Are Beijing home price falling or not? Beijing mirrors U.S. housing market bust

Lots of charts in 北京房价到底降没降 take a detailed look at Beijing's housing market, slicing it into the different local markets.

The blue line is year-over-year price growth each month, while the chained growth shows a flat market with a small dip in November. The authors selected 39 representative projects in Beijing and found that 44% saw price decreases, 38% were unchanged and 18% saw price increases.

This next chart shows prices for various developers withing the 4th ring. Central Beijing has a ring system and although no on calls it a ring, the first is the Forbidden City. The next is the second ring. A lot of government buildings and famous tourist sites fall within it and land is obviously very expensive. The eastern part of the city is more developed, so prices are high even out to the fourth ring. At the moment, 5th ring housing is cheaper and it's far enough away that commute times start becoming a problem, even if one takes the subway.

The chart shows there was very little decline in prices within the 4th ring in Beijing last year. Note the highest priced development, a Vanke project, is pushing 60,000 yuan per sqm, more than US$9,000.

Fifth ring prices are also relatively stable, but there's a lot of different areas. In the east, it is more developed, in the west and south, less so. These are very different areas to lump together, but Beijing people do think in terms of rings. (If someone asks where you live, you might answer east 5th ring.)

Prices are generally down about 10% in the 5th ring.

Next up is Daxing, where prices slid as sales prices are too high. This area is in the south of Beijing, but not in the city proper, it is one of the southernmost suburbs more than 30 km away from the downtown.

The article said land prices are going for about 6000 yuan per sqm, but developers are asking for 20,000 yuan for apartments, which leaves room for further price declines.

Finally, there's Fangshan. This is 38 km away from downtown Beijing, to the west of Daxing. Fangshan replaced Tongzhou as the "hot" area of development in 2010.

Prices have taken quite a dip here, but there's still a gap between the 6000 yuan land price and 15,000 yuan selling price. Competition may drive prices lower, but there's less room for decline here than in Daxing.

How does this compare with the American experience? In the U.S., it was the outer regions that saw the largest price declines, the developments in the desert and a long distance from the city center (Arizona, California and Nevada were most typical). Therefore, the price declines in Daxing and Fangshan are a mirror of the U.S. post-bubble market and indicates the real estate bubble is bursting in a similar manner in Beijing.

Chinese home price declines extend to second and third tier cities; prices down 50% in Chengdu; Vanke sales fall 40%

楼市降价向二三线城市蔓延

Prices fell about 50% in one area of Chengdu, where homes sold for 5200 yuan per sqm, in area that was selling for more than 10,000 yuan. Even at those low (?) prices, very few people showed up to look at apartments.

Also worth noting: the time line keeps getting pushed out for the real estate decline, these articles almost all say at least six months of price declines. Most estimates are 15-20% for top tier cities, down to 10% for fourth tier cities. I expect as much as 40% in parts of some top tier cities, if not in the whole city, before all is said and done. But I also have a longer timeline, the "common wisdom" in the press (mostly analysts quotes and journalist commentary) seems to be that 2013 could see prices rebound.

Vanke January home sales tumble 40 pct
In 万科高管直言:买地过多开发商将会遇大麻烦, Vanke executives also said developers who buy a lot of land will face a lot of trouble this year.

Socionomics Watch—Hong Kong residents call Mainland Chinese "locusts"; Chinese call HKers "running dogs"

A war of words and actions has erupted between Hong Kong and Mainland China. Ostensibly a part of China, Hong Kongers increasingly see themselves as separate from the mainland, to the point where they are confronting Chinese tourists on the streets. The vector for this conflict is the tidal wave of pregnant mainland mothers who go to Hong Kong for medical care and citizenship. As a small city bordering Mainland China, the population imbalance is acute and lead to pregnant Hong Kong women unable to find a hospital bed.

Hospitals may ban mainland mothers

Speaking in a radio interview, Dr Cheung Wai-lun, the authority's director of hospital groups, said: "We are evaluating next year's quota for non-local pregnant women. There is a chance we might further lower it or we may even stop admitting them."

A quota of 3,400 births has been set for non-local women in public hospitals this year, down from 10,000 last year, and Cheung said it could be lowered even further.

He said the primary aim of public hospitals was to meet local needs.

There could be a legal solution to this problem though, one that could defuse the conflict:

Rita Fan Hsu Lai-tai, a member of the National People's Congress Standing Committee, said the NPC had stated in 1999 that babies born to visiting mainland parents in Hong Kong should not be given the right of abode.

But in 2001, the Court of Final Appeal ruled that the right of abode should be given to Chong Fung-yuen, who was born while his parents were in the city on two-way permits.

Fan said, given that the city's government had still not sought a reinterpretation from Beijing after the court's ruling, it now had to consider how to cope with the influx of mainland women giving birth here.

As a testament to negative social mood, this simmering issue has quickly erupted into a big "cross-border" conflict.

Translation of the ad, from ChinaSmack:

Do you want Hong Kong to spend $1,000,000 HKD every 18 minutes raising “double negative” children? ["double negative" refers to when neither parent is from Hong Kong.]

Hong Kong people have had enough!

Because we understand that you are victimized by poisonous milk powder, we’ve tolerated you coming to panic buy milk powder;
Because we understand that you have no freedom, we’ve welcome you to “travel freely” to Hong Kong;
Because we understand that your education is backwards, we’ve shared our educational resources with you;
Because we understand that you don’t read complete [traditional] Chinese characters, we’ve used crippled [simplified] Chinese characters below:
“When coming to Hong Kong, please respect local culture, [because] if it weren’t for Hong Kong, you would all be doomed.”
Strongly demand that the government revise the Article 24 of Basic Law!
Stop mainland “double negative” pregnant women from limitless invasion of Hong Kong!

Hong Kong newspaper ad rails against Chinese 'invasion'

The advertisement in the Apple Daily asks if Hong Kongers approve of spending HK$1,000,000 (US$128,925) every 18 minutes to take care of children borne by mainland parents and declares that "Hong Kong people have had enough!"

Picturing a giant locust perched atop a mountain overlooking Hong Kong, the ad invokes the locally-coined locust label used to describe mainlanders, reflecting a concern among some residents in Hong Kong that mainland Chinese are "taking over" the city.

This paragraph is extremely important for understanding social mood and the nature of conflict. How often does one hear that Europeans or Americans are racist for opposing high levels of immigration, because those immigrants come from different cultures or racial groups? Yet, here are Hong Kong people reacting in a manner that would be a hate crime in Europe and at least described as one in the United States. However, linguistically and genetically, there's no (or very little) difference between most Hong Kong people and those coming from Mainland China. Even culturally, these are very similar populations, but they are still objecting to the mass influx of population. It makes average citizens uneasy:

The ad comes after a series of incidents in recent weeks that point to a growing resentment among locals, with some critics suggesting this is due to a deeper unease and anxiety over Beijing's degree of influence in local affairs and Hong Kong's autonomy within the "one country, two systems" that took effect after the city's handover to Beijing in 1997.

"The greatest fear Hong Kong people have is Hong Kong becoming just one more city in China," Chinese University of Hong Kong anthropologist Gordon Mathews told Time magazine last week.

Fear, anxiety. These are emotions that dominate during negative social mood. The article goes on to detail how some citizens are taking direct action:

In December, a row between locals and mainland visitors on a city train was caught on video and widely circulated online. The prolonged yelling match, sparked when an local man became incensed by a woman who had disobeyed the no-eating rules and ended up spilling food on seats, led passengers to press the emergency button.

Another incident occurred last month outside a Dolce & Gabbana store in Hong Kong when shop staff were accused of discriminating against locals by preventing them from taking pictures, while mainland tourists and other foreigners were reportedly allowed to do so.

Welcome begins to wear thin

At the same time, grassroots resentment has boiled over in Hong Kong toward this influx of mainland Chinese visitors on a number of fronts, including healthcare and housing, presenting a twilight challenge for Tsang and his government’s legacy of symbiotic integration with China.

Insults are being hurled across the border, with some Hong Kongers decrying the mainland Chinese as “locusts”, while one Chinese professor called Hong Kong people “running dogs” of the British.

Some say Hong Kong’s overly China-focused policies have corroded the city’s uniqueness, international character and values, and those policies might now need revising.

Mainland Chinese counter that Hong Kong for too long looked down on its mainland cousins and should not enjoy favoured status from mainland leaders.

It's not as though these feelings are entirely new. There were street protests in 2003:

“It’s all an outcome of a set of inclinations toward China policies laid down by the government 15 years ago,” said Chip Tsao, a well-known columnist and writer in Hong Kong, referring to the first post-handover administration of the unpopular, Beijing-backed leader, Tung Cheehwa, whose policies sparked a mass, half-million strong anti-government demonstration in 2003.

And how was the Hang Seng Index trading at the time?

Only at the lows for the decade, which fits the socionomic theory that these types of protests would occur in the vicinity of stock market declines, the declines themselves a reflection of negative social mood. The people in both Hong Kong and China are in the midst of declining social mood and this conflict is the result. However, it could have deeper legs because of the strong public reactions. For example, some Hong Kong netizens have also created a music video called "Locust World":



There is also a more popular video that shows Mainland Chinese doing things Hong Kong people hate:



Hong Kongers are also singing the "Locust World" song in the faces of Chinese visitors: Hong Kongers Sing “Locust World” Harassing Mainland Tourists

Right now in Hong Kong, people are singing “Locust World” when encountering mainlanders on the street, especially against those tourists who are buying luxury bags and cosmetics, and has already become harassment.

And how is China reacting? First lets look at a chart of the Chinese stock market, which shows a clear decline since 2009, indicating declining social mood:

First up is Washington Post coverage: China denounces ‘Hong Konger’ trend

The survey, conducted last month by the University of Hong Kong, found that the number of respondents who view themselves as Hong Kongers is more than double the number who see themselves as Chinese and that bonds of shared identity with the mainland have grown weaker since Britain relinquished control in 1997.

Infuriated by the results, Chinese officials have orchestrated a campaign of denunciation — the latest blast in a barrage of verbal and written broadsides against alleged disloyalty in Hong Kong.

If you think this is a small issue, think again. Along with the behavior of citizens in Hong Kong, taking action against Mainland visitors, there are very serious implications due to the schedule for democratic elections in 2017.:

The China Daily, a state-run mainland newspaper, ridiculed the survey as “preposterous” and “intent on messing up Hong Kong.” Other party-controlled media in Hong Kong suggested that Chung was being manipulated by foreign interests, including British spies, alleging contacts with David Ford, a former colonial official in Hong Kong with supposed ties to British intelligence.

“I do not know David Ford, and I have never met him,” Chung said.

China’s sharp reaction has sparked wary speculation here about its motives. One theory is that officials merely want to display tough nationalist credentials ahead of a leadership transition in Beijing this year. Others note the role of local politics: Hong Kong will get a new chief executive this year — chosen by a 1,200-member committee — and will then start preparations for a real election, with universal suffrage, scheduled for 2017.

Beijing, analysts say, wants to ensure that the expansion of democracy in Hong Kong doesn’t empower “hostile forces” or encourage discussion of what it views as taboo issues, one of the most sensitive of which is identity.

Conflict is scheduled to occur by 2017. It may not be violent, but if social mood remains negative or becomes worse, separatist sentiment will grow and Hong Kong will become a thorn in Beijing's side. The election could result in a "rejection" of Beijing and a loss of face for the thin-skinned Communist party. On the other hand, if social mood rises in China or Hong Kong (one side becoming positive would probably be enough to defuse the tensions), Hong Kong and China will put aside differences and work together.

The last bit from the Washington Post story:

Independent media have rallied to Chung’s defense and voiced alarm at China’s reaction. Instead of attacking Chung, the Ming Pao newspaper said, Beijing officials should ask why Hong Kong’s people “are growing cool towards China.”

The answer is social mood.

Finally, to see how Chinese netizens are reacting, click through to Anti-Mainlander Hong Kong Ad Parodied, Becomes Internet Meme.There are many parody ads. Some use parody to criticize, such as the one that substitutes Hong Kong for the U.S. and calls for a Chinese exclusion act. Others almost seem sympathetic because they attack migrants moving into Chinese cities, where locals have similar adverse reactions. Also included are many translated comments from Chinese websites, showing a range of opinion on the issue.

For investors, what's the takeaway? Be on the alert for policies/actions that damage the economy. Hong Kong will suffer if there are policy mistakes, or if the anti-Mainland sentiment causes tourism to slow.

Greece on the edge of default; conflict in the streets

Greece nears debt deal with banks but EU clash looms.

The headline says it all. This was always a conflict with origins in social mood and politics. The euro was formally launched at the height of social mood and political unity. Since then, social mood has declined and the chief fault line is political, not economic. The economy and debt are a problem, but it could be solved, as the deal with banks shows. What cannot be fixed is the need for confrontation and conflict that comes with negative mood, which is why we see Greece fighting Germany and France.

The deal will slice €100bn off Greece's debt and leave banks, pension funds, and other bondholders nursing effective losses above 70pc, but it does not in itself avert the risk of a Greek default in March.
Greece must reach a deal over coming days with Troika officials from the IMF, EU, and European Central Bank, who are demanding further austerity cuts equal to 1pc of GDP before disbursing fresh loans.

If you understand the origin of the conflict comes from social mood and that mood is expressing itself via politics, the situation makes perfect sense. No need to wonder why Greece, France, Germany, Italy, Hungary, Spain, Ireland, Finland or Portugal make decisions that appear "irrational" when there are workable solutions; no need to question whether the euro can survive, whether any members will leave. There will be conflict, it will be political in nature, and several nations will exit the eurozone. If Prechter's long-term forecast for the markets is correct, a few years from now this will seem like a happy time in Europe.

Angry Youths Attack House Of Greek President Papoulias with Rocks and Molotov Cocktails

A group of between 30 and 50 youngsters attacked the house of President Karolos Papoulias on Saturday evening.

The result of the attack was some minor damage to the entrance of the house at Asklipiou Street in central Athens and to the car that Papoulias uses.

Violence continues in the wake of Arab spring

Cairo government office torched as protests rage

Egypt's tax authority building in Cairo was set on fire as street protests against army rule raged into the early hours of Sunday, state TV footage showed.
Parts of the building, close to the interior ministry, were set ablaze, state TV said.

Anti-government protests, triggered by violence at a Port Said soccer match which killed 74 people, have killed a further 12 people in the last four days.

Libyan militia accused of torturing to death ambassador to France

Human Rights Watch said that Omar Brebesh, a career diplomat who was cultural attache and then ambassador to France between 2004 to 2008, was brought in for routine questioning in Tripoli over his work for the former regime.
His body turned up at a hospital in Zintan, the town two hours' drive to the south-west that was a hub of last year's revolution, beaten, bruised and with some of its toenails removed.

The Zintan Brigade, one of the revolution's most powerful militias, has clashed with rivals in Tripoli. Most recently, members fought for control of the former beach compound of Saadi Gaddafi, another of the dictator's sons, with members of the Misurata Brigade, once seen as a Zintan ally in Libya's complex patchwork of regional rivalries.

Argentina rattles the war drums

'We'll fight to the bitter end for Las Malvinas'

But as passengers returned to the ship with gaudy, over-priced souvenirs from the world's southernmost city this week they were confronted with an alarming scene.
At the harbour gates, a band of tough-looking stevedores and Falklands War veterans had gathered to unfurl a huge banner showing the Union Jack with a red stripe through it. 'The docking of English pirate ships is forbidden!' read the accompanying message, written, of course, in Spanish.

Until liberation came, we were told, there would be no relaxation of the blockade, which now extends along the entire Argentinian coastline and covers all ships trading in the islands, as well as Falklands-licensed trawlers.

So why, as one apprehensive female passenger pondered on viewing the menacing banner, can liners like the Star Princess still dock in Ushuaia?

Since virtually every business in the city depends on tourism, the answer is clear: the Argentinians may be desperate to regain the Malvinas but they aren't going to break their bank to do it.

The article goes on detail the military mismatch between the two sides and explains why there won't be a shooting war. This is more in line with anti-Japanese protests that erupted in China several years ago, where there was no chance of escalation. During periods of declining social mood, governments desperately want to find a foreign target that let's them join with the people as "us" versus "them", rather than "us" being the people and "them" the government. Even better if there's no way it can lead to war. Of course, how often do government policies work? Stirring up nationalism may not lead to a war initially, but it may eventually find a softer target.

Finally a bit of short covering on the euro

Greece shuts down

60,000 shops to shut down

The jobs to be lost concern 60,000 employers and 100,000 employees in the sector, ESEE expects. Given the data for a 6.2 percent fall in household consumption in 2011 and the Eurostat forecast for a further decline by 4.3 percent this year, ESEE warns that soon Greece will be in a condition of absolute poverty.

When socialists run out of other peoples' money, they really run out. Interesting that the end game for the more doctrinaire socialists in the former Soviet Union, Communist China and elsewhere, is the same for the less strict socialists in Europe—and probably the even-less-but-still socialist United States—total bankruptcy. China's economy was annihilated by Mao and the country switched systems in the late 1970s. The Soviets were more rational in their economics, but they were done by the end of the 1980s. China may yet go down again due to contradictions within the system, but Europe is the main event for now.

The safest places to invest are those where the internal social mood is positive and the country is starting from a low base, which allows them to grow through domestic demand. Indonesia and Vietnam would be good candidates, but they are tied to global trade. It will depend on whether China continues to grow through its real estate slowdown, or whether it tips into outright recession.

