-- Posted Thursday, 14 June 2012 | | Disqus
[From his new headquarters in a fashionable district of Shanghai, our friend and frequent contributor Mario Cavolo, a communications consultant, recently surveyed the passing parade. Bullish thoughts on the global economy ensued. For, who can doubt that the dawning Asian Century will help balance out the difficulties that seem likely to hobble the economies of the West? For an uplifting, long-term view with a global perspective, read his essay below. RA]
Does it not occur to any pessimist that a massive region of the world is expanding, not contracting, and that this statistical fact portends well for the future demand of all “stuff” across the globe? While assuredly not discounting disturbing global financial and economic pressures, pessimists and permabears seem to relish discounting the powerful, upward expansionary forces across the global economy that also clearly exist.
Here in Shanghai, I now sit in the new upper middle class mall called Kerry Parkside, where we have a marketing location for our various services. Forget the fact that prices are annoyingly high and that the mall is still packed on the weekends. Let’s consider right now only of this part of the story which gives us a glimpse of the future:
Observing every family that enters this mall, every woman I see is either with a baby/toddler in tote or pregnant. Did I say “every”? Apologies. Of course not, and I readily confess such an exaggeration. Yet it boggles my mind to note how many pregnant women and under-three-year-olds are here, appearing very much as the rule, not the exception. The same exact observation is easily made across China’s twenty or so major urban centers, now totaling a population well over 300 million family dwellers.
Ladies and gentlemen, embrace and gladly welcome the greatest baby boom in history, unprecedented in world history, size and scope, far beyond America’s relatively miniscule post-war baby boom. Similar stories of expansion in Latin America also tell the global story. They will need to consume plenty of “stuff,” is that correct? There will be a resulting demand for response to the challenges their presence on the globe creates — more services, more solutions, more needs, more issues, more responses, more infrastructure, more food, more investment, more issues, more solutions, more and more demand of everything for more and more people.
Overbuilt? Hardly…
You say China’s infrastructure is overbuilt? Tell that to an IT industry with more than 900 million mobile users, or to an automotive industry that is cranking out one million cars per month for sale domestically and to the rest of the world. Tell me all those roads somehow don’t need to be built? How can one reach such a naive, short-sighted conclusion? Similar stories emanate from India and Latin America, do they not?
To which we next hear the “they already over-expanded and overbuilt” argument. Once again, short-sighted. What timeframe are you referring to? See past Wall Street’s shameful focus on the quarterly earnings and set your sights instead on building a country for the long-term future; for 40 million cars that will be coming; for an additional 200 million urban workers, and families who will need a place to live in the few supposed “ghost towns” that are often wrongly associated with the collapse of the Chinese real estate market. Let us also digress a moment to note very similar stories of expansion across Asia, across the other BRIC emerging economies, so as to not overplay the China-centric view of these matters.
A Vast Grey Market
America spent the last 70 years extending its dominion over all things cultural and financial. Now it is China’s turn. China is very different for reasons that are easy to both observe and measure, exhibiting realities that Westerners too easily forget or simply cannot comprehend. Every scary report about municipal debt, for one, is offset by uncounted $ trillions in China’s grey market economy, well-document by a recent 2011 Credit Suisse report. Do we overlook this? Not when we realize that 90% of Chinese own their homes, most of them mortgage-free. Not when we realize that amongst those one million shiny new cars hitting the road, the vast majority have been purchased with cash. Do you think that the majority of those cars are pricey $100,000 Mercedes Benzes, Audis or BMWs – or are they $12,000 to $25,000 models being purchased by the middle class? You know the answer, and yet it’s hard to swallow it because here in China, when talking with a typical, first time, middle-class car buyer, we ask, “Nice, how much did you pay for your new car?” In the West, our first question is, “What’s your monthly payment?” Giggle.
Global Troubles Loom
Indeed, as Rick’s Picks editor Rick Ackerman sometimes reminds us, these newly arrived citizens of the world will be paying higher and higher prices for the future goods and services they are consuming. That much is true, and inflation over decades is nothing new. However, I would argue that the world’s sovereign financial problems will be managed in a way that allows inflation to continue as a release valve and that, furthermore, the doomsday scenario is relative rather than absolute (as in, “The banking system must collapse!”). Clearly, it is relatively worse for the West at the end of a 60-year economic cycle, compounded by overreaching, elitist banking lunacy and unbridled Wall Street corruption. And yet, such factors are unlikely to have as much of an impact on emerging Asian and Latin American regions thanks to their fundamentally rising, expanding societies.
One can therefore be certain that as Europe and America deal with their appalling financial issues, China over the next several decades will extend its cultural and financial influence in the way that America’s postwar expansion did over a period of 70 years. In either case, we must live with outcomes, whether good or bad.
China May Say Adios
There is one other more, dire possibility to ponder that China’s leaders may ultimately choose as they have in the past. If the West truly implodes, China, well able to flourish economically on its own, may forego global bargain-hunting and shut its doors, isolating itself as the Middle Kingdom once again. Considering how far the country’s political and economic reach has grown to date, that is possible but not likely. As a telling indicator, we must note that over the past two years, the business environment for foreign companies has deteriorated and become less welcoming.
For the past 50 years, the West has held sway economically. Now there will be a painful re-balancing across the globe, with the West’s economic strength leaching into a rising Asia led by China. Meanwhile, we can easily agree that Rick Ackerman is right — that the next ten years, or perhaps much sooner, could see a mind-boggling financial upheaval caused by a collapsing financial system. But that is still a very short-term view. Perhaps it is an opportunistic way of seeing things for nimble traders, bond vigilantes, elitist bankers, hedge funds and other short-termers exhibiting the best and worst attributes of the capitalist system simultaneously. Yet, recovery and restructuring will follow, built on the demand of the very real, unprecedented boom across the powerful, emerging economies of which I speak.
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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 indication of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts. 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 © 2011, Rick Ackerman. All Rights Reserved.www.rickackerman.com
-- Posted Thursday, 14 June 2012 | Digg This Article
| Source: GoldSeek.com
