Jim, random thoughts *some slightly off-subject*:
I have a tiny US flag in my desk with "Made in China" on it. (!)
I rode in a itty bitty van in central China like a quarter-scale VW van, 5 cents to town and 5 dollars back with a different cabbie. The Chinese have no idea what Westerners are willing to pay but are learning quickly, and the degree of capitalism I saw there was absolutely astonishing. Average chinese makes $3500 a year, more on the coasts, gets things by barter. (Other transportation is bikes or Mercedes for the brothel owners) I did not see motorcycles and found it odd.
In the five-star government-owned hotel I stayed at in Xian I could see no lights out of the window at night as none of the apartment buildings had electricity. Water was picked up from trucks brought to the edge of town three times a day. Chinese are trying to put together Chernobyl-type nuclear reactors for power, but tend to burn coal as it is available and are heavily into hydroelectric power development.
A typical popular Chinese truck is literally a portable engine strapped to the front of a platform with wheels, with a belt connecting the engine to the drivetrain, like you might find in 1918. The farmer can quickly remove the engine in the field and use it to drive pumps, grinding equipment, etc. China Air was a real trip, Chinese take trains. Coastal cities are relatively modern but comparing Shanghai to Hong Kong is like comparing Tijuana to San Diego.
Inflation is a huge problem in China, everyone should note that our "deflation" is caused by the availability of goods made in countries where labor costs are very cheap but inflation is rampant, e.g. the low cost won't last much longer as the workers demand higher salaries and figure out how undervalued their products are. I saw stuff like Procter and Gamble products there, Coke, etc, was told that it was put there for Westerners. Chinese cannot afford, and don't want it anyway.
I visited Tandem in Shanghai. They have their own generator because they cannot reliably get electricity and the brownouts and blackouts are random, plus there's certain days of the week that no one gets power so they have to make their own. I'm told this was true in the Compaq plant in Beijing. If you believe Chinese will buy from us, buy APCC and Alcoa, not Dell and Microsoft.
You're half right, Chinese are incredibly nationalistic but I was astonished at the size of the black market and barter economy there, it seemed a matter of pride. Many products had Arabic labels. Gold is still preferred as a form of currency and banks are not trusted. Many Chinese business owners do not understand that a bank loan had to be paid back in one's lifetime and looked at it as a goodwill gesture that might be repaid by the great-great-grandkid.
Here's my take on this:
- The Western financial community has completely disregarded gold as an almost sacred form of currency in the East, and they may live to regret the gold sales.
- The Western financial community has disregarded the desire of the Russians to have their own Russian-based multinationals on Russian soil, and the meaning of this to the world's oil markets. Ditto with the Israelis and high tech, they are fierce and brilliant competitors.
Could a large issue of oil- and gold-backed Russian bonds at 15% strike terror into some hearts? YOU BETCHA!!!! And commodity-backed Chinese bonds? And what if the Russians and Chinese decided they were going to stop partnering with US multinationals because they want to compete with us? And then who would buy US bonds if there was nothing backing them...
- The fact that our some of our disinflation is due to cheap imported products made in countries where inflation is rampant, says that hedge fund devaluation of their currency isn't going to stop the eventual increase in cost of goods.
I think the aftermath of the next Kahuna will see some very strange players appearing in the game. All overseas markets will fall with ours but I might guess that the real incredible bargains of a lifetime will be found there, and not in the US tech stocks. If BEN collapses go get the money truck.
Just some humble thoughts. The next world war is an economic war. |
