Monday, 17 January 2011

Looking East

Based as we are on the West coast, China and the Sinosphere in general are major players when it comes to BC's economy. So it was not with a happy pair of eyes that I viewed the pessimism alluded to here. There're also concerns over the current high price of gold, which some are predicting will go 'pop' in the near future.

Now such economic doom and gloom is rather like the tide and winds. It comes and goes, and whoever watches carefully may, and indeed do make fortunes.

Regarding China, I look at the current economic boom and wonder how long it can last. Also, what are the ramifications for when it does go belly up? My reasons for thinking so are as follows;

1: China Manufactures, and is dependent for its increasing wealth on how much it can sell to everyone else.

2: China's biggest market is the USA. The presses at the US mint must be running red hot to supply enough dollars to pay for the consumer goods China produces.

3: The only reason 1 & 2 happen is because the US Dollar is the World's reserve currency. It is the 'Gold standard', and with it all else rises or falls.


4: China is the biggest buyer / holder of US sovereign debt. Which means it is effectively keeping the US economy going.

5: If the US Dollar, for whatever reason, ceases to be the worlds reserve currency, where is a market for China's goods big enough to replace it?

6: Given that if the Dollar does go haywire (All right, more haywire than at present) and the Chinese dump their massive Dollar holdings, what happens? The USA goes bust and can't afford any more lovely shiny consumer goods from the busy Chinese manufactories, the Dollar gets sidelined, and the landfill hits the windfarm. Bingo! From first to third world in five seconds flat, taking the interconnected economies of the West (and East) down with it.

The Russians will be laughing, as they have massive reserves, and Europe has increasing energy needs. Canada will take a big hit because our markets are mainly south of the 49th parallel. Australia might find their Coal exports to china sitting on the dock, or taking a big (20%+) hit in price. Because without a mass market, the Chinese, who are the Aussies biggest market for coal, won't need the power. India will suffer a similar fate. So it's reasonable to assume that the economic path we are currently on leads to the edge of a very steep cliff.

Okay, so what's the solution Mr Oh-so-clever Bill Sticker?

Here goes. My thinking on the matter follows this route; massive deficits are being run up by various Western nations which are unsustainable. Huge vote buying social programmes (including Social Security) eat up the fiscal budget. I include health care, and all (Which is most) associated funding. There are too many people in the public sector who have been taking too much for too long. Too many people not actually producing or trading anything. A whole Golgafrincham 'B' ark full. They need to be productive, not just chair polishers. Administration alone will be the economic death of the West.

So, what's the solution? Am I saying that we need a massive human die-back or something? No, nothing quite so drastic, as there is one currently in progress from the 'Baby boom' of the 1940's and 50's, although there will be a 20 year lag before the effects of this will be felt. A return to more traditional 'extended family' dwelling, with three or even more generations living in the same house, might ease the pressure on living space. This will be the lot of the less economically active.

Okay, so no real answer yet. However, there is one, and I'm afraid at this point I can already see the eyes rolling up into heads at "Oh, that old chestnut". Something more tangible than the movement of small green pieces of paper. Finance for finance sake is rather like Fantasy Football, the numbers rapidly become just a way of keeping score, and any reference to the real world evaporates. Finance, at least in my world view, is the equivalent of electricity. It powers the making of the tangible. Perhaps that's too simplistic a weltanschauung, but there you go.

Like most species on this planet we are expansionist. Humans need new frontiers and empty space to expand into, or else conflict, famine, and mass death result. This is the biggest lesson of human history. Apart from the extreme Neo-Malthusian faction of Environmentalists, I think none of us want to see that happen. Well, at least no-one who isn't a complete Sociopath with all the social development of a thirteen year old testosterone freak.

My long-term solution to the coming Sino-Western crisis is this; Per ardua ad astra. Investment in properly funded international programmes to get at least some of mankind seriously off this rolling ball of rock across to another. In the process providing productive employment and sustenance for those with their feet still on the ground, including a continuing market for Chinese and other manufactured goods, and spin off technology for everyone. Our (humankind) future gets a reasonable future. Win-win I think.

The alternative really doesn't bear thinking about.


Angry Exile said...

Nice use of the 'B' ark example. Would you like your telephone cleaned while I'm here?

Bill Sticker said...

AE. No thank you, but if you could just run me a bit more hot water please, there's a good chap.

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