The China Problem
The problem is we cannot compete against slaves. Slavery takes many forms. In this case it is a nation of overpopulated people that were dangerously near starvation in 1970. Normally the government solution is to start a war abroad and feed that war your starving masses. The problem comes when you lose that war. Nixon had a better idea. We had just gotten out of the Vietnamese War. We were bankrupt. They needed a way to keep their people from starving to death. A deal was struck. They flooded our economy with their goods at a more than reasonable price.
China became the new industrial power. Through theft of patents, cheap labor, a currency to steal for, they started industrialization. It was government economic war on the world. They could and did produce goods cheaper than anyone thought possible. Everyone is addicted to Chinese retail goods in your stores.
The problem came from no returning funds. China has successfully bankrupted the entire planet. The war is a success story. Success for China that is.
The problem is China does not realize they have won. They are continuing what has brought them success in the past to the detriment of the future. Currency after currency is going broke. China holds the IOUs. Confederate currency has no value. Neither do any nation’s currencies that China holds a lot of. It has not been backed by Gold in 50 years or so. So basically the currency only has value of the faith of the people that own it. That is why printing more money is really a bad idea. It simply makes the money more worthless than it already is.
China has another problem they do not realize that they have. The problem is goods can be produced cheaper with automation than with slave labor. Yes, the assembly line is obsolete. Even at slave wages, China will not be able to compete much longer. The deciding factor will be transportation costs. If the labor costs are even equal, the transportation within the country is going to kill them. A factory in the country is better cost wise than one outside the country 5,000 miles away.
Currency failure is another factor. If the currencies of the world go down and China doesn’t reduce with it, then their goods are not competitive in this country anymore. Where within the country that is not really a factor. It is the exchange that will kill them. A few years ago our currency went down. Suddenly bubble bath almost doubled in price. It was mostly made in Mexico. The domestic brands easily out competed the imported varieties.
This will happen to any currency that does not stay on an equal basis with our own. Since the currency is going down, their prices have to go up in order to survive. That is not possible and stay competitive. So China has to export its labor force to local countries. That is also not possible.
The critical point is China will have to do something to keep their people fed. I suggest they want to go to war with someone to bleed the people off that would otherwise starve. I look to see them enter the middle east conflict in a big way. Either that or they will have to come up with a solution to the currencies going broke.