The smart geopolitical scientists have been talking about higher interest rates, higher fuel prices and the slow breakdown on the global trade system – a toxic combination that will bring some countries who rely on cheap credit and international markets to their knees. Brazil, Iran, Germany and now China are all countries that have seen different degrees of economic expansion but are now wondering, at least for the next decade, how manage a slowdown. Take Brazil as an example. Despite the aggressive economic expansion and explosive export machine that exports everything from commercial airliners to computers, fear is growing as the government, now rocked with a string of scandals, with ex-leaders being dragged by the collar into prisons, is losing control of its society. Crime is rocketing with murder rate spiking to 175 murders each day. There is still a strong and expanding manufacturing sector but corruption at all levels of government seems to get worse. The new populist president who enters office soon, seems to like law and order and has threatened to stop crime and drugs that plague the nation.
We saw the rise of the Soviet Union in the 1950s and 60s, then the rise of Japan in the 1980s (remember when the Japanese Royal Palace in Tokyo was valued at a price more than the state of California?), and then the rise to the mighty European Union. Each one of these systems failed in the end for, of course, for different reasons. China was the darling of economic growth from 1995 to 2015, with GDP marked at 7.3 percent in 2014, which is now slowing to 6.7% and is expected to fall to 6.2% by 2020. China has too much debt and although the powerful central government can continue to build and manufacture for the foreseeable future, one day the pain of collapsing markets, of bursting bubbles will be exacted on the general population.
The growing consistency of weak economic releases is now a concern for even the most bullish economists when speaking about China. Still, most numbers released from China are of little value as only the government knows what is happening in the country. Note that they is a growing fear of a new Mao coming to office.
Chinese capital flight has been shockingly high with $324 billion leaving in 2014 and within two years, the number reported as doubling to $725 billion according to the Institute of International Finance. More importantly, of wealthy Chinese surveyed, 46% said they would like to move abroad to destinations such as the United States, Canada and Australia as the main targets. But this growth has shocked the ruling class in China, triggering new laws and even arrests to take control of the future of the Middle Kingdom. The current leader, President Xi, consolidated power and had himself elected President-for-life recently while he had 1,500,000 million of his fellow citizens – comrades – who were party officials and business owners, arrested and thrown into jail. Mr Xi is preparing for a slowdown that could trigger riots in the streets, and those streets will belong this Xi Regime. Note that “Mao” was just Mao and now President Xi Jingping is just “Xi” as he is a true ruler.
Things are going to get a lot worse, in the coming 3 years in China.