-- Posted Thursday, 4 December 2008 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Thursday, December 4, 2008
“Phenomenally accurate forecasts
Some years ago, when China began to ramp up its export economy, we predicted here that the country would continue to export aggressively even if global trade fell off a cliff. The result, we wrote, would be historically unprecedented deflation in the manufacturing sector – plummeting prices that would make it all but impossible for even the strongest exporters, including Germany and Japan, to make a profit. China would continue to glut down-and-out consumers with exports because the alternative – sending tens of millions of assembly line workers back to the farm – was unthinkable.
Turns out we were wrong and that the unthinkable is happening. Responding to the worst downturn in international trade since the 1930s, Chinese factories have cut back sharply or shut down, and the workers are being left to fend for themselves. Unfortunately, they do not have the kind of safety net that U.S. workers enjoy -- no jobless benefits, no food stamps, no Medicaid, no welfare. Even worse, the farm jobs that they left no longer exist, since much of the land has been leased to agribusiness.
Not that the migrant workers would be much better off if China had not promoted the consolidation of farms in recent years. In fact, there was never enough arable land in the first place to support a large work force, much less make farming pay well enough to bring affluence to the hinterlands. Notes the Wall Street Journal: “China has roughly the same amount of farmable land as the U.S., where only 2% of workers are employed in agriculture. But China has some 730 million rural residents --- more than twice the entire American population.” The article was headlined, China Fears Restive Migrants/As Jobs Disappear in Cities. The picture is quite grim, since there is nothing to suggest that exports will not weaken even more before a bottom is reached.
America’s Advantage
In the meantime, tens of millions of Chinese factory and construction workers are about to find themselves adrift. The paychecks they sent home will no longer be there to alleviate the poverty of rural areas. “I don’t have a head for business,” one worker told the Journal. I can only go down the path of a migrant worker. If I can’t be a migrant worker, I don’t have any other ideas.” We Americans are indeed fortunate to live in a country where just about any good idea can attract financial support. We are a nation of entrepreneurs, and that will count for a great deal as we struggle with the same deflationary forces that have begun to sap the vitality, even, of so industrious and energetic an economy as China’s.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Thursday, 4 December 2008 | Digg This Article | Source: GoldSeek.com
