A thought to ponder Anyone?

[Billy T]

All of what you say is possible. ... Right now I see an investment bubble in China, with regular Joe's borrowing to invest, that threatens to implode that market the same way the Japanese market imploded. ... No other country is as trustworthy with your investments as the United States. Which is why private investors will keep pouring more money into this economy than any other.... You talk about "China" pulling their money out of the United States and "Countries" doing this and that. China doesn't trade with the United States. Individuals in both countries do that. And the individuals in other countries are not going to pick another place to put all of their eggs until they see economic stability of the variety that the United States has....

For an economy growing at >9% annually for at least 3 decades, I do not think "bubble" is the correct term.

I am not sure if your "Joe" is Chinese or not. The typical Chinese certainly is not a borrower. (Only 3% even know what a credit card is! Perhaps only the Japanese are saving a greater percentage of their income.) Nor is he, again like the Japanese, a wise investor. - Burying a gold coin in the backyard is not much of an investment, but it has probably been a better investment than depositing money in a bank as in China too, the real interest from the bank has been negative.

I am not much of an expert on Japan, but I think this extreme saving for rainy day is the fundamental reason why Japan stagnated. - Even with negative real interest rates on money you deposited in the bank, the “Japanese Joe” keep filling the banks with money, which in turn they had to lend out to ever riskier enterprises, especially construction of office buildings which were already in over supply with no renters. These banks carried a lot of bad debt and did not write any off until recently. - Chinese banks have done the same but now are opening up to western ownership, as they must. Western banks will teach them both how to invest money profitably and more importantly to issue credit cards. If you think there is demand in China now, wait until the Chinese follow the US into a "consumer driven debt mode," with typical Chinese using credit instead of saving for years to buy a TV, motor bike, etc.

Thus, I think you are entirely wrong about who is investing in China, the cause of the Chinese "bubble," etc. It is the rest of the world that is pouring the global excessive liquidity into China as they can see a fantastic market coming there when "Joe Chinese" does learn to behave like a borrowing, debt-laden, American.

I also think you are wrong about where Chinese trade demand comes from. - It is not from "Joe Chinese," but yes from the government. For example, it was the Chinese Government that just set up the world's largest ever assemble of African leaders to make trade deals between countries. Chinese SOI (state operated industries) are the ones driving up the prices of commodities. - For example, signing a 25year contract with Brazil for enriched iron ore etc.

I also think you are wrong as to why foreigners are investing in US (not as much as the Americans and US companies are investing in foreign lands BTW) The foreign money is coming to US, not because US is as good a return as they expect to get from China and the third world developing countries, but because they have received dollar (The US deficits) and do not want to get stuck with this falling asset. - I.e.it is better to by Chrysler’s auto plant, etc.

Also it is true that US has world's best record of political stability, but we are speaking of economics. Brazil has a real problem now with the INSTABILITY of the US dollar. The central bank is buying them up at at least a billion a week now. (Reserves have doubled in a year. - just hit 100 billion dollars) as no one wants dollars and they are flowing into the country to take advantage of the world's highest interest rates. (The nominal rate was about 32% a few years ago and has been steadily cut to just under 15% (>11% real) now, but like most modern economies, “inflation targeting” is the main guideline of the central bank and too rapid a decline in rates would restart the inflation with excessive demand.) Local manufacvturing is really hurting as dollar has lost 45% of its value and they still sell for dollars, but that too is changing. Many central banks are getting out of dollars - the dollar is not a "stable store of value" as it once was. Dollars are coming out of mattress all over the world as people are starting to realize this. That is happening, despite China and Japan being still willing to accept more each year. (China because its domestic buyers are not yet rich enough and inexperienced with buying on credit to consume the growing production & Japan as it depends on the seventh fleet to keep it safe and dare not start the run on the dollar.)

SUMMARY: Dollar WAS stable, appears to be now, but soon you will see that it is not. US's rapidly growing debts and termination of the housing bubble assure you of that. Look at the current facts, the current trends, not the past, to predict the future.

 

[swivel]

The Economist and Time magazine both recently ran articles about the rush of the Chinese population to invest in their own economy, and both smell a bubble. I just don't see how this is any different than any of the other countries that industrialized. There is a huge initial surge, then a correction, and then slow growth.

What is true of China today will not be true when they have a larger middle class. They will get the same problems that Germany, Japan, India, and the United States received. You can't have growth, and still retain your favored status as a cheap-labor market. And since the two are currently tied to each other, as the cheap labor gains financial status, the growth will subside. This happens everywhere, and each time, another generation of jeremiads has to learn these simple economic truths for themselves.

I predict that in 20 years we will be saying the same thing about Africa, as investors rush to take advantage of the last undeveloped countries, and the last untapped resource of cheap labor. China will be developed, living below the American standard of living, and languishing just like Japan is, and people will be making millions writing books on how the African countries are going to take over the world because they are growing at a 10% clip annually.

You really should look at what China is growing FROM. When you start in the dumps, the 9% gains aren't that much. You can double your SOL every 5 years and not catch up with the world leaders.

And most of the manufacturing in China is performed by companies that are completely or partly foreign-owned. This isn't a resource that China has, and will have in the future. It is a resource that other countries are generating cheaply, with reduced wages. These factories could be anywhere 20 years from now, and the money is pouring back overseas.

As for the instability of the Dollar, it doesn't matter. As I said elsewhere, the trust in the Dollar is psychology, not economics. You are going to have a hard time getting every investor to pull their money out of the American economy, which is still a juggernaut when compared to the rest of the world. 43% of all manufacturing occurs here with 5% of the world population. You can pooh-pooh the American economy all day long, and point to the savings rate, but you have a hard time arguing with that sort of productivity and efficiency. No other country is even close, which is why the politically correct (and cool) thing to do is to denigrate the United State's position in the world market. It's fun, but it's incorrect.

