-- Posted Monday, 8 December 2008 | Digg This Article | Source: GoldSeek.com

For the Chinese the global financial crisis is fast morphing into a depression with factory orders falling faster than the US in the Great Depression and train stations crowded with former workers heading home for a life with their relatives.

In the US things are bad but they are not that bad. It is 1974 all over again, not 1929. That was also a terrible year for stocks, and yes a Chrysler bailout was the topic of the day.

Indeed the 1974 financial crisis was still being discussed by brokers in 1982 when I went for an interview in the City for a job as a stock broker. That was also a nasty moment for real estate after several years of boom, and it took five years for prices to recover, largely thanks to inflation and not in real terms.

Rural China

So spare a thought for an emerging market like China if you are a financial big shot in the West who feels very down on their luck at the moment. You are not facing the rural retreat of the Chinese in a remake of John Steinbeck’s ‘The Grapes of Wrath’.

The difference is in the level of absolute wealth in the different societies. In the US people still have access to wealth and debt levels on average homes are not so huge.

For the Chinese the wealth was very nouveau and fleeting. Car ownership had soared in the past few years in the People’s Republic, now those same drivers will struggle to fill their tanks.

That means, that far from avoiding or being disconnected from the global financial crisis the Chinese will feel it hardest. It also means that the solution to the crisis will have to come from the leadership of the US and president elect Obama who is making the right noises while playing down expectations.

Necessary stimulus

However, the 14 per cent of GDP Chinese stimulus package does at least show that China is not locked in Hooverian policy mode like the US of the early 30s. Yet given that the scale of the challenge is arguably bigger that is just as well.

If we look back to the 70s that reflation and inflation and devaluation saw the States emerge from its economic black hole by the end of the Carter years, admittedly only in a shape sufficiently strong to take the cold turkey of Reagan and Paul Volcker, now back chairing Obama’s crisis committee.

This is not going to be an easy period for anybody in the developed world, but let us all remember that it is going to be a darn sight worse in the Third World. We should also take care to make sure future enemies are not created out of these hard times, and look upon cries for help with a certain self-interest.

Perhaps we should all be looking at serious infrastructure investments rather than concentrating on scattering money to boost consumption - the very thing that got us into a mess in the first place. In that the Chinese priorities are presently ahead of those of the USA.

-- Posted Monday, 8 December 2008 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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