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SOVEREIGN MAN

The first signs of the coming dollar crash are in Hong Kong

October 21, 2010
Hong Kong, SAR

I’m seeing some things on the ground here in Hong Kong that are the first signs of a coming dollar crash.

We’ve talked before about how the global financial system is based on enormous flows of capital– trillions of dollars flow from one country to another, from one currency to another, and most of it is controlled by large banks, funds, and institutions.

This system requires extremely large economies with extremely large money supplies that can adequately absorb huge capital flows. If you and I go buy a few thousand dollars worth of Peruvian sols, for example, no one will notice. But if JP Morgan decides to buy $1 billion worth of Peruvian sols, the Peruvian sol is going to spike.

As such, there are really only three places in the world where the currencies can absorb huge capital flows– the US, Japan, and eurozone. Coincidentally, these are also among the three sickest developed economies.

Everyone knows that the US has the largest debt in the history of the world, that the eurozone’s supranational challenges are beyond repair, and that Japan’s 2-decade long recession shows no signs of abating… but frankly there aren’t any other options out there.

Trillions of dollars of institutional money need to be parked somewhere, and as much as institutions might like to hold their cash in a better store of value like, say, the Chilean peso, there simply aren’t enough Chilean pesos in existence to absorb trillions of dollars.

This means that institutional investors are essentially left to judge a redneck beauty pageant: which of the three contestants is the least ugly?

The winner fluctuates. For the six months from September 2008 through March 2009, the dollar was the least ugly. Then for the next 6-months until November 2009, the dollar was the ugliest.  From November 2009 through May 2010, the euro was the ugliest, and since May it appears that the dollar has once again been deemed the ugliest.

Undoubtedly, the Japanese yen will have its time in the spotlight as the ugliest, and we’ll continue to see all three of these currencies jockeying for position against the others.  Their respective bureaucrats favor weak currencies, and they’re doing whatever they can to inflate and devalue.

In the meantime, little by little, some of these institutional flows are spilling into other currencies viewed as safer stores of value… hence the rapid rise of the Swiss franc, Canadian dollar, Aussie dollar, New Zealand dollar, Singapore dollar, Chilean peso, Brazilian real, and of course, precious metals.

For institutional funds, though, these currencies don’t necessary offer a long-term solution because they’re too small. The entire money supplies of Australia and Canada, for example, are each about $1.3 trillion, while the value of all the available precious metal is less than $6 trillion.

Meanwhile, the Bank for International Settlements estimates the size of the world bond market at over $80 trillion. Thus, you can see why institutions are having to play judge in such an unfortunate beauty pageant… there simply aren’t any reasonable options to hold vast amounts of currency.

As one of the world’s strongest and most dominant economies, China’s renminbi represents a long-term solution… but not yet. China’s economy is already #2 in the world and will likely overtake the United States within a decade. Its money supply is vast, and would be able to withstand significant capital flows.

The problem is that China has imposed severe exchange controls, and the financial system depends on the free flow of capital. Little by little, these controls have been gradually loosening… and the more these controls loosen, the more likely investors will be to abandon the three ugly sisters and move into the renminbi.

Years ago we saw the first signs– China loosened its exchange controls by allowing foreigners and locals to begin moving money overseas with limited restriction. Now the signs are becoming more frequent, and more obvious.

To start, many countries are beginning to build up foreign exchange reserves in renminbi instead of dollars or euro. Malaysia, for example, is buying renminbi-denominated Chinese bonds, and other countries like Argentina, Iceland, Belarus, and Singapore have swap agreements with China, allowing them to hold renminbi in reserve.

Perhaps even more interesting, though, are all the new bonds that are being issued in renminbi. Here in Hong Kong, I saw Asian Development Bank (ADB) just raise 1.2 billion renminbi ($180 million) through a bond auction. They’re moving to list the bonds on Hong Kong’s stock exchange, becoming the first exchange-traded renmimbi bond.

A few months ago, McDonald’s became the first multinational company to sell renminbi-denominated bonds, and Wal Mart has openly discussed doing the same.  I’m convinced that one day soon we’ll see bankrupt cities in the US taking similar steps and auctioning off renminbi-denominated municipal bonds.

Furthermore, the Chinese government has also paved the way for instant, cross-border settlement services between the mainland and Hong Kong. In other words, banks in mainland China can settle and wire payments immediately to Hong Kong without bureaucratic approval… and then from Hong Kong, to the rest of the world.

