Alert: China Crash

Reading time: 670 words, 1.5 to 2.5 minutes

The China boom is ending and will impact the global economy. The news coming out of China indicates the Chinese economy is slowing down. China’s 2009 stimulus spawned excessive speculation in construction and real estate but their massive construction spree is coming to an end. They’ve built dozens of empty cities that can house millions of people each, yet there are barely 20,000 inhabitants in some of them. Huge malls stand empty; few shops, no customers.


Last month, property values in Shanghai dropped 30%. Some analysts forecast a major drop in real estate prices throughout China. Most of the recent construction has been in the high end and there aren’t enough millionaires to buy these homes. In fact, many of the wealthy are fleeing China.

Until last week, banks were tightening to fight inflation. As of Wednesday, the Bank of China began easing reserve requirements. In other words, they’re beginning to respond to a slowdown.

New deposits entering China are dropping off and Fitch reports that by the end of the year, Chinese banks will be reporting operating deficits. Let’s face it, for more than a decade; China has supposedly been growing at about 9% a year, every year, year after year. This is fictitious. No country can produce such steady growth without some deviation. Chines statistics are even more fictitious than the American government’s. And now with the European Union in such a mess and contracting (remember, the EU population is larger than the U.S.) both China and India are losing their largest customer.

And now the icing on the cake that confirms the above: Goldman Sachs has reported that emerging economies like China and India will CONTINUE GROWING. You must remember what Matt Taibbie of Rolling Stone magazine called Goldman Sachs; “the world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”.

Goldman doesn’t do anything for free. And, they certainly don’t give away good advice. Everything they do is for their own benefit. They see the public as sheep (suckers) to be fleeced. If you know what’s good for you, always do the opposite of what Goldman says.

If Goldman says India and China will keep growing, you know they want you to buy into it so they can sell and bail out at a profit and probably short them on the way down. So, if you’re considering buying China or India or emerging market ETFs or indexes or funds or whatever: DON’T. Don’t walk away; RUN.

And for the rest of us it means that resource countries like Canada, Australia and Chile will be hit with another downturn as markets for resources dry up and resource prices start to tumble. The next downturn will be worse than the last one. This will be the mother of all Great Depressions because we entered this one weaker and with more debt than the one in the 1930s.

We are four years into this one and central banks are still trying to stimulate some life back into a dying global economy. If you have any doubts then ask yourself: when in living memory was it necessary for banks to be injecting liquidity four years into a so-called recession and two years after it supposedly ended? If this were an ordinary recession we would be growing at 6% to 7% a year. Instead, our so-called growth is less than inflation. Boys & girls, that’s not growth; that’s contraction.

And, now we have 2012 just around the corner when all the fundies and crazies start coming out of the woodwork just in time for the public to catch on to the real China story. Oh, Joy! Speaking of which, let’s enjoy Christmas. While we still can.

December 4, 2011

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About gerold

I have a bit of financial experience having invested in stocks in the 1960s & 70s, commodities in the 80s & commercial real estate in the 90s (I sold in 2005.) I'm back in stocks. I am appalled at our rapidly deteriorating global condition so I've written articles for family, friends & colleagues since 2007; warning them and doing my best to explain what's happening, what we can expect in the future and what you can do to prepare and mitigate the worst of the economic, social, political and nuclear fallout. As a public service in 2010 I decided to create a blog accessible to a larger number of people because I believe that knowledge not shared is wasted.
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