The Chinese are dopes; we don’t deny it. While Americans have leveraged their economy to buy things they can’t afford, the Chinese have built factories to build things for people who can’t pay for them. Profit margins in many Chinese industries have practically disappeared. Companies know that the way to survive in China is to get big. The Chinese government is always worried about unemployment. People without jobs are a source of trouble. So, if you can grow large enough to employ enough people, the government will make sure you don’t go under. You will be deemed “too big to fail.”
This imperative sets the Chinese to work in a preposterous way: building factories, hiring people, making things…with little regard to how they will make money from it. The effect in the West is salutary: prices on consumer items fall. But a drop in sales is going to hurt in China…
That’s why they’re not laughing at U.S. Treasury Secretary Snow in China, they know he’s a quack, but they also know he’s right. Many of China’s factories will go bust when U.S. buying eases off. They’ll have to replace foreign demand (largely from the United States) with domestic demand. The Chinese themselves will have to loosen up and spend money, get credit cards, and Neg Am mortgages. Then, they can all go bankrupt, not just their manufacturers.
We’re buying cheap land in South America. But in today’s paper we discover that we could get land even cheaper in North America. Ellsworth, Kansas, is giving away land to anyone who will agree to live there.
Ah…there’s the rub.
We recall, many years ago, we took up a similar offer from the city of Baltimore. The mayor was trying to “revitalize” the downtown area. He gave us two decrepit buildings for $1 each. The buildings were located on East Baltimore Street, near Little Italy. So, when we wanted a good meal, we’d walk a couple of blocks down to one of the many Italian restaurants in the area and hang out with mobsters.
One evening a group of us were walking along when a police car pulled up alongside us. Mistaking us for lost tourists, the officer said:
“What’s the matter with you people? Can’t you see that this is not a safe area? Get out of here.”
Baltimore has the highest murder rate in the nation. One of its mayors tried to slow the violence by proclaiming a ‘No Killing Day.’ We imagined the conversations on the corner of Charles Street and North Avenue, between two civic-minded citizens:
“I see you intend to kill me. Don’t you realize that this is ‘No Killing Day’?”
“Oh, you’re right. I’ll have to wait until tomorrow.”
Another initiative was aimed at getting handguns out of the hands of people who might need them. The city announced a gun ‘buy back’ program. Like every government program, the results were perverse. The low-lifes turned in their used and worthless guns, and took the money to buy better ones.
But people adjust quickly to their surroundings, and soon begin to think that the extraordinary is routine. We got used to stepping over dead bodies and dodging bullets.
Eventually, the downtown area did turn up. The housing projects were destroyed. House prices rose. But our timing was bad. The buildings we bought in the early ’80s were sold in the mid-’90s. After the cost of renovation, they sold for less than we had invested. Even at $1, the property was overpriced.
“I’m going to give you a real Jeremiah this morning,” said the minister at St. Michael’s Cornhill, in yesterday’s sermon. Jeremiah, he reminded us, was a bit like us — providing unwelcome warnings. For his trouble, Jeremiah was branded a traitor, but he was right. The Jews were soon overrun and taken into captivity in Babylon.
Jeremiah pointed out that the Israelites faced two threats: One from the outside, the other from inside. The greater threat, he said, was internal. Turning away from their God and His laws, they practically asked to be enslaved.
And now all of Western Christendom faces similar threats, the Anglican cleric continued. There are external threats we read about in the paper and see on television. But the bigger threat is internal. We are obsessed by material things, by sex, by celebrities, by wealth, and by the thought that we can do whatever we want and get away with it. But it is not true.
We have heard similar sermons, but never in an Anglican church.
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis.