We’re staying at the Peace Hotel in Shanghai. It’s a beautiful art-deco building right on the Bund. We left the hotel last night and had dinner a few blocks north of here. When we saw Shanghai’s skyline, across the river…it took our breath away.
“This must be a city of the future,” said Jules. “You kind of expect a flying car to appear – like on The Jetsons.”
Everything is lit up – including the boats going up and down the river.
In comparison, Paris is dull and predictable. New York is boring and worn-out. The view along the river reminded us most of London. It lights up its buildings. You get the same sort of view across the river. And London has some strikingly new and exciting buildings too.
But compared to Shanghai, London is small…and slow-moving. It is in the ‘old world.’ This seems like the new world.
Shanghai is not cheap. Dinner for a group of six, at a not-too-fancy joint on the Bund set us back $900. The hotel room is about $300 a night. And property? We’ve heard conflicting reports. It was recently the hottest city in the hottest economy in the world. The government has tried to calm the property market in China – with some success. Sales fell some 70% from the beginning of 2010 to the end of it. Prices dropped 30%.
“That’s the thing about China,” said a Dear Reader who joined us for a drink on Saturday night. “When you live in the US or in the UK you might think you know what is going on…but when you live here in China, you realize that you have no idea.”
So, let’s turn our attention back to the USA, where we have no idea either…but lots of opinions.
The Dow fell 100 points on Friday. Gold under $1,500. Oil under $100.
We’ve tried to get in the spirit of the ‘economic recovery.’ We just can’t do it.
The recovery story was always phony. So then, what’s the real story?
As near as we can tell, there are several stories running at once.
1) The Great Correction – in many of the advanced economies, but centered in America…
2) The continued rise of the developing economies…not just in Asia, but in Latin America and Africa, too.
3) The increasing scarcity of cheap energy, land, water and raw materials.
4) The decline (suicide might better describe it) of the American Empire.
5) The approaching end of the dollar-based world financial system.
There are probably a few more we forgot to mention. Each one on its own might be fairly easy to decipher and predict. But they work together…and at cross-purposes. It’s hard to figure out what is really going on…or what is causing it.
For example, the correction tends to depress prices. But the big expansion in the developing world tends to increase them.
And there’s one more major pressure on prices – the feds. The US controls the world’s reserve currency. And the US is working hard to inflate the world’s supply of dollars. That too should increase prices, eventually.
The trouble with inflation today is that it is the worst kind of inflation. It makes prices go up…but not incomes, at least not in the US. Incomes are rising in Asia. So, people can buy more cars and more meat – and push up prices. Then, Americans pay higher prices…while their incomes don’t rise.
Why don’t their incomes rise too? Because the US is in a Great Correction. It spent too much and borrowed too much in the boom/bubble years. Now, it’s paying the price. That’s why so few houses are being built; we built today’s houses yesterday. And it’s why so little money is being borrowed and spent today; we already spent it.
The Fed seems to have no idea what is really going on – probably intentionally. So, it tries to combat the correction by issuing more credit and printing more dollars – as if we didn’t have enough already. This extra money further pushes up prices, adding to Americans’ misery.
for The Daily Reckoning
Since founding Agora Inc. in 1979, Bill Bonner has found success in numerous industries. His unique writing style, philanthropic undertakings and preservationist activities have been recognized by some of America's most respected authorities. With his friend and colleague Addison Wiggin, he co-founded The Daily Reckoning in 1999, and together they co-wrote the New York Times best-selling books Financial Reckoning Day and Empire of Debt. His other works include Mobs, Messiahs and Markets (with Lila Rajiva), Dice Have No Memory, and most recently, Hormegeddon: How Too Much of a Good Thing Leads to Disaster. His most recent project is The Bill Bonner Letter.
“Shanghai is not cheap. Dinner for a group of six, at a not-too-fancy joint on the Bund set us back $900. The hotel room is about $300 a night…”
Bill. I think the Chinese saw you coming. Did you at least get to eat off gold plates? At those prices the plumbing should have been solid gold too.
The one item seldom mentioned these days is the trade deficit. It’s almost as if it doesn’t exist. Were imports and exports in balance in the United States, it would hardly matter what the Fed. It’s the cash hemoraging out of the economy that is creating rising prices coupled with stagnant incomes in the US. Were the trade deficit eliminated, at least the inflation would apply to incomes as well, making Bernanke’s goofy approach to reducing effective levels of debt more plausible.
Just like almost anywhere in the newly developing countries, where there are large groups of western diners, one can always be sure of overpriced and so-so food. To get the good stuff at decent prices, ask a local or an expat who has spent years at these places.
Cheap food in china is often packed with all sorts of chemicals and hormones. Personally I prefer paying more for imported foods
Traders bid up oil prices this week, based on reports of major escalation of hostilities in Yemen, just south of Saudi Arabia. It’s part of Iran’s long-term strategy to surround the Saudis. Which is why Byron says the Saudis’ primary motivation in crashing oil prices last November was to weaken Iran...
Just look at retail stocks. The S&P Retail Index has surged higher by more than 23% over the past six months. And even after a slow start in January, the index is up nearly 6% year-to-date. That blows away the S&P...
Traders bid up oil prices last week, based on reports of major escalation of hostilities in Yemen, just south of Saudi Arabia. Byron King updates his "Oil War" thesis as Yemen burns and as Saudi Arabia continues to be surrounded by opposition. Read on...
Wolf Richter updates the latest wave of defaults and bankruptcies in the energy sector. As you'll see, even Janet Yellen saw this coming...
Every city in the world seems to be jealous of New York’s marvelous High Line, an ancient abandoned elevated rail line that has been converted into a park. Now cities everywhere are looking at their abandoned transportation lines to see how they can be reused.
Despite better dental hygiene products on the market today, a recent study by The Centers for Disease Control reveal a remarkably high amount of cavities still prevalent in children. Stephen Petranek breaks down the numbers and reveals a solution that one popular toothbrush company has in the works.
What happens when a flood of new money pours into an exchange? The rising tide lifts all boats. All that money flowing in causes stock prices to increase across the board. That's what's happening in China.