Our fictional Auditor Zhao will learn in a few short months (i.e. the present) that the default rate for loans to local Chinese governments might be as high as 20%.  And how will China absorb this kind of shock?  By coming to collect on American debt?

Context: up until now, I have grown so tired of people complaining about the United States debt.  Those are the complaints of frat-boy robots chilling at the Union Pub on Capitol Hill, trying to sound awesome and important by railing on about something that should take a back seat to more stimulus - without solving that problem with taxes on the rich.  I guess if you consider a Lacoste polo shirt kick-around clothing, you're not paying attention to the unemployment rate, or the crumbling infrastructure, or the gilded yet oily vice in which big business has placed our collective genitalia.   We need job creation, higher median income, nicer trains and fewer prisons. 


But what if the Chinese need to come collecting on our debt to them because of this crisis?  And if they do, and we can't pay up, what next?  Further limit exports on rare-earth elements? Cease  buying U.S. debt altogether?  I leave that to the movers and shakers, and professional mover/shaker watchers, to decide...

Mayor Du Will Soon Have a Visitor

From an MSNBC article on the current anxiety surrounding debt in China:  

The source of China's current problem dates back to the collapse of the global economy in 2008 when, like its Western counterparts, the Chinese government unleashed a flood of cash to stimulate its economy. Much of that money was loans from state-owned banks to local governments, which were supposed to spend all those yuan on new roads, railways, power plants and other projects to help China maintain its torrid pace of economic growth.

Many of those yuan didn't get where they were supposed to go. It's still not clear exactly where they all went. But this week the Chinese government announced the results of a nationwide audit of 31 provinces and hundreds of municipalities which found that those local governments are now carrying some $1.6 trillion worth of loans. And a large portion — as much as 20 percent — may have to be written off as bad debt.

Auditor Zhao cannot help but chuckle at his surname, which suggests the light of the sun. Such light, when able to penetrate the country's thick coat of smog, is blocked by other barriers before it can illuminate the finances of this nation's countless local governments. Up until now, this has not mattered. Now it does. Orders from the top.

His car, an unassuming white ex-taxi, mounts the hill. There's a general store and a noodle shop to the right (actually, they are both one and the same) a gas station to the left. Bracketed between the silhouettes of both is a view of the valley containing the prefecture-level city of Liangchuan. New office buildings. New high-rises. A Mexican-style villa on the hilltops beyond. This framed picture should have a title, Zhao thinks. “Modern Times.” Perhaps, in a hundred years, economists will remark upon such snapshots and lay blame for humanity's failures upon their empty promise. An interesting thought, but no more than idle musings for a small fry. Auditor Zhao is not an economist. He is only meant to know a lot of the information economists require to speak to the world about the economy.

The sun is up. The yellow hills overlooking the other side of the valley catch the light, while waterfowl rise into the air from the gorge. Auditor Zhao wants some noodles.

He walks into the combination noodle joint and general store. To the left, the store is dingy, its wooden shelves covered in the cheapest versions of every item known to humankind. To the right, the counter where noodles are served. That half enjoys a little illumination from a small, yellowing window facing the back lot. More illumination is provided by a rectangular outline of white light formed by the curtained entrance to the kitchen. He places his order with the old man who runs the combination noodle shop and hardware store. The old man turns and pushes aside the curtain to bark Zhao's order to his wife. She's operating a noodle press. Good, Zhao thinks, they'll be fresh.

Bowl of noodles in hand, he exits to make for a table with a Coca-Cola umbrella. As he pries two wooden chopsticks apart, he begins to brood again. Mayor Du will not know he has arrived. That's the point. That's why he came without a chauffeur in an old white 93 Nissan Bluebird, its heyday as the king of Beijing's taxi fleet long since passed. He is one of thousands who have been sent surreptitiously into the countryside to confirm or refute Beijing's fears that China's local governments are dangerously in debt.

Of course, this is modern capitalism. Modern capitalism requires everyone to be in debt, and for it not to matter. But then 2008 rolled around, and those Americans had to burn themselves alive on a pyre of debt, leftover cash for tons of Chinese consumables included. To pick up the slack, Beijing and the central banks injected stimulus money into local governments to encourage even more infrastructure and newer and cleaner industries, with the assumption that the money would be invested wisely. When he thinks of the integrity of this assumption, he is reminded of his cousin from his hometown in Hunan.

One day a few years back, his cousin's brother, Xiao'er, had had the audacity to purchase a new cell-phone. He got the phone and a pre-paid plan with cash upfront, but an hour later the stupid thing broke. Xiao'er returned to the mobile phone store to demand a refund from the manager. The manager tried to console Xiao'er. “Let me call our district supervisor,” said the manager. “He'll sort this out for you.” But the manager didn't call the district supervisor. Instead, he called a gang of ruffians, armed with wax wood poles, to beat the hell out of him. Xiao'er died hours later in a hospital.

