Gloom, Doom, or Boom? Finance and Economics

[Colonel Sun]

[Alph]

Something is happening in China. The container ships are still empty and traveling at half power because of changes in the US economy, but this is something new and much more important. China's wage inflation was 20-30% last year. Their raw input costs went up faster. And this has brought the cost of many manufactured goods to levels above those of US manufacturers. Importers are balking at the prices. This won't cause China's economy to shrink, but it will end its easy Export-driven growth. In China, one phase is ending, and another is beginning. Now they will have to take the slow road of internal growth forward, just like everyone else. The water levels have risen high enough to balance, and now, for many markets, increasing production in the industrialized West might be more efficient than increasing production in China. The market is clearing. Productive factors are reaching market equilibrium.

This is now becoming visible in the rear view mirror of economic statistics. Chinese productivity growth was only 8.9% last year. (Compared to 17% average during their recent boom years.) US productivity growth was 2.8%, a number in line with the booms of the 90s and double the rampant growth of the 50s and 60s. (Note that these are against a historically extremely high, and only normal in the context of the Information Age in the 90s coinciding with the rapid growth of export economies like China, 3.3% global productivity growth rate.)

This will slow world growth. World growth will remain high because of our position in the Information age and the many positive trends that have not played themselves out. (Like telecommunications, solar panels, robotic automation, modern medicine and computers.) These trends, particularly telecommunication, might stabilize other poor regions of the world sufficiently for them to become new export centers. And there might be some new, disruptive technology that creates another huge upwards spike in productivity. But, more likely, present trends will rule.

So, there are now a two possibilities. In both situations, the Middle East will burn and riot as food prices continue to inch upwards. And Latin America and Developing Europe will shuffle on, as always. China, India, and Brazil will have all joined Brazil's rapidly growing but never seemingly catching up category summed up by the phrase, 'Brazil is the country of the future, and always will be.' The difference between the two situations is in the West. In the first, the West sleeps under the burden of no easy global growth, large debt, and lots of retirees and medical costs. Productivity growth rates are 1-2% against a global 3%. Things are bad in the same way that they are bad now. Hard choices will have to be made in budgets, and we will struggle, though we will struggle in the modern way, at levels of wealth our ancestors could not have imagined, as we do today and as we did yesterday.

In the second, the West maintains its current high productivity growth rates. While they are historically extremely high, a-historically high in fact, they might simply be the long term results of the trends mentioned above, as they have seemed to be the default we bounce back to since they started excluding recessions. The trends of the industrial age, electrification, factory construction, urbanization, and so on, lasted for decade after decade, producing a then a-historically high 2% productivity growth rate year after year. When suppressed by world wars, they bounced back afterward with a vengeance. When contained by wealth in the West, they exploded in developing nations. And they continue even today, well over a century later. If this 3% productivity growth rate is in fact just the result of these trends, is the new normal, then we might actually outgrow our debt problems. Productivity will double every 23 years. The economy of developed nations will change for the better to the same degree as it did in the US in the 50s and 60s, or the 1910-1920 period, or the 1870s, 1880s, and 1890s. (You might recognize these periods by their names: The Gilded Age, the Roaring Twenties, and the Postwar Boom.) This change might be even more profound than those because its productivity growth will be fifty percent faster, and far more profound than the shorter period of intense prosperity in the 1990s because that was only an interrupted slice of this entire movement.

But who knows which way these trends will play out? All that is clear to me today is that the trend of export lead growth in China is coming to a close and that all the hopes that they would lead us to a glorious new age and the fears that they would change the world for the worse by doing so seem to be being ruled out by the latest events. The world will take another path, and the going will be that much harder with one more easy road to greater prosperity coming to an end.

[Mr. Perfect]

Thanks for the research. Am thinking about going over there and looking at some shorting opportunities in RE. Have a friend who manufactures over there, for years, may tag along on a trip. Have largely stayed away from Chinese investments except for a few stocks, most notably BIDU. BIDU probably has quite a bit left in her.

[Colonel Sun]

[Colonel Sun]

So a last minute deal averted the US govt shutdown:

[CgDs]

[Mr. Perfect]

The recent budget episode was not about the money, but establishing who has the power in DC. It is moving decisively to the GOP.

[AzariLoveIran]

This all BS ..

America spends 1 Billion Dollars A DAY for military .. for killing other people

Needs a rebooting ..this thing not gono work .. just window dressing

Dems and Reps are bodies .. they fight in front of TV .. after hours they dine and wine together .. very similar to Ayatollahs


.

[Colonel Sun]

[Colonel Sun]

[CgDs]

[Mr. Perfect]

[Captain Murphy]

"When the power structure is worked out" is a clever way of saying "never". No side can claim a mandate.

[Mr. Perfect]

I'm just saying how things work.

When you say "no side can claim a mandate", that clearly leaves out Democrats who are supposedly all for man dates.

Sorry CM, your belief system saw it's rise and fall early in your life, and you will live out your life in the anguish of shattered hopes and broken dreams. A life time of suffering.

[Azrael]

[Mr. Perfect]

[Colonel Sun]

[monster_gardener]

[Captain Murphy]

[CgDs]

[Mr. Perfect]

[Mr. Perfect]

[Colonel Sun]

[Mr. Perfect]

Yes, it is absolutely dependent on the activities of politicians. Saying "Demopublican" blurs all of the decisions made and lets the guilty off the hook and impugns the innocent.

[Colonel Sun]