Egyptians continue to rage

Egypt: Cairo rages as football disaster bodies come home

Police fired tear gas and rubber bullets as supporters of Egypt’s biggest team, Al-Ahly, and thousands of revolutionary activists surrounded the interior ministry to protest against the worst footballing disaster in Egypt’s history.
The crowd, tens of thousand strong, called for the fall of the Army Council and for Field Marshal Hussein Tantawi, de facto head of state, to be hanged.

Many accused supporters of Hosni Mubarak, the former president whose sons Gamal and Alaa had close ties to Egypt’s football establishment, of deliberately instigating the violence at the Port Said stadium of Al-Masry following their 3-1 win over Al-Ahly on Wednesday night.
“This was not a sports accident, this was a military massacre!” the crowds chanted. Supporters of the rival Cairo club Zamalek turned out in sympathy.

In Clashes With Police, Egyptians Unleash Fury Over Soccer Riot Deaths

News reports indicated that many of those killed in the fighting were teenagers or younger, and at least one victim in the Cairo morgue appeared to be younger than 10.

Groups of ultras organized around rival clubs began appearing in Egypt within the past decade. Although rival fans often clashed, all shared a common culture of obscene chants, special firecrackers and instruments, and a violent hatred of the police who usually try to control them. Some paint vulgar insults to the police on walls around Cairo.

In the year since the uprising against Mr. Mubarak, the ultras have increasingly found that political demonstrations are good for practicing their second favorite sport, fighting with police officers.

Egypt's stock market bottomed at the start of the year, as social mood declines. However, the stock market has rebounded and didn't drop much after the riot. We may see a further rebound as power transfers from the military to democratically elected representatives, but longer term, the outlook is negative.

Socionomics Watch—Volcanic Threat

Concerns grow over volcanic eruptions

wo recent papers highlight the shift. One looked at a Death Valley volcano thought to be 10,000 years old and found it last erupted just 800 years ago, and is still an eruption danger. The other found that large caldera volcanoes, such as the one under Crater Lake in Oregon, can recharge in a matter of decades, rather than the thousands of years previously thought.

"The understanding of the timing of eruptions and the timing of the building up to eruptions is changing," says Margaret Mangan, the scientist in charge of volcano monitoring in California for the U.S. Geological Survey. "These two papers are very nice examples of good scientific work."

This is ongoing research, but the source is USA Today, not the latest episode of "Super Volcanoes."

Egyptian social mood causes riots and stock market decline

In Egypt heading for collapse, I looked at the Egyptian economy breaking down. Now, a riot at a soccer game preceded a sell-off in the stock market.
Egypt market plunges after deadly soccer riots

Egypt's benchmark stock index fell over 2 percent Thursday, paring an earlier plunge stemming from deadly soccer riots the night before that left 74 dead and rekindled fears of fresh instability akin to the unrest that has battered the country and its economy in the year since the ouster of Hosni Mubarak.

Everyone thinks the riots caused a sell-off, but soccer riots aren't strange, even when it leads to death. In Egypt's case, the riot and the falling stock market are both a result of negative social mood.

"There are a lot of fears, a lot of concerns, a lot of potential clashes," said Mustafa Abdel-Aziz, senior broker with Mideast investment bank Beltone Financial's brokerage division. "But we're seeing the market react much better than it should" given the night's violence.

But what's "not quantifiable is the extended tension between the police, the protesters and the army," said Abdel-Aziz. "Definitely, if there's an extended tension in this relationship, you could see another wave of selling."

Why is the decline in social mood necessary? An example from education

Education will be a defining battlground as social mood declines. Due to the need for spending cuts, the education establishment will be forced to make changes in the way it operates, either by accepting reform or being replaced by a new leadership that takes over.

In one of his books, Prechter gives an example of how the traders behave in the pits, why they act in a manner that creates Elliot Waves. Socionomics is the same, there's a story behind the waves that provides detail and color to the unfolding wave. Declining social mood is sometimes presented negatively, but it is necessary, the same way a forest fire cleans out underbrush in a forest. When social mood is rising and reaches its zenith, people are united and follow their leaders. They don't question authority, they accept the advice of experts and this leads to rot. At first the leaders may be honest and driven by the desire to create good outcome, but later they become corrupt and concerned with advancing their own agenda, having drank their own Kool-Aid. When social mood declines, there is in some sense an unfocused mood that aims to destroy or tear down. The question is whether the inevitable decline in mood is constructive or destructive in its destruction. Does it destroy the current regime and replace it with something better, or does it simply destroy? Case in point in America, education.

