People’s Republic of China’s Stock Market Drop

The PRC’s Shanghai Composite Index, which is an index of the stocks that trade on that country’s major stock exchange, the Shanghai Stock Exchange, has fallen by some 28% in the last week. This is the second time since 2007 that this index has fallen this far (in 2007 it dropped by roughly 2/3 over the course of 13 months beginning in October 2007). In response, the PRC has decided to close the market to IPOs until the central planners in Beijing decide conditions are suitable for IPOs.

This central planning foolishness got me wondering. How big a deal is the Shanghai Stock Exchange for the PRC’s economy?

The total value of the PRC’s stock market was around $4.2 trillion in 2014, per Bloomberg Business. The PRC’s Purchasing Power Parity GDP for 2014 was around $19 trillion. Thus, the value traded in its markets was roughly 22% of GDP.

In contrast, the dollar volume on the New York Stock Exchange last Thursday (2 Jul) was some $63.5 million. Expanding that (very naively) to a trading year of 220 days during which stocks are traded out of a 365-day year (weekends and holidays, after all), the annual dollar volume for the NYSE runs to a skosh under $14 trillion. The US PPP GDP for 2014 was $17.7 trillion. The value of the NYSE’s stock trading was a bit under 80% of our GDP.

It’s certainly true that 22% of GDP or the raw value of $4.2 trillion are hefty numbers. But at only 22%, the central planners, in addition to chasing chimeras with their assumption they actually can control in any significant degree any economy, are chasing a relatively minor chimera with their IPO moves. But, then, like central planners everywhere, they think they Know Better than mere investors. Even when the Know Betters are monstrously wrong.

They Disagreed with Me!?

[Juncker] said we were ready to front-load EU funds at the disposal of Greece for the future and the Greek government didn’t take the offer, which convinced them that [the Greeks] weren’t interested in an agreement and it was ideological,” an MEP who was in the room told Politico after the meeting.

How dare they not immediately take our deal!? How dare they put patriotism against the wishes of their creditors!?

“He said, ‘We were so close, in fact, we were so close that it was just €60 million that we were arguing over.”

Then, Mr Juncker, why didn’t you cede the €60 million point, if it was such a trivial thing?

Even The Washington Post is looking at this with clearer eyes.

A Thought on Iron Curtains

Shortly after World War II, Winston Churchill spoke of an Iron Curtain descended across Europe. The curtain was made concrete with the erection by the Soviets of the Berlin Wall in 1961. The purpose of that wall was more than simply to divide the USSR and its occupied territories from the rest of Europe; it was to keep the people inside that wall—inside the USSR or those occupied territories—from leaving for a better place, for a place where freedom and individual choice could be had.

Shortly after our Revolutionary War, our Founders wrote, and We the People ratified, our Constitution and its attendant Bill of Rights, which include the 10th Amendment:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

So was born a Federation and ultimately 50 laboratories of democracy, particularly as described by Supreme Court Justice Louis Brandeis in New State Ice Co v Liebmann when he wrote in his dissent how a:

state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.

Now keep in mind the concern of John Jay who, while the Constitution was being drafted in those fateful summer days, considered that, in contrast to the failing Articles of Confederation, the States should be reduced to the same relationship to the proposed central government as counties then had relative to their States (although, in the event, he strongly advocated ratification of the Constitution itself):

merely as districts to facilitate the purposes of domestic order and good government.

Next, consider these activities of our Federal government:

  • it terminated the democratic discussion in progress among and within the several states concerning abortion and when it might be appropriate or inappropriate, nationalizing the thing in Roe.
  • it terminated the discussion in progress among and within the several states concerning the nature of marriage, nationalizing the thing in Obergefell.
  • it terminated the democratic discussion in progress among and within the several states concerning the provision of health care and of health insurance, nationalizing the thing with the Affordable Care Act.
  • it terminated the democratic discussion in progress among and within the several states concerning the market behavior of private enterprise, nationalizing the thing with Dodd-Frank.
  • it removed from all possibility of local discussion the relationship between private enterprise and private citizens with the creation of the wholly unaccountable Consumer Financial Protection Bureau.

The list goes on.

The USSR’s physical iron curtain was designed to keep people from leaving in an era when they had a place to go to. There is another kind of iron curtain, though.

Our government is no longer requiring—as the Constitution above it does in Article IV, Section 1—that every state honor the decisions of every other state. Rather, it’s demanding that every state behave the same as every other state.

With the reduction of our 50 laboratories of democracy to mere districts to facilitate the purposes of the Federal government, this government is erecting a legalist iron curtain by deprecating the 10th Amendment, and so denying Americans a place to go to, denying us any place more compatible with our individual views, needs, moral imperatives.

Random Paranoid Thought on Future Tech

In just 15 years, [Ray, inventor, futurist, and a director of engineering at Google] Kurzweil believes, the human brain will become a hybrid of biology and technology, and we will “put gateways to the cloud in our brains.” And as the cloud becomes more and more advanced and is able to store increasing amounts of information, so too will our brains. By the late 2030’s or early 2040’s, Kurzweil said, the majority of brain function, at least in terms of information processing and thought processes, will be non-biological.

Our brains in the cloud. Hmm…. With the cloud’s notoriously poor security. Our brains get snooped on or hacked by anyone with a kiddy script or by any government with a wild bug up its….

Or peer pressure not just up close, but inside, as the denizens of that cloud decide they don’t like what you’re doing or thinking. So they think otherwise, en masse, from within your own brain.

Like I said, paranoid. Or not.

American Security

Thinks about the Obama administration’s current, and ongoing, failure regarding the Office of Personnel Management. After having “lost” the background check data it had “stored” in its computer facility last fall, the Inspector General of OPM said that

parts of its network should be shut down because they were riddled with weaknesses that “could potentially have national security implications.”

OPM didn’t bother. Now we learn that People’s Republic of China hackers (should we start calling them invaders?) entered OPM’s computer network and stole the personal data of all 2+ million Federal employees and the personal data of a skosh under an addition 2 million past Federal employees. As The Wall Street Journal put it,

[T]his isn’t a James Bond movie. It’s a Dilbert cartoon.

The WSJ goes on to say that the Federal bureaucracy can’t protect its data. I say, given the long-term duration of these hacks, including those by Russian and Iranian hacks and that IG recommendation, it’s not a matter “can’t.” The Feds refuse to try.

Are these hacks or an ongoing invasion?

The episode is one more confirmation that China is waging an unrelenting if unacknowledged cyber war against the United States.

Does Obama care at all about the security of the United States or of individual Americans?