Live Business Chat
2011 Sep 16, 03:30:51 am *
Welcome, Guest. Please login or register.
Did you miss your activation email?

Login with username, password and session length
News: Some accounts got accidentally deleted by anti-spam software during a spammer attack on this forum. Please re-register. If you have trouble, contact badon or tamo42 in the chat. This is a friendly non-profit discussion group about making money. You won't be able to see all forums at first. You have to register to see more forums. Click the "NOTIFY" button every chance you get to receive instant alerts about new information.
 
   Home   Help Search Calendar Login Register  
Pages: 1   Go Down
  Print  
Author Topic: The 4 Factors of China and the Future  (Read 403 times)
0 Members and 1 Guest are viewing this topic.
tamo42
Administrator
Capitalist Pig
*****

Karma: +52/-12
Offline Offline

Posts: 5113



WWW
« on: 2011 Mar 01, 11:01:32 pm »



In my recent post about all the rumors flying around, badon asked me to summarize my contrarian take on China. In this article, I'm going to review the large-scale factors about what is going on in China's economy and how the Chinese people are reacting. I'll go through economic, historical, and social factors and how they interact to form a unique blend that will shape much of the world to come.

First, a bit of history

China has an extremely long, continuous history. Even though there were different types of governments, different territorial areas under control, the Chinese people still view this as a more or less unified whole. They are surrounded by artifacts from this past. Many houses are hundreds of years old. As a result, Chinese people tend to think very long term. This long term perspective is a key difference between Chinese consumers and consumers everywhere else.

So aside from being long, what is actually in this history? What lessons have the Chinese learned? While I'm sure each person has gleaned his own morals, caveats, and instructions from the past, there are a couple broad themes to be observed. The most important of these lessons is that this has all come before. Human nature doesn't change, and though the details change, the themes remain the same. Chinese governments have time and again destroyed their currencies and abused their power, which has led to revolution.

The last time this happened was under the republican government of Chiang Kai Shek in the 1940s. China had long used silver as the every day exchange money through the 1800s. Chiang presided over the debasement and eventual de-backing of paper money. Once the silver backing was removed, the printing presses churned out billions of yuan. Prices rose, people lost faith in the money, and the whole thing collapsed. Mao and his young communists fought a revolution against this. When the communists took over, they exchanged the old currency for new yuans at a rate of 3 billion to 1. That's what I call hyperinflation. This was not the only cause of the revolution, but it was a large precipitating factor.

There are many elderly Chinese who were there during this time. They remember how difficult it became to buy rice. They remember the fighting, the bloodshed, and the starvation. They are wondering if history will repeat itself.

Next up, some culture

The long term view of the Chinese combined with their heavy emphasis on the obligations to family mean that the older generations often sacrifice a great deal to leave something for the younger generations. You might call this the Confucian ethic. As a father or grandfather, you will do what you can to leave something of lasting value for your children. It might be a prosperous farm, it might be money, it might be a trade or business. As a father or grandfather, what can you obtain for your family that is of lasting value in these turbulent times?

Today's economics

To get the full picture, you have to understand the basics of how the Chinese economy works. The Chinese government are mercantilists. This means they believe that the key to wealth is exporting finished goods in exchange for money coming into the country. To do this, they have linked the yuan to the US dollar. When the US prints more, the Chinese print more and buy US Treasuries. The US never prints less, so that's not much of an issue. The Chinese do this to keep the yuan relatively weak to the dollar, which means Chinese goods (exports) will be cheap for American consumers. American dollars flow to Chinese companies and the Chinese government as Chinese goods flow to American homes.

So what happens when the US Fed starts doubling the money supply overnight? You guessed it, the Chinese money supply has to go up commensurately. The Chinese central bank has to buy up more treasuries to back the yuan. Money floods the system. When this happens, more money is buying the same amount of stuff. Prices rise. This is why you might have heard there is a housing bubble in many of the coastal Chinese cities. The price of food in China has spiked dramatically over the past couple of months. The price of everything is soaring.

Now think back to that patriarch who has seen this all before and wants to leave something of value to his family.

In the midst of all this money flooding, the wealth of the average Chinese is going up. The country is industrializing. Sure, it has a long way to go, but with a wave of a billion people wanting better transportation, better housing, better clothes, better everything, the competition to buy things is intense. Demand for everything is skyrocketing.

