What is the expected direction of the global economy and specifically the big economies like USA, Japan, China

Everyone is saying how well the whole is doing despite the geo political situation, the inflationary pressure, the rise in commodities prices, especially oil, natural disaster and the potential of disease outbreaks. What is actually happening to the economies of the world? Equities are so volatile, even fixed income instruments are unstable and currencies are swinging up and down. So where are we really going up or down? How to safe guard our assets and to have our wealth grow so that we can retire peacefully.

What is the expected direction of the global economy and specifically the big economies like USA, Japan, China
I do hate to burst the Chinese Gravy-Train Theory of economical relativism but the Chinese economy is going into the shredder within the next five years.


You don't have to believe me. MSN Money's top stockpicker, Jim Jubak lays it all out for you in plain, simple English. For a real education on the direction of the Chinese economy and its impact on the West, I would urge you to read his articles on MSN Money.


Basically, it is like this:


The Chinese have corrupt regional (state central...) banks that are under tremendous pressure to perform and, ironically, show a profit to the government in Beijing. As of July 2006, these banks have already loaned out more than two-thirds (and by some estimates, even more...) of their money and the year is only half over-. These loans are to the tune of One Trillion (with a T...) dollars so far this year. Some American economists recon that as much as 65% of these loans will not be paid back. (More on why in just a sec...)


The bankers are on the take from local businessmen, the businessmen get cheap loans and there is a whole lot of back-scratching going on. All this to the chagrin of rice farmers, whose land is being confiscated by these businessmen with the "eminent domain" idea being applied liberally. There have been numerous local uprisings involving farmers and government thugs...one humorous story that relates how these farmers trapped the thugs in their brand-new hotel using pitchforks, scythes and knives.


Now, it would be wonderful if these loans were being utilised to construct low-income housing, water and electrical infrastructure and roads but they're not. About half of these loans are being used to build luxury condominiums that most local people cannot afford, up-scale and American-style shopping malls featuring high-end American clothes (made in China, by the way...).


The other half of the loans are being made to manufacturers who already have existing plants, most notably in the steel industry. The operators of these steel plants are also under tremendous pressure from the government, which has decreed that no old-school steel plants will remain after 2010. In order to keep their jobs and the jobs of their local workers, they have borrowed excessive amounts to modernise their facilities. The result of these projects is that the national capacity for steel manufacture has nearly doubled, thus dropping the price of steel on the open market, which- you guessed it- depresses the income of the steel plant that was just built. Basically, these industrious Chinese workers are making steel for free so they can put rice on the table- provided that the local rice farmer has not been put out of business.





There are many, many other reasons that the Chinese economy will tank, especially as they regard demographics. I won't go into it here but you can read the truth in Mr. Jubak's articles. The research is clear and concise and will put these ideas into a broader and more informed context for you.


Their economy is like a Taepodong II missile on the launchpad. It looks pretty going up and up and up, until it crumbles into thin air.


Rest assured that when the Chinese economy falls, there will be a giant sucking sound in the world economy that has not been heard for many years. It won't be for a few a while yet but you should get ready now.
Reply:Both Frank and Stockpicker2010 have good arguments and I have heard both sides of the same argument from other people. That is a moot point and only time will tell what is going to happen with China.





The primary concern is the global economy. My belief is that the global economy is headed for a major upheaval. Why? Well, with the exception of a few countries, the primary driving force behind the global economy in the past several years has been monetary liquidity. Japan alone issued sum 73 trillion Yen (not sure of the exact figure) along with Zero interest rates, caused the Yen carry trade to flourish. The U.S. is in the same situation as driving the U.S. economy with monetary liquidity and not productivity. Did you notice that in March 2006, the Fed is no longer reporting M3 figures? I believe it's to mask their money printing activity.





Add to that that the U.S. dollar is the world's reserve currency and that dollar is not looking healthy at all. I believe it's a matter of time before we see a dollar collapse and how do you think the world economy will fair in a dollar collapse scenario? I'm not saying every country in the world is going to sink, but a dollar collapse would be catastrophic to the global economy.





You said it yourself, everyone is saying that things are find, but as you look around, you see that things are not what people are claiming it to be. You have taken the first step in looking and researching for yourself and using your own brain and not listening to what others are saying - good for you.





One thing I found out is that the crowd is almost always wrong. Sure, there are times when they are right and things are going the way the masses say they are, but that is generally short lived. If you read the book, "Extraordinary Popular Delusion and the Madness of Crowds" by Charles Mackay, you can see how the masses believed everything was just fine, while the few souls who warned that things were not were riddiculed and denounced.





The bible say that people will be saying all is well, that there is peace and tranquility and then certain destruction comes upon them.





If someone comes to work and they look like their sick (red eyes, droopy likes like their tired, coughing, sneezing, etc.) and they say they're fine - sure, they may SAY they're fine, but what does your observations tell you? People are saying the world economy is find, but what do the symptoms tell you? If the symptoms are telling you things are not what they appear, that is a good indication that things are not as good as they appear.





In my opinion, the world economy is about to tank. When? Who knows, we just have to watch and wait.
Reply:http://investment.suite101.com/discussio...
Reply:I almost laugh at your question, though I know you are serious. The US economy is going down and will no longer be the international monetary standard, as the US refuses to acknowledge outsourcing as a defeatist move, increasing labor costs and general inflation. Japan already owns about 100 % of the major buildings in Hawaii, bans US imports by some very cunning ways, and has picked up the title to about 75% of the titles to buildings in Los Angeles...they play for high stakes...Americans do not understand their ways of thinking. However, China will be the dominant economic factor within 15 years...even predicted by the CIA...work ethics are strong and being a 'communist country', I have never seen such devotion to the companies as I have here...work days are as long as the employee feels able...usually 10 to 15 hours (no overtime) they want to succeed....post offices and banks work 7 days a week...there are more cars on the roads every day....the company I work for is international now (in China), and English is mandatory for the workers...so they can increase their competiveness...Teachers, Doctors, and kids spend their leisure time preparing for another exam...they want to be the best of the best....that is the main factor in driving the economy. However the US workers have lost the zeal....take a newspaper to work as they have lots of slack time and are clock-watchers. I am a white American but raised in Hong Kong and I see a big difference in the attitudes. In Asia, we do not look for who is to blame but how to fix the problem. Look at Hurricane Katrina, there is still squabbles over who should have done what....here we fix the problem and move on.....so where is the economic future?
Reply:in the short run, global economies will grow slow..that's why you need to diversify.





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