Tag Archives: political economy

Off-Books Lending in the People’s Republic of China

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The People’s Republic of China may be approaching a problem with off-books lending as its economy—restarting though it is—still is stumbling badly, which coupled with the government’s attempts to rein in debt creation generally, is making it difficult for businesses and individuals to obtain credit.

Off-balance-sheet entities are selling bonds to finance projects such as investing in warehouses, expanding underground metro networks, building data centers or renovating shantytowns.

Such debts, though, afford government at any level little direct oversight—which the PRC government levels especially desire—and they have often fed wasteful spending.

And

In all, borrowings by such local-financing vehicles make up about 9.5% of China’s total yuan bonds outstanding….

That’s a lot of hidden debt. To give some concreteness to such debt, in just the first four months of this year, the “local government financing vehicles” sector of such lending produced 1.46 trillion yuan ($206 billion).

These off-books lending efforts, though, have a more serious shortcoming than just lack of control by a controlling government: there is little recourse when borrowers default on the loans. Not all of those 9.5% will be defaulted on, but if even a third of those borrowings fail, that would be an even more severe hit to the PRC’s economy.

In contrast, crowdfunding—the process where an individual or private enterprise advertises a venture on a Web site and individual citizens voluntarily commit their own dollars to the project via that site—in the US raised almost $14 billion in voluntary cash payments via just four such Web sites—6.7% of that PRC hidden-debt financing.

Crowdfunding also has a distinct advantage over borrowing, especially when the borrowing is off the books of the lender: default is irrelevant; crowdfunding disburses only the cash actually raised. Think what a population an order of magnitude larger than ours could do with crowdfunding.

Fat chance, though, a government so desperate to maintain microcontrol over every individual citizen would ever afford the population over which it rules the freedoms that unfettered crowdfunding would represent—and fund.

Economic Reopening, Resistance, and Perspective

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As States reopen for business, and as increasing numbers of businesses reopen and customers patronize them against State government encouragements or outright diktats to the contrary, Progressive-Democratic Party Presidential candidate Joe Biden is nattering on that President Donald Trump’s policies are undermining the core pillars of our economic strength. In the meantime, the NLMSM is focusing ghoulishly on body counts and not mentioning any other relevant information.

The following table looks at some data for three States mentioned in one Wall Street Journal article, another State mentioned in a different WSJ article, and two States mentioned by Fox News.

State Wuhan Virus Deaths Wuhan Virus Recoveries Ratio of Wuhan Virus Recoveries to Deaths
Illinois 3,406 Not Reported
California 2,719 Not Reported
New York 26,682 58,006 2.17
Georgia 1,441 Not Reported
Michigan 4,555 22,686 4.98
Texas 1,095 21,022 19.20

Wuhan Virus data are from Johns Hopkins University’s CSSE Dashboard and were current as of 11 May.

Carefully ignored by Biden in his meandering and by the NLMSM in their panic-mongering are those recovery rates and ratios. Check the CSSE data—all of the States reporting recovery rates are reporting recovery-to-death ratios of at least 2:1, and generally much larger.

Progressive-Democrats in charge of their States, despite these favorable trends though, want to keep their States locked down and having no economic activity—all in the claimed name of safety. Of course the longer States stay shut down, the deeper will be the economic recession we’re facing at the end of summer and into the November elections.

Note, though, that wanting a recession explicitly as a means of defeating President Donald Trump in this election has been a key part of the Progressive-Democrats’ playbook for two years.

Be very heads up this November.

Federal Aid to States

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Dead equine pounding time.

Brian Blase, ex- of President Donald Trump’s National Economic Council, had a thought on this. While generally skeptical of expanding Federal aid to the States qua States during the present Wuhan Virus situation, he did suggest guidelines within which Congress should act in the event it does decide to provide any Federal dollars to the States.

If it must incur additional debt to help states, Congress should abide by four principles. usw.

No, there’s only one principle by which Congress should abide here.

The States don’t need help; it’s the many (even most in the present Wuhan Virus situation) citizens of, and businesses in, those States who need help. Any Federal dollars should go directly to those citizens and businesses, bypassing the States’ governments entirely.

The only State government involvement that might be useful here would be to make available to the Federal government the State unemployment insurance data bases and the identification of those small businesses applying for loans under the Feds’ various Wuhan Virus situation relief programs.

One bonus principle: once the current situation is reasonably under control, the Feds’ copies of those data should be certifiably and verifiably destroyed.

Personal Responsibility and Black Americans

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Surgeon General Jerome Adams, among too few others, has pointed out that part of the reason the Wuhan Virus is hitting minorities so much harder than others—with blacks getting the bulk of the ink on this—is because of their inaction on factors under their control.  Leave aside factors like the pre-existence of health conditions like obesity, diabetes, and hypertension, medical conditions that are generally beyond their control. Leave aside, further, that individual life-style choices can nevertheless significantly affect, if not eliminate, those conditions.

In addition to suggesting that blacks should put more of their personal attention toward those medical conditions, Adams was so rude as to suggest that blacks should exercise an additional measure of personal responsibility and do better about complying with CDC guidelines regarding preemptive measures: frequent hand washing, shelter in place except for essential tasks, and use face coverings/keep safe distances from others when in public (especially the former when the latter isn’t possible).

Of course, the Left, with its race-baiters at the fore, objected, vehemently and in their own racist way.

To assert that blacks have the power to affect their own destiny was deemed racist, heartless, and outrageous.

Well, of course it was. No less a light than that icon of the Progressive movement, Woodrow Wilson, insisted to blacks that they should be grateful for the protections of segregation.

Blacks, in the eyes of the Left, simply aren’t capable of personal responsibility.

Federal Money for Local Communities?

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That’s what Congressman Tim Ryan (D, OH) wants—and not just for States; he wants Federal dollars for local communities within the States.

I talk to my mayors every day, township trustees, they’re in a world of pain here. There’s no money coming in. There’s gonna be huge layoffs at the local level.
I think that [McConnell’s plan is] a strategy to let these states go bankrupt so that they can renegotiate the pensions and…renegotiate the contracts for the police and fire and get the wages down[.]

This is ignorant on a number of levels. On one level, Ryan obviously slept through his junior high school civics class. In our federal democracy structure, those mayors, township trustees, et al., lead the governments of communities of the State in which they’re resident, not communities under the jurisdiction of the Federal government. John Jay wanted the States to be nothing more than political bodies established for the purpose of enforcing Federal diktats, but fortunately, he lost that debate at our Constitutional Convention all those years ago.

It’s the State governments that are responsible for the communities within them.  Those mayors and trustees should be looking to their State governments for fiscal help, and it’s solely on those State governments to provide it, or to say “No, clean up your spending.”

On another level, Ryan slept deeply through those civics classes. States cannot go bankrupt, not as long as they have taxing authority. They have no need of Federal dollars.  Beyond that, the States that are in fiscal trouble need first to get their budgets in order, to cut their spending to fit within their revenues—to, among other things, fix their irresponsibly profligate public pension programs rather than demand money from the citizens of all the other States—which is what Federal monies are—to pay for their own foolishness.

On yet another level, there’s Ryan’s threat of huge layoffs at the local level. That would simply expose the government bloat that exists as much at the local level as it does at the State and Federal level. Most of those folks would be better off working in the private economy and so would those communities. The police and firemen about whom Ryan shed his crocodile tears would be better off, too: the payroll funds allocated to that bloated work force could be reallocated to the police and fire departments—and at no extra cost to the rest of the citizens of those local communities.