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China’s “Hualong 1” passes the first stage of the UK GDA process

China’s “Hualong 1” passes the first stage of the UK GDA process

With little fanfare last week, the Chinese designed HPR1000 (previously Hualong-1), pressurised water reactor, cleared the first of four stages in the General Design Assessment (GDA) administered by the UK Office of Nuclear Regulation (ONR). China General Nuclear (CGN) proposes to build 2 reactors of this design at the Bradwell site in England, in partnership with French state-owned EDF that currently operates all UK commercial reactors.

This guest post by Andy Dawson gives a preliminary overview of the design focussing on safety systems.

Introduction

As almost all readers of the blog will be aware, a team of EdF and China General Nuclear (CGN) have proposed the construction of a Chinese designed nuclear station at Bradwell, in Essex. On Thursday of this week, the UK Office of Nuclear Regulation announced that the design proposed for the station -the “HPR1000”, originally known as the “Hualong-1” has successfully completed the first, preparatory stage of the Generic Design Approval (GDA) process. This appears to have been completed on time, or perhaps a few weeks early.

While we shouldn’t over-state the importance of this particular transition – GDA is a four stage process, in which stages 2 & 3 are where the great majority of the detailed evaluation of the design from a safety perspective is undertaken – it is important in that it’s the first point at which the developers have to publish reasonably detailed data on the design. That data is available here.

This piece is intended to give an overview of the design, highlighted particular strengths and weaknesses that may affect the GDA outcome, and giving a comparison against the virtues and vices of the other contenders for UK build.

…click on the above link to read the rest of the article…

China Deleveraging Hits Corporate Bonds As Cascade Effect Begins

China Deleveraging Hits Corporate Bonds As Cascade Effect Begins

Following the market lockdown during October’s Party Congress, many commentators were disturbed by the continued rise in Chinese government bond yields as we returned to “business as usual”, with the 10-year rising to 4%. At the beginning of this month, we discussed the sell-off (see “China: Shadow Bank Inflows Are Critical To Sustain The Ponzi…But They’re Falling”) and noted a useful insight from the Wall Street Journal.

An important anomaly to note about the bond rout: as government bonds sold off, yields on less-liquid, unsecured Chinese corporate bonds barely moved.

That is atypical in an environment of rising rates – usually, bond investors shed their less-liquid holdings and hold on to assets that are more easily tradable, like government debt.

The question was…why had corporate bond yields barely moved? The answer, according to the WSJ, was that China’s deleveraging policy led to redemptions in the shadow banking sector, e.g. in the notorious $4 trillion Wealth Management Products (WMP) sector. Faced with redemptions, shadow banks had to sell something…quickly…and highly liquid government bonds were the “easiest option”. Furthermore…and this is potentially significant…the WSJ noted.

Meanwhile, the nonbanks have held on to their higher-yielding corporate bonds, which at least have the benefit of helping them to maintain high returns.

Not any more (see below).

We agreed with the WSJ’s explanation at the time, but noted that the government bond sell-off was actually a sign of the unravelling of the WMP Ponzi scheme. The Chinese authorities are wise to the Ponzi which is why they announced the overhaul of shadow banking and WMPs last Friday (see “A ‘New Era’ In Chinese Regulation Means Turmoil For $15 Trillion In China’s ‘Shadows”). However, the new regulations don’t kick in until mid-2019, a sign to us that when they looked “under the bonnet”, they didn’t like what they saw.

…click on the above link to read the rest of the article…

Whose Private-Sector Debt Will Implode Next: US, Canada, China, Eurozone, Japan?

Whose Private-Sector Debt Will Implode Next: US, Canada, China, Eurozone, Japan?

Canadians, fasten your seat-belt. Here are the charts.

The Financial Crisis in the US was a consequence of too much debt and too much risk, among numerous other factors, and the whole house of cards came down. Now, after eight years of experimental monetary policies and huge amounts of deficit spending by governments around the globe, public debt has ballooned. Gross national debt in the US just hit $20.5 trillion, or 105% of GDP. But that can’t hold a candle to Japan’s national debt, now at 250% of GDP.

