How many times have we heard that China is the new land of opportunity and prosperity – that they have established a new model for economic growth and prosperity? It’s a place where everybody is equal, united in their common purpose, pursuing their common goal. How many times have we heard this and how great China is?
Then a kink in the armor appears with this Wall Street Journal headline from today:
Housing Drop Threatens China Growth
And then you see the accompanying picture which clearly illustrates the tale of two worlds surrounding another pipedream.
(Source: Reuters, via WSJ)
In the background is a lush housing complex, some may call them the “Haves.” But in the forefront is completely different picture – the “Have Nots.” How could this happen in the land of common equality?
It always baffles me how the propaganda of our foes always seems to be more real than the reality we live. Here’s a dose of that reality in a comparison of the U.S. and Chinese economies. (Source: Google)
Listen, a Chinese housing bust won’t help the global financial picture and will certainly add further stress to the global economy; but without such a correction, China alone could not have held off a global recession. They’re not big enough or strong enough. Nevertheless, this is more bad news.
Now, some pundits are saying that America could insulate itself from the financial stress occurring overseas. This is impossible.
First, this Wall Street Journal headline from November 4, 2011:
Regulators Close Banks in Nebraska, Utah
Our problem never went away. A total of 87 U.S. banks have failed so far this year.
Second, and more importantly, this Wall Street Journal headline from today:
Old Debts Dog Europe’s Banks
This article details that the top sixteen European banks are sitting on “heaps of exotic mortgage products and other risky assets that predate the financial crisis.” In other words, they own hundreds of billions of dollars of US subprime mortgage debt – guaranteed by who else – Fannie Mae and Freddie Mac – a.k.a. the U.S. government.
There is no way for the U.S. to escape this.
Once again I urge you to strongly consider your asset allocations and minimize your exposure to the financial industry.
Stay tuned…