Emerging Markets Are The Future, The U.S. Dollar And Euro Are Doomed!
Stock-Markets / Financial Markets 2011 Jan 17, 2011 - 08:30 AM GMTBy: Larry_Edelson
Over the past several years I’ve repeatedly given you major warnings on several critical issues affecting all of us.
Chief among them have been the ongoing devaluation of the U.S. dollar … the phenomenal rise of China and emerging markets … how the seeds of inflation were being sown … and warnings of imminent rampant price rises in food, energy and consumer staples.
Today, I’m going to tie them all together for you. And you will see that not only am I right as rain, but all of the above is happening now in spades.
First, let’s take a look at the U.S. dollar. Since the end of 2001, the U.S. dollar has lost 37.9% of its purchasing power against a basket of currencies. That’s bad enough. The problem right now is that the U.S. dollar’s bear market is not over, not by a long shot.
In addition to the Fed printing at least another $600 billion of fiat money — as you well know by my recent writings — China is about to give Washington what it wanted all along — a much weaker dollar against the Chinese currency.
All you have to do to understand this is look at the motives behind it. Washington believes the U.S. economy needs a major dose of inflation. To get asset prices moving higher and to get consumers to start spending money again, out of fear that prices will be higher in the future.
Right or wrong, that’s what Bernanke wants … that’s what Washington wants … and that’s what they’re going to deliver to you. Come hell or high water, they are going to inflate prices by deflating the purchasing power of the dollar, even if it hurts tens of millions of savers and makes life very difficult for the poor.
Don’t get me wrong. I am not siding with Washington. I am just accepting reality for what it is. Until our leaders accept ideas like the ones I presented in my September 20, 2010 column titled 10 Steps to Save America …
And place a moratorium on ALL debt, then monetize all debt, issue every American citizen bearer-coupons … a new currency … and equity shares in a newly re-organized U.S. government — inflation through a dollar devaluation is coming, big time.
And China is about to help Washington. You see, China needs the opposite of what Washington wants. Washington wants inflation, but China wants some deflation, to cool off price rises, and to increase domestic consumption by giving its currency more buying power for the country’s 1.35 billion consumers.
Like yin and yang, Washington and China are tied together. Beijing knows this, and that’s why I’ve been warning you to start aggressively preparing for a Chinese yuan that increases in value versus a U.S. dollar that keeps losing purchasing power.
But for those who claim a little “deflation” for China will spell the end of the country’s rip-roaring economic growth, and for other emerging markets, I say think again.
Emerging Markets Are The Future
The fact of the matter is that more than 20% of the world’s population is Chinese. One out of every five people.
And when taken together, fully 84% of the world’s population — 84 out of every 100 people — live in emerging markets. Economies and societies that are just about where the United States was in the late 1800s — and in just the first phase of their explosive rise higher.
Indeed, consider the following facts just published by the London office of PricewaterhouseCoopers. Allowing for price differences of the same goods between countries …
China will overtake the United States as the world’s largest economy as early as 2018, just seven years from now.
Combined, the economies of China, India, Russia, Mexico, Brazil, Indonesia and Turkey will eclipse the economies of the developed G-7 nations in just nine years, by 2020.
Personally, I believe those estimates to be conservative. I believe China will eclipse the U.S. economy less than seven years from now. The reasons are simple: Even if Washington and the Federal Reserve get what they want and can inflate the U.S. economy — it will be based on devalued dollars, not real economic growth.
So the U.S. economy at best, will remain stuck in the mud in real terms, and more likely, sinking in quicksand. While a revalued Chinese yuan — and strengthening emerging market currencies — combined with the wants, needs and desires of 84% of the world’s population, or nearly 5.89 BILLION people, will drive emerging market economies higher.
Think about that again in terms of what it means for the United States. For every U.S. citizen alive today, there are nearly 19 people in emerging markets.
So even if China revalues its yuan higher, and other Asian currencies rise as well, I highly doubt it’s going to dampen any economic growth in emerging markets.
Emerging Inflation
Quite to the contrary, with newly found purchasing power, those living in emerging markets will be able to BUY MORE GOODS AND SERVICES, pushing inflation even higher than what would otherwise be expected by a tsunami of fiat dollars being printed by Mr. Bernanke and the Federal Reserve.
All you have to do to see this emerging inflation is look at what’s happening to the prices of key commodities …
Soybeans are up more than 202% since late 2009; 55% in the last six months.
Wheat, up 48% in the last six months.
Corn, up 68% in six months. Oats, up 69.8%.
Copper, up 55%; Platinum, up 110% in just over a year. Palladium, up 103% in 11 months.
Cotton, up an amazing 234% just since last March, to a 150-year high. Cotton prices have risen so much that apparel manufacturers will be passing on the price hikes in what promises to be the biggest price increases in clothing in at least 20 years.
Yes, commodity prices, I have been warning, are overbought in the short term and due for some pullbacks.
But don’t kid yourself and don’t let anyone kid you: The only deflation that exists in the world right now is in the purchasing power of the U.S. dollar and the euro.
The U.S. Dollar And Euro Are Doomed!
BOTH currencies are doomed. Both the European and U.S. economies are in a quagmire — in fact, a depression — that will last for years. While emerging markets, especially China, continue to rise.
The well-chronicled 500-year East to West and West back to the East civilization cycle shift is here, now.
No one, no matter how much power he or she has, and no country, no matter how powerful, will be able to stop it.
There’s another aspect to all this that I would like you to think about, and I believe is absolutely critical that you understand: The financial crisis that began with the real estate sector in the United States is not, and will not, lead to a crisis in capitalism.
Rather, it’s leading to the exact opposite: The collapse of big government and socialism.
Think about it: Europe’s governments are reeling. So is the euro currency and the European Union itself. In the United States, the federal government is not only broke, it’s under siege. So, too, are municipalities.
Meanwhile, in nearly every emerging market we are witnessing the power of the free market take root, driven by the newly emerging and “let loose” souls of 5.88 billion people.
You’re not going to stop any of these trends. But you have the power to protect your money, your investments, the purchasing power of your savings, your children’s and grandchildren’s — by spreading the word … understanding what’s happening, and seeking out alternative and uncommon ways to invest your money.
God bless and best wishes,
Larry
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