And private-sector debt, which includes household and business debts — how has it fared in the era of easy money?

In the US, total debt to the private non-financial sector has ballooned to $28.5 trillion. That’s up 14% from the $25 trillion at the crazy peak of the Financial Crisis and up 63% from 2004.

In relationship to the economy, private sector debt soared from 147% of GDP in 2004 to 170% of GDP in the first quarter of 2008. Then it all fell apart. Some of this debt blew up and was written off. For a little while consumers and businesses deleveraged just a tiny little bit, before starting to borrow once again.

But the economy began growing again too, and debt as a percent of GDP fell to a low 148% in Q1 2015. It has since picked up steam, growing once again faster than the economy, and now is at 151.7% of GDP, back where it was in 2005. This chart shows US private sector debt to the non-financial sector, in trillion dollars (blue line, left scale) and as a percent of GDP (red line, right scale):

…click on the above link to read the rest of the article…

Pictorial: American Animosity Ambling Amuck

Pictorial: American Animosity Ambling Amuck

This Russia Collusion thing has been going on for one year now. I’m not interested in debating whether or not Trump colluded. I am interested in examining the massive hypocrisy emanating from our government, and on display daily in living color from MSM  whores, prostitutes, traitors, teleprompter readers. Who among us Dirt People isn’t amazed that our politicians can feign their fake indignant shock that such a thing could happen …. for, surely, America would never do such a thing!

The fact is that we  treat the world like a giant outhouse, a place where we shit upon any nation we choose, at the time of our choosing, and then pretend outrage when they return the favor. Not that there’s anything wrong with this. Because, there isn’t, right? It’s how the world works.

But, the Whores&Pols act as if foreign entanglements should be a pure and noble endeavor when, if fact, it’s a dirty rotten business, played as such by powerful nations. Criticism of Russia, China, etc. has risen to a fever pitch. Meanwhile, they paint America as a friendly bringer of democracy,  whose motives are pure as the driven snow, building shining cities on the hill for other countries, and where unicorn farts smell like wildflowers.

Of course, this is all poppycock because making America great again comes at  a price.

—– Henry Kissinger said, — “America has no permanent friends or enemies, only interests.” (Probably stolen from British PM Benjamin Disreali, who likely stole it from Lord Palmersto)

—– Czar Alexander III said; —  “Russia only has two allies: the army and the navy.

—– De Gaulle  said — “a man can have a friend, a nation, never

…click on the above link to read the rest of the article…

Corruption In China Risks A Soviet-Style Collapse – Party’s Graft Buster

Corruption In China Risks A Soviet-Style Collapse – Party’s Graft Buster

Yang Xiadou is the Party’s number two man in Xi Jinping’s crackdown on corruption in the Chinese Communist Party – although some have seen this, in part, as a convenient way for Xi to bolster his power base.

During the 19th Party Congress last month, Yang was asked about the anti-corruption drive and how to achieve a balance between human rights and party discipline. Yang replied that, having worked in the Tibet Autonomous Region for many years, human rights was an “interesting question”. He recounted a conversation he had with a US assistant secretary of state where he likened Abraham Lincoln freeing slaves in America to China’s actions in Tibet.

“I said in the hearts of Chinese people, Lincoln is a hero, because he freed the slaves.

On this point the Chinese people and the American people have the same understanding – this is a human rights issue.

In turn, we freed the serfs in Tibet, how come American friends cannot understand this? From Lincoln’s perspective, he should have supported China’s overturning of the serfdom in Tibet.”

No matter that the Central Tibetan Administration, usually called the “Tibetan Government in Exile” has a starkly different view.

Yang’s ability to “paint broad canvases” was in evidence again when he stated that corruption in China could lead to a collapse similar to the Soviet Union. According to the Times of India.

 China must step up its battle against corruption in order to safeguard against a Soviet-style collapse, the country’s second most senior graft buster said in an editorial on Wednesday. Yang Xiaodu, the deputy secretary of the Central Commission for Discipline Inspection, who was promoted to the ruling Communist Party’s 25-strong Politburo last month, said failure would risk the “red country changing colour”.