Effectively, Chinese policymakers have dropped most of the exchange controls with Hong Kong, and they’re using Hong Kong’s financial system as a middle man to have a free flow of capital between China and the rest of the world.

As the Chinese government continues down this path of monetary deregulation, you can be sure that institutional funds will dump their dollars, yen, and euro and head to the dim sum market for a better store of value.

This is not a cause for panic, but merely preparation. We can see the signs of the long-term trend… and if you haven’t done so already, you should be taking steps to preserve the value of your capital. Consider holding stronger currencies in a foreign bank account, buying precious metals, or purchasing well-located foreign property.

If you wait until your broker calls to offer you renminbi-denominated muni’s, it will be too late.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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Comments on this entry are closed.

  • Tony_waszkiewicz

    I’m confused why you say “one day soon we’ll see bankrupt cities in the US taking similar steps and auctioning off renminbi-denominated municipal bonds.” It makes no sense to take a loan in an appreciating currency since the amount you repay in your local currency will be higher, and your income will be in USD. check with Iceland or those in East europe who took Euro mortgages and are now struggling.

    • BondVigilante

      Cities and states wouldn’t do this by choice– they would have to do it because the market wants it. In the futur, no one would expect dollars (US) anylonger, and so investors would demand their prefered currency instead– renminbi. If the local governments want to sell bonds, they would be forced to do so in the currency that investors want.

      • Cheeseburger

        US issuers can keep using dollars if they pay high enough interest rates (to compensate the buyer for the expected loss in purchasing power). The interest rate (in dollars) would be high enough to include the expected cost (in dollars) of buying the renminbi at the bond’s maturity. You could buy a renminbi bond now – effectively buying very long-dated renminbi futures with dollars, or you could buy a dollar bond now and get extra dollars in interest during the life of the bond and wind up, in the aggregate, with enough dollars buy the same renminbi later on (if you chose to).

    • http://www.facebook.com/LatchDaddy Calvin Holt

      it only makes sense if on one wants to buy your dollar denominated bonds..because the dollar is crap..think Zimbabwe

  • Fiji

    great artical, so what do you think will become of the HK dollar? Do you think the HK dollar will be replaced by the renminb? and or some new instrument?

    And the big question is how soon and is it prudent to buy them now?

    JM

  • jambo

    i’d still rather live in the US than china, any day.
    economic power is not indicative of innovation or development, and certainly not evolution, either, for that matter.

    i’ve personally been saying we will see more regionally strong economies, than one ‘mega super power’ in the future. brasil, chile, china, singapore, etc. the US and europe [countries w/in europe really] will still have their place; they just won’t have as influential of a place as they have enjoyed up until now. you can still find opportunity and prosperity in these places, however.

  • Dagwood

    There’s no quesion that we face a dollar crisis, but I still have reservations about anyone’s paper. I also think Jimmy Rogers is right about hard assets, and China, being a totalitarian nation, can turn on a dime.

  • Goofballgoof

    Wha’s wrong with rednecks? My cousin one a local beauty pagant down here and she’s hot!! and now she’s all mine….suckers!

  • http://www.facebook.com/people/John-Manning/1796568881 John Manning

    I have lived and done business here in Asia for a few years. Prior to that I was a currency trader, so let me say that the first signs of the coming dollar crash happened a long time before this guy went to Hong Kong. It is being propped up by the same country that is causing the problem.
    China is a false economy, driven by exports and a currency that is as much as 50 % undervalued due to China’s interference in the market. Now imagine the depression China is going to have if all of the sudden the cost of a color TV from China doubles. Yes it is cheap now, but if it doubles it is going to put the breaks on the Chinese economy and they are all going to be back to fighting with the chickens for a few grains of rice on the ground. China is a false economy and driven by exports, but if market forces take that away they will be like Japan, in a 2 decade long recession. So they look healthy now, but will it last. The US and Eurozone are internally driven economies, but they are spending money like a sailor in a whore house. If that ever stops, then the dollar or Euro will solidify and the wave of capital that comes with it will be bigger than the 2004 Tsunami. Look to politics in America and the financial crisis. I know when you don’t have a job it is hard to see the silver lining, but think about what the American people have learned. They have learned that there is such a thing as a budget and if your out go exceeds your income for a long time, your up keep will lead to your down fall. Now for politics, it looks like the republicans might go back into power, this time with the Fiscal conservatives at the helm instead of the spend happy Neo-Cons. Does it mean there will be a solution, no , but it means the American people know there is a problem. Remembering the first step to solving the credit adiction of the west is to admit you have a problem. This is like AA for politicians drunk on credit. The American economy is just starting to heal itself, Europe well due to the opinions of the people, my guess is that it will be a while.