The elites in America do not allow their children to watch television or restrict their children's viewing habits. They force their children to read books, learn to play instruments and play games that require concentration. They may send their child to an elite public school, otherwise they probably send their child to a private school. Less wealthy parents who want to give their children a similar upbringing spend money on tutors and extracurricular lessons, or they homeschool. At public schools, there has been a push to use computers and digital media, and when children don't concentrate, they are given drugs, the type used by recreational drug users.

How America made its children crazy

One really wants to light a torch and march on Frankenstein's castle, also known as the psychology profession. Until the passage of the 2005 Individuals with Disabilities Act, schools had the power to force children to take ADD drug, namely amphetamines, or bar them from classrooms, even when parents objected to the medication. I don't know how many children were harmed by the sorcerer's apprentices in school psychology offices, but the new research might provide grounds for some exemplary lawsuits. It turns out that the mainstream was dominated by cultists and loonies. The religious day schools, the home-schoolers, alternative schools like the Waldorf movement turn out to have been islands of sanity in a sea of delusion.

Consider the peak of social mood and the above paragraph. I don't think the author is using hyperbole here: America has been forcing young children to take narcotics because the educational system failed and the medical community offered an explanation that blamed the children. Many American parents objected to their children being "medicated," but unless they had the means to pull them out of public school, they could not stop the government from forcing their children to take drugs. Parents have a duty to take their children out of harmful situations and what the public schools were are are doing is child abuse, but most people accept what the government does and do not make choices that adversely affect their economic situation. As social mood declines, however, the "kooks" and "lunatics" who opposed the system are now seen as being correct. The psychology profession itself is attacking long-held ideas about child development. Now, evidence is piling up that computers in the classroom are a bad idea:

Learning how to learn is the point of education. We will forget the great majority of specific things we were taught: Euclidean proofs, the polynomial theorem, Roman emperors, French grammar, atomic weights, the poems of Browning, and whatever else was stuffed in our heads as schoolchildren. What we learned, if we learned anything, is to memorize, analyze and explain. If we know geometry, algebra or French today, it is not because we retained our knowledge but because we re-learned the subject. School, in short, taught us to concentrate. The most successful people are not the cleverest in terms of sheer processing power, but those who multiply cleverness with persistence.

The psychology profession, by contrast, thinks that the brain is a machine, and the best way to engage it is to use another machine, namely a computer. Computers, to be sure, do not kill brains; people kill brains with computers. Computers in the hands of people who believe that gratification is the highest human goal, and the quicker the gratification, the better, have devastated our mental landscape. Our children do not read; they only surf. They do not write; they only text. They do not plan and strategize in games; they react to visual and aural stimuli while inflicting simulated mayhem. They do not follow a plot: they cut among disjoined images in the style of rap videos. And when they fail to concentrate, we give them Adderall and Ritalin.

It is mouth-foaming, howling-at-the-moon madness, and it is our mainstream culture. The wired classroom hasn't worked, so the educational establishment recommends more of the same quack cure. The New York Times reported last September that computerized education has produced no measurable results, except for some negative ones (test scores fell after massive investment in computers). Yet the education gurus remain undeterred. ''The data is pretty weak. It's very difficult when we're pressed to come up with convincing data, ''Tom Vander Ark, the former executive director for education at the Bill and Melinda Gates Foundation told the Times. Reporter Matt Richtel wrote: ''And yet, in virtually the same breath, he said change of a historic magnitude is inevitably coming to classrooms this decade: ‘It's one of the three or four biggest things happening in the world today.'''

If social mood were still rising, we could expect no changes in the educational system. Instead, the decline in social mood is the moment when outsiders can challenge and tear down the existing system. In this case, they have plenty of evidence that this is the right course of action:

The American elite, to be sure, does not subject its own offspring to this kind of digital treatment. New York City's most exclusive private schools, the ones with an acceptance rate lower than Ivy League colleges, do things the old fashioned way. Brearley School, sometimes considered the best of the private schools for girls, requires every student to learn an instrument and play in the orchestra (the only other New York school with this requirement is the Rudolf Steiner School). The Dalton School teaches chess to every student. Acoustic instruments, classical music, and ancient games with wooden pieces teach concentration span.

In Silicon Valley, Times reporter Matt Richtel observed in an October 22 feature, many of the Silicon Valley types who make weapons of mass dementia send their own kids to a school that bans computers until the 9th grade.

