I have read everything you say about China, but just because they want their citizens to be as rich as us Westerners, won’t make them so. We are at the brink, if not already in, a major recession, and China is not in a position to ride out the effects, yet. In 5 years they will be, but today they have an export-dependent economy.
Becoming rich/industrialized requires trading with other countries, and having a population which can afford to buy these goods it trades. China cannot. Its citizens are too poor to trade or buy the products they make.
If becoming wealthy is as easy as producing things that your own people can buy, with money you print/provide, then every nation on earth would be rich. Becoming wealthy means that your citizens are paid enough to consume the things they make. China is a long way from that.
They also suffer from fraud, inflation, money supply growth that is unsustainable. Their M2 grows at 18% per year, the US at only 2%. Their inflation is about 8%, their GDP growth is 12%. They are out of control. Their banks hold mainly bad loans, and corruption is rampant. Their real estate bubble is as bad as ours. The government is trying to reign in the speculative excesses, but in my opinion, they make it worse by printing so much money.
Here is something nobody ever talks about. China is increasing its money supply at the rate of our trade deficit with them, because they print yuan to buy all those dollars we send, to prevent the renminbi from appreciating. They have a huge liquidity glut.
We are going to see another group of people lose money: those betting on China as the savior of the world economy. Don’t hold your breath, and stick away your checkbook. China is not ready to unleash from the US quite yet, and their fortune is tied to ours.
How will I know that China can sustain itself without the US? When I see China buy few Treasury notes, and when they let their currency float freely, they will have achieved true freedom.
Our next recession will take them along for the ride. And the commodities boom will go down, too.
Precious metals willbe the only safe haven, and I believe gold will jump to new heights. I am going to load up on gold next week, and euros. I think the euro has the chance as the world’s next reserve currency. Mainly because of the petroeuro bourse, and the economic strength of Europe. It has the bank stability.
China’s banking system is a mess, and the world economy will not allow China to provide a world currency until they get some stability. China is going great places, but it is still in baby stages. Not a mature adult yet.
The FED has no more games to play. They must choose between busting the dollar or busting housing. The dollar will lose either way.