The Sarcasm Report v.14

China's Retail Sales Grow at Fastest Pace Since 1999 (Update5)

March 12 (Bloomberg) -- China's retail sales climbed 20.2 percent, matching the fastest pace in at least nine years, a sign that consumer spending may sustain the world's fastest- growing major economy as export demand weakens.

Wow. How are they getting people to spend so much?

To foster domestic consumption, China is raising welfare payments and subsidizing farmers' purchases of televisions and refrigerators. Urban disposable incomes climbed to 13,786 yuan ($1,900) last year, while rural earnings rose 15.4 percent to 4,140 yuan.

Farmers do need their televisions. No doubt about it.

``The underlying story is that because food prices are rising rural income growth is the strongest it's been for years,'' said Cavey. ``Urban incomes also are very strong and with real interest rates very negative people don't want to leave money in the bank.''

Incomes are strong, as long as you don't compare them to food prices (about one third of the typical Chinese budget), oil prices, and/or bank interest rates. Seriously strong, once you strip those things out and subsidize TV purchases.

``Real'' interest rates are returns after inflation. The key one-year deposit rate is 4.14 percent, less than half the rate of inflation.

More than 4% in the hole? I must be an optimist. I'm thinking I-Bonds are still a great deal at 1.2% over inflation, because they are tax deferred, AND because the government no longer wants us to buy them (by reducing the maximum amount one can purchase each year). I'm also thinking a 1.6% real yield on the 20-Year TIPS isn't all that bad of a deal these days (it was 1.8% two months ago and 2.2% a year ago). See? Optimist!

That's what I love about America. The Chinese are given subsidies to help buy TVs. In contrast, we are given subsidies (tax rebate checks) to buy entire TVs (maybe even two small ones per person!) or anything else we might desire. We also have the option to buy even more expensive gasoline. It is our choice in the land of the free. Woohoo!