BeyondGenius.com

Watching that 9% drop in the Chinese stock market and the turbulent day here in the US makes me wonder what we’re all in for.

Foreign investment in the Chinese stock market is extremely limited and its capital exposure relative to the world’s resources is still pretty minor.  So why all the fuss?

It’s the little engine that could.  That is, the little economic engine that could.  China’s GDP has been growing close to 10% per year compounded for past twenty years.  It is now the 3rd largest economy in the world.  They are sucking all of the world’s manufacturing in and are now unquestionably who we rely on for many crucial items.  More importantly, we have been counting on all of the “rich” Chinese to sell us products on the cheap, buy American (and European) goods, and then take their escalating trade surplus dollars and loan them back to us so we can finance the massive debt we are incurring.  Keeping our interest rates low and economy alive.

This house of cards is due for a fall. 2008 or 2009 tops.  It will be described in a series of blog entries here, so stay tuned if you want to get depressed (yes for all the economic majors, its a play on the word depression). 

The only math you need to remember is this… China 2009 = US 1929