 

[Billy T]

We will just wait and see which of us is right. Your "All is rosy" or my "US is going down"

The Economist and Time magazine both recently ran articles about the rush of the Chinese population to invest in their own economy, and both smell a bubble. ...

Perhaps only a smell from the bursting bubble in US?
Here is a long quote from Bloomberg today, which I have slightly shortened and made bold in a few spots for "speed reading":

Housing `Hangover' Kills Jobs as Spending Wanes; More Cuts Loom By Kathleen M. Howley, from:
http://www.bloomberg.com/apps/news?...Dnbs&refer=home

Feb. 21 (Bloomberg) -- Denise Hamilton was earning the biggest salary of her life painting and packing refrigerator parts until Collis Inc. decided to shut its Evansville, Indiana, factory and she was fired.

Hamilton, 36, lost her $11.20-per-hour job last month because Collis's main customer, Whirlpool Corp., the world's largest appliance maker, cut production after a drop in home sales reduced demand for new refrigerators, washing machines and dishwashers. Whirlpool fired 500 workers at its Evansville plant and Collis fired 160, including Hamilton. ...

New and existing home sales dropped almost 10 percent last year, depressing demand for products from copper pipes to kitchen sinks and resulting in the loss of about 100,000 jobs in the U.S. Housing-related unemployment probably will increase in 2007, according to the Joint Center for Housing Studies at Harvard University...
``Appliance manufacturers and other suppliers are already feeling the heat, but they may not feel the full impact until the end of 2007,'' Bendimerad said. ``There's typically a lag of as much as a year.''

Furniture Makers, Plumbers

By the end of this year, job cuts at companies including Whirlpool, Masco Corp. and Emerson Electric Co. may exceed the fallout from the 1991 housing slump, said Paul Puryear, managing director at Raymond James & Associates. The Bureau of Labor Statistics doesn't give data for housing-related job losses. ....``The full impact hasn't hit yet.''

As the backlash from the latest slide spreads, U.S. economic growth probably will slow to 2.7 percent this year from 3.1 percent in 2006, said David Berson, chief economist of Washington-based Fannie Mae, the world's largest mortgage buyer.

U.S. furniture makers fired 28,000 workers in the past year, according to the Bureau of Labor Statistics. Homebuilders have cut 24,000 jobs in the past three months alone. The U.K.'s Wolseley Plc, the world's biggest distributor of plumbing and heating equipment, has eliminated about 4,500 positions in the U.S., about the same number that Whirlpool plans to shed.

`Ripple Effect'

Masco, maker of Behr paint and Delta faucets, is firing 8,000 people, or about 16 percent of its U.S. workforce, after reporting its first loss in five years. Emerson Electric, based in St. Louis, cut 230 jobs at a plant that makes furnace components and Stanley Furniture in Stanleytown, Virginia, fired half the workers at one of its factories. ``We're going to see other industries have a hangover long after the housing recession is over,'' said Richard Yamarone, chief economist of Argus Research in New York. ``Housing has a ripple effect through the whole economy, from the carpet makers to the dishwasher salesmen.''

Builders broke ground in January on the smallest number of new homes since August 1997 as the industry struggled to unload last year's record 542,000 of unsold properties, the Commerce Department said in a Feb. 16 report. In the last three months of 2006, housing starts fell 24 percent from a year earlier.

Wealth Effect?

New-home sales probably will decline to an annualized pace of 944,000 in the third quarter and then rise to 959,000 in the last three months of the year, the National Association of Realtors said Feb. 7. Sales of previously owned homes bottomed in the fourth quarter at an annualized 6.24 million and will rise through at least the second half of 2008, the group said.

Long gone is the so-called wealth effect that prompted consumers to increase spending as the values of their homes climbed, according to analysts, including Ivan Feinseth of New York-based Matrix USA LLC.

The median price of a previously owned home will fall 1 percent to $216,500 this quarter from $218,700 a year earlier, the third consecutive quarterly decline, Chicago-based NAR said. Prices for new homes, about 15 percent of the real estate market, probably will rise 1.1 percent to $247,500, the slowest pace in 15 years. ...

Masco's Loss

``For the first time in many moons, the fourth quarter was a time for slowing sales in the United States and booming sales everywhere else in the world,'' Caterpillar Chief Executive Officer James Owens said in a Feb. 15 interview. ``I think we will see that essentially be the pattern for 2007.''

The world's largest maker of earthmoving equipment saw North American sales of backhoes and dump trucks fall 1 percent in the three months ended Dec. 31 as homebuilders cut production, Caterpillar said in a Jan. 26 statement. The Peoria, Illinois- based company forecast ``sharp declines'' for sales of the equipment in 2007.

``We've seen sales drop off by about 10 or 15 percent from last year,'' said Ron Stites of Wagner Equipment Co., in Aurora, Colorado, where a new Caterpillar excavator costs $200,000. ``The housing market in the whole region has slowed down,'' he said in a telephone interview from his office on the outskirts of Denver.

Masco last week said it had a fourth-quarter loss of $187 million, or 49 cents a share, compared with net income of $173 million, or 41 cents, a year earlier. The company, based in Taylor, Michigan, blamed plummeting home sales and said further weakness might push 2007 earnings per share to $1.50 or less, compared with $2.22 in 2006.

...

Shipments of appliances made by Whirlpool probably will fall by 2 percent to 3 percent in 2007, after declining 8 percent in the fourth quarter, the Benton Harbor, Michigan-based company said in a Feb. 7 statement.

