Tooearly, I now think of the world in this way:
Draw a chart with vertical axis CROSSING horizontal axis, as in +, with vertical labled at the top "US stable", and bottom "US unstable", and the horizontal axis labled at the left "China unstable", and the right, "China stable".
'Stable' can be interpreted in many ways, applying to domestic vs foreign policies, policy swings, monetary/fiscal affairs, population agitation, external threats to policy, energy, financing, etc.
Put one single dot on where you think we are on the chart, and where we are going toward if events go the way they are, inexorably, and then paint a scenario for that world where we are going, possibly:
US stable/China stable: new world order on stable basis;
US stable/China unstable: uni-polar world leading to chaos or setting up for multi-polar world, depending on how China goes, and how US develops;
US unstable/China stable: Things will get bad, very bad;
US unstable/China unstable: TeoTwawKi scenario.
I think we are either on or very near the TeoTwawKi quadrant, moving further into the quadrant, unless the US commits more and genuine efforts to the ME, and China helps to finance same along with Japan.
Changing the exchange rate will not get us out of the TeoTwawKi quadrant because there is no exchange rate at which US low-tech manufacturing can be saved.
China is not in any position to buy high-priced and low quality US products because China is running a trade deficit in the world, buying high quality and reasonably priced stuff from others (ex-US) and buying raw materials.
What China wants to buy from the US, the US does not want to sell ... satellites, 5-axis machining centers america-china.com , super computers, aircraft-grade carbon composite materials, and so China has to buy the US factories that make such things:
rrstar.com
Ingersoll Milling closes
rrstar.com
Ingersoll unit sold to firm in China
Logically, the US companies need to be helped to relocate to China, so that at least a good portion of Chinese factories are US owned, as opposed to Japan/Taiwan/Europe owned.
Also, the US ought to encourage Chinese investments in the US.
The US also needs to encourage Chinese economic and political reforms, so that the end-result has a familiar face. Making China into an enemy will achieve less than naught.
China is in the USD space. Attempts to jiggle that relationship is risky.
However, in this schema, the J6P Mr. Average will suffer, in terms of income and asset value, just as the average HK Cognac1Bottle is suffering. This is simply economics.
Should political mob be successful in putting up a tariff wall in the US (which, BTW, IMO, is very likely), we will go further into the TeoTwawKi quadrant.
Buy gold.
Chugs, Jay |
