This is why we can't have nice things!

People, this happened:


"a Weibo post showed a child defecating on board Shenzhen Airlines flight ZH9709 from Nanjing to Guangzhou.... after a passenger complained saying both bathrooms were vacant, the parents said the bathrooms were too small anyway so they used the back of the plane because it had more room."


What's that you say? Pictures or it didn't happen? OK.

I can't believe that the only valid complaint was that the bathroom was vacant. On Chinese airlines are you ALLOWED to poop in the aisle if the bathrooms are occupied?

In the process of designing our house in Santa Fe, we were concerned the guest bathroom was too small. Our architect assured us it would be functional and beautiful "like an airline bathroom". Robin went totally nuts. We somehow got the project done anyway and the bath in question is actually quite spacious. Even a Chinese kid would deign to poop there.

Perhaps the worst part of the airline poop saga? The plane had not yet taken off!

China as Solar Icon

Lots of  Yewessers have been saying we should pattern our solar industry after that of China.  Of course, we pretty much bought the farm on Solyndra, etc.  What is China doing differently?

The answer, it turns out, is NOTHING.  Their heavily subsidized companies are failing also, on an even larger scale.  The reason is not a difference in policy, but rather a similarity in physics:  Solar power is simply not a viable energy source at this point.  It takes $120 to generate $100 worth of electricity, and at some point the subsidies run out.  The story from the NYT.

The collapse of Suntech is a milestone in the precipitous decline of China’s green energy industry in the last four years. 

More than any other country, China had bet heavily on renewable energy as the answer to its related problems of severe air pollution and heavy dependence on energy imports from politically unstable countries in the Middle East and Africa. 

China is also exposed to global warming on its low-lying, densely populated coastline, which the Energy Department in Washington has estimated to have more people vulnerable to displacement from rising sea levels than anywhere else on earth. 

But China’s approach to renewable energy has proved ruinous, financially and in terms of trade relations with the United States and the European Union. State-owned banks have provided $18 billion in loans on easy terms to Chinese solar panel manufacturers, financing an increase of more than tenfold in production capacity from 2008 to 2012. This set off a 75 percent drop in panel prices during that period, which resulted in losses to Chinese companies of as much as $1 for every $3 in sales last year. 

Now, Max will likely comment and say something about how Germany's decision to end subsidies was somehow different.  It must be fun to live in your own world, Max, free from the restraints of logic and evidence!

Why China Must Urbanize: Strange mushroom object found in China

Okay, it was buried 80 meters down.  And it has a strange, fleshy feel, and an "eye" on each end.  The video is okay, but the English captioning doesn't really work.  Still, you get an idea.  The reportrix is quite young, and (apparently) naive.  Not really a city lass. She plays it very, very, VERY straight.



Okay, but then you read the description of the video:

(Below the jump, and NSFW, or the easily offended)

I'm so bored with the USA!

Oh anonymous Weibo user, I see what you did there. Pretty good read.

Here's a teaser:

(14) Americans are wimps. 95% of drivers don’t even dare to run red lights…although 99% of American adults have a car, their driving method is very strange: There are many cars on the road, but you can’t hear any horns, the streets are so quiet it’s as if they’re not streets, there’s none of the energy of a major province-level Chinese city.

Linkulus maximus

1. Great long-read about the mystery monkey of Tampa and how (s)he stirred up the inner anarchist of the locals.

2. Calming the student debt crisis hype.

3. College grads face hard times.... IN CHINA!

4. Romney is as an alpha male chick magnet (funniest thing I've read this week).

Long, Huang Eat Pussy, Long Goes Down, Huang Hung

Wealthy Chinese man dies after eating poisoned stew made from slow-boiled cat.

A Chinese billionaire is dead after apparently ingesting some slow-boiled cat meat stew — though it wasn’t the cat meat that killed him.

Police in southern China have detained a local official on suspicion of poisoning the stew at the restaurant where the two were eating in Guangdong province on Dec. 23.

Agriculture official Huang Guang, billionaire Long Liyuan and a third diner were sharing a cat meat hot pot — a local delicacy — when Huang allegedly dropped some toxic herbs into the stew, the BBC reported.

Long, who ran a forestry company, was taken to the hospital after feeling dizzy and sick and later suffered a cardiac arrest. Huang and the third diner were hospitalized as well, though both survived.

According toFlickr user MowT the New York Times, Huang had apparently eaten some of the poisoned stew himself to avoid suspicion.

Police detained Huang on Dec. 30, after discovering evidence that Huang had embezzled money from Long.

Police initially took the restaurant’s owner into custody on suspicion of serving unsanitary food, according to the BBC. Long’s family, not believing he died simply of food poisoning, offered a $16,000 reward for information and insisted police keep the case open.

(Nod to the Blonde, who of course was mostly all excited about the title. I think she rented this movie last week.)

(UPDATE: Yes, I was thinking of Tom G. when I wrote this)

Dr. Doom does China

Uber-bear Nouriel Roubini has turned his sights to China, and he doesn't like what he sees. This is required reading, people.

Here's an excerpt:

When net exports collapsed in 2008-2009 from 11% of GDP to 5%, China’s leader reacted by further increasing the fixed-investment share of GDP from 42% to 47%.