When asked by Zhao why he hadn't pressed charges against the manager, the cousin explained that the manager in question was related to the township party cadre, who occasionally utilized the same armed gang to exact extra taxes from farmers. Zhao, despite his position, was powerless to seek justice.

These are the people entrusted with almost two trillion dollars in loans?

Finished with his noodles and subsequent cigarette, he makes his way back to the car, alone in the street whose every surface cannot repel the fine dusting of Shaanxi Province's famous yellow earth.   

Where are the adults, and where are the children? And how do we distinguish between the two?

"Orcs have no love of daylight, so he covers the face of the sun to ease their passage along the road to war. When the shadow of Mordor reaches this city it will begin." -Gandalf, Return of the King. 


Two days ago, Gloria Borger of CNN published the article "Where are the Adults?"  Perfect content creation.  I should know.  I write copy for a online catalog of scientific equipment.  It is the eternal challenge of the internet content creator, whether they be lowly copy-writer or featured columnist, to walk the narrow line between the need for specifically useful information and the need to sensationalize, simplify and package for the widest possible audience.  This article, like so many from news sites like CNN, does a good job describing the deadlock surrounding the budget talks, yet it's overall premise is shoddy.


First of all, if you're like me and believe that the Republicans shoulder most of the blame for the impossible situation this country has been put in (both in a greater sense as well as with regard to the debt ceiling issue,) then your heart likely dropped when you saw the title of Ms Borger's opinion piece.  "Here's another fake fairness article," you sigh to yourself.  Another opinion piece that refuses to distinguish between the wildly different tactics and beliefs of the Democrats and Republicans.  Actually, it's worse, as it mostly just blames Obama.  Here's an excerpt.

Call me old-fashioned, but when the president and congressional leaders get into a tussle over who should be "leading" the country in matters of real national consequence, I feel like sending them to their rooms.

"Call me naive," President Obama said at his news conference today. "But my expectation is that leaders are going to lead."

Mine, too.

So imagine my surprise when the president came to his own press conference -- which he called -- without anything much new to say on possible ways get to a deal to raise the national debt ceiling. Plenty of talk about gamesmanship, about deadlines and about how even Sasha and Malia are mature enough to do their schoolwork before it's due.

A few lines later: 

And it's not that [the President is] wrong about Congress ducking responsibility; it's just hard to see how that counts as news.

Well, that is news.  The media needs to hammer home the crazy and unprecedented partisan attack by the Republicans.   But wait, what's this?:  

What might actually have counted as news is if the president, as the nation's leader, had proposed a definitive way out of the budget mess -- or at least drawn some lines in the sand.

Instead, we learned that we need a "balanced approach" to the debt mess. That Obama is willing to "tackle entitlements" (presuming, of course, that nothing is done to touch Medicare beneficiaries). And that taxes -- the kinds that affect "millionaires and billionaires," corporate titans and their personal jets -- should be on the table.

Okay, now we're talking.  Yes, Obama, please draw a line in the sand -- although, he has made it clear that extending the Bush tax cuts any further is unacceptable.  I think.


Look, the point is that it's all well and good to get on Obama's case about not being forceful enough, but why spend a whole article called "Where are the Adults" on that theme?  It's not just that the Republicans are acting more childish.  They are acting SO much more childish that they now exist in a completely different dimension than the Democrats do.  So when Barack Obama gets up and chastises the Republicans for not doing their homework, it is because he sees that they are acting like children, and is therefore calling them to task for it.  The act of calling someone to task about acting like a child does not automatically lower one to the same level.  


Republicans have been holding up even the most routine house and senate votes in order to stall the government and prevent it from fixing the horrible economy.  Never before in living memory has one party gone to such extremes.  They've forced the debt limit issue, which had never been an issue (Republican lawmakers voted to raise it SEVEN times when Bush was in power, without anyone paying attention.)  Everything they're doing is partisan and extreme.  They are creating a crisis in the middle of a downturn to force their agenda and destroy Barack Obama by keeping the economy in the pits.  Their game is dangerous, cynical and callous.  They are acting like immature schoolyard bullies.  The same cannot be said of any Democrats who dare speak up against the din, however timid and unsatisfying they appear to be.   

But Republicans can now count on cover.  For whenever a Democrat gets up in one of our many halls of state to lambast these crypto-feudalists, there will always be Trusted, Impartial reporters who have decided that everyone gets heat for speaking up against the wrong-headed actions of others.  It's so much simpler that way.


When mainline journalists like Ms Borger report within the fake-fairness, each-side-is-equally-irresponsible mindset, people loose sight of the specific actions of each side.   Unintentionally or not, fake fairness provides a cover, a black cloud beneath which the orc armies of the right wing can march into our public discourse and lay siege to reality, democracy and everything a free society stands for.