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Malinvestment

It’s nice to see that, while leaders come and go, some things remain the same, namely, the growing number of spinning plates the Chinese government attempts to keep from crashing to the floor (a.k.a. the credit and infrastructure binge that future historians will marvel at).

Bloomberg provides the details in this story that includes the graphic below.

SOE: State Owned Enterprise, FAI: Fixed Asset Investment

Of course, to the enlightened modern-day Western (and, apparently, Chinese) economist, there is no such thing as “malinvestment”, so, there’s that…

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Debt, Without the Degree

There should be a great deal of sympathy (and, yes, someone in the gubment should actually do something) for those who failed at their attempt at higher education and are now saddled with the debt sans the degree (that would help then pay back said debt).

In this story at Bloomberg, the default data is tallied and – Surprise! – dropouts are defaulting at alarming rates.

Yeah,  college is nice, but it’s not for everybody, and this is very much a case of giving someone too much rope with which to hang themselves.

Many years ago, when dropouts would walk away with a few thousand dollars in student load debt, it wasn’t such a big deal, but the numbers are much, much bigger today. Most 20-year old dropouts (surely there are quite a few exceptions) shouldn’t have to wear the debt of their failed college experiment like a ball and chain in perpetuity.

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Debt: The Descent into Madness

I think Grant Williams is right when he says that more books will be written about the last ten years and the next ten years than any other period in modern history and, importantly, writers are not likely to look kindly upon the current crop of central bankers.

With the gold price now closing in on $1,400 an ounce (and perhaps set to go much higher), look for more from Mr. Williams and others who have endured a difficult few years due to a struggling market for precious metals and related investments.

Credit Cards Reanimated

From last week, the WSJ reports that the number and popularity of credit cards has experienced something of a resurgence after the near-death experience Americans had with debt (that is, excluding student loans) during and after the Great Recession.

I dont’ know about you, but we regularly get offers for new credit cards with introductory rewards of anywhere between $100 and $500 each. You’d think they’d stop sending them to us since we just make the minimum purchases to get the reward and then go back to using our Costco Amex which morphs into an even better Costco Visa next month.

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Draghi on Root Causes

I get a kick out of someone with great authority (especially central bankers these days, given their quickly fading super powers) speaking confidently about the root causes of some problem as if you’re an uninformed ignoramus (i.e., not an economist) if you don’t see what is so obvious to them and people like them. Such is the case with ECB chief Mario Draghi’s explanation to the Germans about why interest rates are freakishly low.

To wit:

They (low interest rates) are the symptom of an underlying problem, which is insufficient investment demand across the world to absorb all the savings available in the economy. And so the right way to address the challenges raised by low rates is not to try and suppress the symptoms, but to address the underlying cause.

Got it?

It’s the ‘ol “lack of aggregate demand” root cause canard (i.e., as opposed to the more sensible reckless, multi-decade expansion of credit and debt that artificially raised aggregate demand) that future historians will someday have fun with, that is, after the current set of top economists and central bankers are completely discredited.

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