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The United States is at a precipice that all great empires find themselves at. She has chosen the role of policing the world and fighting a war on terror. Lots of foolish politicians have claimed that this behavior is good for our national interests and our economy. At the same time America has decided that transferring wealth from the rich to the poor through welfare programs is a moral prerogative. I just read that 25% of Michigan residents live on food stamps. How could that possibly be sustainable? One million dollar lottery winner still thinks it’s okay that she gets financial aid from the government, and it turns out that it is. Click here to read the full article.
But welfare isn’t just for the poor in America, it’s also for the poor bankers who took huge risks to make huge profits and lost it all. The only way to pay for their mistakes has been to print more fiat paper dollars and debase the US currency.
Instead of exporting goods and services to the rest of the world we have imported everything, and our only significant exports are our Hollywood movies and our US dollars. We are a nation of consumers. And Americans blame the US government for creating or destroying US jobs. Unfortunately, the more the government gets involved the less jobs there are.
The United States’ most valuable industry is private banking. It’s no wonder that our national debt plus our unpaid liabilities exceeds 60 trillion dollars. Americans have become slaves to debt; most people that I know in America have far more debt than assets.
To some America has been a beacon of freedom and hope, but much of the world sees America as the playground bully who is in everybody’s business. However, some are starting to notice that this young tormenter has become enabled and fat.
I predict that war with Iran in the next 12 months will begin the end of America’s dollar, our only exportable commodity. I have been warning my friends and family of this for a number of years now. Some have listened, most have not. I hope I’m wrong.
After spending the last couple weeks in China I have realized that they are also at a precipice. China is obviously the engine of the world. I sat next to a businessman on the flight here who designed all the microphones for Mac computers. He told me that China does not have the cheapest labor anymore, but they are the best at what they do. The competitive advantage has made its shift from cost to quality. And the average income in China is rising quickly. Every year they are exporting more and more goods to the world.
China’s markets are becoming more and more free. Foreigners are now able to come and buy property. And housing prices have exploded everywhere. In Guilin they have risen 400% in five years. If I had the funds I would purchase a place right here in Yanghshuo. It would be comparable to buying real estate in Jackson Hole forty years ago. The Chinese government is realizing that by loosening their grip their country is becoming more prosperous and more productive.
As soon as we arrived in Guilin we went to the Bank of China to exchange our US dollars for Yuan. I can’t tell you how amazed I was to see a display of precious metals at the center of the bank. The communist Chinese government is encouraging its people to buy gold and silver. Ann and I own a small online precious metals business and doing large transactions always makes you feel like a criminal drug dealer in America. But in China you do your business right at the bank.
In fact they have limited their exports of metals mined in their country so that they can sell to their own people. China holds a number of rare earth metal mines and a large percentage of the gold and silver mines in the world. Since 2007 they have been the largest producer of gold in the world at more than 276 tons per year. It seems as though they own a bit more gold than US debt, after all. If you’re holding a dollar debt when the dollar collapses you get screwed. However, if you are holding gold you are king. It makes sense that they are betting for and against America at the same time.
Without a lot of restrictions on small business China is every entrepreneur’s dream. In 2010 the amount of millionaires in China grew by 31 percent, according to Bloomberg. It’s so easy to start a business and get it booming in China. There are very, very few restrictions.
They are also becoming interested in their environment and are producing more solar panels than any other nation in the world. Soon they will have clean air and water. Most Western countries including America have gone through a period of destroying the environment around their cities before they could afford to care.
When I realized that shop owners only make equivalent to a few dollars a day I decided to pay a little more for the things I was buying. But the shop owners wouldn’t take it.
Two days ago Ann and I went rock climbing and borrowed a pair of climbing shoes and a harness from a local climbing shop so that we could take our friend Ami climbing with us. At the end of the day when we returned the shoes we learned that they didn’t have a single customer all day. I felt bad and tried to pay for using the shoes. To my surprise the shop owner would not take it. I even tried to hide the money in the shoes which made him mad and he forced me to take it back.
I took a picture of a very poor, elderly woman and wanted to pay her for it. She instead wanted me to buy this back scratcher that she had made, and so I did. In America these folks would be considered the poorest of the poor and yet they don’t want something for nothing. They work like machines all day to make a living and take great pride in their work. China doesn’t have a welfare program. Instead they must take care of each other.
All of the Chinese people that I have talked to about it tell me that everyone knows that communism doesn’t work. The problem is that the folks in power don’t know how to free the people and keep their cushy living. It’s a pretty big crime to speak out against the party, and so I will keep my statements positive out of respect for the PRC. I must say that the spirit of these people is incredibly resilient and they do want a better future for their children. It seems to be obvious to everyone that more freedom creates a better standard of living and more opportunity for everyone. I find it interesting that so many of the kids rallying on Wall Street for a better future are critics of economic freedom and believe that transferring wealth will help people out of poverty. Though they have quite a few major obstacles still in their path, I am very optimistic about the Chinese economic future.
As far as military mobilization goes, China has only a few bases outside its borders. Though they are fighting their own war on terror it is within their borders. China has modernized their military and built a number of aircraft carriers. Everyday in Guilin their version of an F-16 buzzed over the city. There are 1.25 million ground troops in China and the New York Times says that they are building up their military at a cost of 160 billion dollars per year. That is quite a lot considering they are one of the only nations that is not indebted to the rest of the world. Most US websites suggest that China is becoming incredibly powerful but are not using their military at the moment. The leadership hopes to reclaim Taiwan at some point. China’s force should not be underestimated.
As long as the US continues to ship China our freshly printed dollars in exchange for iPhones, X-Box players, and everything else at Wal-Mart we will be on good terms with this sleeping dragon. But what if our dollar does collapse? What if we can’t afford to buy factory made knick-knacks any longer? Or even worse, what if America defaults on the $1,160,000,000,000.00 worth of debt that China generously lent? The US dollar has already dramatically slid in value compared to the Chinese yuan.
Nobody knows exactly what the future holds. I hope that the US decides to bring our troops home and cut back the spending to protect us from a coming dollar collapse. I hope that China stays a friend to the US and I hope the standard of living continues to rise in China over the next ten years. I hope that America and Americans would begin to produce more, export more, invest more, and live on less. Maybe a dollar collapse will open all of our eyes to the insanities of the unsustainable American life style of consume, consume, consume and consume some more. We love the principles that America was founded on and want its beacon of freedom to continue to shine its light to the rest of the world.
We came to China (I know it sounds stupid) to rock climb and work on our marriage but we have gotten an unexpected education in return.