There is one crises spot in the world that few dare speak about because they do not want to irk a fire breathing dragon. I am talking about China the once sleeping giant that is now economically devouring the world. While the whole world is mired in stagnation or depression the Chinese dragon is red hot. However, a deadly game of chicken will soon play out with the Chinese great red dragon when the world gets red hot over the Chinese driven unemployment.
The United States currently buys four times the amount of goods from China than China buys from the United States. This is not just a U.S. China imbalance it is happening all over the world and is one of the prime reasons for high unemployment all over the world. So as China moves its rice farmers to the cities to fill new factories the people in the rest of the world are losing their Jobs.
Low wages in Chinese cities is still a better life for Chinese than they had in the country so the exodus to the cites for better living standards has become a stampede. China does not dare slow the transition because people are now conditioned to expect employment in the cities and rising wages. The huge expansion that has been going on at the rate of ten percent a year has to continue or there will be great social unrest.
In order to keep the expansion going the leaders of China have decided that they are not going to play by world free market rules. China is a true fascist state, everything in China is state controlled. The Chinese government is playing Chinese checkers with the world but she wants to controls all the marbles. She keeps her currency way below true value in order to keep her products cheap and that makes it impossible for industries in other nations to compete. So they close up shop and build a brand new factory in China where they have endless cheap labor and do not have to pay benefits to their employees or worry about environmental laws. Therefore, they can undersell most products manufactured anywhere else in the world.
The workers of world are about fed up with losing their job to China. The only reason they keep buying the Chinese products is that Chinese goods is all they can afford on their unemployment benefits or welfare checks. The end result is more debt for nations that are subsidizing their people because their jobs departed to China.
This obviously cannot continue for many reasons. You cannot have a nation that hardly produces anything but consumes as if it had endless credit. Governments cannot keep paying out benefits when many nations are now very close to bankruptcy. Idol people without jobs do not pay taxes and they become an increasing drain on their governments. In addition, the government benefits given are not enough for people without jobs to have a decent quality of life so they are losing their homes and cars etc. Meanwhile, while family incomes fall the only thing they can afford to buy is more cheap Chinese goods.
So we have a bubble cycle. The Chinese make cheap products, they are increasingly employed but the world is increasingly unemployed. So the Chinese have to lend more and more money to the governments of the world so they can give it to their unemployed so the world can keep buying Chinese products. This bubble where governments continually owes more money to China should make their dollar fall against the Chinese currency and make Chinese goods more expensive and solve the imbalance problem. However, the Chinese government will not allow their currency to rise to achieve balance. Instead they hold ever increasing reserves of foreign debt.
It should be obvious that unrest from the unemployed in the world will soon turn all this into a Chinese game of chicken. The unemployed will soon force their governments to put tariffs on Chinese goods. Then of course China is going to want to take all the marbles home and if they do not get all the marbles they will turn over the economic game board.
It is obvious that this crises is going to play out because China is selfish and they will never have enough at the expense of others. When nations decide they must take action against China because China is not playing by the rules the Chinese will take the whole system down with them before losing face.
This very well could be the next world crises. A trade war with China or some economic action taken against China that gets totally out of control. If China gets angry with the U.S. or believes the U.S. gravy train is coming to an end watch China move against Taiwan and even try to crash our dollar. With any economic bubble you either let the air out or it is gong to burst all at once. I think China’s leadership decisions will insure a burst.
But, on the other hand, if China does see the light and allows her currency to rise to the full value needed to stop the imbalances. Expect everything in Wal-Mart to suddenly double and unemployment to soar in China. Of course that would mean inflation in the world and unrest in China because the Chinese are not going back to the rice patties now that Pandora’s box has been opened. This is also the reason why the Red Chinese leaders will not dare blink in this deadly game of chicken with the West.
