The Motley Fool Discussion Boards

Previous Page

Investment Analysis Clubs / Macro Economic Trends and Risks


Subject:  China's Black Hole of Corporate Debt Date:  11/19/2012  9:19 PM
Author:  WatchingTheHerd Number:  408996 of 499555

If you're trying to look at macro trends to improve micro investment decisions, it's crucial to avoid "momentum thinking" -- extrapolating current interpretations of current trends out to infinity and concluding the end of the world is near. A few years back, I posted a comment about how China was becoming the world's critical patient -- the canary in the world economy's coal mine, the patient whose sniffles soon become everyone else's flu epidemic. Over the past 15-20 years, US manufacturers shipped tens of thousands of jobs to China and China gained political and financial leverage over the US by using cash from its trade surplus to sop up trillions in US goverment debt. The flood of cheap Chinese labor contributed to a worldwide downward wage spiral in multiple sectors (clothing, electronics, etc).

As mentioned in the prior post, the potential for failure lurks in every success, especially when you're trying to operate a cutting edge industrial market economy with only a decade or two of market experience and a political system 180 degrees out of phase with the n