Unemployment Rate

``Current demand trends in the United States are expected to be down during the first half of the year and improve during the second half,'' said Jeff Fettig, Whirlpool's chairman and chief executive officer, in the statement.

That will come too late to save jobs at the Collis factory in Indiana. On Monday, Hamilton started a new job unloading trucks. ... She's making $3 less an hour than she made at Collis, ... but at least I found another job,'' said Hamilton... ***

While workers in appliance, furnace and furniture factories worry about their jobs, the rest of the labor market is showing strength, said Michael Darda, chief economist of MKM Partners LP in Greenwich, Connecticut. The U.S. unemployment rate was 4.6 percent in January, close to a five-year low of 4.4 percent in October, according to the Labor Department.

``There are certainly industries shedding jobs, but with the labor market as tight as it is, those workers will get reabsorbed into other parts of the economy,'' Darda said. That's not much comfort for executives such as Caterpillar's Owens, whose U.S. sales are falling. ...

***Note added by Billy T: Taking a pay cut to get replacement job is very typical. Note this also means there is less coming in to the Social Security system to finance the rapidly rising claims of the retiring baby boomers." and of course they were contributing greatly to SS during their peak earning years. (more out go with less income - not very stable)

 

[swivel]

You should add some boldface type for the sections, that was a very difficult post for me to read.

And I don't dispute your ability to cull negative economic news. There has never been a year in our history where this was not possible, and obviously, every year hasn't been horrible for our economy. I could just post the Dow numbers for today and pretend that both of us have made a point.

My posts are not daily snippets of the typical news headlines, they are my own analysis from years of studying history and economics. I agree that this seems weaker on the face, especially compared to the output of a google search and the puling of media outlets. However, I'm inclined to trust my wisdom over the headlines that are designed to get your blood boiling.

So, this week it is the housing market sucking = doomed economy. A few months ago, the housing market was souring, but it was gas prices = doomed economy. Before that, gas prices were great, but unemployment was rising = doomed economy. Now, unemployment is great, but service jobs are on the rise, so it is manufacturing jobs lost = doomed economy. But manufacturing output is the same now as it has been since 1982, which must mean that outsourcing = doomed American economy. But net jobs have increased, and unemployment flirts with 4%, so housing slump = doomed American economy.

If you can't see how you have made up your mind because of political ideology, which colors the way you sort your news (which has a negative bias to begin with), then there is no helping your understanding of how things truly are. You will always believe the things you believe, and no observation or measure will ever change that. What is odd, is that there are so many people like you, and you are wrong about nearly everything every year, but you cling to your jeremiad convictions and feel that THIS year will be the year it all goes to hell. It is this similarity of the far left with the far right's conviction that the end-times are near that force me to lump you all into the same pile.

 

[Billy T]

...I could just post the Dow numbers for today and pretend that both of us have made a point.....

No, you would be making my point for me. I predicted last year in some thread here that the dow will close 2007 "just below 1500." - Reason is the dropping dollar value, not the increasing prosperity of US economy. For example, if every green dollar were replaced overnight by two blue ones in some surprise anti- counterfit move, then the dow would double in one day. The dow going up, at new highs, etc. is just more evidence that the US dollar is in trouble. Measure the dow in ounces of gold, (or anything of real value instead of a printing press product) and you will understand that the US economy is going down. Honestly is your purchasing power going up for essential things like food (corn up 86% in 12 months is now reflecting into other foods etc.)

 

[swivel]

No, you would be making my point for me. I predicted last year in some thread here that the dow will close 2007 "just below 1500." - Reason is the dropping dollar value, not the increasing prosperity of US economy. For example, if every green dollar were replaced overnight by two blue ones in some surprise anti- counterfit move, then the dow would double in one day. The dow going up, at new highs, etc. is just more evidence that the US dollar is in trouble. Measure the dow in ounces of gold, (or anything of real value instead of a printing press product) and you will understand that the US economy is going down. Honestly is your purchasing power going up for essential things like food (corn up 86% in 12 months is now reflecting into other foods etc.)

1,500 is pretty low for the Dow. I think you missed the mark quite a bit.

Exactly my point. That's why I said we could both "pretend" to have proven something. The Dow is just as meaningless as most of the other tidbits you have thrown out, which is why I was making fun of the fact that I could counter with it.

I am very aware of the effect that inflation has on the Dow. I view inflation as a stock-split that the shareholders are unaware of. What governments do is criminal according to their own standards of prosecuting businesses. :bugeye:

 

[Billy T]

1,500 is pretty low for the Dow. I think you missed the mark quite a bit. ...

Yes, I missed a zero as you surely know (15,000 was my prediction) but wait a few years more (until after the run on dollar is over and some new currency has replaced the old, world is in deep global depression etc, and 1500 may be about right (in real purchasing power that is.)

Also at your request, I have added some more bold, and removed the section on metals from prior post of article Bloomberg printed today.

 

[Billy T]

...So, this week it is the housing market sucking = doomed economy. A few months ago, the housing market was souring, but it was gas prices = doomed economy. Before that, gas prices were great, but unemployment was rising = doomed economy. Now, unemployment is great, but service jobs are on the rise, so it is manufacturing jobs lost = doomed economy. But manufacturing output is the same now as it has been since 1982, which must mean that outsourcing = doomed American economy. But net jobs have increased, and unemployment flirts with 4%, so housing slump = doomed American economy....you are wrong about nearly everything every year, but you cling to your jeremiad convictions and feel that THIS year will be the year it all goes to hell. It is this similarity of the far left with the far right's conviction that the end-times are near that force me to lump you all into the same pile.

