James Lewis

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.