    For now, you are looking to build wealth, so you have to look outside of the US and the best way is to diversify outside of the country. When you bring your money back it will be worth a lot more. This is called a carry trade, not coined after the senior senator from Massachuesetts John Kerry either. What it essential entails is that you have a multifaceted investment, which will make you money in multiple ways. In other words you are going to make money from you investment plus the currency appreciation. It does not matter what the interest you are making if you recently invested in Thailand, because the currency went up 11 % versus the dollar. Yep those are nice gains in 4 months. International finance is the key to your future success, but beware there are all kinds of traps along the way. You can invest in false economies and have all your earnings disappear quick.
    For now, I would say to park your money in businesses in the developing countries of the world, but where. Let me say look to ASEAN, this zone has some promise. Their brand of corruption is less of a road block that what you see in Latin or South America, it is mainly a way to make things easier, but it is voluntary. You can choose the hard way, or give me some money and I will make it all go away.

    Things back home are going to get expensive as well, so it is not a bad idea if you deversify yourself as well. That means get off your sofa and out of your comfort zone, move to a foreign country, be scared, excited and live a life that someone might actually want to read about in a book. Your family might think you are crazy, but you will have to last laugh. When the prices on the things they buy double. For some places, frankly I don’t know but for South East Asia, particularly Thailand I can have you up in running here in 2 days, just hit me up on facebook and I will advise you for free.

    Deversification is the key to your future and you better do it fast because we are in the 4th quarter now, so if you want to make money, you better start looking now. When the dust settles in a few years you can move back and laugh at those who didn’t listen to you. I bet people thought Noah was crazy when he was building a big boat in the desert, but after the flood and they were swimming for their life, my guess is they thought of him as a Visionary.

    • Valdereevalderah

      Nice comments and very interesting. What types of investments (companies / ticker symbol and stock exchange ) do you recommend?

  • http://www.facebook.com/people/John-Manning/1796568881 John Manning

    Where do you want to park your money outside of the US? Good question!!! There are a lot of choices, in this section I cannot comment on what I don’t know about, so I will only tell you what I do know. South East Asia!!! South East Asia is dominated by 2 big economies (Thailand and Singapore) one economy that has been sputtering (Phillippines), a few midsize countries with fast growing economies (Vietnam, Malaysia Indonesia) and some basket cases (Cambodia, Laos, Myanmar(formerly Burma)). In these economies there is differences that will effect your investment decision. I choose Thailand and Singapore, because of the size of the economies. Singapore being the better of the 2, but Thailand showing significant promise due to its location, governmental policies and size.

    Now what do you invest in, well with Singapore, you can invest in the whole gambit of investments, but with Thailand go with the basics. The best performing internal companies in Thailand are cell phone service providers and food companies. People in Thailand still have to eat, even if they cant afford much else, plus they like to talk to their girl friends while they are working out in the rice fields. I would look to private equity (because a little bit can buy you a lot)(for example $15,000 dollars investment can buy you a 1% stake in fast growing start up companies, which can be enough to retire) , but their are some values in the stock exchange although it is slower moving, so you can look to that as well if you want something a bit more regulated.

    In this case your main goal is not to loose money, so stay away from high tech and with the coming fall of the dollar stay away from export driven companies. If you hit me up on facebook I can tell you some better places to look to see what is out there.

  • http://www.facebook.com/LatchDaddy Calvin Holt

    Agree, a better analogy would be a beauty contest between pigs or C Bankers- Bernanke,Trichet or Gono

  • daveco

    There have been too many lies lately to comment on but here it goes. Common sense, simple math can disclose the lie and good engineering(science if you want) can fix anything.

    1. There never was a sub prime mortgage crisis. This was mathamatically impossible. Ask a loan shark. If you loan at over 6% and you get your money at under 1% as long as 50% of the people pay you make boat loads of money! Never mind pmi, tax breaks and the fact that you do not have to pay back the federal reserve if the home loan defaults.

