China is ascendant so our administration wants us to emulate China’s infrastructure investments and constructions, by building high-speed and light rail projects few will use and which will further drain state budgets.
It will not last. China’s ascendancy, that is. I agree with this analysis by a short seller (someone who makes money when stocks or other assets go down), 5 Reasons China Will Collapse in 2011:
According to the Chinese zodiac, 2011 will be the “Year of the Rabbit,” which is considered to be a lucky sign. But I think China’s luck is about to run out, and I’m not the only one who sees the writing on the wall.
Despite what you hear from the China bulls out there — and there are plenty of them — 2011 will not be the “Year of China” for investors … unless they plan on shorting China stocks and ETFs, that is.
Here are the 5 reasons detailed in the article: The Great Chinese Credit Bubble; The Great Chinese Labor Force; The Great Chinese Commodity Gobbler; The Great Chinese Currency Reserve; and The Great Chinese Nation-State.
Note that some of these reasons given for a Chinese economic collapse are the reasons often cited as China’s strengths.
While I’m not willing to say that 2011 will be the year in which the Chinese bubble bursts, there is no doubt that China is an economic bubble waiting to burst. And unlike our economy, the state-dominate Chinese economy will have a tougher time recovering.
If you want to see the Chinese bubble in pictures, check out images of entire cities build by China which sit empty, the so-called Ghost Cities. You think your local subdivision was unduly speculative, China has replicated the Florida, Arizona and Nevada housing bubbles on an almost unimaginable scale.
Build it and they will come is the stuff of which bubbles are made.
Haven’t we seen this picture before? Europe is collapsing, yet Democrats and the Obama administration want us to emulate West European socialist entitlement policies.
We created our own bubble with unsound government policies encouraging (and in some cases mandating) cheap credit and unaffordable loans to home purchasers. Everything stems from those failed policies, and now we want to double-down because the Chinese are on a building binge.
Fortunately, the incoming Republican House will have a chance to stop the runaway train. We do not need to chase the coming Chinese failure.
Update: China Lifts Rates Again to Cool Inflation.