Posted on 08/19/2005 9:02:46 AM PDT by headsonpikes
Many are hopeful the threat of an economic slowdown will force the party to speed up much-needed reforms, but others remain skeptical. The government is relatively untested when it comes to stick-handling delicate fiscal matters, and its ability to make quick, informed decisions is bogged down by a glacial adherence to consensus-building and a generation of leaders born of the immensely destructive Cultural Revolution.
That raises many frightening possibilities, not just for China but for all those investors who've pumped billions into its rickety institutions. "If the Chinese banks collapse, the whole world economy collapses," Wilson warns. "The world economy is very dependent on China in ways we still don't completely fathom, and we won't for another five or 10 years." We do, however, know this: when Japan arrived at its day of reckoning, the rest of the world escaped relatively unscathed, and the lessons learned faded quickly. Should the same fate befall China, the pain will be spread far and wide. It's not something we're likely to forget.
(Excerpt) Read more at macleans.ca ...
If the Chinese banks collapse, they will stop buying our debt. (treasuries)
If they stop buying our debt, interest rates will rise. (even more)
It interest rates rise, people will stop buying houses here.
If people stop buying houses, the housing bubble will pop.
If the housing bubble pops, people will stop buying Chinese goods.
It's all very "iffy". We'll probably see how the economic weather changes and what's to come shortly.
"Thanks. I have come to recognize a standard editorial formula for such stories: lay out a financial doomsday scenario and then get experts to comment on whether it "could" happen. There are always experts available who will play along, flattered by press attention or thinking publicity useful to their careers.
String together several apocalyptic comments and our prosperity can be made to seem fragile and endangered by adverse changes in most anything: Shanghai port loadings; reserve Saudi oil capacity; LIBOR schedules; Japanese patent filings; drought in the Sahara; and so on.
Uhhh, what about the American economy? What about domestic business conditions, the money supply, and the burdens of taxes, regulation, and politically driven misinvestment and financial bubbles? Dull, dull, dull. A foreign scare makes for better reading does it not?"
Very well put indeed. America is bar none the best financial market to invest in. Period. I don't see that changing in the next 20 years so any other fear-driven speculation is politically motivated.
If oil becomes as scarce and costly as many predict, it will be cheaper to make things closer to home than to ship them across oceans and continents.
If if if...
Oil is most likely due for a correction down from the $66+ range it's in today. I say that as an owner of Athabasca Tar Sands stock. ;^)
As oil pushes up, a geometrically growing range of substitutes presents itself, both for oil as fuel and oil as a source for 'chemicals'.
Note how with oil at $40+, the vast reserves of the Alberta tar sands become known exploitable resources - far more than the Saudis have. If $80+ became buildable into feasibility studies, even more substitutes for light crude become economic enterprises, including Wyoming's shale oil.
On the theme of the posted article, I'd say that one ought to concede that there is a Chinese Bubble, fueled by reckless and political lending practices. As to whether a Chinese Crash would crater World markets and the World economy, I'm sceptical. The Chinese stock market has already discounted a good deal of the sickness in the Commie economy.
OTOH, such a debacle could precipitate either a militarist 'auto-coup' in Red China, or an honest-to-God revolution.
They ran out of fuel a little while ago....tell me that wont slow down the sales of Buick Sails!
And so as I said:
As the price of fuel increases, it will be cheaper to make things closer to home than to ship them across oceans and continents.
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