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I wouldn't worry about China in 2016 as much as the increasing age of every country for themselves as the US becomes less of a focus and there is no other clear leader. China is looking out for China now and China will be looking out for China in 2016. I like China, I think China has tremendous potential and is very exciting. But China is not going to be a world leader and, in time, neither will the US be. So, how the next 5-10 years play out with that potential scenario will be interesting.
The cheerleaders of America's doom will be proved wrong again.
First, IMF is a European dominated organization and the message is a bit politically motivated. If IMF wants a fair comparison they should have compared per capita GDP. Some 45K for US to 2.5K to China. There is a long way to go!
Not only IMF report assumes China will maintain 10% GDP growth forever. The growth from a smaller base is much more easier and it gets more and more difficult to maintain it and especially for China there are some significant headwinds.
China has to deal with rapidly aging population due to one child policy. Their population is among the oldest in the world. The growth in inevitably slow down.
Secondly, China will have to bear the cost of environmental destruction. There is a cost to it. Air and water resources are already in bad shape.
China needs huge external resources to maintain their growth. As they use more and more resources, the inflation will provide more and more headwinds.
This is assuming that China will not hit a wall on a credit and real estate crisis of its own. Bad credits is likely to pile up in Chinese state controlled banks and there is huge blocks of unoccupied ghost cities. Capital has been hugely mis-allocated during recent boom. All such expansions will end some day.
All is not well with China and America's enemies are too quick to call doom of the US.
I don't think anyone's cheerleading the decline of the US or calling for DOOOOM - simply a decline (and that decline can be orderly over a long period or disorderly) in the overall and a decline in the individual standard of living, as well as a decline in the importance of the US on the global stage.
I don't think that China is going to necessarily overtake the US in the traditional sense as China is not going to act as the kind of leader that we used to be - China is looking out for China and no one else (and certainly isn't without the potential for error - as I've noted before, I think China has immense potential and potential to screw that up) and I think you're entering into an age where countries are increasingly looking out for themselves first. Again though, no one's cheerleading - it's simply a matter of outlook. I don't see an outlook that's sunshine and rainbows and that problems simply don't matter and we can spend endless printed money with no consequences whatsoever. I don't think various EM's are perfect either by any means and have significant potential for problems, but they are at least attempting to create infrastructure and other elements that are trying to keep their countries competitive.
Certainly not, but I'm not going to get into it in great detail. I just see nothing that does not indicate that the US is in a state of decline that has the potential to become disorderly (and as I noted in the debt ceiling discussion, there is no good answer.) I don't like it, it makes me upset, but that's the reality and outlook as I see it.
Moving to a new board, I really feel as if I'm not in the mood anymore to start debates on monetary policy like I did on FA. I've said what I have to say and the arguing never really goes anywhere. Those who feel differently or think that I'm being political (which is ridiculous) or whatever are not going to change their mind and, really, neither am I (and the Bernanke fest today - if that speech and the softball questioning gave anyone confidence, you must have been watching a different speech than I did - has certainly done nothing to change my mind.) Additionally, I've heard Bernanke referred to as "The Bernank" a surprising number of times on CNBC this week. I think it's a sign of lack of respect and confidence in him that a mispronounciation on an internet video with cartoon characters is being presented in such a casual manner on financial media.
No offense at all. I think that China has significant potential (enough to say yes) to surpass the US economy by 2015-2016. If that happens, I think it's a very different world and my view is that the world stage will look very different over the next 5-10 years as countries try to look out for themselves and figure out a slowly (or possibly quickly) shifting balance of power.
Again, it looks like everyone is assuming China is going to continue to grow at this rate forever as well as US will forever is slow growth mode.
Trees do not grow to sky indefinitely. Starting from a low base, growth is easy. It becomes more and more difficult to grow the number as numbers become bigger and bigger as the economy matures. I've already listed a number of challenges in my first response. Those are not small challenges.
Another assumption is that China cannot make mistakes and everything US is doing is wrong. They have already made many mistakes and they will make more mistakes and some of them will prove costly. I do not think they will be able to sustain this growth. Sooner of later they will fall behind and if they try to keep propping up artificially, the worse they will fall off. The admiration of China now among investors is very similar to the admiration towards Japan before their crash.
As a naturalized citizen, I have full confidence that this country will continue to grow and prosper and it will be way more than 2020 that China will catch. Time will show.
Everything at this point is speculation. It appears as if china's economy will surpass ours sometime in the future, and it appears as if we have some serious problems in this country that need to be overcome. However, this is all dealing with probabilities of potential futures and that's always dicey at best.
With regard to US - we've got major problems with our debt and unfunded liabilities and a disfunctional gov't. The futures range from them fixing it (15-20% chance), having a financial meltdown of sorts possibly including hyperinflation (20-25% chance) and muddling along in the Austerity for 10-15 years (chances 55-65%).
