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To: PugetSoundSoldier
There is a bubble forming in China. Whenever you see high capital goods spending (infrastructure, steel, etc.) combined with high consumer spending, you can be sure there's a bubble. Under normal circumstances, consumer spending drops and is replaced by capital spending or vice versa.

Swiftly rising oil, coal and steel prices are the immediate symptoms.

8 posted on 04/06/2010 9:12:49 AM PDT by BfloGuy (It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect . . .)
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To: BfloGuy

I don’t think it’s a bubble, it’s simply the signs of the big growth of the middle class. A bubble would be spending or investment beyond the growth of sustainable consumption; that’s not what is happening.

When you have 200 million people moving from the lower classes into middle class, and now spending the wealth they have created, and you have another 100-200 million coming along behind them, I think it’s more a sign of inflation and simple growth of an economy. The infrastructure and steel aren’t being hoarded or going unused; add in the continuity of the savings percentage of the typical Chinese family and it’s not their long-term wealth being converted, it’s the new wealth.

This is more like the US boom in the 1960s, but the Chinese are doing whatever they can to slow it down and avoid the stagflation that hit in the 1970s.


9 posted on 04/06/2010 3:20:46 PM PDT by PugetSoundSoldier (Indignation over the Sting of Truth is the defense of the indefensible)
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