    2. Chinese workers(not slaves or child labor) work for less than American workers. So it is cheaper to manufacture everything in China. WHAT A UNBELIEVABLE LIE!!!!!! The cost of shipping from China to the US is more than it cost to make anything in the US forget the wages! Again math, 180 barrels of oil per hour to push a ship across an ocean turns out to be over $2 per pound(item shipped) and increasing every single day. Just oil cost forget the actual shipping cost. The minimum wage worker in America can not afford a home, a car, food, forget taking care of kids, but yet the minimum wage worker in china can afford a house, food and taking car of kids and are actually starting to buy cars. So what is really going on, Wall Street saying the dollar is the way to measure a chinese worker, yet a chinese worker will not except a dollar for pay but will only except chinese currancy because the dollar is worthless to the chinese. That is on purpose to perpetuate the LIE that China can make anything cheaper than the US.

  • http://www.facebook.com/people/John-Manning/1796568881 John Manning

    Ok, daveco, your numbers are off on the shipping cost from China. I export from China and going to the port of Savannah I get shipping cost of $2,600 per 20 ft conex. My load weighs approximately 28,600 pounds so that means it must cost the shipping company, based on your math, $57,200.00 which they are only charging me $2,600 so they are loosing $54,600 for every container they ship. I doubt it !!!

    Now time for some of my own math. In 2008, Maersk made 208 million dollars, they shipped 1.9 million containers, now how did they make money because based on your numbers they really should have lost 103 trillion dollars, that is more money than the world economy will generate for the next 2 years. Now how did they do that, I guess they got the extra money from a secret conterfeiting operation that is managed by Santa Clause and operated by his elves which are really Cambodians with big ears. I doubt it!!!

    Take your bs and move on.

  • daveco

    Ok john I will bite.

    I actually own a boat. I actually also ship to china. Not on my little boat though.

    But if you owned a boat bigger than 100ft long you would know that your boat would take over $5000 worth of fuel to run from here to China with much less than 28,600lbs worth of cargo. There are a lot of people who probably do own boats that can confirm that.

    You can not move in ANY boat ever made in the history of man 28,600lbs from China to California much less through the locks and into savannah for $2,600 worth of fuel. PERIOD!

    Go look up the boat that took your load. Go look up how much fuel costs. Go look up how many miles. Go look up how much the boat will carry and you will find out that the fuel costs were higher than the total cost of what you bought.

    And if you tell me the boat I will do it for you in front of the world.

    It is all wallstreet bullshit about what it costs to ship from china in actual dollars by corporations who are lying to us every single day and we are all too stupid to pick up a calculator and figure it out.

    And yes the reason all the bailouts were needed (not just in America but throughout the world) is because all the numbers do NOT add up about the true cost to make everything in China and shipping accross an ocean! That is the true reason for the global recession(or depression)! Instead of optimizing production we have completely distorted the truth of what it cost to produce and ship everything by currency manipulation and outright lies by wall street and corporations.

    So give me the boat I can use a calculator and you will then know the cost of the fuel just to ship it. And keep buying from china I am sure it will work out for America. I actually ship TOO china the goods I produce and yes it costs a lot more to ship too china than from china but still not as much as the actual fuel costs.

  • daveco

    I guess I can not stay away from this subject because it actually is the tip of the iceberg for a lot of problems and what most people believe like JOHN is down right corporate propaganda and the beginning of the end for the American way of life and the dollar if people do not start voting and stop watching dancing with the stars.

    I was wrong about 180 barrels of oil per hour, or actually that was a low average. The newest, largest most polluting machines ever built are container ships by Maersk and they are actually beautiful engineering marvels. They use over THIRTY FIVE THOUSAND GALLONS of BUNKER FUEL OIL per hour. Yes I said that right 35,000.00 gallons of fuel per hour. Bunker Fuel is the nastiest most polluting form of oil to ever be burned. With absolutely no pollution control what so ever. The world wide fleet of container ships pollutes more than the entire WORLD fleet of automobiles. Yes I said that right more than the entire world fleet of automobiles. And yet no regulation, no carbon control not even a whimper from the main stream media. All we can talk about is how The average american pollutes by using his Chevy to go get grocieries for his family. If we only knew that the cargo ship that delivered that (I whatever) product produced more pollution than all the cars in the world combined would we still buy all that stuff from China. PROBABLY NOT.

