Reading as much market commentary as I do, I don’t think most people have even the slightest realistic inkling of the effect that China and India are going to have on the world financially, and in terms of raw prosperity, in the next decade or two to come. And you know what? I’m tired — really — of hearing and noting that China are a bunch of commies.
We’re a bunch of commies. What’s new?
What’s new is that you can be a commie and still have a nice house, two cars, and take a vacation every year. They’ve gone and done it (us, and them). They’ve figured out how to steal half of everything produced and still have a content population with citizens more prosperous than their parents.
The Shanghai Stock Exchange composite index has shot up about 50% this
year, following a 130% gain in 2006. The Shenzhen Stock Exchange’s
benchmark is up more than 100% in 2007.
Ordinary Chinese are increasingly dipping into their savings
accounts (the country’s central bank reported on May 12 that $9 billion
in savings has been transferred to brokerage accounts at the Shanghai
exchange this year) to bet on mainland stocks. It’s hard to escape the
fact that the country is now in the grip of an historic stock market
mania—more than 8.5 million new brokerage accounts were opened up in
the first quarter.
The desire to strike it rich quick is definitely a big part of the
wave, but it’s also a somewhat rational move for Chinese families.
Chinese interest rates are woefully low for an economy that is showing
signs of overheating—China grew by 11.1% during the first quarter of
2007—and where M2 money supply growth and bank lending are worries for
Chinese central banker Zhou Xiaochuan and other financial mandarins in
President Hu Jintao’s government.
These aren’t your father’s Chicoms. And; see here, and here.
Of course, the Chinese are eventually going to learn that markets top
out when there’s suddenly more people wanting to take profits than want
to get in and that the market will proceed to seek bottom, until a
point where there will be more people looking to get in than sell. And
this can take a few years to cycle through. But humanity being what it
is, it’ll come back and establish new highs and you’ll be off to the
races once more.
I thus conclude that there’s ultimately only one solution to
organized (state sponsored) theft. Just make it irrelevant. Just
produce, prosper, create, produce, and prosper some more. The
alternative is unhappiness and misery. But look on the bright side: you
can wallow in the pessimism of the permabears in markets, or the
pessimism of bloggers like me in politics; and you may one day be
proved right — if you live (in misery and unhappiness) long enough.