How Do You Say ‘We Surrender’ in Mandarin?
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China: bigger, faster, stronger…the world’s up-and-comer does have some trouble on the way. More and more people competing for the world’s resources. The Chinese work their way up the ladder, as Americans work their way down…and more!
An old friend gave us a subscription to the National Geographic. When an issue comes, Henry takes it and spends hours reading. This month, the magazine devoted the whole issue to China and Henry passed almost all of Sunday afternoon studying it.
“China is unbelievable,” was his judgment by evening.
Every detail is a superlative…bigger, faster, higher, more…more…more. Things are happening so fast that in just 10 years, China will be the world’s biggest economy. We don’t have to tell you what that means, dear reader. Give a guy some money and it’s not long before he thinks he can tell other people what to do and how to live. The United States became the world’s largest economy around 1900. By 1918, Woodrow Wilson was headed to France with his “14 Points.”
“God himself only needed 10,” said Clemenceau.
But America had lent a lot of money to the French and English; they had to listen politely, even if they thought Wilson was a fool.
Now, China has the money - the biggest pile of dollars in the world. And soon it will have the most powerful economy. It won’t be too much longer before Chinese leaders will want to throw their weight around. And they’ll have plenty of pounds to toss wherever they want. There are only 5 girls for every 6 boys. By the time China has the world’s largest economy, it will also have 30 million young men who cannot hope to find a wife. What will they become? Soldiers! Then, China will have the world’s biggest and most modern military…and a keen desire to show the rest of the world how things should be done.
How do you say, “We surrender” in Mandarin? We don’t know, but the Pentagon may want to look it up, just in case.
But don’t worry, that’s still a long way away…with many a slip betwixt the cup and the lip. Oh yes, China is headed for trouble too…you can’t have that kind of growth without trouble. In some ways, China is the biggest bubble the world has ever seen - bigger than dotcoms… bigger than U.S. housing…bigger than credit, finance and derivatives. Not only is it expanding rapidly - it MUST expand or it will blow up. Like a credit bubble, it can’t rest…it can’t stand still. If it stops expanding…bad things happen. In a credit bubble, people need more and more credit to service the bad loans and bad investments they’ve made. If they don’t get more money, the credits go bad. Businesses go belly up. People miss their payments. Loans get marked down. Pretty soon, you have a recession…or worse. China’s bubble is far more dangerous…because it has hundreds of millions of people who have come to depend on high rates of growth. They can’t stay where they are…they’re not peasants anymore. They’ve moved to the cities to join the international proletariat; they need work! They need progress! They need to build giant roads and aqueducts…airports and factories. They need to produce more things. They need to contribute to the global economy. They need jobs. And if they don’t get them, China could blow up. What’s more, China’s economy is run - at the very top - by officials who are even more blockheaded than our own. If trouble fails to find them; they’ll find it.
What caught our eye was a chart of China’s oil use. Ten years ago, China imported 165 million barrels of oil per year. Today, the total is more than 1 billion. What does it do with all that energy? It grows…it develops…it chugs…it thumps…it soars.
Looking at the photos (we haven’t been to China for more than 15 years), the replace reminds of a teenager - sassy, obnoxious, and outgrowing his pants. It is an adolescent nation, growing so fast it must eat all the time. In addition to the oil, China has opened 229 new coal-fired power plants since 1990.
Wonder why the price of oil hit a new high last week - above $126 a barrel? Well, China is a big part of the answer.
And rice is now selling for twice as much as did last year. Could that too be blamed on China? Well, partly. When the Chinese lived on the land, they fed themselves with what they produced. But once in town, they become more customers for the globalized market…competing for their daily bread with people in Des Moines and Dubrovnik.
You’ve heard the expression about land - ‘they’re not making any more of it.’ Well, in China, they’re actually losing it. Since 1949, says National Geographic, China has lost one-fifth of its farmland to dust-storms, desertification, pollution and urbanization. Each year, the country loses more ground - an area approximately as large as the state of Rhode Island.
Let’s see, more and more people moving to the cities - hundreds of millions of them. Building factories…building houses…buying cars…washing machines…computers… More and more people competing for the world’s resources…less and less farmland…
Oh, we’ll do the math later.
*** Today’s a holiday in much of Europe - Pentecost. Between the secular holidays and the religious ones…that is, between the sacred and the profane…it is a wonder anyone gets any work done.
But here at The Daily Reckoning headquarters, we keep our eyes open, even on national holidays.
What we saw at the end of last week was the kind of day that suits us. The Dow dropped 120 points on Friday. The dollar fell. Gold rose. And oil…as mentioned above…hit a new record.
*** And throughout much of the United States, farmers say ‘rain, rain go away.’
Often too much rain can be just as harmful to a crop as not enough. And in this case, heavy rain across the country has caused the corn crop to run behind by a few weeks. Some farmers have no choice but to plant later, causing their crop yields to go down…and push grain prices up.
An option farmers have when corn planting is delayed is to switch some of their acreage over to soybeans, but even this is becoming increasingly difficult.
Kevin Kerr explains:
“One Resource Trader Alert subscriber told me that he ’spoke to a family friend who farms a few thousand acres in Northeast Iowa yesterday, and he’s not expecting to rotate any corn to beans unless wet weather continues through this week. Even then, it’s pretty hard to get the right bean seed not to mention they’ve already fertilized for corn.’
“I heard this over and over again when I went on my spring farm tour. Farmers are locked in now, couldn’t switch if they wanted to. Input costs are so high they are even planting sections that aren’t underwater in order to just get something in the ground. At this point yields are certainly going to be impacted and there is no turning back or switching to shorter yield corn like a 90 day, or certainly not trying to switch to beans.
“In fact, I hear in some smaller rural areas seed and fertilizer dealers have been cut out and not even gotten what they were promised from their distributors, leaving many farmers without anything. This could be one of the worst years for farming in recent memory and at one of the worst times possible.”
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Tags: , , Barak Obama, china, corn, economics, fed, food crisis, inflation, oil, Paul Volcker, politics, U.S. housingAbout the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning and three best-selling books, Financial Reckoning Day: Surviving The Soft Depression of the 21st Century, Empire of Debt: The Rise of an Epic Financial Crisis and Mobs, Messiahs and Markets..
The Daily Reckoning offers a "uniquely refreshing" perspective on the global economy, investing and the ability to live well in uncertain times. You will learn what you can expect from today's markets and how to prosper in the face of uncertainty.