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Toldya

The American Dream Is Alive and Well—in China

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https://www.truthdig.com/articles/the-american-dream-is-alive-and-well-in-china/

 

Quote

The average middle-class U.S. family could not afford to buy a home outright for their oldest heir even if they did pool their money. Americans would be savers if they could, but they have other bills to pay. And therein lies a major difference between Chinese and American family wealth: In China, the cost of living is significantly lower. The Chinese government subsidizes not only its industries but its families—with educational, medical and transportation subsidies.

According to a 2017 HSBC fact sheet, 70% of Chinese millennials (ages 19 to 36) already own their own homes. American young people cannot afford to buy homes because they are saddled with student debt, a millstone that now averages $37,000 per student and will be carried an average of 20 years before it is paid off. A recent survey found that 80% of American workers are living paycheck to paycheck. Another found that 60% of U.S. millennials could not come up with $500 to cover their tax bills.

In China, by contrast, student debt is virtually nonexistent. Heavy government subsidies have made higher education cheap enough that students can work their way through college with a part-time job. Health care is also subsidized by the government, with a state-run health insurance program similar to Canada’s. The program doesn’t cover everything, but medical costs are still substantially lower than in the U.S. Public transportation, too, is quite affordable in China, and it is fast, efficient and ubiquitous.

The disparity in incomes between American and Chinese workers is misleading for other reasons. The “average” income includes the very rich along with the poor; in the U.S., the gap between those two classes is greater than in China. The oversize incomes at the top pull the average up.

Even worse, however, is the disparity in debt levels, which pulls disposable income down. A survey after the 2008-09 credit crisis found that household debt in the U.S. was 136% of household income, compared with only 17% for the Chinese.

Another notable difference is that 70% of Chinese family wealth comes not from salaries but from home ownership itself. Under communism, all real property was owned by the state. When Deng Xiaoping opened the market to private ownership, families had an opportunity to get a home on reasonable terms; and as new homes were built they traded up, building the family asset base.

Deng’s market liberalization also gave families an income boost by allowing them to become entrepreneurs. New family-owned businesses sprang up, aided by affordable loans. Cheap credit from state-owned banks subsidized state-affiliated industries as well.

“Quantitative Easing With Chinese Characteristics”

All this was done with the help of China’s federal government, which in recent decades has pumped massive amounts of economic stimulus into the economy. Unlike the U.S. Federal Reserve’s quantitative easing, which went straight into big bank reserve accounts, the Chinese stimulus has generated new money for productive purposes, including local business development and infrastructure. Sometimes called “qualitative easing,” this “quantitative easing with Chinese characteristics” has meant more jobs, more GDP and more money available to spend, which in turn improves quality of life.

The Chinese government has done this without amassing a crippling federal debt or triggering runaway inflation. In the last 20 years, its M2 money supply has grown from just over 10 trillion yuan to 80 trillion yuan ($11.6T), a nearly 800% increase. Yet the inflation rate of its Consumer Price Index (CPI) has remained low. In February of this year, it was just 1.5%. In May it rose to 2.7% due to an outbreak of swine fever, which drove pork prices up; but this was a response to shortages, not to an increase in the money supply. Radically increasing the money supply has not driven consumer prices up because GDP has increased at an even faster rate. Supply and demand have risen together, keeping consumer prices low.

Real estate prices, on the other hand, have skyrocketed 325% in the last two decades, fueled by a Chinese shadow banking system that is largely beyond regulatory control. Pundits warn that China’s housing is in an unsustainable bubble that will pop, but the Chinese housing market is still more stable than the U.S. subprime market before 2008, with its “no-doc no-down” loans. Chinese buyers typically put 40 to 50% down on their homes, and the demand for houses remains high. The central bank is also taking steps to cool the market, by targeting credit so that it is steered away from real estate and other existing assets and toward newly-produced goods and services.

That central bank intervention illustrates another difference between Chinese-style qualitative easing and Western-style QE. The People’s Bank of China is not trying to improve banking sector liquidity so that banks can make more loans. Chinese economists say they don’t need that form of QE. China’s banks are already lending, and the central bank has plenty of room to manipulate interest rates and control the money supply. China’s central bank is directing credit into the local economy because it doesn’t trust the private financial market to allocate credit where local markets need it. True to its name, the People’s Bank of China seems actually to be a people’s bank, geared to serving the economy and the public rather than just the banks themselves.

 

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In many ways, this sounds like the Nordic model of government.  There is an ongoing effort to distribute wealth equitably.  Prosperity for all seems to be the goal.  And China has it's own variant of a generous social safety net.  So-called "Red" China is certainly, no longer communist.  The US is well along the way to plutocracy.

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29 minutes ago, bludog said:

In many ways, this sounds like the Nordic model of government.  There is an ongoing effort to distribute wealth equitably.  Prosperity for all seems to be the goal.  And China has it's own variant of a generous social safety net.  So-called "Red" China is certainly, no longer communist.  The US is well along the way to plutocracy.

 

The difference is that China runs the corporations, instead of the corporations running China.

Obviously this doesn't always produce the best result, but it also strikes me as being far less dehumanizing than the consumer culture that has been forced upon Americans. 

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3 minutes ago, Toldya said:

The difference is that China runs the corporations, instead of the corporations running China.

 

Yes.  That is a big difference between the US and China.  China is more similar to the Nordic Model of government, where corporations are highly taxed and regulated.   In both China and most of Northern Europe, the corporations are forced to share their profits, instead of taking an ever bigger piece of the pie, like in the US.

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1 minute ago, bludog said:

 

Yes.  That is a big difference between the US and China.  China is more similar to the Nordic Model of government, where corporations are highly taxed and regulated.   In both China and most of Northern Europe, the corporations are forced to share their profits, instead of taking an ever bigger piece of the pie, like in the US.

 

The difference is that the Chinese government still puts the interests of the 'whole' over the interests of 10000 or so people who don't want to die at 39 because corporations are freely dumping toxic waste into their drinking water and any opposition to it is immediately suppressed. The Nordic model doesn't allow for that.

 

I don't think we should be overly rosy about China, but in terms of hope for the future I think it's got the edge.

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13 minutes ago, Toldya said:

I don't think we should be overly rosy about China, but in terms of hope for the future I think it's got the edge.

 

A reasonable assessment as long as Xi Jinping is not replaced by someone less enlightened.

 

https://en.m.wikipedia.org/wiki/President_of_the_People's_Republic_of_China

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Since 1993, apart from brief periods of transition, the top leader of China simultaneously serves as the President, the leader of the party (as General Secretary), and the commander-in-chief of the military (as Chairman of the Central Military Commission). This individual then carries out different duties under separate titles. For example, the leader meets foreign dignitaries and receives ambassadors in his capacity as President, issues military directives as Chairman of the Central Military Commission, and upholds party rule through the office of General Secretary.

 

This state of affairs has mostly given the Chinese president the power to act independently of the National People's Congress.  The Chinese Constitution currently caps the presidency at a 10 year term limit.

 

But that is likely to be lifted:

https://www.npr.org/2018/02/25/588726045/china-proposes-to-lift-presidential-term-limit

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The official New China News Agency reported Sunday that the party's 205-member Central Committee proposed that the term limits be removed from the constitution.

 

Making Xi virtual dictator.

 

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14 hours ago, bludog said:

Making Xi virtual dictator.

 

Yeah, he's not going anywhere.

He actually staged his own 'drain the swamp' campaign after he was selected that of course only really served to get rid of any opposition.

 

I am sure that this is what Trump had in mind too.

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