Reprise: China Has Created a New Form of Capitalism

This is a reprise of a posting from this café in 2012.

It was my attempt to recreate a story I had originally posted on The Crossroads Café when it was hosted on Yahoo Geocities, between 2000 and 2007.

 

This is an old story from 2005. It is getting harder to find on the web, and so I wanted to copy it here for future reference.

I remember vividly when this came out, because only a month or two before Mr. Gates had reportedly condemned the Opensource software movement in the west as the work of 'communists.'

Irony is like candy to the restlessly cynical mind.

Now we must keep in mind that this story was written before the suicides at the factories like Foxconn in China, that exposed the horrific working condition in those cheerless and faceless manufacturing combines where people live and work like indentured servants or serfs. And we do not know what Bill Gates was shown or told during his official visit to China.

I imagine it was also before the Chinese provoked him for the serial violation of his copyrights. Funny how regulation and good government protects property from unbridled, unprincipled greed for the same people who abhor the protections it might also provide for their workers and customers.

And he was certainly not alone in his opinion at that time. Walmart was actually requiring their key suppliers to shift manufacturing to China to break the back of US labor for their stores, and engage a spiral of lower costs for a competitive advantage.

In the technology sector there was a mass migration to the big box factories with their wonderfully 'low medical and legal overheads.'

And I question how really 'new' this 'new capitalism' might be. It sounds quite a bit like the old British East India company to me, without the gin and tonics.

The neo-liberals economists were gung ho for this, and Clinton and his administration was smoothing the way for them, even before the arrival of Bush II on the scene, who delivered the coup de grace. By the way, remember that scandal involving large campaign contributions from official Chinese sources?

As I recall a certain number of venture capital firms made quite a bit of money encouraging that trend. And that has not stopped some of them from running for President. So one might not be hard at all on Bill.

But I did not appreciate his reported remarks about Opensource which I think is a marvelously capitalist free market force for the busting up of inefficient, overpriced, and underachieving software monopolies, which are too often only challenged by other would be monopolies.

This article struck a chord in me at the time, and I wanted to preserve it, and share it with you.

China has created brand-new form of capitalism: Bill Gates

Sat Jan 29, 2005 3:49 AM ET

DAVOS, Switzerland, (AFP) - US software giant Bill Gates (news - web sites) has high praise for China, which he says has created a brand-new form of capitalism that benefits consumers more than anything has in the past.

"It is a brand-new form of capitalism, and as a consumer its the best thing that ever happened," Gates told an informal meeting late Friday at the World Economic Forum (news - web sites) in this ski resort.

He characterised the Chinese model in terms of "willingness to work hard and not having quite the same medical overhead or legal overhead".

Manufacturers have created "scale economies that are just phenomenal", in part owing to companies there and elsewhere on the planet designing good products, Gates said.

Looking ahead, he added: "You know they haven't run out of labor yet, the portion that can come out of the agriculture sector" was still considerable.

"It's not like Korea, Korea got to a point where, boom, the wages went up a lot," he said, adding "that's good, you know, they got rich and now they have to add value at a different level.

"They're closer to the United States in that sense than they are to where China is right now."

Gates continued by heaping praise on the current generation of Chinese leaders.

"They're smart," he said with emphasis.

"They have this mericratic way of picking people for these government posts where you rotate into the university and really think about state allocation of resources and the welfare of the country and then you rotate back into some bureaucratic position."

That rotation continued, Gates explained, and leaders were constantly subjected to various kinds of ratings.

"This generation of leaders is so smart, so capable, from the top down, particularly from the top down," he concluded.

Gold Daily And Silver Weekly Charts - His Mills Grind Slow, But Exceedingly Fine

Today was gloom over Europe day, as concerns about European economic growth had stocks on the ropes, and a late day downgrade on the credit outlook for France had stocks selling off.

Traders are watching 1905 on the SP 500 cash very closely, because that is its 200 DMA. If we break it and don't bounce, the day after next could see a gap down open.

The Comex continues to be a showpiece, Madame Tussaud's on the Hudson, with little actual metal activity except for CNT which is providing bullion for the US government in their silver eagles sales, which are breaking records.

Jack Lew spoke to the IMF today, and had some hard words for Europe about doing things to stimulate aggregate demand.

Well considering that the Russia sanction which the US forced on Europe are hurting, and the austerity they imposed thanks to the massive control fraud perpetrated by the US based global Banks, I doubt the Europeans were taking his advice too well.

I might like to remind Jack that despite the lower unemployment rate that has the intelligentsia so mesmerized and happy, in fact the jobs being added are low wage, and overall the real median wage is falling.

In other words, Jack, unless you are one of the one percent, things do not look so good in the States either, and it is going to start showing through the threadbare sleeves of our real economy statistics beyond the accounting gimmicks.

I am keeping a very open mind on this, but to me the lower highs and lower lows that have been steadily hammering away at the precious metals are going to break down fairly soon, and the reaction might help us to forget some of the distasteful actions of our own guys in papering over their errors and missteps. And we ought not to forget. These half measures keep adding to the growing climate of moral hazard in the Western financial sector.

 

Party like its 1999

 

Here is an interesting article about IPOs and their financials.  Are we really at the threshold of a bubble?   I think we are beyond all that if you account for the real economy in this equation.

 

Let Wall Street tell us again that gold and silver are dodgy investments, but stocks and bond are such values?

 

Control frauds, leverage, counterparty risk, and other people's money, bitchez.   Mostly yours.

Have a pleasant weekend.

 

 

 

SP 500 and NDX Futures Daily Charts - Pop Go the Weasels

The theme I struck that the record Alibaba IPO might strike a high watermark given the extreme ramp higher in stocks that the wiseguys provided to get that pig out at a high price is proving a little more credible now.

I did not look up the statistic, but I heard that the 25 or so IPOs that have come out since then have all sold weakly to lower in the secondary market, and several are lowering prices to even get them out the door.

The market was trading weakly most of the day. The algos and trade monkeys are looking hard at the cash SP 500 and its 200 Day Moving Average which is now around 1905. We *might* see support and a bounce there if they have it in them next week. But if not, the next day may see a gap down open and some cascade selling until we reach stronger support and a capitulation of sorts.

Another interesting statistic I saw today is that on average the stock market corrects about 15% over time after the Fed ends a QE program.

Hey, we're almost there!  At least in terms of the calendar.  The market have another ten or more percent to go. 

The talking heads are busily assuring mom and pop to stay fully invested. I own no stocks myself, except for a small position in a silver royalty play.

I have included the news for next week in the calendar below. As a reminder Friday is also a stock option expiration for October, so we will most likely see some shenanigans before and on that day.

Earnings season continues.  Tech was leading the way lower today, so lets see if tech can get its act together and provide a typical short covering rally which is typical of this thin, technically traded market.

Have a great weekend everyone.

S&P Cuts France's Sovereign Credit Outlook From 'Stable' to 'Negative'

The US equity markets, which had been trading weakly all day, turned decidedly south when this breaking news was released, to the minute.  I happened to see the flash headline, but the story did not appear generally in the news.

I think this merely demonstrates how skittish and thin the algo-dominated US stock markets really are.

As a reminder the US Bond markets are closed on Monday, but the stock markets will be open.

Reuters - France outlook revised to negative. AA ratings affirmed.

France ratings remain supported by view of French economy's high income per capita and productivity, diversification, and stable financial sector.

French government's budgetary position is deteriorating in light of France's constrained nominal and real economic growth prospects.

Negative outlook indicates view that robust recovery of French economy could prove elusive and public finances could deteriorate beyond 2014.