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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: SuperChief who wrote (105188)	9/17/2009 3:59:58 PM
From: Gib Bogle	1 Recommendation Read Replies (1) \| Respond to of 110194

It has been apparent for many years that wage rates and standards of living around the world would tend to equilibrate. As the Chinese (for example) installed technology and production facilities of the same standard as those in Europe and the US, and as education levels in China approached (or even surpassed) those in the US, what could prevent them from competing with US workers? It was inevitable that Chinese real incomes would rise and US real incomes would fall. No politician wants to say this, because telling the truth is political suicide. This is the main reason why politicians lie - people want them to.

To: SuperChief who wrote (105188)	9/17/2009 5:35:28 PM
From: GST	2 Recommendations Respond to of 110194

China's goal is not to be poor -- on the contrary. China is well on its way to having a far larger middle class than the entire population of the USA. As they become better off, we will have the opportunity to work long hours to make things for them at low wages (paid in worthless dollars) in competition with the poorest of the poor in China. We won't be able to compete easily at the higher end because that will take us into competition with well educated urban middle class population -- better educated than most Americans and more productive. On the other hand, we won't easily compete against the dirt poor Chinese no matter how they value the yuan, unless your goal is to lower your standard of living to a level you probably cannot even imagine. So, you are screwed -- you can't compete with low productivity low-wage types without living like a peasant and you can't compete with upper class Chinese people who earn great salaries because they have a better education than most Americans -- and the bar is being raised every day. We are not accustomed to seeing Chinese as better than us -- so we blame it all on cheap labor. What drives the global economy is not cheap wages. That is at most ephemeral and the Chinese themselves hate it -- that is universal. What drives the global economy (and China in the global economy) is highly educated brains. As but one example, China graduates more than 10 times the engineers than does the US, and that today is the heart and soul of their competitive advantage -- that and their willingness to save a gigantic portion of what they earn while living with zero personal debt and paying cash for everything. Education, hard work and a thrifty approach to life -- how dare they. As for their currency value -- they are arranging for your fondest dream to come true -- they are preparing for the collapse of the dollar and the ascent of the yuan. You should plan on things costing twice as much as they do now in the not too distant future. Some might ask how paying China twice as much for consumer junk -- ironically paid for with your credit card using money borrowed from China -- is going to lift your standard of living. But I know the answer -- you want that low wage job that is currently occupied by a peasant right off the farm who lives in a sleazy company dorm room in the middle of some God forsaken farmers field on the edge of some God forsaken secondary city in China. Well, be careful what you wish for, because maybe that is exactly what you will get. If you or your children want even a wiff of prosperity, tell your kids to crack the books and be smarter and better educated than the Chinese -- then you just might have something to celebrate in the future.