    But instead we make the panama canal bigger to take these super polluting machines so we can carry more junk for John from China to the Atlantic because to ship it across america by rail were electric motors run railroads at a cost of less than pennies per mile with negligible and regulated pollution paying American wages well that is just toooooo much for the corporations and John to handle while he lives in ignorance shipping from china in container ships guzzling oil and polluting the world unregulated paying slave wages and completely subsidized for corporations to abandon the US and the regulation of the US.

    Which in turn is devaluing the dollar and completely distorting the optimization of manufacturing which is the production of more with less manpower, less material waste and less harmful environmental impact. The true meaning of productivity. Which in turn produces true economic growth.

    Not deregulation to pollute more. Not deregulation to use more material and waste more material. Not deregulation to use more manpower and pay them less with a pegged currancy. That is lunacy and leads to economic depression along the way of a devalued dollar.

    Why would I know, well I have been to those automobile factories in China and I have worked in them in both countries. First the chinese are great people and love americans! But the sad fact is the American automakers even after every single ounce of productivity and know how has been stolen from American workers and given on purpose to China and India, American automobile factories still hands down produces more automobiles with less people, less material waste and with less environmental impact and better quality than there Chinese or Indian counterparts. And that is just auto plants. Every factory I toured and worked at had exactly the same deregulated wasteful unproductive results in China and India. In China and India More workers more pollution more waste yet the world media keeps saying that it makes sense to produce everything in China and India and ship across an ocean wasting millions of gallons of fuel and causing more pollution from climate change then the entire 20th century of production.

    That is why we are in a world wide economic downture and can not seem to get out and that is why the dollar is in a downward spiral and can seem to get out.

    Coporate propaganda that John believes has led to a world wide great recession and the dollars fall,

    when common sense would tell John what Henry Ford knew a long time ago. Increased productivity, decreased material waste, decreased environmental impact and decreased shipping costs by centralized production leads to true and lasting economic prosperty.

    And thanks for posting and reading and there are a lot smarter people than me to say all this and I hope I did not make too many mistakes and apologize for them.

    • Armchairprotester

      Your wrong, as an example…The Emma Maersk’s 109,000 hp engine burns 1,700 gallons of HFO per hour. This is very good efficiency, about 20-25% better than most out there today.

      HFO = bunker fuel, yeah its dirty. I think you are mixing gallons with pounds. Think in terms of HP’s. 0.25lbs/HP/HR is standard burn rate for very large Diesel engines burning bunker fuel. HFO weighs in at about 7 gals per pound. An average large container ship like a 6000-8000 TEU will have a power plant(s) in the neighborhood of 100K HP total. Do the math dumb boy.

      And stop with the whole flag waving “Nationalism” thing. The world turns, we Americans have forgotten in our laziness that the world turns without us. Globalism has been around since the dawn of man, the planet will clean up our mess when we are gone.

      • daveco

        I kind of appreciate the fact anyone even reads this stuff, it shows that not everyone is watching dancing with the stars.

        Like I said I was wrong about the average of 180 barrels per hour of bunker fuel. That was the old average for smaller ships now with the bigger panama canal and the bigger ships the average is higher, and what I said is the newest ships use about 35,000,000.00 gallons of bunker fuel per hour which is still correct. You can pick out individual ships that use less but they also carry much less cargo at an even lower rate of return. SO smaller ships cost more to operate!

        Something you said that is comical is that 7 gallons of bunker fuel wieghs 1 pound. Pick up a ONE gallon CONTAINER of gasoline it is about 7 pounds. Bunker fuel is the heavy fuel left over from the oil after it has been refined and about the same as asphalt and weighs over 7 POUNDS PER GALLON, dummy. What are you smoking that is 7 gallons bunker fuel weighs one pound! More corporate propaganda for dummies who can not do simple math and just a little common sense!
        Again most people can do math and just a little common sense, 7 gallons is not one pound of just about any liquid much less heavy nasty bunker fuel!

        About Nationalism, I am not American and was not born in America! I am a product of globalism having been raised on 3 different continents from parents and grand parents from 4 different continents. I really do not call myself just an American even though I do identify having spent a lot of time there!

        I am actually all for the transfer of knowledge around the planet to help poor people. That is actually what I do in a way. What I am not for is the constant lies and propaganda spewed by the main stream media and Idiots who do not know the weight of Bunker fuel because they have never used it or bought it. I have done both.

