PD, logic doesn’t mean much when emotions run high. Whether the emotion is about housing never going down, the importance of our military, or the insured stratospheric growth of China, you cannot convince people otherwise.I am trying my hardest to make the point that China is not a place to put your money for guaranteed appreciation. But the China bull reading this, will not be swayed.
The China bulls would say that as we buy less, the Chinese consumer is going to buy more.
I know our imports the last 2 months were less than expected, and I can’t wait to see a report about recent Chinese export activity and economic activity. I know they keep this all secret,but they’ve got to be concerned about the slower pace of orders.
For example, Ethan Allen, car dealers, Home Depot, are experiencing slowing sales. Their June orders from China are going to be down. What the heck is China going to do? Their factories are cranking at full capacity. Are they going to lay off people? Cut prices? They are already facing slower orders.
Within a couple months, China’s orders from Korea, Taiwan, and the other export-dependent countries from which China buys, will slow down.
On an unrelated note, look for the 30-year bond yield to go up, as demand for them decreases. China will buy fewer Treasury notes at our future auctions.
The reason: as the US consumer loses its equity-withdrawal power, we cut back on spending on Asian goods, sending fewer dollars to China. China has fewer dollars to offload in purchasing US assets. You will see the long-term yields rise. But don’t look for this in any media reports or economics texts. You get this exclusive only from an economics-obsessed housewife who gets her thrills exposing economists whose heads are stuck in the sand . Oops – better be careful with the imagery, in case some future employer reads this.
(Do you know that employers, before hiring, google your name and find out everything about you on the Web?)