Wikipedia:Reference desk/Archives/Humanities/2008 October 16

= October 16 =

Is China's political system robust enough to withstand the global financial crisis
Given that inflation and corruption are endemic in the PRC, how well can they withstand the current financial meltdown (assuming that it gets worse)? On another point, I'm only guessing here, but if a financial crisis, on the same scale as that in the US, were to (somehow) originate from the PRC I believe that it would have a pretty hard time dealing with the problem (compared to the US). Does that sound like a reasonable assertion?

I don't know anything about economics so feel free to take me task with my assumptions.ExitRight (talk) 14:01, 16 October 2008 (UTC)


 * Actually, since China is largely a worldwide purchaser of government bonds of other countries (they are a creditor nation rather than a debtor nation), and most of the western world is issueing bonds faster than they can print the promissory notes to cover their respective governemnt obligations to "prop-up" the banking industry, China is likely to "make out like a bandit" in the current crisis. As long as the US and UK governments don't go bankrupt in the current crisis, China stands to make a pretty penny on the interest on these bonds.  Plus there's always the threat they could "call in the debt" which puts them in a position of considerable power, politically speaking, over the politics and policies of those governments.  Scared yet?  --Jayron32. talk . contribs  14:10, 16 October 2008 (UTC)
 * Fortunately for the debtor nations you can't "call in" a bond. It's a promise to pay at a certain time in the future. DJ Clayworth (talk) 14:35, 16 October 2008 (UTC)
 * Indeed, the closest they can get to calling in the debt is to not roll it over when it matures. Usually when a bond matures you just use the proceeds to buy another bond, if they choose not to do that and to stop buying new bonds entirely then the governments borrowing from China would have to pay more interest on their debt in order to attract other lenders (I'm sure they would still be able to find lenders, it would just be more expensive). --Tango (talk) 15:50, 16 October 2008 (UTC)
 * I think that ExitRight is asking how the PRC government might fare if the current financial meltdown spreads to the PRC, rather than how the meltdown now mainly confined to Western countries will affect the PRC government. Of course, we can't know the answer to either question, since we can't predict the future.  However, the PRC has a relatively fragile and undeveloped financial system, and it has had a real estate and stock bubble similar to the ones whose bursting is impacting the West.  I think that there is a very good chance that the PRC will have its own financial crisis in the fairly near future. At the same time, its economy is somewhat dependent on exports to the West.  Recession in the West, coupled with a drying up of credit within the PRC, would be likely to cause a rise in unemployment within the PRC.  The PRC government has relied on steady economic advance to legitimize its rule, and an end to that economic advance could cause public dissatisfaction, already evident in many parts of the country, to increase, perhaps dramatically.  Public unrest on a large enough scale could pose a serious threat to the Communist government.  But we don't know whether unrest would reach that scale, and even if it did, the government might find an effective response.  Marco polo (talk) 16:29, 16 October 2008 (UTC)
 * Isn't China as affected by the financial meltdown as the rest of us, given that the Hang Seng has been subject to the same falls as the Nikkei and other Asian stock markets? Itsmejudith (talk) 22:49, 16 October 2008 (UTC)
 * It's difficult to compare how much each country is affected, but China has definitely been affected. I believe they've already reduced growth forecasts. --Tango (talk) 23:09, 16 October 2008 (UTC)

Marco polo, China does indeed have problems with its domestic financial sector, but it also has two things that we’ve never seen in a rapidly growing emerging economy: almost no foreign debt, and massive forex reserves. Therefore, any financial crisis China might (will) have cannot be a classic Balance of Payments crisis (which is a much more accurate term than currency crisis). I also would take exception to the comment that the PRC government has “relied on steady economic advance to legitimize its rule.” Progress hasn’t been all that steady (cf inflationary surges), and much more important there is no alternative to the current government, and no serious threat has been identified since the reforms began 30 years ago.

Itsmejudith, China and the Hang Seng are so very different that it is hard to know where to begin. The Hang Seng Index is Hong Kong’s main stock market index, and the Hong Kong economy is very different from that of China. China’s economy, moreover, is almost untouched by equities markets: the Shanghai stock market index is down about 70%, but real GDP rose 9% in the third quarter. DOR (HK) (talk) 06:01, 22 October 2008 (UTC)
 * Wouldn't you say Taiwan would be another historical case of the two things never seen? If I understand you correctly, I agree about how these things mean China is in comparatively good shape, also because its real economy is in good shape.John Z (talk) 10:03, 22 October 2008 (UTC)
 * John Z, Taiwan is indeed an example of a financial crisis being limited to the domestic side of the economy. Specifically, the 10th Credit Cooperative scandal in the 1980s looks a lot like the model China might follow. DOR (HK) (talk) 02:54, 23 October 2008 (UTC)

UK Banking problem ... solution
What would have happened if Scotland had gone independent of the rest of UK. As a result of which Bank of Sotland and Royal Bank of Scotland would not have been advanced loans. But National Westminster Bank belongs to RBOS. Kittybrewster  &#9742;  19:18, 16 October 2008 (UTC)


 * If Scotland had gone independent it would have its own central bank that could have lent them money. The Bank of England or UK Treasury might have lent money to the parts of their businesses in the UK, as well, or at least protected depositor's money. --Tango (talk) 19:31, 16 October 2008 (UTC)


