Friday, January 15, 2016

A Short Ride From Black Friday to Day of Infamy

China's stock market is getting hammered and ordinary people are suffering. If the Chinese Communist Party sees all threats to their rule as a continuum rather than viewing internal matters separate from external affairs, should we worry just a bit more these days?

The Chinese economy is wobbling as the stock market tanks and people lose lots of money and blame official corruption for their troubles:

Ultimately the Chinese people will have to pay for this mess via higher taxes and temporarily reduced income (from unemployment because of many bankruptcies). This will make millions of skilled and educated Chinese very angry and that might be enough to force the communist dictatorship that has held onto power for 70 years to allow more democracy. Communist Party leaders do not want to be forced to deal with democracy.

This anger is currently fueled by the millions of small investors who lost big. This was largely made possible by the ease of borrowing money to buy stocks (“buying on margin”), which was a major factor in the epic American 1929 stock market crash.

I know we are supposed to draw comfort from the fact that the Chinese Communist Party wouldn't risk a war that might shake their economy and thus threaten their position of power.

But if the economy tanks without war, shouldn't we worry that the Chinese rulers might start a short and glorious war to rally the people around the party in the face of foreign devils?

And do the Chinese over-estimate their military power, which could make them more willing than they should be to risk a war?