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To: Think4Yourself who wrote (42070)	4/16/2005 6:37:14 PM
From: jim_p	Read Replies (2) \| Respond to of 206326

More opinions on China: The China Meltdown Syndrome Stratfor's most dramatic prediction is a meltdown in China. Essentially they see the current euphoria over China as a focus on Shanghai and the growth in the coastal areas and ignoring the problems deep within China. The staggering proportion of bad debt, enormous even in relation to official dollar reserves, represents a defining crisis for China. While they expect China to hold together through the 2008 Olympics, for a variety of reasons they see power devolving to the various states and region of China and away from Beijing. They predict massive social upheavals because of the difference between rich and poor, especially the relatively rich coastal areas which last year received a 87% of foreign direct investment as opposed only 3% given to the inner provinces, yet 25% of the people live in those inner provinces. They do not see China going away, of course, but they do see Japan replacing her as the premier power in East Asia, with Taiwan aligning itself with Japan. Within the next few months, I will do another specially letter on China and will go into their concerns more carefully. Hopefully I will get some face time with George Friedman and ask him a question or two which will give us some insights. In summary on the economy: "It is our expectation, based on our Asian forecast, that pressure on the trade deficit will subside before the end of the decade. At the same time we continue to forecast productivity growths and smoothed demographic curves throughout this period. We expect two or more recessions during the coming decade - at least one of which will be triggered indirectly by Chinese problems. When China's own version of the Asian model falters, China's export sector will cease its current red-hot growth. This will gut Chinese exports to the United States, thereby removing China's need to heavily invest in American government debt. "For the past two years, China has not only been a leading source of U.S. trade deficit, it also has been a leading purchaser of U.S. government debt to finance that deficit. The Chinese crunch and step-back from U.S. debt purchases will cause the U.S. dollar to plummet on international markets, most likely triggering a recession until the U.S. economy's inherent efficiencies allow it to regain its strength. We do not expect to see a return to 1990s growth rates.

To: Think4Yourself who wrote (42070)	4/17/2005 2:44:51 PM
From: gregor_us	Respond to of 206326

John, I Assume You're Aware You're Reciting Almost Exactly the conventional, standard view. With historical precedent to boot. The point of my post was to prod discussion of other possibilities. In particular, the Dollar/Oil Equilibrium perspective is one worth mulling over for long periods of time. It requires digestion. Now, the view you recited will, definately, without question, start to come to pass if we enter a Recession. The market without a doubt will position itself that way--and already is. Just as you describe. But have you really dismissed the possibility of a stagflationary US economy, slow, struggling, with stubbornly "high" energy prices? in dollar terms. Regards, LP