I have not been wrong - just the opposite. I saw the decline in dollar's real value coming at least five years ago, started getting my money out of dollars back then, mainly by buying ADRs. - others now see what I saw then and are doing the same. For example I bought the water company of Sao Paulo as even in a global depression people do not let their water get cut off. I paid less than $5 /ADR sh for it and how it is about $35 - a seven fold gain. However it is up only about 350% in local currency. A significant part of this local gain is because other wealthy Americans are now buying its ADRs to protect themselves for the dropping dollar. That is, the 45% drop in dollar value against the Brazilian currency AND the extra demand for foreigners, especially Americans, explain most of the 700% gain. (Water companies are not "high flyiers" by them selves.) I have done almost as well with India ADRs, especially my IBN (a large bank) ~500% gain for that ADR but less, I am sure, in the Indian rupee. The average of all my ADRs is >300% dollar gain, but of course the dollar is worth less and ever more rapidly droping now, so I have roughly increased the purchasing power by slightly more than 200% in less than five years (took a few years to get out of dollars carefully).

Repeating:

I have been right, not wrong, for the last five years, but agree on your weekly/ monthly comments about fluctuations.

PS - I agree that thinking for ones self is the only way to make speculative money - following what you read will not get you out in front. But you need to pull your head out of the sand, look around at what is happening to get the facts to think about, not rely on fact American has been great, thus always will be. etc.

 

[swivel]

PS - I agree that thinking for ones self is the only way to make speculative money - following what you read will not get you out in front. But you need to pull your head out of the sand, look around at what is happening to get the facts to think about, not rely on fact American has been great, thus always will be. etc.

Agree. I don't pretend that America will always be great, nor do I think it always has been great. I just think that it will lead the world economy for at least the next 100 years. Even if we have a global depression, which will make all countries not-so-great, the United States will be the least-worst-off, making it the leader.

We just have too much in natural resources, and too advanced an infrastructure for anyone else to leapfrog us. A global depression will be utter doom for China and India. Once demand for products overseas stops, they will settle right back into subsistence agriculture.

I think of myself as a realist, so your "head in the sand" comments don't even register with me. I look around the world and analyze each country and don't see any that are poised to handle an economic downturn the way the US economy is. Especially since, if the global economy goes bad, you can expect military strife. Positioned between Canada and Mexico, with a world of water on either side, the United States could go uni-hemispheric in a heartbeat while Europe destroys itself for the umpteenth time and the Orient scrapes away at an environment that has been raped for thousands of years. And Africa will go right back to being the Black Continent, a phrase that had nothing to do with skin color, and everything to do with its non-existence as far as the rest of the world was concerned.

If you want to create dire economic conspiracy theories, look no further than the European Union, which will implode long before the United States does. When you have that many disparate economies with no control over monetary power, you get the national version of the free-loader effect. Everyone is riding Germany right now, and that is a recipe for disaster. Economically and possibly militarily.

I'm glad you've made some money on your investments. I do not invest. I keep my assets liquid, as I am not one for gambling. Inflation affects me, and that is about it. I don't spend much money overseas, so the strength of the dollar has minor effects on my life, notably on the trickle-down costs of goods. I make very little money and I spend even less, so my economic concerns are not for myself, but for the betterment of the most lives possible. And this latter concern has pleased me considerably the past dozen years, as I do not think our species has ever been this well-off in our brief history. And perhaps this view, coupled with my modest means, is why I am an optimist who appears to have his "head in the sand".


Edit: I just read your post again and it is much better, it will really help future readers (god bless them!)

 

[Billy T]

...Even if we have a global depression, which will make all countries not-so-great, the United States will be the least-worst-off, making it the leader.

I think that unlikely. China will be “number one” long before your 100 years. Have you read any of my many posts that discuss the difficulty the US will have because more than any other nation it has built "suburban infrastructure"?

In a dollar collapse generated global depression, US will only have limited oil import ability and essentially zero income for trade. US is highly (more than any other country by far) dependant on cheap energy, especially liquid fuel. US imports much of what it needs (trade deficits) and with a rapid decline in dollar's value, will not be able to sustain its "suburban infrastructure" / consumer debt economy.

China, in contrast, has long term contracts for the raw materials it needs and will require all of its growing production capacity to service its domestic demand and honor the commitments it has made for these raw materials. (At least after the dollar collapse, the US will then be enjoying a positive trade surplus with China because then the US will be an “agricultural colony” of China, due to US’s natural gifts of good water and soil in the mid west.)

Because in approximately a decade, the rapidly growing middle class in China will have greater (than all of America’s) disposable income (including new Chinese credit cards that have not been "maxed out" and also, unlike US, have homes with value far in excess of any mortgages that may exist to secure loans etc.) China will be quasi-closed economy, relatively undisturbed by the global depression.

In a decade, China will be self sufficient in energy even though using less coal! - 30 new nuclear plants will be online in two years - US has not even ordered one in 30 years. (China has a new power plant coming on line every 8 days now!) Many new hydro-electric dams also coming on line, including the world's largest now on line. Western China has more oil than all of the gulf states put together, but just now starting to drill ass the area was not of interest to the big oil companies (too far for ports in the rugged mountains and real possibility that China would confiscate their investments - also why I do not own any ADRs of China or Russia.) China recently opened world’s highest railroad that will bring the mineral wealth of Tibet into China to further reduce the need to import raw materials. China wants to, and soon will be able to, stand alone as world’s leading economic super power.