…click on the above link to read the rest of the article…

US to Import Inflation from Japan, China, South Korea

US to Import Inflation from Japan, China, South Korea

Even from Japan – whose export producer prices are soaring.

The oil price collapse that started in 2014 pushed down input costs that companies – the “producers” – faced. And producer price indices, which measure inflation further up the pipeline, plunged. But this is over. And the biggest export powerhouses in Asia that have ballooning trade surpluses with the US, show how.

The Producer Price Index in Japan – the “Corporate Goods Price Index,” as it’s called there – jumped 3.4% in October compared to a year ago, after already climbing an upwardly revised 3.1% in September, the Bank of Japan reported on November 13. It was the tenth month in a row of year-over-year gains and the highest annual rate since September 2014, by which time the collapsing energy prices were mopping up any inflationary pressures (chart via Trading Economics):

On a monthly basis, the index rose 0.3% from September. But excluding “extra charges for summer electricity,” the index jumped 0.6% month-over-month.

The biggest movers: Nonferrous metals prices soared 22.4% year-over-year, petroleum and coal products 15.8%, iron and steel 9.7%, and chemicals and related products 3.6%.

On the negative side of the ledger there wasn’t much activity: prices for electrical machinery and equipment edged down -1.1%, for business oriented machinery -0.4%, and production machinery -0.3%.

Export prices in October jumped 9.7% year-over-year in yen terms and 3.8% in contract-currency terms. Export prices of Metals and related products soared 25.8% in yen terms and 17.7% in contract-currency terms. Chemical and related produces soared 16.3% and 11.8% respectively. Other primary products and manufactured goods prices jumped 10.3% and 4.2%. All three of them soared in double-digit percentages just from September!

Japan has exported $101 billion in goods to the US so far this year.

…click on the above link to read the rest of the article…

How to Protect Yourself Online, No Matter Your Security Needs

How to Protect Yourself Online, No Matter Your Security Needs

Find a balance between security and convenience that is appropriate for your life.

Almost every week, it seems that there is some kind of major security breach. Whether celebrity nudes, the social security numbers of the majority of Americans, or a Bitcoin heist, it seems that our private data is under constant attack.

The Internet and your co-workers are full of advice: put a sticker over your webcam, disable Flash/Java in your browser, encrypt your drives, delete your Facebook account, cover your hand while using the ATM, get a burner phone, pay for everything with cash, start wearing a tinfoil hat to protect against the NSA’s spy rays, etc.

The reality is that as more and more of our lives become digital, information security becomes increasingly important. Many bad things can happen when your privacy is breached: from finding out that you have a boat loan that you didn’t know about to having your naked photos all over the web to being thrown in jail because the government doesn’t approve what you have to say. It’s important to take appropriate measures to protect yourself, but what is appropriate for you really depends on the kind of secrets you have to keep and the kinds of threats you need to protect against.

Let’s consider three people who care about their privacy, and steps they should take to keep their stuff private:

Lisa Monroe

Lisa Monroe lives in Madison, Wisconsin. She is a college student with a part-time job.  She just got her first credit card, and just started going steady with a boyfriend.

To keep her private photos private, Lisa only sends them using Snapchat.

Lisa doesn’t have many secrets to keep, but she is worried about fraud to her credit and debit cards and the naughty pics she trades with her boyfriend Brad.

…click on the above link to read the rest of the article…

If The Saudi Arabia Situation Doesn’t Worry You, You’re Not Paying Attention

A key geopolitical axis is swiftly shifting

While turbulent during the best of times, gigantic waves of change are now sweeping across the Middle East. The magnitude is such that the impact on the global price of oil, as well as world markets, is likely to be enormous.

A dramatic geo-political realignment by Saudi Arabia is in full swing this month. It’s upending many decades of established strategic relationships among the world’s superpowers and, in particular, is throwing the Middle East into turmoil.

