Has the Chinese century started yet?

Surprisingly quickly we have gone from looking at China as some evil purveyor of shoddy goods to the rest of the World, to anxiously regarding it as the economic saviour of the planets economies. Just a handful of years after Tiannamen Square and the global outcry as to its violent outcome, everyone is now counting on the country to save us all. How are they going to do it? By becoming history’s greatest export based economy? Because even though my economics education ended a few decades ago, I cannot help but wonder who is going to buy their stuff, when we don’t have the money to do so? In fact, all those years ago, my fellow students and I were bad mouthing another country for doing much the same thing – Japan. One of the favourite jokes going around at the time was that ‘The English may make the best lovers in the World (Well, it was our race!), but the Japanese made them better, faster, and cheaper.’

The more I think of these two nations and their economies, the more they become similar, too. Although the Japanese have a recent history of innovation and invention that appears to be missing in the Red Empire, I cannot help but think that this current Far Eastern global saviour is nothing more that the Japanese Miracle turned out to be – A bubble economy. Both inside and outside the country, the Chinese way of life is changing at almost head-spinning speed, and these changes will have an effect for all of us if we continue to spend our last few bucks on their exports.

As their economy grows, more workers are being turned from farmers to assembly line workers. As the communications revolution spreads, and cannot help but find it’s ways into the nooks and crannies of everyday Beijing life, more and more educated offspring will find out what is happening everywhere else, and demand more. There have already been protests concerning work being shipped offshore to Bangladesh, where labour is cheaper. In a world where being connected to anyone, anytime is becoming a more vital way of life, how long will it be before today’s children demand to be part of a global community, and want what everyone else has. In other words, exactly what happened to Japan: Twenty years isn’t a log time when you are looking at macro-economic trends, but that boom of the early nineties has turned into a stagnant economy for more than half of that time.

Every country prides itself on being able to honour their elderly by keeping them alive and fitter, longer. The Japanese have done this so well, that those over retirement age and collecting benefits forever are over a quarter of the country and growing. In the Western world, the aged are growing in number, and when you look at the US, combined with the loss of 8.5 million jobs over the last two years, and one in twenty residential properties being ether in foreclosure or underwater, we are close to saturation point already and the baby boom has only just started to cease sending taxes to their Government.

Is this the start to the Chinese Century? A race to the bottom of the lowest common denominator of price and value in manufacturing, and a rise in those taking from the economy instead of giving to it? Will they start to hide their money under the mattress instead of trusting banks, like we have? The danger of looking to them as an economic exporter is that we won’t be able to buy from them very soon, and they will have to make changes to their own exchange rates in order to look after their own – even as their own tax payers demand more freedoms.

Canaries in the mine?

It is time to get all of my receipts together for tax time. Yes, it is the first week of February, and yes, I am that anal. Digging behind my drawers looking for the T4 from the third of four companies I worked for last year, I came across some forgotten press items that I had kept from May 2008 and exactly one year later. It’s amazing what you can learn from donning those hindsight glasses:

May 2008 – “Real GDP figures in the US understate the pain that home owners are feeling from a collapsing housing market. Their net worth is deteriorating and unemployment is climbing. Strong exports are masking the their domestic weakness. GDP aside: “ Basically every indicator you can hake a stick at is screaming recession”

This was closely followed by: “ Eastman Kodak Co. said yesterday that it was raising prices by an average of 20% because of soaring prices of energy and raw materials.” Wow, did you really think that this was the best time to do it? On the other hand:

“In Stockton, California ..three out of four homes for sale are in or on the path to foreclosure” Hmm…Did Eastman Kodak know that?. Chief Executive of Lowe’s Co’s Inc., yesterday said population growth and the aging of America’s more than 130 million existing homes provides a favourable long-term outlook for the home improvement industry.”. Especially when it’s in foreclosure, and you have taken your parents in, in the spare bedroom.

From 2009, one year later to the month, a stock broker mused: What if the Fed’s safety net is about to be pulled like a rug from under the economy, because the Fed wants to be sure that (stock) traders start   minding their risks? What happens to stock manipulation, Speculation, and downright investment start to pull back? Who’s going to kick start the economy, then? So not only is a Socialist style capitalist rescue OK, but there may be a wrong time to put Capitalism into first gear! Amazing. Oh, and look…

“U.S Home sales continue freefall”. Isn’t this what was forecast a year ago, when homeowners were spending all of their spare cash at Lowe’s and deciding whether to put Mom into a care home to rent out the spare room in order to afford the mortgage?

And, finally – Banking: “ING Direct has made massive inroads into the domestic banking market by nor offering branches, and running with less than 1,000 employees world wide – many of them in low paying, entry positions. A the end of March 2009, it had $23.6 Billion in assets, up from $2.8 billion eight years earlier.”

No more homes, existing homes worth less, everyone spending their spar time making improvements to their own houses, because there is nothing to move up to, Kodak going bust because it thought that people would spend more for an ageing technology, and all of our banking secrets have to be talked about over the phone to someone in Pakistan, because your high street bank is run by the same guys that tax you. This is the future, people. Look at these headlines NOW , not one or two years in arrears, and do your taxes in February, before they run out of money before paying you, your refund.

Today, I read that China’s Economy is a Bubble! Oh, Sh*t!

The Olympics from the inside: 100 days to go

At the time of this writing, we are only 100 days away from the Opening ceremonies, and here are a few headlines from the last few weeks to show how we are doing.

The Olympic Village debacle: The construction of venues required was finished very early in the process. Thank God! With the recession hitting us last year, we weren’t trapped in the situation of having to complete at the last minute the way that Athens appeared to. While we are using a lot of existing venues (Look for changes at the hockey tourneys.), there was a fair bit of building to complete and we apparently did all of this under budget and early. The only sore point was one of the two Olympic villages built in the downtown core (The second one is in Whistler itself). This was always going to be a large project – imagine a small town centre being built on downtown soil – but thanks to the collapse of world-wide economies, it got very nasty. The builder ran out of money, the debt sold to secure financing suddenly couldn’t be serviced, and the hedge fund looking after it went insolvent. Of course, the tax payer is going to have to pick up the built, because the payments outstanding on the site match the annual budget of the entire council, or something just as alarming.

As of today, it is unfinished, but work continues apace, and it is to handed to the Organising Committee today. The apartments were going to be sold to individuals after the games anyway, so at least the City will reap the benefits of that, but not as much as originally planned. Also planned was a plan to earmark a percentage of the apartments as low income housing. While it is a tough pill to swallow, I believe we shouldn’t be doing that, now. We should get as much money back as we can from this ‘investment’. Financially, we are still in good shape, and very high-end purchases, such as ticket packs, and travel plans, are picking up. I think the hundreds of residents that thought they could earn a vacation by renting out their homes for the games are going to be disappointed, though.

THE TORCH RELAY: The Olympic torch touched down last week, and has started on it’s cross country tour. WAY too much First Nation involvement for many people’s liking, especially as it was held back by native people’s protests (see last blog), the first evening it travelled, but definitely a sense of pride about the country, and a sudden alert that we are only a few weeks away from the puck drop to this thing.

SECURITY: It was announced today that 90% of Security personnel have been hired. Now the fears start that these were mostly recruited from Craigslist, and may be ‘the bottom of the barrel’ as far as employers go! It must be nice to feel you are respected as you work for almost nothing in the coldest time of the year, pissing people off, and NOT enjoying the once-in-a-lifetime experience that you are guarding!
Considering the U.S. has spent millions securing their border, and the overall security bill is $1 Billion, it’s a pity we couldn’t be more positive about the front line folks we hire.

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