        Yes the world probably will clean up the mess of pollution from container ships and shiping everything all over the world to use slave labor, child labor, and currancy manipulation but it may take over 100,000.00 years at the currant rate you idiot!

        In the mean time, you can not breath in most port cities aymore and cancer and lung diseases are on the rise and you can actually take pictures and see the haze just about i any Chinese, Indian, American, European port city at any sunset or sunrise. Which is visibly getting worse every month now. I know I have been to a lot! You probably have never left your cubical were you work for MaerSk!

        Again I apologize for any mistake I have made in absolute technical terms being an Engineer I know I should be exact with the numbers but they are staggering now and you do not have to be to the exact decimal point.

        Economic recession is being caused by the manipulation of markets and propaganda to create a lie that everythig should be made in China and India and shipped around the world to people with pollution created as a by product and people enslaved in poverty, and the middle class destroyed in America, and Europe as a result. The cost of the shipping is normally more than it would cost to create the product in the home country! AGAIN i KNOW I have been to Europe, American, China, India, It is all baloney that the Chinese and Indians work for less, THEY DO NOT! And there is a lot more greed/kickbacks and coming taxes in those countriess. Remember the Chinese have been taxing and nationalizing coporations for longer than America has been a country and they will do it again sooner or later.

      • daveco

        Again thank you for posting all of this and if anyone reads this thank you.

        The answer to the global recession is actually very simple and it is not my idea and we are doing half of it right now.

        Spread technology faster and further.

        Create laws that take globalism into account that force corporations and governments to get better by being more productive and by having more competition to make them want to be more productive.

        These same laws must stop the corporations and governments from being more productive by making people work for less or no money and by not allowing corporations and governments be more productive by harming the environment.

        Europe, Canada, America and other countries already have these laws internally,,,,,that is why they got richer first but these laws did not take into account the globalism that would explode because of technology. The laws need to be updated to incude globalism such as slave labor and child labor laws should include all goods inported. ie if walmart buys goods made in the US by slave or child labor they would be subject to fines and jail time, yet there shelves are stocked with imported goods from China, India, Malasia made by child and slave labor!!!!!!! Such as minimum wage laws should include all goods imported. In countries such as Sweden and Germany were just modest globalized laws are used there economies are doing better than anyone elses.

        That is the answer, laws that include globalism. Not regulate your own country to death and kill your own companies and then let imports by global corporations do whatever they want from slave labor, child labor to unregulated bunker fuel that creates more green house gass climate change than all the automobiles on the earth combined!

        Whew!!!!

        It is a small world and getting smaller and more technically advanced every single minute!

        Governments people, laws all need to Get with the program of globalism, the corporations did about 20 years ago and that is why the so called rich nations are in trouble, there laws did not keep up and need to be updated for a very globalized planet and very globalized corporations.

    • IslandHammer

      Man made global warming/cooling/climate change (whatever it is popular to call it this week) is a hoax. And I’m assuming that you have turned a blind eye to the big, powerful unions and their impact on manufacturing in this country? What we need is de-regulation. And Henry Ford did more to screw up the Amazon Rainforest and it’s local people than anyone else ever has.

  • Dmaring

    To put faith in China’s currency is dumb.
    China is still a third world country where the average income is still less than three thousand dollars a year, and fifty percent of the people still don’t have electric power in their homes. The present regime could collapse overnight. The title to private property could also disappear quickly. The present government is not that stable. Sooner China will have to give in to the people’s demand for a democratic government or become a more rigid dictatorship.

  • http://twitter.com/pjwerneck Pedro Werneck

    hard to believe China can be trusted that way.

  • Guest

    I’m generally bullish with China in the long-term. Heck, I’m going back to school to learn Chinese and study Asia. However, it is possible to be overly enthusiastic in your assessment of the actual situation in China. Japan is an excellent lesson. There are major differences, but there are also many parallels. 20 years ago, Japan was feared, praised, and put on a magical pedestal in many of the same ways as China super-bulls do today. China has enormous potential, but there are VERY serious and VERY major risks along the way. China as the new economic superpower that eclipses the USA is by no means guaranteed. Very serious caution and research is necessary before making major long-term financial decisions and predictions relating to China.

  • Meddioui

    Its really a very interesting article of practical economics.It demonstrates the complexity of international exchange beween nations.
    The entire world must be careful to avoide a possible cahos if things don’t change on the good direction.

  • Carlos

    so what

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