 * Firstly, it's impossible to know, as we'd only be speculating what the fiscal arrangements would be for an independent Scotland. We don't know what regulatory framework Scotland would have, and we don't know to what extent, and in what manner, the central banking and monetary policy structures of Scotland would be disentangled from those of the rump UK. An amicable split would involve a distribution of the community assets (and liabilities) of the UK, and inevitable asymetries between the resulting countries would mean the negotiators of the schism would trade one thing off against another. It's likely Scotland would seek to join the Euro; we can presume (but cannot be sure) that it would either inherit or immediately join EU, EEA, and the panoply of European and international institutions.  Secondly, it seems countries are taking responsibility for protecting banks that operate in their own country regardless of the nominal HQ of that bank. So it would seem rump UK would be responsible for banks trading in its economy, Scotland for banks in its (so each country is responsible for the business RBOS or HBOS or XBOS does in its economy).  Unless you have banks that attract business from one country while having little actual trading or presence there (like Landsbanki) it's probably mostly a wash.  But thirdly, the economies of Scotland and the rest of the UK are so deeply intertwined that, even with a political disunion, neither country could afford the other getting into trouble, and it would be in both countries' interest to help out the other. -- Finlay McWalter | Talk 20:04, 16 October 2008 (UTC)


 * It's an interesting question; rather like Iceland, Scotland has big banks for such a small nation: RBS, HBOS, and also Lloyds TSB which is headquartered in Glasgow although largely an English company. It is questionable whether an independent Scotland would have enough money to bail out its banks.  Being optimistic, you can look at what happened in Ireland recently where the Irish government guaranteed deposits by some subsidiaries of foreign banks so if Scottish banks failed the English government might well still have intervened to protect English depositors in NatWest, etc - or, as is happening with Iceland, the English government might have taken more aggressive moves against Scotland.  Who knows?--Maltelauridsbrigge (talk) 16:31, 17 October 2008 (UTC)

President and Vice President nominees
When the nominees for USA President and Vice President are out there, all across the country campaigning, are they protected by the Secret Service? Do they hire their own bodyguards? Both? What is the situation? Thanks. (Joseph A. Spadaro (talk) 19:21, 16 October 2008 (UTC))


 * They're protected by the Secret Service for 120 days prior to the election. See here. --Tango (talk) 19:29, 16 October 2008 (UTC)


 * (ec)The USSS certainly protects both Rep and both Dem candidates - but (as with Presidential protection) they're responsible for protecting the key individual - security of overall campaign events is the responsibility of local and state law enforcement and often private security. To what extent notable but very unlikely to succeed candidates like Nader and Barr are USSS protected, I don't know. -- Finlay McWalter | Talk 19:33, 16 October 2008 (UTC)


 * "Major" candidates aren't strictly defined, but ABC News notes that "the criteria normally include an announcement of candidacy, prominence, major party affiliation, fundraising and matching funds." Various sources note that Ralph Nader requested, but apparently did not receive, USSS protection in previous election cycles.  Going back to past major third party candidates, I find that John B. Anderson apparently had a USSS code name (though I don't see specific note of a detail).  It would seem that James Stockdale (Ross Perot's VP candidate in 1992) accepted USSS protection.


 * It's also worth noting that "120 days" is the minimum. Obama received a USSS detail in May 2007. &mdash; Lomn 21:17, 16 October 2008 (UTC)

Thanks for the helpful info and the link. Much appreciated. (Joseph A. Spadaro (talk) 03:58, 18 October 2008 (UTC))

What determines the value of money and is there a safety for capitalist economies from the hoarding of wealth by the wealthy?
I have been researching what determines the value of money and havn't found a clear answer. Is it national gold stores, total demand for a nation's money or is it equal to the value of total material capital within a nation? The last idea I believe is correct because if all the material capital in a nation disappeared all the money in a nation would become useless and worthless. If you could enlighten me on this subject or direct me to where I could find an answer I would be eternally grateful and I also think the answer would be a useful addition to the wikipedia internet encyclopedia. I would also like to ask if there is some kind of safety net for national economies as most capitalist economies I believe with the knowledge I have are due to exhaust money supplies with the hoarding of wealth by the wealthy. This has not happened and so I suspect the production of more and more material wealth is sustaining the middle and working classes or nations are producing more and more liquid money sustaining the middle and working classes. If you could clear up this issue I would also be very grateful. 78.152.217.254 (talk) 19:35, 16 October 2008 (UTC)
 * Does the article on fiat currency help?--droptone (talk) 19:53, 16 October 2008 (UTC)


 * Short answer: If cash is taken out of the market (by hoarding or whatever), prices fall to match the new lower supply of cash. That's your "safety" for first-order effects, though this is a simplified picture. —Tamfang (talk) 03:27, 18 October 2008 (UTC)


 * I believe there is an incorrect assumption built into the question. The wealthy do not hoard their wealth, removing it from the economy.  They reinvest it for the very selfish reason that they want to make more money.  By reinvesting, they stimulate more economic growth, providing jobs, creating goods and providing services.  The money continues to flow.  Anyone who actually hoarded their wealth would lose value because their wealth would be static - inflation would decrease their spending power.  152.16.59.190 (talk) 13:46, 20 October 2008 (UTC)