Spengler goes on to note that China does not have an epidemic of ADD:

It appears that Chinese children, who must memorize several thousand characters in order to complete elementary education, do not suffer from Attention Deficit Disorder. Two-thirds of Chinese children graduate secondary school, which involves a grueling exercise in memorization. As I reported earlier in this space, 50 million Chinese children are studying Western classical music (see China’s six-to-one advantage over the US, Asia Times Online, Dec 2, 2008). That's the same number of children aged 5 to 17 in America. Nothing builds attention span better than playing classical music. Granted that much of China's educational system teaches rote memorization, and that the majority of Chinese may not receive top-quality schooling, it is still the case that the absolute number of Chinese kids mastering high-level skills is a multiple of the American number.

Declining social mood is nature's way of shaking up the system; it is an opportunity for change. What people do with the changed mood is another matter. They could turn anti-intellectual and close schools, as happens in some countries. Or they can tear up the education establishment and replace it with new standards and ideas. The elite could find a minority group to target and attack them instead, blaming them for the failures of education. Or, perhaps the current system is the best one, but has some failings. Maybe it survives the challenge through reform and becomes a more robust system. Ultimately, this depends on the groundwork laid out in the years before. Today, the likely opposition is from school choice advocates and homeschooling.

Chinese government reserves tumble

Gov't Deposits in Central Bank Decline

According to data released by the central bank on January 31, the central bank's treasury deposits were 2.27 trillion yuan, marking a significant decline from November's 3.41 trillion yuan. The decline in government deposits had the equivalent effect of cutting bank reserve requirement ratios by 1.5 percentage points.

Despite widespread speculation that the central bank cut bank reserve requirements to improve market liquidity, the central bank didn't announce any rate hikes in January. Instead, the bank conducted several consecutive rounds of reverse repurchase agreements to inject liquidity into the market before the Spring Festival holiday which started on January 22.

Market analysts said that the significant reduction of treasury deposits has been a key factor in the delay behind the announcement of a new reserve requirement cut.

There's probably an explanation, but such a large drop in reserves doesn't look good.

Chinese to drill 10 km into Earth's crust

The Rocky Depths of Heilongjiang

Last December, the 60-meter-high, 1,000-ton drilling rig, which takes up approximately 10,000 square meters of ground, was put on more than 70 delivery vehicles and trucked from Chengdu to Daqing oil field, the largest oil field in China's Heilongjiang Province.

Its first task will be to drill a 6,600-meter Sonke No. 2 Well in the Songliao Basin in northeast China. With the completed Songke No. 1 Well, it will constitute the world's only nearly complete record of Cretaceous continental deposits. By obtaining a high-resolution record of climatic changes during the Cretaceous period in East Asia, scientists say the data could be used in predicting future global climate change trends.

The deep survey project led by the Chinese Academy of Geological Sciences (CAGS) has a budget of 1.1 billion yuan, making it one of the largest basic science projects since the founding of China. Titled the "Deep Surveying Special Project," (DPSP) scientists say a basic survey of the Songliao Basin will be completed by the end of 2012.

It doesn't sound as though they'll test the abiotic theory of oil.

Social mood: horror gets more horrible?

The horror movie so terrifying it made audiences SICK: Ambulances called to screening at Sundance festival

One viewer was watching a midnight screening of V/H/S last week when he ran from the cinema screen, collapsed and began to suffer seizures, according to the film’s co-writer Simon Barrett.
While he was being treated, his girlfriend also ran into the lobby and began to vomit. The night before, another woman reportedly left in tears because she could not stand the suspense.

Most people are skeptical of these stories and believe it to be a publicity stunt. However, the mid-2000s graphic torture movies continually escalated their content and this movies sounds like it is within the trend. It also coincides with declining social mood.

Bearish stories on China dominate media

Check Out Frank Holmes' EPIC Presentation On The China Boom, And What It Means For Commodities

What's interesting to me is that the Western press isn't as bearish as the Chinese press. There's more coverage of the China bears, but not a lot of new arguments. Although domestic media is generally positive, there's a lot wider range of bearish opinion and some of it cuts much deeper than what is reported in mainstream Western media outlets.

Financial repression is profitable: Chinese bank profits exceed those of the tobacco and oil industries

内地银行业暴利超过烟草石油 专家建议存款单边加息 (Chinese bank profits exceed tobacco and oil Expert suggests raising rates on CD deposits) Google Translations follow:

According to CBRC statistics, the first three quarters of last year, China's commercial banks realized a total profit of 817.3 billion yuan, up 35.4%, close to 2010 full-year profit after tax net profit, average profit margin of 22.1% of capital and operating costs 208.5 billion yuan, per capita profit of nearly RMB 400,000. According to this situation, I guess commercial banks in 2011 accumulated profits in excess of 1 trillion yuan, then the profits will be more than RMB 500,000 per capita.

