Stephen Roach Should Know Better, so should US policymakers...

I just read this paragraph inside of this article about China’s growth and challenges:

“The best way to measure how far China still has to go is to consider the development of its services sector — the infrastructure of consumer demand in an economy. The good news is that services are now growing faster than any other sector, having reached 48% of gross domestic product in 2014 (thus surpassing the end-2015 target of 47% well ahead of schedule). The tough news is that this remains significantly lower than the 60% to 65% share typical of a more “normal” economy.”

This is from Stephen Roach, a senior economist for some 30 years at Morgan Stanley Asia. Now to make a statement like this about a nation with as many people STILL living on $2.00 a day as there is in the entire population of the US is almost unconscionable and shows the level of disconnect between those who are supposed to know what is going on in places like China and those who actually know what is going on in places like China.

Really! Just because China has gone through a massive transition of manufacturing something like 25% of the global goods output followed and coincided with/by the largest government led “development” of everything from housing to roads to rail, power, telecom etc., all inside of one generation, does NOT in any stretch of the imagination mean “senior economists” anywhere in the world should start to compare China with mature developed economies that have been built over 4 times that long!! Yet there it is, in Black and White from someone who should know better.
Fair enough, there is mention of “at least another decade” to “complete” structural adjustment, but I would say a fair number in this category is 25 years+ to accomplish anything near what is insinuated in this article as “complete”.

In addition, the article goes on about America’s paranoia about China and the “Cold War” mentality in dealing with the “rise” of China. Yea, America will bury itself “worrying” about something that is complete nonsense. China is as fragile as any nation in history right now and all the US is doing is playing a card that supports massive additional deficit spending on pointless weapons production and support of the Military Industrial Complex. Nothing good will or can come of this ignorant policy mentality.

Meanwhile, you give me ONE example in history of a country that developed as rapidly as China has in the last 30 years with anywhere near the population they have managed to do this with. Then give me ONE example of any nation that comes anywhere close to comparison and tell me if some 60% of the wealthiest people in that nation have hedged their bets by transferring literally Billions of Dollars out of the country, buying foreign property, secondary visas, and sending their children out of the nation in mass at the same time!! Go ahead, show me! Then tell me what a “threat” China is anywhere in the world!

More and More Wealthy Chinese Want to Emigrate Percentages of Rich People Who Leave the Country: Source

The Day The Economy Died...

I was reading today an article on the proposed merger of Sysco and US Foods (currently owned by private equity groups KKR & Co. LP and Clayton Dubilier & Rice LLC.) about the FTC's opposition to the merger.  Hurray for the FTC!  Well really is there any question in anybody's mind in the US who is a restaurant owner that this should not happen?  Really?

The plain fact is, the chains that have built a considerable business serving Americans low grade industrial food via corporate restaurant "brands" have been the biggest cheerleaders of having national distributors to serve their hundreds or thousands of restaurants nationally.  The lazy MBA's they hire and the corporate managers who hire them have only the lowest cost corporate structure and highest profit in mind when making decisions like buying food for their restaurants.  They like nothing more then to deal with one source for all their food needs.  The national restaurant chains buy large volumes from Sysco, have standardized menus (often items on the menu are actually "created" by Sysco to meet certain cost/price thresholds and certain theme/ethnic branding needs based on available ingredients and cost factors out there) and are able to wield some influence over pricing. Given their size, they can negotiate with the national food wholesalers and even hedge against food costs if necessary.  Essentially the dominance of national food chains and the habit of fat America not to cook any longer but to eat out has over time created these mega distributors and essentially put everyone else out of business.

However, there are still thousands of "non-corporate" restaurant chains who have absolutely NO barganing power against these distribution behomeths and are faced with a scereno like this: It's Tuesday. Sysco arrives at about 10:00 am Tuesday and Friday, portable order tablet in hand quoting the latest "prices" for your food needs.  "Oh, Tomatoes are up 12% from last Friday?" you ask why, Salesperson answers, "Yea, we had price hikes in X, Y, Z of over 10% and A, B, C of 15% due to the 'blizzard, storm, flood, drought, port delay, latest bug infestation yada yada' so these are the prices today, what will you buy?"  Total BS and you know what, unless that restaurant owner happens to have a true independent restaurant supply wholesale ware house or another batch of independent suppliers he can check prices with on a regular basis, then he just has to eat the Sysco price and deal with it.

Oh, so what happened to all the other thousands of local supply companies that used to exist?  They went the same way as the "markets" that used to exist.  All food chain supply in the US is controlled by national grocery chains, national distributors and national franchise wholesalers. Even regional supply chains have disappeared.  The oligopoly economy is rapidly moving to a monopoly economy (which though not controlling 100% of the market everywhere, the Sysco / US Food merger would still enjoy monopoly privilege over price setting and other variables if allowed to happen along with controlling 75%+ of the market over much of the US) which basically means, well, who cares any more?  I mean What's the difference?

America you have the "Office Supply Store", the "Construction Supply Store", the "Food Store", the "Buy all your other imported plastic junk here Store" and soon "get your home plumbing, HVAC etc. here" service...

It is so funny to hear Conservative politicians in the US spout about the more liberal party members and the current president being "socialist" when in fact the conservative side, in their support of ever larger corporate entities, national oligopolies and the like are the ones actually "creating" socialism.  There is nothing more socialist then 3 or fewer companies controlling the sale and distribution of nearly everything America buys (Thank God for Independent Brewery's!).  Just get on the phone and try to contact a real person in some of these behemoths, it's like calling the Kremlin!  Oh, well, actually we are becoming the Kremlin, a nation of oligarchs running the show while everyone else lives like, as Putin himself put it, "serfs". And the US government?  A big fat drain on what "wealth" may have been left in the hands of it's citizens to the Defense Department and for Profit Health Industry.

So kudos to the FTC for overseeing the VERY END DAYS of a dynamic economy in America.  The last wave of mergers will be the last wave cause there is almost no consolidation left to happen... All that's left is Monopoly.  Unfortunately, corporate America is not only consolidating like mad, but doing everything they can to avoid paying their fair share of taxes, essentially gutting the government (hence the influence of the public under constitutional law), while raking in ever larger "profits", often left overseas, which under an oligopoly and monopoly economy may be redefined as "tax" since it increasingly sucks the welfare out of the consumer in favor of the corporation operating in a high price environment without fair competition leaving the citizen with no choice but to pay.

NOTE: The comical thing about the habits of corporate America are when doing business in other parts of the world, even though the corporate entities do everything to avoid paying fair taxes, as soon as they are hit by some cartel or other "unfair" practice in other lands, they try to use the "taxpayer funded" and "constitutionally backed" US legal system to seek justice.  But as Motorola recently found out, TOUGH LUCK cause you can't come home and cry to Mama Liberty when you get screwed by the big boys who operate in kleptocracies with no legitimate legal system or constitutional protections they can turn to when they get screwed!!