James Lewis

Jim Rogers on the Next 10 Years

If there is not a very significant war, then there will be room for both the USA and China to hold significant corridors of power. Of course the rise of China has been and is at the expense of the USA both in financial and power terms. But I am sure the USA did not think it would hold such immense monopoly power on world affairs forever.

Those that predict China will become the sole superpower are wrong unless of course there is a very significant war that China wins. I am not sure if there is such thing as victory in wars between big countries anymore however.

Of course China has given a glowing example on how a developing country can develop financially and economically. So lets be clear that other countries like Brazil are going to also over time develop and take away the acceleration of financial gain and power from China as well.

I think though that globalisation will contract significantly and domestic agendas will trump idealogical free trade trade actions. So even if China develops its power base, it will only benefit them domestically. Protectionism will see that power corridors are created. China may be able to make inroads in countries such as Africa and poorer asian countries. In order to develop technology and acquire resources. But I doubt they will be able to develop new markets to sell their goods. And certainly will lose open access to European, Indian, and USA markets.

Those that think China can achieve its imperial goals probably do not understand the enormity of its internal problems.

The Consumer Driven Commodities Bull

Per Capita income increases need to be put into prosepective of living cost increases and thus disposable income.

Wages are not rising anywhere near to the rise in the cost of living.
The factory workers have never been so poor. The cost of living in ruban/rural areas is up massively.

Also lets not get confused about the reality of the development of factory workers consumer power. A lot of them in this lifetime will never buy cars/houses. As things stand most of them can not even afford to buy what they help make.

Same with construction workers, if you are a builder in the UK. You make good money. Can buy a car, buy a nice house, have nice LCD TV. Construction workers in China can not afford any of the above. Sometimes they do even get paid.

The wage differential is huge and until that reduces, we will not see the sort of consumer development everyone thinks will happen.

However of course, due to the immense size of China's population, you only need a low percentage to develop into fully fledged consumers for increadible consumption trends to emerge. This is sure to happen as China develops its manufacturing base to a higher added value chain and the service industry develops further.

In terms of the USA, effectively their entire economy is flawed.
Wealth is created through financial manipulation and the printing of money. Which is then backed up by military strength. This financial manipulation and monetry creation is then sent down the chain to the consumer who has artificial wealth to spend which creates the consumer sector strength.

Problem is this is unsustainable. Sept 11 we saw the military chain broken. The credit crisis/housing collaspe then broke yet another chain.
The solution, print more money and send more printed money to consumers in the form of rebate cheques.