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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (131277)	3/3/2017 1:25:41 AM
From: Elroy Jetson	Read Replies (1) \| Respond to of 217501

That's the deal with a command economy. Things are whatever the boss says they are. If you have too much internal debt, banks can't lend to new customers. So, you can say the banks now own big shares of the companies they lent to, which eliminates the debt. But banks still can't lend to new customers because their money previously tied up with debt is now tied up as shares. The thing China has going for it is the population has a high propensity for saving, so a percentage of income is always becoming new lending capital. The part that's rotten are the loans made to loss making steel producers. The state can say the bad loans were cheaper than providing benefits or alternate jobs to the would-be unemployed steel workers. They only reason they're not liquidated from what I've heard is they're too close to Beijing. If the steel plants had been out in the provinces they would have been liquidated a long time ago. They don't want an unemployment problem in the capitol. All of the capital which became empty "new cities" would have normally necessitated a change of ownership as rent would have been needed to pay loans. Without loans it's a huge loss. It means that rather than earning a much higher rate in an alternate investment your return is close to zero. There was a fairly large Coke bottle green high-rise near downtown Los Angeles built by an investment group called the World Chinese Trust, which they stylized as a WTC logo on the top of the building. When the Chinese Trust building was completed, projected rents had declined by 50% due to overbuilding so after many discussions with them they decided they preferred to keep their building empty rather than "depreciate it through use" and give the impression it wasn't worth the rent they wanted. There was no reasoning with them and the building remained empty for 13 years or so. Eventually rents recovered, but at that point they decided to sell the building to a pension fund which occupied a lot of the building themselves. If they had been paying interest on loans they had a huge loss on their sales price. In their mind they merely made no money for 13 years. That's as good as a loss. It's a completely different way of thinking.