Perhaps more important than all these physical facts, is that China has years of experience with running a closed economy (and a population that accepts, even supports, all that implies). In contrast to your claim that US will lead the world for a 100years, I expect China will be dominate in less than 20. This more because the US has built unsustainable "suburban infrastructure" and has constantly growing debts, which will require constantly increasing interest rates to compensate for the growing risk of "printing press dollars" / dropping dollar values.

Yesterday's data on core inflation rise surprised most experts, but not me. In no more than a decade US will need to pay 10% real interest to finance the debt* and this alone will kill the US economy even if there is no global depression. What money I could not get out of US (mainly because the taxes on my profits concentrated in short period) is in inflation adjusted bonds. Glad to hear you live cheaply - you will need this skill and a gun to protect your vegetable garden before 2017.
--------------------------------------------
*Debt to GDP ratio is more important that absolute level of debt. It will rapidly rise as these high interest rates cut the GDP. US has already, IMHO, passed the point of no return. I.e. must now borrow more or run the presses to pay for the debts it already has, and theyare rising rapidly now. - The cost of financing them is growing even more rapidly as interest rates rise. This is a vicious road to dollar collapse, even if there were no financial disaster being created in Iraq. (You, like every American, will go about $2000 deeper in debt because of that in 2007 alone!)

Again, open your eyes, try to protect yourself. US history in the era of cheap energy is a false guide to the future. If I were young, without money to invest in ADRs, I would at least be learning Chinese!

 

[spuriousmonkey]

Economically and possibly militarily.

Military????

 

[quadraphonics]

In a dollar collapse generated global depression, US will only have limited oil import ability and essentially zero income for trade. US is highly (more than any other country by far) dependant on cheap energy, especially liquid fuel. US imports much of what it needs (trade deficits) and with a rapid decline in dollar's value, will not be able to sustain its "suburban infrastructure" / consumer debt economy.

Oil dependence can be replaced with use of domestic coal, should things come to that (which they won't). Moreover, if the dollar really does collapse, America won't need to sustain a consumer economy, as it will overnight become an export powerhouse to shame Germany or China.

China, in contrast, has long term contracts for the raw materials it needs and will require all of its growing production capacity to service its domestic demand and honor the commitments it has made for these raw materials.

What makes you think these contracts will be worth the paper they're written on after a widespread global depression? The African governments that signed those deals won't exist.

Because in approximately a decade, the rapidly growing middle class in China will have greater (than all of America’s) disposable income (including new Chinese credit cards that have not been "maxed out" and also, unlike US, have homes with value far in excess of any mortgages that may exist to secure loans etc.) China will be quasi-closed economy, relatively undisturbed by the global depression.

You can't be quasi-closed when you have massive dependence on imports of energy and raw materials, and massive dependence on exports. Remove either one of those (which a global depression would), and China's economy goes down the drain.

In a decade, China will be self sufficient in energy even though using less coal!

Stuff and nonsense. Why would they be signing long-term oil contracts if they intended to be self-sufficient in 10 years?

http://www.rand.org/pubs/monograph_reports/MR1244/index.html

30 new nuclear plants will be online in two years - US has not even ordered one in 30 years. (China has a new power plant coming on line every 8 days now!) Many new hydro-electric dams also coming on line, including the world's largest now on line. Western China has more oil than all of the gulf states put together, but just now starting to drill ass the area was not of interest to the big oil companies

And yet, all of this development is still not enough to keep up with rising demand for energy, let alone cut into energy imports.

Perhaps more important than all these physical facts, is that China has years of experience with running a closed economy (and a population that accepts, even supports, all that implies).

Dude, they ditched that approach decades ago. It was a miserable failure that resulted in widespread poverty and untold millions of deaths. Their economic progress over the past decades has been a direct result of the opening of their economy. To go back to a closed system now would be economic and political suicide, and so will never happen.

More here:

http://en.wikipedia.org/wiki/Deng_Xiaoping

Yesterday's data on core inflation rise surprised most experts, but not me.

You mean the news about how core inflation is less than was expected, and so interest rates are holding steady?

http://today.reuters.com/news/artic...01_N21319561_RTRUKOC_0_US-USA-FED-MINUTES.xml

In no more than a decade US will need to pay 10% real interest to finance the debt*

Funny, rates have been constant for 6 months now, even in the face of ongoing deficits. Interest rates have yet to approach pre-9/11 levels or historical averages. There's plenty of room to raise rates without strangling the economy, not that it will be necessary.

and this alone will kill the US economy even if there is no global depression.

If the US economy dies, that alone will result in a global depression. Conversely, if the US economy thrives, there will not be a global depression. You can't have one without the other.

*Debt to GDP ratio is more important that absolute level of debt.

And yet, America has a lower debt to GDP ratio than many developed nations, despite ongoing budget problems. The picture you paint has America looking more and more like France or Japan, both of which seem to get along fine (if not as well as the US).

 

[Billy T]

Oil dependence can be replaced with use of domestic coal, should things come to that (which they won't). Moreover, if the dollar really does collapse, America won't need to sustain a consumer economy, as it will overnight become an export powerhouse to shame Germany or China.

True coal can be made into liquid fuel, at considerably higher cost, but to convert US to replace even 1/3 of what it imports would take half a decade or more. The dollar can collapse in half a month, so coal to liquids will not protect US against sudden financial disasters.

What makes you think these contracts will be worth the paper they're written on after a widespread global depression?

The best of all possible guarantees - the self interest of both parties.

Take Brazil's 25 year contract to supply China with enriched iron ore as an example. China, which has built the most modern ports in the world, will build a port for it to export thru and improve the railroads, supply heavy earth moving equipment etc. Also China will sell all sorts of electronic equipment and starting in2008 the Cheery motors model QQ car for the equivalent of us$3500 to get the Brazilian Real to pay with.