So much is currently in flux, especially in Saudi Arabia, that nearly anything can happen next. Which is precisely why this volatile situation should command our focused attention at this time.

The main elements currently in play are these:

  • A sudden and intense purging of powerful Saudi insiders (arrests, deaths, & asset seizures)
  • Huge changes in domestic policy and strategy
  • A shift away from the US in all respects (politically, financially and militarily)
  • Deepening ties to China
  • A surprising turn towards Russia (economically and militarily)
  • Increasing cooperation and alignment with Israel (the enemy of my enemy is my friend?)

Taken together, this is tectonic change happening at blazing speed.

That it’s receiving too little attention in the US press given the implications, is a tip off as to just how big a deal this is — as we’re all familiar by now with how the greater the actual relevance and importance of a development, the less press coverage it receives. This is not a direct conspiracy; it’s just what happens when your press becomes an organ of the state and other powerful interests. Like a dog trained with daily rewards and punishments, after a while the press needs no further instruction on the house rules.

…click on the above link to read the rest of the article…

Perpetual Notes – China’s New Way To Hide Debt (Call It Equity)

Perpetual Notes – China’s New Way To Hide Debt (Call It Equity) 

The legacy of the soon-to-retire PBoC governor, Zhou Xiochuan, will be that in sharp contrast to his western brethren, he warned that China’s credit bubble would burst before the fact. Two weeks ago, Zhou warned during the Party Congress that China’s financial system could be heading for a “Minsky moment” due to high levels of corporate debt and rapidly rising household debt (see here).

“If we are too optimistic when things go smoothly, tensions build up, which could lead to a sharp correction, what we call a ‘Minsky moment’. That’s what we should particularly defend against.”

Perhaps sensing that nobody in the Middle Kingdom was paying attention, we noted two days ago his lengthy essay published on the PBoC website. It contained another warning that latent risks are accumulating in the Chinese system, including some that are “hidden, complex, contagious and hazardous.” He also highlighted “debt finance disguised as equity” as a concern. Talking of which, there’s a new growth market in the gargantuan Chinese corporate debt market – we are referring to perpetual notes. Are you ready for the clever part about perpetual notes – they are debt but it’s permissible under Chinese accounting regulations to classify them as “equity” – et voila, corporate gearing has fallen. According to Bloomberg.

Under pressure to trim borrowings, China’s companies have found a way to reduce their lofty debt burdens — even if some of the risk remains. Sales of perpetual notes – long-dated securities that can be listed as equity rather than debt on balance sheets given that in theory they could never mature — have soared to a record this year as Beijing zeros in on leverage and the threat it poses to the financial system.

…click on the above link to read the rest of the article…

Why So Many (in the West) Are Pissed Off

Why So Many (in the West) Are Pissed Off

Campaigning to “Make America Great Again,” Donald Trump swept to the presidency last November 8, buoyed by a wave of anger and sense of betrayal in the American heartland. He knew that, for many, the American Dream had receded inexorably beyond reach, lingering only in distant memories. Critically, American parents no longer expect what had been virtually guaranteed in the mid-20th century – that our children would be better off than we are.

It isn’t just less-educated middle-aged White Americans who believe that American greatness will be restored by pushing back hard against the “other,” including China, India, and immigrants who don’t look like them. A much larger part of America seems open to the simple notion that what ails us is someone else’s fault. This is because hardly anyone on the right or the left realizes just how fleeting the dominance of the West – and the U.S. in particular – has been in the longer sweep of human history.

Few appreciate the uncomfortable fact that, while China and India have advanced rapidly in recent decades, even this is only a partial reversal back to the historical norm. A two-millennium perspective – derived primarily from the lifework of Angus Maddison – shows that, for more than 90% of the time, China and India dominated the world economy, together accounting for about half or more of global GDP in terms of real purchasing power (Chart 1).

In year 1, India’s share was nearly a third of global GDP and China’s was over a quarter – both bigger than the Roman Empire’s. Rome had a huge trade deficit with China, whose silk was worth about its weight in gold.

…click on the above link to read the rest of the article…

Will China Bring an Energy-Debt Crisis?

