The invitation sent by Isaiah Berlin left the date open. The city was supposed to be London.
However, Xi Jinping responded with one precondition: An assessment by Berlin of Biden’s dogma, especially after their first phone call on February 10th.
To that Berlin replied, “One half realistic liberalism, the other half liberated realism, both halves informed by disciplined faith that guides the politics rather than the other way around.”
In addition, Berlin sent Xi one book as a gift with a humble request to read it (or at least have someone summarize it for him) before their dinner-meeting in London. The book title was The Bad-Ass Librarians of Timbuktu, by Joshua Hammer. The note/request also included the following graph.
As soon as both men sat down for the dinner, the conversation started. Xi Jinping wanted to know what Berlin thought of China’s monist philosophical and economic policy. Berlin, in his usual style, questioned if such doctrine – where all reality is supposed to form a rational harmonious whole – is even rational, whole, and realistic. “Moreover,” he added, “don’t you think that your practices of torturing dissidents, abusing human rights, repressing freedom, and following a policy of insane excesses – including debt – resemble antinomianism where morals and norms are ignored for the sake of expediency and untruths – covered up in the name of harmony – while the goal is to subjugate others to the misinformed will and goals of a few?”
Xi Jinping chose to change the subject. “That book you sent me about smuggling and saving 370,000 priceless manuscripts from the hands of Al Qaeda and other jihadists and mobsters is nothing but a chilling portrait of a country under siege when one person’s defiance outwitted mental darkness and brainless militants who had no appreciation of culture and history.”
“I am glad to hear that you enjoyed the book,” Berlin stated. He continued, “The story of Haidara is the story of a hero and the story of a single person determined to save the rich history and culture of a people who, throughout the centuries, have been deprived of their liberties and repressed by boneheads who have no appreciation of human dignity, literature, art, and culture.”
“Timbuktu – like Beijing – had been a thriving intellectual and trading center for centuries,” Xi Jinping added and continued, “Everything changed when the barbarians arrived. Devastation and ruins became the norm when, throughout the centuries, the barbarians prevailed. Haidara and those who assisted him in saving those precious manuscripts, demonstrated how wrong our perceptions are, because when Europe was going through its dark ages, Timbuktu and the Maghred region was a thriving center of science, poetry, philosophy, and the most bibliophilic city on earth. In China, we are equally proud of our history.”
“And you should be. The world has learned so much from your history, scientific improvements, and culture,” Isaiah Berlin noted, only to add, “But don’t you think that your monism is so obscured and convoluted that a person is reduced to a single scope of serving goals that a few elites dictate to the masses, to the point of canceling not just the ethos and the virtues of history and culture but also the human soul?”
“I am not here to be lectured,” Xi Jinping stated. “Our economy thrives, and we will overtake the world. We will be the #1 economy in a few years. Our products are on the shelves of almost every country in the world. Through our Belt and Road Initiative, we are acquiring valuable assets around the world and our military is getting stronger by the day.”
“My goodness friend, you don’t need to be so fanatic about that materialistic and myopic monism where everything has a price, but nothing represents any higher value that honors the purpose of been called a human being who searches to find an identity and belonging beyond the prison of an egotistical self who just consumes, rather than also exploring the constellations of eternal truths about humans, our purpose, and our destiny.” Berlin exhaled, only to add, “When bigots and looters of human dignity and of truth deprive the people of their wholeness, intellectual rigid jihadism prevails in the name of success of that myopic monist vision, but the latter needs to be tested through depression. Depression usually follows the fall of a great wall of steroids when debt accumulation has been advertised as prosperity. By the time the wall of steroids bursts, the shallowness and nakedness of that materialistic and myopic monism will be exposed.”
“Our debt is manageable and under control.” Xi proclaimed. Berlin replied, “For your sake, but most importantly for the sake of the great and wonderful Chinese people, but also for the sake of the world that misunderstood and trusted Chinese policies for the last twenty years, I truly hope that your debt is under control. My humble understanding is that your bubble is a bubble that doesn’t burst until it does, and at that point your economic monism will prove to be morally and financially bankrupt.”
“How do you dare saying such things? What are the facts that make you question the sustainability of our debt?” Xi demanded.
“Here are the facts,” Berlin stated, and he started outlaying them:
The graph shows that central government, local government, corporate, and household debt exceeds 270% of GDP.
State-owned-enterprises (SOEs), local banks, and local governments are overstretched as shown by the bankruptcies that have been allowed to take place.
Deleveraging – which is a top priority – could turn out to be a financial famine that will tip the wall of steroids.
Deleveraging and social stability are not always positively correlated.
