Is the West About to Accelerate Away From the Rest?
Economics / Global Economy Mar 02, 2013 - 03:36 PM GMTBy: Nadeem_Walayat
Many academics such as Niall Ferguson have been publishing books and broadcasting TV series promoting the rise of China and the threat it poses to a decaying West whereas in my opinion far from the west being in decline it has yet to even peak. That coupled with the probability that China rather than presenting a threat to the west, is likely approaching significant hurdles to future growth as evidenced by the fact that academics such as Niall Ferguson are making TV programmes for mass media audiences, much as the tek stocks were becoming all the rage in the mainstream media just before they went bust.
China Development Facts
The jist of my argument is that there is nothing extraordinary in the development taking place in China which the following graph illustrates is that all China is doing is playing catchup to the West and it is Western technologies that are driving this rate of development, the ONLY input from China has been cheap chinese labour, nothing else as the primary driver is in the convergence of GDP's between all nations where the greatest potential for economic gains on a percentage basis is from those that lag furthest behind and for that we look to the likes of China, Indonesia, India and a long string of other sub GDP $10k per capita nations around the world as originally stated in the Inflation Mega-trend ebook of Jan 2010.
Furthermore my long standing expectations remain for China to hit an economic road block at around 50% of the West's GDP that will either force it to further change to emulate the West or collapse in spectacular style.
The West Wins by Outsourcing of Old Industries to the East
The development of China and other emerging markets has so far been a net win scenario for the West for in a time of rising energy costs the have proceeded too in many cases cap energy consumption and in some cases (Europe) start to reduce the consumption of fossil fuels. This has been achieved by effectively relocating heavy industries to the likes of China and increasingly India and Brazil who have played scant regard to the long term environmental consequences of producing cheap junk to sell to the West, the environmental costs of which have NOT been factored into the goods being sold to the west but that countries such as China will pay an increasingly heavy price for as a consequence of the destruction of their environment. None of this is really news for I mentioned it over 3 years ago in the Inflation Mega-trend Ebook (Free Download) as some of the major hurdles that China faces.
At some point even China's corrupt and mostly blind to its peoples suffering communist party will come to the realisation that destroying the environment is tantamount to destroying China's economic future and conclude that they too need to start offshoring junk production to probably newly industrialising countries such as Burma and large swaths of Africa.
Western Unemployment
The argument put forward is that western jobs are being offshored to the likes of China and India at wage rates that the West cannot compete against. However the picture is not black and white, in reality 90% of the jobs offshored would not have been able to be financed in the West as a consequence of cost of production including environmental regulations. But perhaps 5-10% of the higher end jobs offshored such as in accountancy and programming could have been retained in the West.
The key to unemployment as a consequence of offshoring of old industries to China is that the western economies are ready for and already immersed in several emerging industrial revolutions some that you are already familiar with such as the internet with its low running costs and low investment structure is ideally suited for small businesses rather than larger highly industrialised manufacturing plants that are populated all over China.
So the West is primed as a function of having a large pool of existing un or underemployed workers available coupled with the entrepreneurial spirit to profit from several emerging industrial revolutions.
However there is another economic price for buying cheap Chinese junk and that price is in loss of currency i.e. money is flowing out of western nations to China, the consequences of which is inflation. China in response to currency inflows engages in currency manipulation to maintain exchange rates so that it can continue to sell cheap chinese goods to the west. Thus this acts to force up the rate of unemployment due to the constant leakage of foreign currency reserves to countries such as China which then buys Western debt and assets to offset the outflow of currency which makes western countries lazy, i.e. it appears to the masses that they can get something for nothing which is deficit spending as China in part supports it's economic consequences by buying western debt.
The bottom line is this - EDUCATION + FREEDOM OF EXPRESSION + ENTREPRENEURIAL SPIRIT, are the primary requirements for prosperity. not just for the next decade but the whole century. In which respect many emerging competing nations such as China and India are seriously lacking and will not be able to compete.