The per capita number is based on employees. The article compares this with industrial sector profits, which were 3.67 trillion yuan, but spread over 87 million workers, for a per capita profits of about RMB 40,000.

China bailed out the banks a decade ago by holding down deposit rates and lifting lending rates, allowing the banks to pocket the spread. This also helped shift assets towards borrowers (state owned industry) and away from consumers. Foreign analysts have speculated there could be a similar policy to bail out the banks from bad real estate and infrastructure debts, but as the above article shows, the social mood may not allow it this time.

Q: so high banking profits What is the reason?

Mr Chan: The sources of bank profits so high a number of factors, first, the credit last year, the foundation is relatively large, although the growth rate is not so high in 2010, but growth is still very large, then the corresponding bank is big scale. Therefore, the corresponding operating profit was more.

The second aspect is the most basic factor, the relatively large deposit and loan spreads. The bank deposit and loan spreads is the main business income, but also the major source of profits. Our country's 16 listed banks, the first three quarters of last year, net interest spread revenues of more than 1.2 trillion yuan, accounting for 80% of total revenue, 71.7% at the five state-owned banks and 90% at joint-stock commercial banks . In other words, the 70-80% of the banks' operating income is from the deposit and loan spreads. Because this spread is provided by the State, the State to the bank a higher interest rate, banks can get more income, you can make more money, so this is a basic factor.

Sweden investigating 200 Chinese families for immigration violations

中国移民梦断瑞典：近200中国家庭被指不诚信或遭遣返. The article discusses what attracted one man: the generous welfare state and clean environment. However, the rub here is that there may have been some illegal methods and shortcuts used to obtain visas and work permits. Those in violation could be deported. I don't know if this is covered in the Swedish press; there's no English story that I could find. It will be interesting to see how the government responds. Anti-immigrant sentiment is mainly focused on the Muslim immigrants who cause a large amount of crime and are less likely to adapt to Nordic life. Declining social mood would make it harder for all immigrants though...

Chinese banks discount mortgage rates

After January's dismal housing results, Chinese banks are cutting mortgage interest rates. Last year, many banks were charging premiums, generally about 10% above the benchmark rate.

Shanghai banks lower mortgage interest rates

"Rumor has it that major State-owned banks have started to offer benchmark interest rates for a first-home purchase, while some smaller commercial banks and foreign-funded commercial banks are offering a 5-percent discount compared with the benchmark interest rate," said Lu Qilin, research director at Shanghai Deovolente Realty Co, a Shanghai-based real estate agency.

First-time homebuyers were only able to apply for a mortgage interest rate at 10 percent above the benchmark level last year because of the credit crunch and a State-backed campaign to deflate the property bubble.

Banks may be discounting rates to grab market share early in the year.

Beijing has seen a similar easing, see: 京城银行房贷大面积回归基准利率 相比去年明显松动. (Beijing banks return to normal interest rates, loose than last year). This article quotes the big state owned banks as saying their policies are consistent, while some smaller Chinese banks are offering discounts to customers with good credit. It goes on to say foreign banks, such as Citibank and HSBC, have the most lenient standards and offer discounts of 5 to 10%.

African unrest could cost China billions of dollars

In Liu Junluo: if Italy or Spain default, Chinese stock market will drop 40%, an important portion of Mr. Liu's comments was the following:

In early 2010, I suggested that the policeman of the world, USA, was preparing to exit, and all over the world, in every region, would be large scale unrest. Along with the "Arab Spring" approaching epilogue, Chinese investment in the Arab region sinks into disaster, and we'll soon see China's African investments similarly fall into catastrophe. The losses will be $500 billion or $800 billion, only God knows.

Already in 2012, Chinese workers were taken hostage in Sudan. Then, today, Egyptian Bedouins kidnapped more than 20 Chinese workers in Egypt.

Egyptians hold Chinese workers

The confirmation from the embassy came after sources from a Bedouin tribe in Sinai said tribesmen had kidnapped 25 mostly Chinese cement factory workers who were travelling to a concrete plant.

The workers were held in a tent near a road that the Bedouin had blocked for three days to press their demand that authorities free fellow Bedouin from prison, the tribal sources said.