1920s: America - Rising Giant, UK - Falling Superpower. Sounds familiar?

[touchring]

This is an interesting read - http://www.financialsense.com/editor...2004/0902.html

Unless there is an unforeseen banking, currency, or a derivative crisis spreading throughout the world, it is my belief that the Chinese bust will occur sometime in 2008-2009, since the Chinese government will surely pursue expansionary policies until the 2008 Summer Olympic Games in China. By then, inflation will be most likely out of control, probably already in runaway mode, and the government will have no choice but to slam the brakes and induce contraction. In 1929 the expansion stopped in July, the stock market broke in October, and the economy collapsed in early 1930. Thus, providing for a latency period of approximately half a year between credit contraction and economic collapse, based on my Olympic Games timing, I would pinpoint the bust for 2009. Admittedly, this is a pure speculation on my part; naturally, the bust could occur sooner or later.

While I base my timing of bust on the 2008 Olympic Games, Marc Faber, the foremost Austrian authority in the world on Chinese economic development, believes that the bust will occur sooner. According to him, the U.S. is due for a meaningful recession relatively soon, which in turn will exacerbate already existing manufacturing overcapacities in China. This, coupled with growing credit problems, makes him believe that China will tip into recession sooner than the Olympic Games. In other words, Dr. Faber believes that a U.S. recession will trigger the Depression in China. Indeed, that very well may be the trigger, but if so, it still remains to be seen whether the Chinese government will let the bust run its course or choose the route of a “crack-up” boom, come hell or high water.

Take note, this article was written in 2005! The whole scenario is unwrapping itself!

Lastly,

Whatever the trigger of the bust in China, there is little doubt that this will provide the onset of a worldwide depression. Just like the U.S. emerged from the Great Depression as the unrivalled superpower of the world, so it is likely that China will emerge as the next.

[TrafficDomainer]

Very interesting indeed. IMHO, however, I believe that recessions have been shorter in the last few decades due to the current mechanism available to deal with economic issues and I believe if any depression happens, it will also not last as long as the Great Depression of the 20's.

Cheers!

Originally Posted by touchring

This is an interesting read - http://www.financialsense.com/editor...2004/0902.html



Take note, this article was written in 2005! The whole scenario is unwrapping itself!

Lastly,

[Rubber Duck]

Not convinced. Inflation is largely due to individuals' expectations of income out running an economies ability to deliver. This cannot really happen in China as there is still a bottomless pit of untapped labour. The Chinese Government has already slapped the brakes on fairly hard so it has plenty of scope to ease the pressure if there is a downturn, even without digging into one of the biggest chests of foriegn currency reserves in the World.

OK, the US is threatening to go bust any time, but there are plenty of others to trade with. With the current economy only measure as the size of Britain or France in dollar terms there are plenty of markets out there to absorb Chinese output, especially as most Asian economies are bumping along at 8% growth. Europe and Japan are also shaking off their malaise and Russia is emerging as a substantial economic power.

It is time for the US to stop blaming China for its problems and to stop crediting itself for the Chinese economic miracle. What we are witnessing is a huge change in the World Economic order, and the Americans are in denial.

[touchring]

Originally Posted by TrafficDomainer

Very interesting indeed. IMHO, however, I believe that recessions have been shorter in the last few decades due to the current mechanism available to deal with economic issues and I believe if any depression happens, it will also not last as long as the Great Depression of the 20's.

Cheers!

Yes, definitely everything is shortened. In terms of modern events, i think the Asian Crisis is quite a good reference, except it is a regional crisis, while a US+China led recession will have worldwide repercussions.

As for when it will happen - that's the key - the author believes after the Beijing Olympics, which is a long way to go.

After that, when bloodletting has ended, the author says, China will emerge as the next superpower. So Chinese idn holders, sit tight.

[Giant]

Originally Posted by Rubber Duck

Not convinced. Inflation is largely due to individuals' expectations of income out running an economies ability to deliver. This cannot really happen in China as there is still a bottomless pit of untapped labour. The Chinese Government has already slapped the brakes on fairly hard so it has plenty of scope to ease the pressure if there is a downturn, even without digging into one of the biggest chests of foriegn currency reserves in the World.

OK, the US is threatening to go bust any time, but there are plenty of others to trade with. With the current economy only measure as the size of Britain or France in dollar terms there are plenty of markets out there to absorb Chinese output, especially as most Asian economies are bumping along at 8% growth. Europe and Japan are also shaking off their malaise and Russia is emerging as a substantial economic power.

It is time for the US to stop blaming China for its problems and to stop crediting itself for the Chinese economic miracle. What we are witnessing is a huge change in the World Economic order, and the Americans are in denial.

Your analysis is more careful and more acurate than the "experts"'s.

There are great demands for goods and services within China itself, the talk that China will fall into recession soon is not convincing.

[touchring]

Yes, internal demand. Also, China isn't falling into recession first - according to the article, America is falling into recession, and the events will unfold from there.

America was one of the biggest consumer market in the 1920s. But many factors the author did not account for - the political system is different, hence the comparison might not be as valid as the article says.

Anyone here at least 90 years old, maybe able to share what happened!

[Drewbert]

Originally Posted by touchring

America was one of the biggest consumer market in the 1920s. But many factors the author did not account for - the political system is different

China hasn't legalised torture?

[Giant]

China will enjoy a long period of healthy economy because China has a very stable cultural, economical, and political system. Most importantly, China has a very smart and diligent central government to take care of problems.

There are some good factors that keep Chinese economy in good shape that foreign experts don't know about.