Deleveraging at a time of demographic imbalances and under the inadequacies of welfare do not mix well.
Switching from an investment boom to a consumer boom at a time of deleveraging reduces the multiplier effect to the point that more and more credit is needed to generate less and less growth.
More than 200 trillion yuan has been added to the banks’ balance sheet in the last ten years, on top of the trillions circulated through the shadow banking system.
Dodging banking regulations through opaque investment vehicles, postponed the inevitable crisis, but at some point, there is no more road to kick the can down, especially when you have a currency that is not an international reserve currency. Digital yuan is a nice effort but cannot avoid the inevitable forthcoming tragedy.
Just look at Japan in 1989 and in Asia in 1997. The problem is that the Chinese population is not prepared for the tragedy that is coming. Preparing them by the reproduction of some ancient Greek tragedies might be useful. Maybe Jim Chanos’s warning should be heeded when he said that “China is on a treadmill to hell”.
To the conservative corporate debt estimate of 165% (as a fraction of GDP) that the Bank of International Settlements published, we should add the conservative estimate of another 20% debt hidden in obscure off-balance sheet investment vehicles.
To these estimates we should also add another 20% of Accounts Receivables that have not been paid to suppliers, as SOEs and other state-related entities have been ordered to only pay banks just before a loan is declare non-performing, in order to save face, but in the meantime suppliers remain unpaid.
The total corporate debt is well above 200% of GDP vs. about 75% in the US, 100% in Japan, and about 48% in other emerging economies.
The lion’s share of that corporate debt is attributable to state industrial firms. The debts of those SOEs are hiding the true debt picture and as long as they are not paid, they represent a hidden tax on suppliers. Just recall the case of Dongbei and what happened in the province of Liaoning where 45 million residents had a first taste of deleveraging.
The historical anomaly where cheap credit is allocated carelessly, and default is avoided has not been discovered or invented yet. People need to read essays on the Counter-Enlightenment movement.
When companies’ bad debt in particular sectors (such as metals) is approaching 50% and when half of them do not earn enough to even cover the interest of their debts (let alone the principal), then zombies start knocking at the door, and zombies survive by eating others.
The fact that policy banks’ debt (China Development Bank, Agricultural Bank, and China Export-Import Bank) is not included in the official public debt figures, only makes the case worse, given that their borrowings represent about 30% of China’s GDP.
When banks receive payments, they are forced to roll over those funds to ailing government projects, adding to the moral hazard disaster that is taking place.
The augmented deficit – as reported by the IMF- puts the annual deficit (pre-Covid-19) to about 10.5%.
Needless to say, that if we dig deeper to the debts for real estate development and those of the ghost towns, the depths of the debt hole will run even deeper.
Berlin continued, “For example, just yesterday China Fortune Land Development, which as you know is owned by your largest insurance company Ping An, defaulted on a $530 million bond. Furthermore, China Evergrande is your largest property company but also the world’s most indebted. It narrowly avoided a crash after rumors swirled that it had sought government aid.”
Silence prevailed for several seconds and Xi, changing the subject once again, said, “I heard that you are having dinner with Vladimir Putin too. Are you sending him the same book?” Xi asked. “That’s right, the dinner is set for March 23rd, but I sent him a different book by Frederic Morton titled Thunder at Twilight,” Berlin replied, and we know what will happen next. The eavesdroppers will have that book on Xi’s desk by the time he lands back in Beijing.
“I would like to continue this discussion,” Xi stated as he stood up to say goodbye, only to hear Berlin saying, “With great pleasure, and we may invite Irving Fisher to join us next time. I will make sure to send you his book titled The Debt-Deflation Theory of Great Depressions, before we meet again. In that book you will see the story of Dongbei foretold about 83 years before it took place!”
When Isaiah Berlin Dined with Xi Jinping: Extrapolating Facts about The Great Wall of Steroids
Author : John E. Charalambakis
Date : March 2, 2021
The invitation sent by Isaiah Berlin left the date open. The city was supposed to be London.
However, Xi Jinping responded with one precondition: An assessment by Berlin of Biden’s dogma, especially after their first phone call on February 10th.
To that Berlin replied, “One half realistic liberalism, the other half liberated realism, both halves informed by disciplined faith that guides the politics rather than the other way around.”
In addition, Berlin sent Xi one book as a gift with a humble request to read it (or at least have someone summarize it for him) before their dinner-meeting in London. The book title was The Bad-Ass Librarians of Timbuktu, by Joshua Hammer. The note/request also included the following graph.
