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1 Why China may shake the world again (Robert Peston on BBC) When a big economy is investing at the pace China is to generate wealth and jobs, it is a racing certainty that much of it will never generate an economic return, that the investment is way beyond what rational decision-making would have produced. That is why in China, there are vast residential developments and even a whole city where the lights are never on and why there are gleaming motorways barely tickled by traffic.
But what makes much of the spending and investment toxic is the way it was financed: there has been an explosion of lending. China’s debts as a share of GDP have been rising at a very rapid rate of around 15% of GDP, or national output, annually and have increased since 2008 from around 125% of GDP to 200%. Analyst Charlene Chu gave a resonant synoptic description of this credit binge: “Most people are aware we’ve had a credit boom in China but they don’t know the scale. At the beginning of all of this in 2008, the Chinese banking sector was roughly $10 trillion in size. Right now it’s in the order of $24 to $25 trillion.
“That incremental increase of $14 to $15 trillion is the equivalent of the entire size of the US commercial banking sector, which took more than a century to build. So that means China will have replicated the entire US system in the span of half a decade.” There are no exceptions to the lessons of financial history: lending at that rate leads to debtors unable to meet their obligations, and to large losses for creditors; the question is not whether this will happen but when, and on what scale.
So what will happen to China’s economic miracle? Well, the Chinese government has announced economic reforms, which – in theory – would over a period of years rebalance the economy away from debt-fuelled investment towards consumption by Chinese people. But as yet the reforms are at a very early stage of implementation, and the lending boom goes on. And what if the lending and investing bonanza can’t be staunched? Then we would be looking at the kind of crash that would shake not just China, but the globe.
The biggest story in recent times has been the rise and rise of China. It boosted our living standards, by selling us all those material things we simply had to have, cheaper and cheaper. But its exporters killed many of our manufacturers. And the financial surpluses it generated translated into our dangerous deficits, the secular and risky rise of indebtedness in much of the West. A China suddenly incapable of providing the rising living standards its people now see as their destiny would be less confident, less stable, and – perhaps for the world – more dangerous.
2 A 100 years after taxis saved Paris (Peter Sigal in The New York Times) The echoes of the guns of August 1914 had barely subsided when France faced its first crisis of World War I. By early September, the German army had moved through Belgium and was within 30 miles of Paris; the French government was preparing to decamp to Bordeaux, and panic spread through the city. Gen. Joseph Joffre organized a counterattack, and by Sept. 6 his troops were fighting the Germans along the Marne River. With the outcome — and possibly the fate of France — in the balance, General Joffre called for reinforcements from Paris.
But the railways were clogged and no trucks were available, so the military commander of Paris, Gen. Joseph Gallieni, hailed the city’s taxi drivers. On the evening of Sept. 6, hundreds of cabs assembled at Les Invalides, the military hospital, and by morning a convoy of impossibly top-heavy Renault AG1s with tiny 1.2-liter 2-cylinder engines was puttering toward the front. The AG1 was the Checker cab of its day. Simple and sturdy, it became the standard Paris taxi in 1905. By 1907, there were 1,500 clattering over the cobblestones. By the end of Sept. 7, some 600 taxis, each making several runs, had delivered 3,000 troops. It is not known whether the passengers tipped the cabbies — but they tipped the battle to the French.
Yet while the French halted the Germans at the Marne, they were not strong enough to mount an offensive. Four years of trench warfare lay ahead, a stalemate that led to the development of the tank and poison gas. A hundred years later, all of Europe is pausing to remember World War I. But the anniversary is perhaps felt most deeply in France, where much of the combat on the Western Front took place.
3 Time for bitcoin ATMs (Kristen V Brown in San Francisco Chronicle) Getting your hands on bitcoin could get a bit easier after Robocoin installs the nation’s first bitcoin ATMs in Seattle and Austin, Texas later this month. The kiosks are similar to ordinary ATMs, but with some added features, such as scanners that read a driver’s license or passport to confirm a user’s identity. Users will be able to trade in bitcoin for cash, or use the machines to acquire the cryptocurrency.
The Las Vegas-based Robocoin installed its first bitcoin ATM in Canada last fall. The bitcoin ATMs are only the latest effort to bring bitcoin to a wider audience. Launched in 2008, the currency has received nearly as much doubt as it has hype — largely due to its wildly fluctuating value and black market affiliation.
But, in San Francisco especially, increasing numbers of vendors are accepting bitcoin. Earlier this month, a Japantown restaurant hosted what it claimed was the “first ever” bitcoin fair — intended to show the masses that, just like good old-fashioned dollar bills, you can use bitcoin to buy booze and ramen. Soon, you might be able to walk to the corner and pick up some cryptocurrency to foot the bill.
4 South Africa as world fraud champs (Graeme Hosken in Johannesburg Times) South Africa is the world leader in money-laundering, bribery and corruption, procurement fraud, asset misappropriation and cybercrime. For the first time in nine years, the prevalence of economic crime is on the increase in South Africa. And according to the Institute of Accountability, the spread of corruption is directly linked to the demise in 2009 of the corruption-busting Scorpions, which were replaced by the police’s Hawks.
The PricewaterhouseCoopers South African edition of the Global Economic Crime Survey fingers senior managers as the No1 culprit driving the “mind-boggling” theft. The report revealed that 77% of all internal fraud was committed by senior and middle management. PwC director Louis Strydom described as “mind-boggling” the loss South Africa suffered as a result of economic crime.
According to the current PwC report, 37% of those surveyed globally had experienced economic crime. Africa and Eastern Europe reported the highest prevalence of bribery and corruption (39%), followed by the Middle East (35%), Asia Pacific (30%), Latin America (25%), North America (14%) and Western Europe (12%), Strydom said.
Profile of a fraudster: Male; 31 to 40; University degree; Employed in company for more than 10 years.