Submitted by Taps Coogan on the 7th of March 2019 to The Sounding Line.
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Kyle Bass, founder of Hayman Capital Management, recently spoke with CNBC about his concerns over the Chinese economy and his skepticism that a trade deal between the US and China will resolve bilateral tensions.
“We have a golden opportunity today for a global reset in our relationship with China. Trade is such a small part of our relationship… our real issue is forced technology transfer; it’s intellectual property theft; it’s subversive industrial policies that… circumvent WTO rules. It’s basically the way the Chinese lie, cheat, and steal their way through our economy… We have no way to truly measure and/or counteract those things…”
“The US’s number one asset… is our ingenuity, our intellectual property. our ability to innovate… It’s really important that this new agreement, whatever it is, to be measurable and punishable… There are so many things our government can do to reciprocate with the Chinese on these issues. Why do we have hundreds and hundreds of Confucius institutes in our educational institutions and our colleges? Why do we allow Chinese points of presence in our telecom switching facilities when they don’t allow any of ours in theirs…? On the judicial side of things, we could make a few judicial changes in the US that really make it more difficult for the Chinese to act the way they have been acting with our intellectual property here in the US.”
“The Chinese print more money than any other country has printed, in gross terms, in world history… Since 2001, they’ve printed roughly $30 trillion worth of RMB (Chinese Yuan). Think about that for a second. The debate here in the US, about the Fed, is: ‘Is the Fed balance sheet too big? Is it too large? It got to $4.5 trillion. Should it be $3.5 trillion?’ China has printed $30 trillion worth of RMB in a decade (18 years). The scale to which they have printed is… unprecedented. Can the Chinese run their stock market up? Absolutely. They control the price. They control the printing press. They control the police and they control the narrative. They can control that for a long time. They way they interact with the rest of the world is they actually have to spend Dollars, Euros, Yen, or Pounds for anything that they are trying to import… At some point in time economic gravity is going to catch them on the FX reserves side… By the way, they run a 10% of GDP fiscal deficit… We are up in arms about running a trillion here, which is roughly 4%…”
As we noted here, China has created over three times as much money supply as the US since 2008.
There is much more to the interview, so enjoy it above.
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China watchers, economists, and investors have been forming battle-lines for years as they debate the true strength and sustainability of China’s economy and its role as a global player. Those of us that paint a picture of future collapse and a day of reckoning are often accused of spreading “doom-porn” when we claim that the Chinese have masked over their dire situation by continually stimulating the economy by expanding credit. Today China continues to prop up the unpropable, and yes, while no such word exists, when it comes to China’s economy it should, for “unpropable” describes the financial collapse that… Read more »