patrick.net

I do not expect the dollar to have a dramatic rise. But the rest of the world is going into the toilet much worse than we will. And they are on a lag behind us. By 2010 we will be rising while they are still falling.

China cannot afford to blink. As I have posted for years, China is addicted to our trade. They need us - but we don't really need them. They sell stuff to us for dirt cheap prices and they even lend us the money to buy it with. So they give us real stuff now, and in exchange we give them a promise to pay them later with our paper that is declining in value.

But they are desperate and must sell their goods at any price (even at a loss) to maintain employment. Otherwise they will have civil unrest, rebellion. The economic tide is going out now and they are headed for severe trouble. Watch for increased turmoil and serious rioting in China soon.

Zephyr,

"China addicted to our trade":

In one sense, because the trade is the primary mechanism for creating the hierarchical capitalist social structure that the leadership appears to be so very much yearning for. ("I need oh-so-badly someone to be on top of").

In a practical sense, they could just as well sell their consumables domestically.
And the US consumer is quite addicted to the cheap stuff, if you ask me. They are the ones that really need to go to the dollar store and buy a tool for $1 that used to cost $10.I do think that WE are addicted.

So there is your contrarian view. Tell me where I'm wrong.

Justme, The communist structure gives them more dominance over the people. The leaders of China have been supremely on top of the people. That dominance is eroding.

Economic reforms give power to more people - diluting the concentrated power of the party elite. It is also creating a small but growing middle class.

Clearly China could consume more of their own output, but not enough to keep their factories running at their current rate. If the export market declines for them their unemployment will skyrocket. The lack of freedom in China has unrest already boiling under the surface. A rise in unemployment would be a disaster for the rulers.

We have become accustomed to cheap goods from China. But removal of that source would mean we pay more to buy those goods elsewhere. Our quantity of unnecessary stuff would decline somewhat. Americans would be annoyed by the reduced purchasing power.

However, the impact on China would be soaring unemployment, rising poverty, civil unrest and violence in the streets in protest against the government. There are already thousands of such protests each year. The Chinese rulers cannot afford to inspire greater dissatisfaction. They are sitting on a powder keg.

Paul,

My two year currency forecasts:
Euro $1.00 (if the Euro survives at all)
Pound $1.30
Canadian $0.70

Clearly China could consume more of their own output...

I think they know better than to eat their own dog food...

Patrick, that kind of loan actually pays 12% or more. There are hard money brokers I have told you about who do these loans. Yes, it is risky, you have to be very careful about the appraisal and working with a broker you trust. That is not meant to be a joke, you have to find someone reputable to work with. Also, realize that someone's residence is different than say a commercial project. I have seen people get very protective of their home and threatened to sue for such things as usury. Even if the claim is bogus it still scares people. If you have money burning a hole in your pocket and want to lend or invest in real estate get in touch with me and I'll show you how. I am working on some things on foreclosures back east that you will find interesting. You could get in with less than $15,000.