Many of Brazils industries are already hurting as China bought 18 billion in grains and ores last year (Think I have remembered it correctly.) and the Brazilian Real is already excessively strong as a result of all these exports. (China needs to sell more to Brazil and less to US.) Brazil’s Central Bank is buying up dollars at more than a billion per week now (reserves now at 100billion dollars) but still the Real gets stronger. No one wants dollars it seems.

I.e. The contracts will be honored as both sides need each other and the growing global dislike of American policy is not a negligible influence on why many countries are trying to replace US trade with that of other South American, African (especially South Africa) and Chinese or other Asian trading partners. Hell, the government of Italy just fell because of this dislike, but falling governments in Italy is not really news.

You can't be quasi-closed when you have massive dependence on imports of energy and raw materials, and massive dependence on exports. Remove either one of those (which a global depression would), and China's economy goes down the drain.

You are 100% correct here. For at least a decade, what I just said about mutual needs will remain true, but if China has natural gas from Russia (hundreds of kilometers of the pipeline already in the ground) and does develop its vast western providence's oil reserves (a new pipeline needed - perhaps part of the reason why importing steel despite making 43% of world's total) then they might tell Sudan to go to hell, but I doubt it. I expect China would build and fill strategic oil reserves to feel more secure /and as investment as oil will be $100/Barrel and going up.

You miss understood in part my "closed economy." That did not refer to a state planned & directed economy but one servicing its domestic demand mainly (much like the US one does) With new rail line to Tibet, lots of hydro and nuclear power, some oil imports if cheap, China will mainly need (find it more economical, at least) to buy and import grains, even some from the US as US has great agricultural lands.

By then that is the only thing China will want from US (For example, the now two years old join Embrare /Chinese airplane factory in Harbin will be meeting the growing domestic demand for airplanes etc. instead of Boeing. All those western designed and financed factories will be cranking out products mainly for the Chinese market - not export. China will be able to threaten US with it 15 to 20 trillion dollars reserves and no need to accept more just to have a customer for it products. The US/China trade imbalance will disappear or be slightly in US favor. Certainly, China will not need to sell to the US market anymore than it needs to turn dollars back as grain purchases and can threaten to dump trillions if US tries to interfer in China's plans.)

...You mean the news about how core inflation is less than was expected, and so interest rates are holding steady?

http://today.reuters.com/news/artic...01_N21319561_RTRUKOC_0_US-USA-FED-MINUTES.xml

Thank for the link - it proves my point, not yours. It is the expectations of the FED's OMC on 29&30 Jan07 where they clearly state that they expect core inflation to be stable or go down. Well my statement that " everyone, but me, was surprised on Feb20 (or was it 21?) when the data was released as the core rate having gone up" certainly is support for my statement. Your reference only documents that my "everyone" included the Open Market Committee!

...And yet, America has a lower debt to GDP ratio than many developed nations, despite ongoing budget problems. The picture you paint has America looking more and more like France or Japan, both of which seem to get along fine (if not as well as the US).

Yes that is true today. (next year probably also) I made the point same point - explicitly stating that the debt to GDP ratio is more important than the absolute level of debt; however what you are ignoring is that US GDP can rapidly go down and will if either:
(1) Energy cost were to rapidly go up (say Iran production or even Nigeria's or the 1/4 US imports from Venezuela were to suddenly stop) True every one gets hurt badly, but having built "suburban infrastructure" much more than any other country the US suffers the most. Tell me again about how all that US coal would make US secure a month later, when trucks can not bring food 500 or more miles on average to your local store, or if they can, you are allowed any gas to go and get it!(You do own a bike or horse do you not? as that is the nature of the US economy with limited high cost gas.)
OR,
(2) A run on dollar is likely and FED jacks up interest rate to keep foreigner holding paper that they have lost confidence in because every one knows soon even that will fail to stem the run on the dollar and printing press money will be made to pay-off the maturing bonds that no one wants to roll and can not sell with out very deep discount.

Personally I expect both (1) and (2) will happen together. It is hard to imagine how (1) would not immediately lead to (2) and if run on dollar starts (2), then US will not be able to buy the oil it needs to run its "suburban infrastructure," consumer-debt-driven economy. (No one will lend customers money if it will buy much less on the repayment date and quite a few have already a mortgage that may not be covered by the declining house value. The “bad paper“ in “sub-prime” mortgages is at least 1 trillion dollars now. The LTCM panic of 1994 was caused by a debt of 1.85 billion dollars only; but that almost brought the US banking system down! - Run on the banks was stopped by Fed /Treasury bailout of LTCM.

Just today I read in another forum (I think you suggested it to me - I am Billdick there.) a very clever phase to drive home the danger to US this trillion of bad paper in the financial system represents:
A poster there, named “ByLowSellHi” said:
“Compared to this trillion of bad paper, the “LTCM debacle was a pimple on an elephants ass!”

That “pimple” nearly collapse the US banking system - would have except for the FED’s speedy over-the-week end actions. Not even the FED and all the Treasury’s printing presses running flat out 24/7 for a month can save the US now if a trillion of bad paper goes “belly up” in the banking/ home mortgage system.

 

[swivel]

Billy T, are you going to be sad when all of your dire news comes to light? I have a feeling you won't be. Millions will starve, and you will be tickled pink, won't you?

That is the sense I get when I read your slanted view of global economics. You dismiss all of the good news about the American economy, and highlight all of the bad. You dismiss all of the bad news about the "next" powerhouse (I assume you were on the Japan bandwagon, and then the Indian one, before settling on the China one (for now)), and dismiss any bad news about that "upcoming" giant.