As soon as both men sat down for the dinner, the conversation started. Xi Jinping wanted to know what Berlin thought of China’s monist philosophical and economic policy. Berlin, in his usual style, questioned if such doctrine – where all reality is supposed to form a rational harmonious whole – is even rational, whole, and realistic. “Moreover,” he added, “don’t you think that your practices of torturing dissidents, abusing human rights, repressing freedom, and following a policy of insane excesses – including debt – resemble antinomianism where morals and norms are ignored for the sake of expediency and untruths – covered up in the name of harmony – while the goal is to subjugate others to the misinformed will and goals of a few?”
Xi Jinping chose to change the subject. “That book you sent me about smuggling and saving 370,000 priceless manuscripts from the hands of Al Qaeda and other jihadists and mobsters is nothing but a chilling portrait of a country under siege when one person’s defiance outwitted mental darkness and brainless militants who had no appreciation of culture and history.”
“I am glad to hear that you enjoyed the book,” Berlin stated. He continued, “The story of Haidara is the story of a hero and the story of a single person determined to save the rich history and culture of a people who, throughout the centuries, have been deprived of their liberties and repressed by boneheads who have no appreciation of human dignity, literature, art, and culture.”
“Timbuktu – like Beijing – had been a thriving intellectual and trading center for centuries,” Xi Jinping added and continued, “Everything changed when the barbarians arrived. Devastation and ruins became the norm when, throughout the centuries, the barbarians prevailed. Haidara and those who assisted him in saving those precious manuscripts, demonstrated how wrong our perceptions are, because when Europe was going through its dark ages, Timbuktu and the Maghred region was a thriving center of science, poetry, philosophy, and the most bibliophilic city on earth. In China, we are equally proud of our history.”
“And you should be. The world has learned so much from your history, scientific improvements, and culture,” Isaiah Berlin noted, only to add, “But don’t you think that your monism is so obscured and convoluted that a person is reduced to a single scope of serving goals that a few elites dictate to the masses, to the point of canceling not just the ethos and the virtues of history and culture but also the human soul?”
“I am not here to be lectured,” Xi Jinping stated. “Our economy thrives, and we will overtake the world. We will be the #1 economy in a few years. Our products are on the shelves of almost every country in the world. Through our Belt and Road Initiative, we are acquiring valuable assets around the world and our military is getting stronger by the day.”
“My goodness friend, you don’t need to be so fanatic about that materialistic and myopic monism where everything has a price, but nothing represents any higher value that honors the purpose of been called a human being who searches to find an identity and belonging beyond the prison of an egotistical self who just consumes, rather than also exploring the constellations of eternal truths about humans, our purpose, and our destiny.” Berlin exhaled, only to add, “When bigots and looters of human dignity and of truth deprive the people of their wholeness, intellectual rigid jihadism prevails in the name of success of that myopic monist vision, but the latter needs to be tested through depression. Depression usually follows the fall of a great wall of steroids when debt accumulation has been advertised as prosperity. By the time the wall of steroids bursts, the shallowness and nakedness of that materialistic and myopic monism will be exposed.”
“Our debt is manageable and under control.” Xi proclaimed. Berlin replied, “For your sake, but most importantly for the sake of the great and wonderful Chinese people, but also for the sake of the world that misunderstood and trusted Chinese policies for the last twenty years, I truly hope that your debt is under control. My humble understanding is that your bubble is a bubble that doesn’t burst until it does, and at that point your economic monism will prove to be morally and financially bankrupt.”
“How do you dare saying such things? What are the facts that make you question the sustainability of our debt?” Xi demanded.
“Here are the facts,” Berlin stated, and he started outlaying them:
Berlin continued, “For example, just yesterday China Fortune Land Development, which as you know is owned by your largest insurance company Ping An, defaulted on a $530 million bond. Furthermore, China Evergrande is your largest property company but also the world’s most indebted. It narrowly avoided a crash after rumors swirled that it had sought government aid.”
Silence prevailed for several seconds and Xi, changing the subject once again, said, “I heard that you are having dinner with Vladimir Putin too. Are you sending him the same book?” Xi asked. “That’s right, the dinner is set for March 23rd, but I sent him a different book by Frederic Morton titled Thunder at Twilight,” Berlin replied, and we know what will happen next. The eavesdroppers will have that book on Xi’s desk by the time he lands back in Beijing.
“I would like to continue this discussion,” Xi stated as he stood up to say goodbye, only to hear Berlin saying, “With great pleasure, and we may invite Irving Fisher to join us next time. I will make sure to send you his book titled The Debt-Deflation Theory of Great Depressions, before we meet again. In that book you will see the story of Dongbei foretold about 83 years before it took place!”