The headlines

So now you have a basic idea as to the economic environment in China. There are huge resource demands as the country develops. There is fear that the inflation they are seeing is the beginning of runaway inflation. There is the desire to do well by your family. Into this volatile cauldron, we see these news items:

Chinese demand for gold quadruples over last year.

Customers are standing on line for gold shops.

The Chinese central bank has stopped accumulating US Treasuries - this is huge news that everyone is ignoring.

China is buying up every natural resource mine, plantation, or well it can get its hands on through Africa, South America, and anywhere else.

Chinese finance ministers are saying that there will not be hyperinflation in China this year - nothing is official until it is officially denied? Why specify this year?

Prices of some food items are up 25% in 10 days.

The Chinese government is distributing fake rice made out of potato and plastic in some areas.

The calls for protests to show solidarity with revolutions in the Middle East have led to a censoring of the name of a particular flower in all internet searches and publications.

The central bank has raised interest rates and reserve requirements on banks multiple times to try to cool the housing market.

The net result

It goes on and on like this. China is an economic powder keg and everyone knows it. They have created a situation in which they are between a rock and a hard place. They have started deleveraging from the dollar, but it may be too little too late. If they hold on, they are looking at hyperinflation, revolution, and collapse. If they sell off, they lose their biggest customer and will tip straight into a very painful recession, which might lead to a revolution anyways.

Right now, they are trying to navigate their way along a middle path. Slowly selling off the US debt which they know will not be honored and in the mean-time using those dollars to buy up real assets around the world. If they pull this off, it will be a huge success and set them on a strong footing for the next century. But it will be very tricky to do and not fall off to one side or the other.

For now, we see that demand for hard assets will continue to be very strong from both the Chinese people and the Chinese government. In any of the above cases, that demand will continue. Really the only question is what will the world look like when this is all said and done?




* chinese coin.jpg (33.56 KB, 300x300 - viewed 820 times.)
Logged

Neal McSpadden
Honest Silver and Gold, LP - Earn 3% a Month By Turning Silver and Gold into Cash Flow
The Primal Prepper - my blog about preparing for the worst while living the best
badon
Administrator
Capitalist Pig
*****

Karma: +44/-35
Offline Offline

Posts: 3951



« Reply #1 on: 2011 Mar 02, 10:16:57 am »

This is excellent work. It's on Digg now:

http://digg.com/news/business/the_4_factors_of_china_and_the_future

It's on the CCF too:

http://china-mint.info/forum/index.php?topic=2358.0
Logged

Chinese coin investment articles
Do not PM questions. Answers should be publicly available.
Backup is not enough. Protect your data with MultiPar
pandamania
Almost Nobody


Karma: +0/-0
Offline Offline

Posts: 1


« Reply #2 on: 2011 Mar 02, 10:38:30 am »

Excellent article, thanks for writing it. Saw this on the Chinese Coin Forum as posted by Badon.
Logged
tamo42
Administrator
Capitalist Pig
*****

Karma: +52/-12
Offline Offline

Posts: 5113



WWW
« Reply #3 on: 2011 Mar 02, 10:46:56 am »

Glad you find it useful pandamania.

Brand new headline today that Hong Kong will be handing out $6,000 HKD to each resident over the age of 18. Basically, this is the same trick tried a couple years ago in the US when taxpayers received a rebate in the mail of $300-$600. Of course, the fact that the "generous" government has to print the money to do this just adds to the inflation problem. But that won't be noticed for at least a few months, so it buys the government some time to placate the people.
Logged

Neal McSpadden
Honest Silver and Gold, LP - Earn 3% a Month By Turning Silver and Gold into Cash Flow
The Primal Prepper - my blog about preparing for the worst while living the best
badon
Administrator
Capitalist Pig
*****

Karma: +44/-35
Offline Offline

Posts: 3951



« Reply #4 on: 2011 Mar 02, 10:51:27 am »

Wow, things are getting crazy. Silver is almost $35 per ounce now. It may pass that level today, with no resistance. The supply of coins is disappearing too.
Logged

Chinese coin investment articles
Do not PM questions. Answers should be publicly available.
Backup is not enough. Protect your data with MultiPar
r3globe
Mogul
****

Karma: +4/-0
Offline Offline

Posts: 415


« Reply #5 on: 2011 Mar 02, 03:17:54 pm »

Excellent article. It touched on and summarized the currents economic components of China's economy. I liked the historical perspective.
Logged
r3globe
Mogul
****