Will China Bring an Energy-Debt Crisis?

It is easy for those of us in the West to overlook how important China has become to the world economy, and also the limits it is reaching. The two big areas in which China seems to be reaching limits are energy production and debt. Reaching either of these limits could eventually cause a collapse.

China is reaching energy production limits in a way few would have imagined. As long as coal and oil prices were rising, it made sense to keep drilling. Once fuel prices started dropping in 2014, it made sense to close unprofitable coal mines and oil wells. The thing that is striking is that the drop in prices corresponds to a slowdown in the wage growth of Chinese urban workers. Perhaps rapidly rising Chinese wages have been playing a significant role in maintaining high world “demand” (and thus prices) for energy products. Low Chinese wage growth thus seems to depress energy prices.

(Shown as Figure 5, below). China’s percentage growth in average urban wages. Values for 1999 based on China Statistical Yearbook data regarding the number of urban workers and their total wages. The percentage increase for 2016 was based on a Bloomberg Survey.

The debt situation has arisen because feedback loops in China are quite different from in the US. The economic system is set up in a way that tends to push the economy toward ever more growth in apartment buildings, energy installations, and factories. Feedbacks do indeed come from the centrally planned government, but they are not as immediate as feedbacks in the Western economic system. Thus, there is a tendency for a bubble of over-investment to grow. This bubble could collapse if interest rates rise, or if China reins in growing debt.

China’s Oversized Influence in the World

…click on the above link to read the rest of the article…

Is Korea Just a Smokescreen?

Is Korea Just a Smokescreen?

In my last article (Sticking the arson charge on a couple of patsies) I questioned why North Korea’s nuclear program was attracting such attention from the United States. North Korea is a very poor and backwards country whose bellicosity reflects the regime’s need for an external enemy like the United States to galvanize domestic support. Attacking America and its allies in the region is the last thing North Korea’s leaders would want to do as such an attack would guarantee an American response that would be sure to destroy their lives, their government and the lives of millions of innocent Korean civilians.

However, this month I was made aware of another possible reason for the attention being paid to North Korea and its nuclear program. What if the escalating tensions over Korea are just a smokescreen intended to legitimize an American military buildup in the region aimed at intimidating China?

In 2011, former U.S. President Barack Obama announced a change in U.S. foreign policy that was termed a ‘Pivot to Asia.’ The official thinking was that as China and the emerging countries of South-East Asia gained in economic importance, it made sense to devote more military and diplomatic attention to the region while reducing the attention paid to Europe and the Middle East.

Of course, observers also saw the pivot as a response to the rising economic, political and military power of a resurgent China. Just as the U.S. sought to contain the Soviet Union during the Cold War with a string of encircling alliances and economic agreements, so America today seeks to keep China in check through military alliances with East Asian countries like Japan, South Korea and Taiwan and trade agreements such as the Trans-Pacific Partnership (TPP).

…click on the above link to read the rest of the article…

PBOC’s Zhou Warns Of “Sudden, Complex, Hidden, Contagious, Hazardous” Risks In Global Markets

PBOC’s Zhou Warns Of “Sudden, Complex, Hidden, Contagious, Hazardous” Risks In Global Markets

Just two weeks after warning of the potential for an imminent ‘Minsky Moment’, Chinese central bank governor Zhou Xiaochuan has penned a lengthy article on The PBOC’s website that warns ominously of latent risks accumulating, including some that are “hidden, complex, sudden, contagious and hazardous,” even as the overall health of the financial system appears good.

The imminence of China’s Minksy Moment is something we have discussed numerous times this year.

The three credit bubbles shown in the chart above are connected. Canada and Australia export raw materials to China and have been part of China’s excessive housing and infrastructure expansion over the last two decades. In turn, these countries have been significant recipients of capital inflows from Chinese real estate speculators that have contributed to Canadian and Australian housing bubbles. In all three countries, domestic credit-to-GDP expansion financed by banks has created asset bubbles in self-reinforcing but unsustainable fashion.