And of course, you can fiddle with the probabilities, but the main issue is that I don't see a finanical meltdown as being a likely scenario. BUT, and this is the nut, the consequences of a meltdown are so ghastly that for someone to NOT prepare is foolish.
Risk management folks. If the costs associated with an outcome are not high why worry. However, if the costs are enormous EVEN with a low probability of occurrence, you simply must cover your ass.
'mornin'... and that's exactly why when my wife asked the other day if we should sell that jar of silver quarters I told her that I didn't think so, "because you never know...."
Comments
First, IMF is a European dominated organization and the message is a bit politically motivated. If IMF wants a fair comparison they should have compared per capita GDP. Some 45K for US to 2.5K to China. There is a long way to go!
Not only IMF report assumes China will maintain 10% GDP growth forever. The growth from a smaller base is much more easier and it gets more and more difficult to maintain it and especially for China there are some significant headwinds.
China has to deal with rapidly aging population due to one child policy. Their population is among the oldest in the world. The growth in inevitably slow down.
Secondly, China will have to bear the cost of environmental destruction. There is a cost to it. Air and water resources are already in bad shape.
China needs huge external resources to maintain their growth. As they use more and more resources, the inflation will provide more and more headwinds.
This is assuming that China will not hit a wall on a credit and real estate crisis of its own. Bad credits is likely to pile up in Chinese state controlled banks and there is huge blocks of unoccupied ghost cities. Capital has been hugely mis-allocated during recent boom. All such expansions will end some day.
All is not well with China and America's enemies are too quick to call doom of the US.
http://www.reuters.com/article/2011/04/27/us-china-demography-idUSTRE73Q1SC20110427
I don't think that China is going to necessarily overtake the US in the traditional sense as China is not going to act as the kind of leader that we used to be - China is looking out for China and no one else (and certainly isn't without the potential for error - as I've noted before, I think China has immense potential and potential to screw that up) and I think you're entering into an age where countries are increasingly looking out for themselves first. Again though, no one's cheerleading - it's simply a matter of outlook. I don't see an outlook that's sunshine and rainbows and that problems simply don't matter and we can spend endless printed money with no consequences whatsoever. I don't think various EM's are perfect either by any means and have significant potential for problems, but they are at least attempting to create infrastructure and other elements that are trying to keep their countries competitive.
We are not.
But that's just me.
Moving to a new board, I really feel as if I'm not in the mood anymore to start debates on monetary policy like I did on FA. I've said what I have to say and the arguing never really goes anywhere. Those who feel differently or think that I'm being political (which is ridiculous) or whatever are not going to change their mind and, really, neither am I (and the Bernanke fest today - if that speech and the softball questioning gave anyone confidence, you must have been watching a different speech than I did - has certainly done nothing to change my mind.) Additionally, I've heard Bernanke referred to as "The Bernank" a surprising number of times on CNBC this week. I think it's a sign of lack of respect and confidence in him that a mispronounciation on an internet video with cartoon characters is being presented in such a casual manner on financial media.
With per capita GDP of 2.5K for (China) vs 45K (for US) did US really decline?
Trees do not grow to sky indefinitely. Starting from a low base, growth is easy. It becomes more and more difficult to grow the number as numbers become bigger and bigger as the economy matures. I've already listed a number of challenges in my first response. Those are not small challenges.
Another assumption is that China cannot make mistakes and everything US is doing is wrong. They have already made many mistakes and they will make more mistakes and some of them will prove costly. I do not think they will be able to sustain this growth. Sooner of later they will fall behind and if they try to keep propping up artificially, the worse they will fall off. The admiration of China now among investors is very similar to the admiration towards Japan before their crash.
As a naturalized citizen, I have full confidence that this country will continue to grow and prosper and it will be way more than 2020 that China will catch. Time will show.
Everything at this point is speculation. It appears as if china's economy will surpass ours sometime in the future, and it appears as if we have some serious problems in this country that need to be overcome. However, this is all dealing with probabilities of potential futures and that's always dicey at best.
With regard to US - we've got major problems with our debt and unfunded liabilities and a disfunctional gov't. The futures range from them fixing it (15-20% chance), having a financial meltdown of sorts possibly including hyperinflation (20-25% chance) and muddling along in the Austerity for 10-15 years (chances 55-65%).
And of course, you can fiddle with the probabilities, but the main issue is that I don't see a finanical meltdown as being a likely scenario. BUT, and this is the nut, the consequences of a meltdown are so ghastly that for someone to NOT prepare is foolish.
Risk management folks. If the costs associated with an outcome are not high why worry. However, if the costs are enormous EVEN with a low probability of occurrence, you simply must cover your ass.
peace,
rono