http://www.uncommonwisdomdaily.com/did-you-grab-your-profits-4-7923...
It’s one thing when you pull the wool over a few people’s eyes, like Bernie Madoff did. But it’s another when the entire world wakes up and realizes the Emperor has no clothes.
The comparison may sound harsh, but nevertheless, it’s accurate. While Madoff fleeced some of the richest of the rich in a giant Ponzi scheme, Washington is attempting to fleece almost the entire world.
It won’t work. Many of our creditors are too savvy to fall for Washington and our central bank’s shenanigans.
That’s why the Fed will be forced to continue printing money in 2010, and why it will not be able to exit its policies of supporting the U.S. economy and financial markets.
On the one hand, our foreign creditors know what’s going on. But they cannot stop lending us the money we need for fear of a global meltdown.
Instead, countries such as Japan and China will continue to help buy our debt.
On the other hand, they will actively seek refuge in assets that outperform anything denominated in dollars.
Suffice it to say that the above is why, in just the past 12 months, the U.S. dollar’s status as the world’s reserve currency has not only come into question, our largest creditors are actively seeking to replace it.
Which leads me to one other big force I think you should keep in mind for 2010 …
B. The Fed’s money-printing will benefit China more than it will benefit the U.S.
So China will defy the pundits yet again in 2010. First of all, and like it or not, China is still the manufacturer to the world. And that’s not going to change anytime soon.
Not when you have a billion people who are willing to work for 25 cents a day.
Secondly, China is soaking up most of the Fed’s money-printing, via purchasing large amounts of it through our bond markets.
Yes, that does mean that they do still recycle a good portion of it back into the U.S.
But it also means that China’s influence over us is growing almost daily …
That China is now receiving hundreds of billions in interest payments from us …
And that whatever liquidity China provides the U.S. actually ends up benefitting China and other countries more than it does us because of the "dollar-carry" trade. In other words, savvy investors of many sizes and shapes simply borrow cheap money here and invest it in China.
And there is no denying the financial strength now inherent in China’s economy …
Beijing now has $2.37 TRILLION in cash in its kitty
At least $585 billion being spent on infrastructure, with a good portion of the stimulus due to hit the economy in 2010
Retail sales still robust, growing at an annual rate of 15.3%
Disposable income still rising, up 9.8% in 2009
Fixed-asset investment growth up 32.1%
Property sales up 53%
Investment in real-estate development, up 17.8% through November
Auto sales up an incredible 76%, to more than 13 million vehicles produced AND sold in 2009
Beijing is committed to not letting anything derail the economy’s growth. And to the pundits out there who claim China will end up like the former Soviet Union and collapse in 2010, I say you’re going to be dead wrong, yet again!
China is nothing like the former Soviet Union. Unlike the Soviet Union, Beijing’s leaders are well aware that change is coming to their country, and they are well aware of the influence of long-term cycles.
So, unlike the Soviet Union, China’s leaders are "going with the flow" of the changes to their economy and civilization rather than fighting it.
It’s evident in all their policy decisions from privatizing property rights, to easing up on censorship, to cutting deals with Western companies to secure not only natural resources, but also intellectual resources and more.
But perhaps the biggest factor of all in China’s continued growth and outperformance in 2010 will be our own Federal Reserve: For all the money it will print, for all the debt it will issue, China will be the main beneficiary. Why and how?
Because what the Fed doesn’t realize is that its efforts are indirectly subsidizing not just the U.S. economy, but also that of our biggest creditor — China.
It means China will eventually soak up most of the newly minted dollars, recycling them into its own economy. No, that doesn’t mean China will stop purchasing our debt.
It doesn’t have to. The Chinese economy is generating enough GDP to buy our debt to stash it into its reserves and hedge those reserves by securing natural resources, thus overall liquefying its entire economy.
China is in a "heads I win, tails you lose" position. And not just with the U.S. but with virtually the entire world. So I expect China’s stock market to vastly outperform the U.S. markets yet again in 2010.
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But we have a real big military?