the chosen phrase "long over due" is telling, of frustration with base case that didn't pan out.
so we must refrain from being conventional and remain true to that which did not pan out, and instead seek truth from math.
sitting in freedom hong kong and attending parties watching mandarin-speaking folks plop down usd 800k for swiss watches for own delight and dropping spare change usd 80k for watches to decorate girlfriends i can be excused for thinking the long-referred to c.u.b., at least 5 years running when some offloaded gold between cheap and truly cheap may be more of the same that could have been and were written about by enough over the past 30 years - as and whenever a script fails to track, best to change script
instead, one can consider a contrary case:
(i) china crashed, starting 600 years ago, and burned, up until 1949, then bottomed, and is just twitching to get back up. iow, one cannot crash from a crash bottom;
(ii) china share market, participated in by plenty but all with tiny allocations, is inconsequential. iow, should shanghai index go to zero, it would hardly matter. there is no equity faith in china. all just treat the share market as a rigged casino that it truthfully is. usa would not be in nearly a pickle had its population realized that the share exchange is just another of the many mechanisms to part their body from their asset;
(iii) china banking system, as noted 10 years ago, 5 years ago, and so few weeks ago, is a money-deposit-transfer function, and not a derivative-infused hedge bomb, and as long as the officialdom stands behind the banking system with an occasional dollop of printed cash, nothing for worse, given that china is at the start and not the end-game of grand credit cycle that should play out for a long time still
(iv) china inflation, of wages, is a positive, not a negative, as the customers must still buy, just buy more dearly. china cannot possibly lose much of serious manufacturing to the likes of any nation one cares to tee-up as possible alternate location. anyone who holds view contrary to the math cannot do math
(v) china inflation, of the food variety, is a positive, for (a) china is a net exporter of food, (b) china has imperative to migrate capital inland and to rural locations - food inflation moves center of gravity of capital aggregation fast, and (c) as 25% of china private ledger is spent on food, balanced by 25% savings rate, china's capacity to take on food inflation is arguably the most plentiful on this planet, unlike the sort living paycheck to paycheck and have hard time filling gas tanks to arrive at minimum wage jobs even as such pay 10x china wages
do ponder, why should coastal urban china be allowed to get too far ahead of inland rural china at the cost of the inland?
(vi) which entities are leveraged in china? why does it matter?
- central government? can print. for the chinese invented paper, ink, printing press and paper money, along with money transfer function. they know the game better than most and have been at it longer than about all.
- local governments? can be easily bailed out, again and once more, over and over, with barely any consequence, because they are just mobilizing reluctant capital to aggregate marginally more productive capital.
- real estate developers? big deal. more social homes are needed and shall be built, to counter home inflation. the empty homes? how many empty homes should there be as work-in-process should one need to mover 250-300m folks to unban environ w/i 15-20 years?
- public, state, private companies, and private individuals? not a one.
(vii) iow, the great rebalancing is not in china, where a small rebalancing is happening between urban and rural development, but fractally scaled up, the rebalancing between east and west shall only accelerate, inflation of one and deflation of another, per same game as that in the past quarter century, and so far, tracking so true
(viii) the way i think of china fiscal / monetary policies is that the central folks must either accommodate the (a) coastal urban, or (b) the inland rural, or (c) chart a middle course that satisfies neither, or (d) zig in favor of coastal urban then zag to allow catch up by inland rural. they have been doing the zig then zag for a while and most should be able to see the obvious especially when pointed out by the more astute observers.
china is about to shift gears again, suggest speculators and investors get ready set and about to go.
(ix) ask yourself the simplest of questions, "why is the china government the only officialdom on this planet in this universe encouraging gold ownership? what do they know about the consequences of the plan they are on?"
best to keep the rumination re simple question at simplest levels so as to have opportunity to get at the truth.
above is a contrary case for consideration, out of all the noise, and has been my basic premise since the dawn of the great correction, circa 2000; so far tracking so true and therefore so good.
cheers, tj |