Instead the strategy for the likes of China, a system that is devoid of the freedom of expression is to hack and steal western innovations and then seek to churn out junk versions by the container load which has remained the unofficial policy of the Chinese state for several decades now that many western nations have so far been ignoring, however at some point the West will seek to act against Chinese state hacking through collective action.
The Real Threats to the West
The real threat to the west is not China, or even the ever present debt mountains, no conversely the real threat to the West is FEAR of the State, Fear of Litigation and Lack of Education.
Fear of Litigation
We are already there in terms of Fear of Litigation in the United States and the UK with class action law suits being all the rage, and giant highly litigious cockroach corporations that seek to stifle freedom of expression.
Fear of litigation hits innovation amongst ALL businesses which is why they fail to grow once reaching a certain size as by then they have a wide enough user base and public profile for the cockroaches to start to emerge and systematically target them to make a fast buck.
Even small companies can fall victim to the cockroaches, for instance a small business startup using something as simple as a free image off of the internet on their website can open up themselves up to extortion that can amount to as much as 50X the original licensing fee from the likes of for instance Getty Images that despite having FREE use of the internet resulting in huge commercial gain has no sense of its responsibility as it seeks to extort funds form individuals and small business. The solution here off course would be to ONLY use your own images, but it illustrates how easily small and large business can be crippled by litigation vampires.
So the west really needs to get a grip on the out of control litigation culture which is a far greater threat to the west's future prosperity than anything China can do, for it continuously reigns in the growth of small companies as the larger they become the more legal issues they will face slowing down their pace of growth and innovation so that the exponential growth curves they were once on in most cases tend to fast evaporate.
The bottom line is this lawyers are WORSE than Bankster's! One day we, the public may recognise this and force corrupt politicians to do something about it before we enter a permanent depression! Off course most politicians ARE themselves silver tongued lawyers so it will be an up hill battle against these leeches on society.
Fear of the State
There is a negative consequence of new technologies and that it gives the state and its minions ever more ways of invading our privacy and attempting to control our behaviour, all under ever changing banners of fear of x,y,z for instance in the UK it was fear from the IRA, giving the likes of special branch special powers.
Today's all prevailing fear banner is that from Islamofacist terrorism.
The western governments WANT terrorism they WANT something that the populations can become fearful of and there is nothing better than a war without end, the current situation is straight out of 1984 and V for Vendetta, the government uses its propaganda tools to its fullest extent from the mainstream media using magnifying glasses on the smallest of incidence, to the mainstream media broadcasting highly polished propaganda pieces such as the TV series Homeland.
All serve the governments fear agenda that seeks to dismantle your civil liberties and make your fearful of the state and its capabilities
The bottom line is when we ALL become enemies of the state, it is at that stage when every major action you take one has to be second guessed as to what are the consequences in terms of state sanctions, maybe we are already there given the occupy and other freedom movements lashing out in all directions but not in the right direction which is that the STATE apparatus is the enemy that seeks to invade and control our lives to ever greater extent.
The only way the west can prosper to the extent it has done in the past is if the State Fears the people and NOT the People Fears the State.
Mediocre Education
The problem with state education is that it's primary objective is to churn out docile debt slaves who will do the bidding of their elite masters. Schooling right form primary to Universities is flawed because children are taught by academics who have NO REAL EXPERIENCE. Instead theory piled on theory piled on even more theory of junk subjects is programmed into children who are then left to face a life time consequences of not having a clue of the real world.
At the end of the road Universities churn out barely employable graduates with junk degrees that employers then have to RE-TRAIN at great expense.
The answer is clearly for LESS University education and MORE Vocational education.
The answer is clearly for teaching of practical subjects such as a greater focus on Design and Technology.
The answer is clearly to teach financial education something that does not exist in any form in Britain's state schooling.