What you have there is the recipe that all conspiracy theorists use to buttress their shaky theories. You are a very bright person, but so are most UFO fanatics and 9/11 conspiracy theorists, and "grassy knoll" historians. They all have a ton of seemingly-scientific data memorized that they bandy about in an attempt to win converts. I'm sure you tire of these people just like the rest of us, but are unaware that you are one.

I don't mind you being wrong on these issues, as quadraphonics has shown numerous times, you certainly don't have your facts straight. What bothers me is the zeal with which you look forward to unparalleled loss and human misery. I just don't understand the psychology behind that sort of evil. Instead of suggesting ways to forestall or prevent the "falling sky" of your dreams, you give us financial advice on how to maximize our profits from the collapse of humanity. Maybe you are so far gone you can't see the immorality of your stance, at least that is what I hope.

 

[quadraphonics]

China will be able to threaten US with it 15 to 20 trillion dollars reserves

Where is China going to get 20 trillion dollars? If the current trade deficit keeps up, it would take 100 years to amass that much (and then only if they put the entire deficit into reserves, which they've already stopped doing). According to a statement by Bernanke the other day, China holds only around 5% of US debt instruments, so I wouldn't exaggerate their clout here.

Thank for the link - it proves my point, not yours.

I have no idea what you're talking about. The article states that inflation was better than expected. I.e.:

"The central bank's policy-setting Federal Open Market Committee believed a "confluence of better-than-expected news" on the economy and inflation suggested there were smaller risks to growth and improved prospects for core inflation."

(1) Energy cost were to rapidly go up

Okay, but it would have to go up a LOT, and very rapidly. Gas prices doubled in a bit over a year during and after the Iraq war, and America's GDP continued to rise. It didn't even really slow down oil consumption. Also, I don't know how long you've been away, but the trend in the US has been away from distant suburbs and towards urban areas for quite some time now. The suburbs still exist, but most people live in cities, and the rural population is very small. Anyway, the energy intensity of the US economy (i.e., GDP divided by energy consumption) is comparable to most other developed economies (Europe or South Korea, say) and signifcantly lower than some (Canada, Russia, Iran). So, suburban infrastructure or no, America's economy does not seem to be particularly vulnerable to increasing energy costs.

consumer-debt-driven economy.

It's a consumption-driven economy, not a consumer-debt-driven economy. It's true that consumer debt has been on the rise, and this may prove to be a problem, but it's not the basis of America's economy.

Other than that, all I can say is that your idea of a "global depression" seems to be pretty weird, in that it consists of every other country on the globe humming along while America falls apart. This is unrealistic: the collapse of America would entail a brutal global depression. Brazil and China can't escape it by increasing trade with eachother, as neither is even remotely rich enough to make up for the loss of the US market, nor would they be able to compete with US exports, which would become amazingly cheap if the dollar collapsed.

 

[dixonmassey]

Productivity is overrated. Totally ficticious concept in the age of financial capitalism and service paper pushing.

 

[dixonmassey]

China has screwed up its soils and forests (long before becoming world's sweatshop, now it's total disaster), it has something like a 6 by 10 meters plot of the exhausted arable soil per each chinese. You can't eat steel, gas, sweatshop products, etc. In other words, China is doomed to be always on the hook of those with foodstuff to sell.

 

[quadraphonics]

China has screwed up its soils and forests

Don't forget the water!

http://news.bbc.co.uk/1/hi/world/asia-pacific/4374383.stm
http://www.chinadaily.com.cn/english/doc/2005-06/07/content_449451.htm

 

[terryoh]

With problem with China (to their "advantage") is that as their middle class grows, they still have a huge population of potential labourers to do the dirty factory work for them. China still has 900 million people who would be glad to work in East China working in the factories for better wages than they make farming. The same pretty much goes for India.

I think people who think America will never be overtaken economically will be in for a shock 20 or 30 years from now. It's no better than the British saying that they'll always be #1 in the 19th century, the Roman's saying they'll always be #1 in the early 2nd century, or the Persians saying they'll always be #1 in the 4th century B.C..

We merely have to look at historical data. Compare the rate of growth that America achieved in it's history as a capitalist nation and compare it to the rate of growth that China achieved in it's history since it adopted capitalism. The numbers are fairly astounding.

And yes, as has been mentioned by another poster in a different thread, China's rise hasn't been pretty. They've increase pollution (which industrialized nation hasn't?). They've had to cheat industrially and militarily by stealing and espionage. So what? That saved them from having to go through decades of research themselves. They've fast-tracked their growth.

I think BillyT overexaggerated in terms of the energy independence, but China is taking proactive steps. They are building many MANY nuclear power stations and they are investing a lot of money into cleaner wind power in the Gobi Desert.

Instead of denying China's rise, I think it would be good to see China rise. It's only a matter of time before they must accept democracy, as their middle class grows and demands the freedoms that other industrialized countries have.

 

[Billy T]

Billy T, are you going to be sad when all of your dire news comes to light? I have a feeling you won't be. Millions will starve, and you will be tickled pink, won't you?.... What bothers me is the zeal with which you look forward to unparalleled loss and human misery. I just don't understand the psychology behind that sort of evil. Instead of suggesting ways to forestall or prevent the "falling sky" of your dreams, you give us financial advice on how to maximize our profits from the collapse of humanity. Maybe you are so far gone you can't see the immorality of your stance, at least that is what I hope.

You have my psychology all wrong. I am already sad, deeply disturbed by what I see coming. So much so that about five years ago I began to ponder the question: "Was there anything I could do that might change the dire future I foresee?"

