February 15, 2012
Stealth Withdrawal of Wealth From China By Its Entrepreneurs Unwittingly Helped China Avert Runaway Inflation. But That Practice Is About To Be Halted.
by Bill Sardi
Predictions that economic bubbles would pop in an ever-growing Chinese economy have been frequent over the past 10 years. But prognosticators failed to realize that Chinese bankers are more conservative than the colleagues in the US and require 30-60% down payment on home loans. Furthermore, as China captured trillions of dollars in US money, it set much of it aside to guard against run-away inflation and to pour into the economy as the meltdown in the US economy beginning in 2008 resulted in a decline in exports from China to the US.
Certainly China over-responded to this crisis and went so far as to build whole cities that remain unoccupied. However, incomes there are simply not sufficient for people to move into these modernized communities.
China is cunning. It holds over $1 trillion in US treasury bills that may never be repaid in full value. It has begun to seek tangible wealth rather than hold US T-bills and has conducted a worldwide search to buy minerals, oil, unprecedented amounts of gold in the form of US bullion coins, or to obtain long-term contracts for the same, and to barter without using the US dollar as the medium of exchange. Marc Faber, financial commentator based in Asia, says China puts its money into building infrastructure whereas the US puts its newly printed money into consumption. American consumption also boosts China’s exports.
What all the analysts missed, while they predicted the huge expansion of credit in China to result in uncontrolled inflation, was that much of China’s money was covertly leaving the country, serving as a counterbalance in its economy.
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China knows it is holding a diminishing asset in US T-bills. So does the rest of the world. The US economy keeps getting propped by its lenders. A US default on its debt would result in an implosion of the world’s economies. At some point the US will not be able to pay interest on its debt and be forced to default and the dollar will collapse. That day may come sooner than predicted.
Full article: http://lewrockwell.com/sardi/sardi204.html
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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