The answer is clearly to teach entrepreneurship through PRACTICE and NOT theoretical business studies. I.e. ALL secondary school children should be coached in entrepreneurship by being given a small amount of capital to set up their own school based businesses. 12 to 16 IS the age to light the spark of entrepreneurship, because by the time one gets to the 20's it's just too late! If you have not already setup a business by the age of 20 then it is highly likely that you never will.
Summary
The West needs to cap the legal parasites that prevent companies from growing and maturing into giants such as Google, Apple, and Microsoft.
We need to undo the damage done with all of the laws passed under the false flag of terrorism so that the people retain the fundamental driver for innovation which is Freedom of Though and Expression. Else it will not be China that passes us on the way up, but we pass China on the path towards totalitarianism as the trend we are on today may result in a China (without changing much from the present) being more free than the West.
We need to urgently address the flaws in our state education system that churns out unemployable graduates with junk degrees. We need to financially educate children and plant the seeds for future entrepreneurship.
These are the real dangers that could stop the future unfolding of technological advancement trends, something akin to soviet era bankrupt states with the masses beaten down into submission.
This article ia an excerpt from the NEW 71 page The Stocks Stealth Bull Market 2013 and Beyond Ebook that you can Download Now for FREE (PDF 2.7meg), the only requirement is a valid email address.
CONTENTS
| Introduction | 1 |
| Part 1: Why a Stocks Stealth Bull Market? | 2 |
| 2009 - Birth of the Stocks Stealth Bull Market | 3 |
| 2010 - Bull Market Consolidates and Targets 12,000 | 10 |
| 2011 - Setting a Target of Dow 14,200 | 14 |
| 2012 - Dow Still Targeting Dow 14,000 | 17 |
| Part 2: Formulating a Stock Market Forecast | |
| Fundamental Inflationary Background | 20 |
| Money Printing QE-4-EVER | 22 |
| How Can the Stock Markets Keep Going Higher .....? |
23 |
| Corporations Create Wealth, Government's Consume Wealth |
25 |
| You Want to Know the Future of Innovation? | 26 |
| Have Central Bankers Saved the World? | 27 |
| The Self Fulfilling Prophecy | 27 |
| Existing Stock Market Trend Expectations to be Tested | 28 |
| Stock Market Broadening Top Pattern Meets the Inflation Mega-trend | 28 |
| Stocks Annual Percentage Change | 31 |
| Stock Market Elliott Wave Theory Analysis - Semper Terminus | 32 |
| Stock Market Psychology and Investor Sentiment | 37 |
| Stock Market Technical Analysis |
37 |
| Formulating a Stock Market Forecast | 39 |
| STOCK MARKET FORECAST FINAL CONCLUSION | 40 |
| Risk to the Forecast | 40 |
| Peering into the Mists of Time | 40 |
| Part 3: The Real Secrets of Successful Trading, Multiple Technological Revolutions |
|
| Simple Stock Market Investing Strategy | 41 |
| Know Your Risk of Ruin | 41 |
| Central Banks and Governments Do not Understand the Risk of Ruin! | 42 |
| Trading and the Risk of Ruin | 43 |
| Debt and the Risk of Ruin | 43 |
| Debt is Slavery | 44 |
| Mortgages - Debt Till Death literally! | 45 |
| Why I Love Bear Markets | 46 |
| Is the West About to Accelerate Away From the Rest? | 47 |
| Western Unemployment | 48 |
| The Real Threats to the West | 48 |
| The Danger of a New Dark Age | 50 |
| Quantum Leap in Human Productivity | 50 |
| Exponential Technological Development | 53 |
| Multiple Technological Revolutions | 54 |
| How to Profit from The Next Technological Revolutions | 58 |
| Stock Market Crash Investing Lessons | 61 |
| The Real Secrets of Successful Trading | 65 |
| Chaos Theory - Trading Market Fractals | 67 |
| About the Author | 71 |
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Nadeem Walayat
Copyright © 2005-2013 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.
Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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