After thinking about it off & on for a few months, and recognizing that the only field that I could claim to be significantly more capable than the next Joe, was teaching of the sciences, and recognizing that the internet has made the world "flat" and also recognizing that the US (where all my children and grand children live) could not keep its advanced state of knowledge from the world, I decided that the only thing I might be able to do would be to encourage young Americans to work harder in their studies, especially math and science. The leadership of the modern world, and the rapid advance into it, that India and China are making, have the hard sciences as the foundation, not high paid lawyers or stock brokers, etc.

The problem, as I recognized it, was that many of the US's best brains, now entering college, do not want to do the hard work a science program requires. (Fortunately there are still some "computer geeks" coming along, but even they are driven, in large part, by the desire to get very wealthy - Bill Gates being their model.) IMHO, the US youth have forgotten Kennedy’s "Ask not what your country can do for you -ask what you can do for your country." Kennedy's magic and the brief existence of his "Camelot" inspired many, made the peace core, etc. - I am not saying that it was a great success - only that there was nearly a decade of hope and feeling that one's duty was to be useful, instead of get rich.

So I wanted to encourage more of the good brains, planning on go to law school or business administration etc., to go into science, but how as they would not even open a science book, had no personnel experience, thrill, with understanding how the physical world works, is. (I have never regretted being a very-poor full-scholarship student, working for my meals etc as I got to be part of a experimental 5 year program, called "engineering physics," at Cornell. - It was dropped after only a few groups graduated - too tough for most, especially hard for me as I came out of the public schools of West Virginia, not Choate, Brooklyn Poli-tech, etc as did most of my classmate.

Then I remember how Osen Well's radio broadcast* version of Vern's War of the Worlds had stopped everyone (who happened to hear it) in their tracks. I.e. “Plausible Fear” would be my tool to get the attention of the pre-law student switched to science. If I could just make him/her wonder if it was true that his life was about to end, and only science could save him. Probably he/she would doubt that it was true, but might at least want to check the validity of that possibility. I first considered a global plague, but Michael Crichton had just written a book by that name and I did not know much about biology, so I decide a predicted "cosmic disaster" could scare my intended "not-interested-in-science" readers.

I needed it to appear real, like Well's radio broadcast*, so main character had to be an astronomer, and telling of some impending cosmic disaster, that only he knew about. How to make it creditable that only he knew was a problem. The solution was he had been making a detailed study of Pluto's orbit for years, lived in the Southern Hemisphere, from which Pluto can be better observed, etc. - Thus, my book, Dark Visitor was born.

I never intended to get fame or money from it - why it is written by Billy T, (same false name as I use here), the historian friend of the astronomer, who is now very busy trying to observer the "dark visitor" occult some star and thus get the trajectory more accurately. The first four chapters** historian Billy T wrote, have little science in them. - They tell the family history of the main characters for several generations. - I hoped they were the "hook" to get the non-science reader interested. All the science I sneak in later. It is smoothly woven into the story. Reader does not need to realize/ know he is learning some science. - Story tells (with a straight face) the "facts" about a very slight, but growing, perturbations of Pluto's orbit that the books astronomer has noted: They are best explained by a "dark visitor" of mass 2.2 solar masses (probably a small black hole as they reflect no light, can not be seen by other astronomers etc.) is approaching the solar system. It will miss Earth by only 12 times Earth's distance from the sun (12 AU), and the gravitational impulse (it passes thru solar system very quickly) will make Earth's orbit slightly more elliptical (but still less than Mars is.). Because Earth is “just on the edge” of an ice age in the current orbit, Earth plunges into a rapid onset ice age. (All ports useless in less than ten years as ocean levels drop with thick ice covering the solid Earth, etc. - by far the worst disaster mankind has ever faced.) - I needed everything to be entirely possible as I wanted my target, non-science, reader who did ask science major friend: "This is all non-sense, fiction, is it not?" to get the answer, "No, it could be true. Let me see that book."

Anyway that was the best thing I could think of to do, given my background and deep concerns for the economies of the western world.

Go to the web page under my name and you will find that the motive described above is true. (Website was set up by a friend, as I don't know how to do that, and has not changed for years.) - I.e. the home page starts by expressing my concern that the Western world has already lost technical leadership to Asia, and is in the process of losing scientific leadership as well. That is part of the reason why I see a financial disaster coming in the West with China and Japan taking over the world in a couple of decades, at most.

I.e. it is not much, but I have done what I can. Here, I act like the AA does. - "The first step in the cure, is to admit the problem." That is why I make many posts pointing at the black cloud I see approaching. I will be extremely happy if I am wrong, but currently am very sad with the world I foresee for my grand children.

Whenever I mention my book, I always tell that you can read it for free. - How is told at the website, but it is a pain as must download each page separately. Also in a sub page, you will find a list of all the physics I have woven into the story.
----------------------------------
*You may not know about this famous 1938 Halloween broadcast that terrified much of the US. See:
http://en.wikipedia.org/wiki/The_War_of_the_Worlds_(radio)
Or better than that academic, boring review, read the compete stage script:
http://members.aol.com/jeff1070/script.html
Or better still, actually hear the broadcast (so they claim, I have not done so) from a sub link at:
http://www.rense.com/general4/hg.htm
Where the “homepage" is worth a look, even if you do not plant to listen to it.

**Next two chapters first explain climate and then tell how/why it will change. (Billy T has another friend who worked for NOAA etc,) The final eight or so chapters are Bill T's adaptation of the astonomer's technical reports, for the lay reader.
At one of the on-line book stores, there is a review that likes the book (I did not make it.) and one by reader that wanted his money back, as book is so disjoint. (That is true - book is really three different sections) but I have naturally motivated everyone to do what they do, and there are no "lose ends." - why everything happened as it did, is clear and creditable.