And then at the latest Communist Party Congress meeting in Beijing, the governor of the PBoC (People’s Bank of China) said the following;

“If we are too optimistic when things go smoothly, tensions build up, which could lead to a sharp correction, what we call a ‘Minsky moment’. That’s what we should particularly defend against.”

Yet, stock markets shrugged off his warning… while the Chinese yield curve has now been inverted for 10 straight days – the longest period of inversion ever…

Which appears to be why he wrote his most recent and most ominous warning yet… (as Bloomberg reports)

The nation should toughen regulation and let markets serve the real economy better, according to Zhou.

The government should also open up financial markets by relaxing capital controls and reducing restrictions on non-Chinese financial institutions that want to operate on the mainland, he wrote.

…click on the above link to read the rest of the article…

Former Prime Minister Howard assumes US shale oil will provide for China’s oil demand growth

Former Prime Minister Howard assumes US shale oil will provide for China’s oil demand growth

Australia in Today’s World – some observations from former PM John Howard
https://aiiansw.tidyhq.com/public/schedule/events/16630-australia-in-today-s-world-some-observations-from-former-pm-john-howard

John Howard was happy to report that Chinese GDP growth is 6% and that a great future lies ahead for Australia.

In Q&A I asked him:

“Are you aware that Chinese oil production peaked in 2015? Therefore China is now where the US was in 1970 when US production peaked. That was followed by the Nixon shock in which the US cancelled the convertibility of the US$ to gold. In 2016, China’s oil demand growth was around half a million barrels per day. Multiply this by 10 years and where will 5 mb/d come from?”

Here are a couple of graphs which highlight the situation:

China_crude_production_2002-Jul2017_JODIFig 1: China’s oil production

China_demand_by_product_2015-Sep17_IEA-OMR

Fig 2: China’s oil demand by fuel

Note that only 24% of fuels (and 18% of growth) is petrol which means electric cars won’t help much.

Asia_oil_production_consumption_2005-2016_fill_in-2036

Fig 3: Asia Pacific oil production vs consumption

The above is my favorite graph to show that there cannot be perpetual growth in the “Asian Century”

Howard’s answer:

“I was never asked this question….from US shale oil I guess”

Let’s have a look at the US crude oil projections from the Energy Information Administration done in January 2017:

…click on the above link to read the rest of the article…

The End is Near…Depopulation is Out of Control…So Buy Stocks (Seriously)

The End is Near…Depopulation is Out of Control…So Buy Stocks (Seriously)

The world economy is premised on a ludicrous idea.  That Asia, then India, and then Africa will continue to drive economic growth.  So as not to turn this article into a book, lets consider this idea focusing on East Asia consisting of China, Japan, North and South Korea, Taiwan, and minor others.  This region consists of 1.6 billion persons or about 22% of earths inhabitants.  However, since 2008, it is this region that is responsible for nearly 100% of the global increase in demand for oil (best proxy available for true economic growth) and having primarily driven global economic growth.  My point in this article is that the growth in this region is entirely a credit driven supernova against collapsing populations which will never be able to fill the 100+ million newly added apartments or pay back the debt incurred to achieve the “growth”.  Contrarily, from an investor standpoint, this weakness is the green light to “invest” as aggressively as possible because as long as central banks exist, they have your back.
Consider, since 2000, China’s debt outstanding has risen something like 14x’s to 17x’s or from about $2 trillion to something between $30 to $35 trillion presently.  As for Japan, who knows Japan’s true debt as Japan’s central bank is buying much or most of the debt and essentially throwing it in a black hole, never to be seen again(…monetization with a capital “M”).
Why the massive debt creation and central bank monetization?  Depopulation with a capital “D”.  First off, consider the collapse in fertility rates for these nations (chart below).  To maintain a constant, zero growth population, the childbearing population needs to produce 2.1 children in order to replace themselves (dashed line, below).  However, as the chart below shows, E. Asian nations have seen negative fertility rates for decades (Japan turning negative in ’74, S. Korea in ’83, China in ’92, and N. Korea in ’96).

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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