Thus, China did not suffer a severe recession – as occurred in Japan, Germany, and elsewhere in emerging Asia in 2009 – only because fixed investment exploded. And the fixed-investment share of GDP has increased further in 2010-2011, to almost 50%.

The problem, of course, is that no country can be productive enough to reinvest 50% of GDP in new capital stock without eventually facing immense overcapacity and a staggering non-performing loan problem.

Yikes!!

China Has Problems

In 1990, I interviewed for a job at A. Tuck Business School, Dartmouth College. At lunch, someone brought up the need for business schools in the U.S. to adopt Japanese methods and teaching techniques.

Ever adept at making people like me, I snorted. "Japan is a giant economic bubble," I said. "And the only way that they have growth is by implicitly taxing their consumers with protectionism and diverting private saving into public investment. We ought to look at what Japan is doing, both publicly and privately, and do the exact OPPOSITE. Their growth is fake, and their business methods are short-sighted." (To be fair, I had gotten this view from my mentor Murray Weidenbaum; it was not original)

The reaction from the Tuckwads: Crickets. Utter disbelief. Would have been much better if I had loudly farted and then said, "Middle C! I usually can't hit that note!"

Finally, the Ass. Dean said, "(ahem). Dr. Munger, that would be a rather controversial opinion in these halls. We are trying to learn more about Japanese methods. I'm not sure you are really well versed in the latest research." (He was a Brit; just imagine the condescension ladled on to these words.)

No, I didn't get the job. But here is the growth path of Japan's economy:
Hey, Dean, you mother Tucker, bite me! I hope you lost your 180 thread count bespoke button-down shirt, you idiot!

All that is prologue (and yes I have been badly wrong on a dozen things in the meantime). Anyway, here is my current view:

China's growth is fake. Not as fake as Japan's, because the China doesn't have a zombie financial sector. That's because they have ZERO financial sector, at least in the sense of being able to generate liquidity on a consistent scale. And the threat of nationalization rules out private offerings of publicly traded stock.

It is true that they are producing mountains of stuff. But what they are doing is taking all private saving and expropriating it, converting it into capital for more semi-state-owned factories.

The problem is that there are three reasons wages can go up. (Real Wages are shooting up, over much of China, by the way. Perhaps an index number problem, since an increase from near zero is a big percentage, but still.).

Wage Increase Reason 1: Production process becomes more capital intensive.
Wage Increase Reason 2: Skills and human capital of workers increase
Wage Increase Reason 3: Unions such as UAW or SEIU steal higher wages, driving employment offshore, and devestating the economy. Minimum wage laws work, too, though they mostly harm the poor and economically marginal.

Now, the US chose #3 in northern states ranging from Mass to Mich, and everything in between. And now those states look like a post-apocalyptic wasteland. So, that is a bad idea.

I had been under the impression that China was struggling along under Reason #1. But this study suggests Reason #2 is bigger than I would have thought. Interesting.

"The Contribution of Human Capital to China's Economic Growth," John Whalley & Xiliang Zhao, NBER Working Paper, December 2010

Abstract: This paper develops a human capital measure in the sense of Schultz (1960) and then reevaluates the contribution of human capital to China's economic growth. The results indicate that human capital plays a much more important role in China's economic growth than available literature suggests, 38.1% of economic growth over 1978-2008, and even higher for 1999-2008. In addition, because human capital formation accelerated following the major educational expansion increases after 1999 (college enrollment in China increased nearly fivefold between 1997 and 2007) while growth rates of GDP are little changed over the period after 1999, total factor productivity increases fall if human capital is used in growth accounting as we suggest. TFP, by our calculations, contributes 16.92% of growth between 1978 and 2008, but this contribution is -7.03% between 1999 and 2008. Negative TFP growth along with the high contribution of physical and human capital to economic growth seem to suggest that there have been decreased in the efficiency of inputs usage in China or worsened misallocation of physical and human capital in recent years. These results underscore the importance of efficient use of human capital, as well as the volume of human capital creation, in China's growth strategy. (Nod to Kevin Lewis)

The point is that China is going to run up against a captial constraint, and may (this is delightful) actually follow the Marxist predictions about industrial capitalism. Marx didn't understand capital, but neither do our Chinese friends. Unless the Chinese can get huge amounts of liquidity to feed the need for physical investment, wages from increased human capital are going to start to squeeze them really bad. And there may actually be the worker's revolt that Marx predicted for Western Europe. Except it will happen in a communist country, precisely because it is not capitalist enough to have common stock offerings.

Thomas Friedman finds a friend in politics

I can only hope PA governor Ed Rendell was trying to be funny when he had the following reaction to the postponement of an Eagles game (but I fear that he was serious):

"We've become a nation of wusses. The Chinese are kicking our butt in everything. If this was in China do you think the Chinese would have called off the game? People would have been marching down to the stadium, they would have walked and they would have been doing calculus on the way down."

Holy Moly!

I will say this though. If the Communist party wanted the game to go on, it would go on and the people would walk there if ordered to and would do calculus, or even the hokey pokey on the way if ordered to.

KPC is officially "short" on Ed Rendell AND China for 2011.