Karma: +4/-0
Offline Offline

Posts: 415


« Reply #6 on: 2011 Mar 02, 03:55:03 pm »

Can you argue that investing in Chinese Coins is a play on both scenarios? 1) Inflation===>Higher coin prices 2) If Yuan is eventually de-pegged from the Dollar,the coins will be valued higher as the Chinese buyer will have a higher buying power!
Logged
badon
Administrator
Capitalist Pig
*****

Karma: +44/-35
Offline Offline

Posts: 3951



« Reply #7 on: 2011 Mar 02, 03:59:47 pm »

Yes, in both scenarios, coins will win. Coins are not going up for just one reason. There are MANY things causing them to go up. The biggest one is that the Chinese coin collecting market is new, and MUST grow just to mature normally, even if everything else stayed the same.
Logged

Chinese coin investment articles
Do not PM questions. Answers should be publicly available.
Backup is not enough. Protect your data with MultiPar
GhostRider808
Serious Business
***

Karma: +1/-0
Offline Offline

Posts: 169


« Reply #8 on: 2011 Mar 02, 05:40:00 pm »

Glad you find it useful pandamania.

Brand new headline today that Hong Kong will be handing out $6,000 HKD to each resident over the age of 18. Basically, this is the same trick tried a couple years ago in the US when taxpayers received a rebate in the mail of $300-$600. Of course, the fact that the "generous" government has to print the money to do this just adds to the inflation problem. But that won't be noticed for at least a few months, so it buys the government some time to placate the people.


FACT- Protect yourself- You can do well-

This will cause Inflation on a massive scale as we're only now feeling QE1 and QE2 to come.  2011-2012 will be a total decline for America.  I feel bad if I didn't warn the unsuspecting investor consumer.  Don't trust the stock market as I did in 06-09--You will def. get eaten Alive".  

INSTEAD, Know the road ahead as this is where we are in a inflationary environment and hope we're hedged accordingly to make it out of this financial bomb ticking before 2012.  Call me what you will but the facts speak for themselves.  I'm not a financial planner nor claim to be. BUT Trillions meltdown's and over 200+ bank closures since July 2008 till today is NOT a sign of a healthy economy and a nation as a whole.  Knowing what I know and see happening in the throughout World today one would be forced to conclude/foreclosed on one must seek true knowledge as this is what learning is all about.  I myself still have a lot to learn that's why one has Smart advisers surrounding oneself  if one we're to take the time-out to seek the true knowledge.  PLS dont take my word as the truth PLS DYODD as I could be wrong or got Dis-Info as there are plenty out their in the Web.


Anyhow, This is NOT a healthy sign of a sound Economy.  History has shown that when a country chooses to debase their fiat currency the PEOPLE has always suffered say's Jim Rogers (Mutil-Billion-Aire).  If one was smart one would study history/economics/Understand math and one would come to the conclusion the current trend is radically different than the 1990s/1970's/2008/1920's/1930's.  Bust--Boom and Bust cycle will continue as long as we have a central bank.  Truth be told the good'ol USA is one their 3rd Central Bank and I predict USA will abolish this current Central Bank called the, " FED Reserve"  which is nothing but a facade of Private Banker's which charges Americans interest on fiat currency one could make themselves with NO INTEREST.  ****IF ONE DOESN'T ANTICIPATE WILL CAUSE ALOT OF UNDUE STRESS IN THE FUTURE****  <-----GhostRider808, LOL  


There is a reason the rich stays Rich as they are Ivy League Grads and study History and good at Math/Simple Economics as their is not such thing as a free lunch.  What," We People will feel from 2011-2012--Will be a total decline of faith/reality/poverty.".


Educate yourself and know there is a," Brighter side in everything dark and take advantage of the Greatest Wealth Transfer that happens every 70-100 years".  Get into HARD ASSETS  **LBC Hint Hint!!**  As China increased their GOLD holding over 75% in 5 years!!!   Cheers   =).


« Last Edit: 2011 Mar 02, 05:50:25 pm by GhostRider808 » Logged
Pages: 1   Go Up
  Print  
 
Jump to:  

Powered by MySQL Powered by PHP Powered by SMF 1.1.14 | SMF © 2006-2009, Simple Machines LLC Valid XHTML 1.0! Valid CSS!
Page created in 0.065 seconds with 21 queries.