The three most important economic factors in the world today are the US economy, the Euro crisis, and the Chinese slowdown. Well quickly look over the Chinese slowdown right now.
First, when researching the Chinese economic slowdown, you have to remember to absolutely question all data. The Chinese government is essentially a state-run central planning government, which means they’re a country of incredible corruption and strong-arm planning. If the US distorts economic data, I can only imagine how much the Chinese government is manipulating that same data.
The Economic Slowdown
Over the last several decades, the Chinese economy has grown at an incredible rate, several hundred percent times faster than the US economy has grown at the same time.
I don’t just mean the stock market — the actual GDP and economic growth of the nation itself. Businesses, personal wealth, income, wealth — the growth has been nothing short of historically amazing.
There have been a lot of reasons for this, but the most important would be that the economy of China has been loosening the government’s control over said economy for quite some time. Plenty of people have pointed out that as the United States becomes less economically free, China has drastically loosened their own restrictions.
Still, they aren’t a capitalist paradise — not even remotely. One thing the Chinese government has done is create their own central banking, easy money system — and that’s helped create several bubbles that have begun bursting in the last year, including even a real estate bubble.
Their mortgage bubble isn’t likely as bad as the US bubble and isn’t likely going to lead to a financial crisis of the same proportion, because they didn’t use derivatives like the US did, as I’ve written about before.
The Economic “Solution”
The solution by the Chinese government has been to essentially print their way out of the crisis. They had local governments go into a lot of debt to boost spending. This mostly failed, just like our own recovery “effort” failed.
What’s the future of the Chinese economy? In the short run, there’s no telling. Over the next century, however, they’re almost inevitably going to eclipse the size of the US economy and will likely try to challenge the dollar in a way that has never been done before.
I’ll be writing more about China because the Chinese influence to investors is simply unavoidable, whether you’re investing in gold, silver, copper, stocks, bonds, or something else. If you haven’t already, make sure to sign up for the weekly newsletter here.
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