[touchring]

Originally Posted by Drewbert

China hasn't legalised torture?

No, but i have no doubts China may have to legalize torture if they were to become a democracy 30 years later.


And yes, the Chinese Confucian thinking - the government is always right. We got this problem in Singapore as well. Westerners that preach democracy may not understand this kind of authority worship. It's ingrained in the genes after 2000 years. Started with Han Wudi - http://en.wikipedia.org/wiki/Emperor_Wu_of_Han_China

Yet another difference between 1920s America and modern China.

[mdw]

Some of you guys are charmingly naive. Some of you are just so eager to bash others that you never even bother to exercise your brains a bit. An amusing thread overall though.

This guy may be some kind of authority but it's a stretch of giant proportions to liken an oncoming economic slowdown in China to 1920s America. That was a different age, economic "truisms" were vastly different. The US federal reserve constricted the money supply and raised interest rates - EXACTLY the wrong prescription. That exacerbated the situation and pushed the US economy into an extended depression.

In modern times no reasonable government would ever do that. The Chinese governmen ill certainly not be that foolish; economics is just better understood now. As bullish as the outlook for Chinese IDNs is, it's just unreasonable to expect an economy growing at a fast rate to not experience cooling off periods. Legalized torture seems inevitable though.

[touchring]

Yes, precisely, the US is now doing the opposite - fueling unchecked spending and ever increasing debt! Great if people keep spending and countries like China and Japan keep throwing in money to support the dollar.

Best is this continue for another 100 years, so debt becomes 1 quadrillion! By then, three quarters of everything in the US except the US government will be owned by foreigners.

[Rubber Duck]

Originally Posted by touchring

Yes, precisely, the US is now doing the opposite - fueling unchecked spending and ever increasing debt! Great if people keep spending and countries like China and Japan keep throwing in money to support the dollar.

Best is this continue for another 100 years, so debt becomes 1 quadrillion! By then, three quarters of everything in the US except the US government will be owned by foreigners.

The problem is that eventually the gravy train comes off the rails. The fear of a dollar devaluation will eventually cause the like of China to panic and get as much money out as they can. When, not if, that occurs the US economy will go into recession. I could quite easily anticipate a lost decade similar to Japan where no degree of interest rate lowering is capable of getting a moribund economy off the floor.

It stated below that economics is much better understood these days. That may be true, but somehow I think the incumbant of the White House might be an important exception.

[touchring]

Originally Posted by Rubber Duck

The problem is that eventually the gravy train comes off the rails. The fear of a dollar devaluation will eventually cause the like of China to panic and get as much money out as they can. When, not if, that occurs the US economy will go into recession. I could quite easily anticipate a lost decade similar to Japan where no degree of interest rate lowering is capable of getting a moribund economy off the floor.

I think they are already doing that, just that 90% of the time, it's not reported or heard on news. From western computer makers, automobile companies, mobile phone companies, and what nots, they are already acquiring as quickly as they could, and as quietly as possible while the dollar is of value.

This is not unique to USA i think, and the buyers come not only from China, but Taiwan, Hong Kong and other East Asian countries.

And unlike what the Japanese did in the early 1980s, the buyers this time round are more interested in market reach, technologies, and management expertise rather than just pieces of land in Hawaii.

[mdw]

Originally Posted by Rubber Duck

The problem is that eventually the gravy train comes off the rails. The fear of a dollar devaluation will eventually cause the like of China to panic and get as much money out as they can. When, not if, that occurs the US economy will go into recession. I could quite easily anticipate a lost decade similar to Japan where no degree of interest rate lowering is capable of getting a moribund economy off the floor.

Yeah, as soon as it becomes too hard to keep raising interest rates, then asian countries, esp China, have to start looking for alternatives to buying US bonds. Sooner or later those alternatives start looking less attractive.

[touchring]

Originally Posted by mdw

Yeah, as soon as it becomes too hard to keep raising interest rates, then asian countries, esp China, have to start looking for alternatives to buying US bonds. Sooner or later those alternatives start looking less attractive.

So you think the interest rates are raised to support the US dollar rather than to curb inflation?

[mdw]

Inflation is a real non-issue in US economy now. Politicians will always mention it because people fear it so much. I think interest rates must continue to go higher because that's the only way to finance such a massive debt - keep selling bonds. Oh yeah there's always one more way - paying the debt (the only real alternative: taxes)

One other thing - I heard that Norway had accumulated a surplus amounting to about $50k per person. Are these guys smart or what?

[Drewbert]

Originally Posted by mdw

One other thing - I heard that Norway had accumulated a surplus amounting to about $50k per person. Are these guys smart or what?

I think that's called having more oil than you can shit.

Edmonton is now in the same boat.

[Giant]

Originally Posted by Drewbert

I think that's called having more oil than you can shit.

Edmonton is now in the same boat.

Yeah, no kidding, many people are moving in to this city now, but business here still have hard time hiring enough workers.

Nevertheless, I will be moving to Vancouver next year, for a change.

[touchring]

Originally Posted by mdw

Inflation is a real non-issue in US economy now. Politicians will always mention it because people fear it so much. I think interest rates must continue to go higher because that's the only way to finance such a massive debt - keep selling bonds. Oh yeah there's always one more way - paying the debt (the only real alternative: taxes)

One other thing - I heard that Norway had accumulated a surplus amounting to about $50k per person. Are these guys smart or what?

I remembered researching on UAE that the net worth per citizen for it's oil reserve is like $3 or $4 million dollars at $60 per barrel. How's that in comparison?