’s ferocious growth drive was the world historic transformative triumph that it was, lifting hundreds of millions out of poverty. But, in the last fifteen years, investment has reached its limit. China reached the point of diminishing returns. Whether the investment is public or private matters less than the aggregates. They are simply too big.

And once you hit the wall of diminishing returns finance begins to matter. The debt-finance model becomes both unproductive and dangerous because the liabilities that are piled up are no longer matched with productive asset. So China is accumulating a large pile of painful write downs, which at some point inflict real pain. ..........



Quotes of the Week:

Newman: "They’re jumping the gun on this. They don’t really have a good reason why they have this view that there’s going to be a soft landing except they haven’t seen a hard landing yet. Therefore, we must be having a soft landing.”


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Charts:
1: 
2: 
5: 




(not just) for the ESG crowd:



Each year we are mining more than our ancestors did in multiple generations




The costs of inaction on global warming are potentially vast and often not sufficiently factored in to asset values

...................... "Some 2 per cent of output would be lost at 3C of warming, while 8 per cent of output would be lost at 6C of warming, according to Nordhaus’s 2016 model. There is great uncertainty about the potential effects of such large rises, but even so the credibility of those predictions looks weak."
there's an understatement!! -- those predictions should have no credibility whatsoever;
at +6C, civilization is toast



Sci Fare:

Pigs are conscious

........................... It seems Yudkowsky’s theory has literally nothing going for it, beyond it sounding to Eliezer like a good solution. There is no empirical evidence for it, and, as we’ll see, it produces crazy, implausible implications. David Pearce has a nice comment about some of those implications:
Some errors are potentially ethically catastrophic. This is one of them. Many of our most intensely conscious experiences occur when meta-cognition or reflective self-awareness fails ......


Other Fare:


Today’s topic is far too sprawling to address well in a single post; one can imagine future historians, assuming there’s enough societal surplus to support serious academic inquiry then, will likely debate this and other issues related to the decline of US/Western hegemony. But it seems that there’s been enough additional decline from the already deteriorating baseline of operational (or alternatively, managerial) capabilities in most advanced economies to spur more and more commentators to write about it. Aurelien has been describing this problem in passing but roused himself to write his stylish Reality Would Like a Word. John Michael Greer had a go at the question of why elites today seemed incapable of doing anything useful in a crisis (aside from grifting, which is personally useful) in Storm Trooper Syndrome. This same week, Andrei Martyanov, who has an extensive, extremely well-documented description and analysis of the decline of the US military across several highly regarded books, warned that the pathology was getting worse. ......


Even if the artists don't realise it.

Last week, I argued that the kind of crises that we can expect over the next few years will be beyond the ability of our enfeebled governments to tackle, and that in any case their room for manoeuvre to tackle them will be very limited. (If you think climate change is not a problem, fine, you can substitute any other of a long list of potentially ruinous events.) This week, I want to take the next logical step, of trying to begin to imagine what a society in which government could no longer deal with major problems would be like, and what the implications would be. ...



Pics of the Week:





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