China's economy and environment

They are hell bound to become (arguably they already are) an economic superpower disregarding the real long term costs. I believe they will reach this goal (if it's argued they have not already).

Their relative indifference to their own population and ecologies will not stop them.

Just as it did not stop Western Europe, North America and Japan during their earlier developmental stages.

This type of resource / ecological / societal abuse has been and is common throughout the world, not just in China.

It's all a sign that the present short-term blind ambitions, combined with a growing world population now at 6,602,224,175 is simply not sustainable without likely dire consequences.

I suggest the answer does not depend on China's intentions to be an economic superpower, so much as it does on a global dramatic population reduction.

That's not likely to be enabled willingly anywhere.

Excellent point; the population increase and the economic development of more countries and its people cannot be sustained at the present levels of growth. Resource supply is a given; population growth has no control.

China's growth cannot be sustained - even while they pollute their environment and kill off their own people. Water shortage is real, and they cannot continue to expand at the current levels while their water resources disappear. It doesn't matter how much they wish to expand their economy. Without water, they can't survive.

Here's one of many examples of the water crisis in China. From TIMESasia (this article is over one year old):


China's Water Woes


Pollution, drought and vast deserts are all signs the country is struggling to manage its most basic resource

By Susan Jakes

Posted Monday, October 2, 2006; 20:00 HKT
The first day the water truck came to Xiangshan village, the wells had already been dry for two months. Throughout the hills flanking the city of Chongqing and stretching south and west into Guizhou and Sichuan provinces, parts of China this summer suffered their worst drought in 100 years. In Xiangshan, a tiny mountain village high above the Qi River valley 150 km south of downtown Chongqing, residents had made do drinking from the muddy catchments in their fields. But by Aug. 24, when the truck set out on what was starting to become a routine delivery, those holes too were dry and Xiangshan's farmers had been forced to give up on irrigation. Pears hung hard and blistered on the trees. Sunflowers crumpled. The bamboo was brown.

Ao Minhong, a truck driver conscripted by the local government, was working long days. He filled plastic drums on his flatbed from a fire hydrant hooked up to the river. The Qi was listless that day and the liquid in the drums looked like weak tea. When he rounded a bend into Xiangshan after an hour's climb, he was mobbed. Li Caowan, a mother of two, worried the water wasn't clean. But she poured it into a ceramic tub in her yard anyway. "What choice do we have?" she said. "There's nothing else to drink."

The scene was familiar. In Harbin last November, it was fire engines plying icy streets lined with people holding buckets. Harbin's water had been contaminated with benzene from a chemical-plant explosion. In February, the trucks were in Sichuan, where a power plant discharged a toxic cocktail into the Yuexi River. And in September, when tap water for 80,000 in Hunan province was cut off because it had been tainted with an arsenic compound, the trucks saved the day once again.

But water isn't supposed to come on trucks. China's flair for contingency plans isn't reassuring. Rather, it's one of a growing number of signals that when it comes to dealing with this most basic of resources, the country is failing. Some 320 million Chinese lack adequate access to clean drinking water. Deserts cover 27% of the country's landmass. Most of China's surface water is unfit for human consumption, and some of that not even clean enough for industrial use. Grain production is sliding. And the Yellow River runs dry so often and so long that some scientists have argued that it ought to be considered a seasonal phenomenon. "China's water shortage and pollution problems are more severe than any other large country in the world," said Qiu Baoxing, Vice Minister of Construction, last month, "This is a critical point in time. We are at a crossroads."

For what it's worth, I will suggest that one of the benefits of the economic "miracle" of Asia is that we (in North America) get very low inflation due the plethora of imported high quality inexpensive goods.

That's not to say the long terms risks justify the short term benefits, but as you may well know, high inflation is the death-knell of both the stock and bond market.

With the amazing flood of high quality inexpensive goods from Asia, the risks of inflation are dramatically reduced at least until the socio-ecologic pressures exceed the economic benefits.

Thus I suggest your retirement net worth depends more on the economic health of Asia then you might like.

Put another way, our present North American prosperity has a lot less to do with US Fed policy than most believe!

Actually, our net worth is dependent on the US economy; our investments are concentrated in US funds and bonds. Unless the US companies can compete in the world market to show growth and/or profit, our funds will suffer. With the subprime debacle, loss of liquidity, and more families losing their homes, 2008 is gonna be a tough year for all.

We already have inflation; I don't believe in the government stats that they claim is under three (3) percent. That's impossible in today's world in the US where energy, health insurance, food are increasing at double-digits every year, and credit card rates are close to 20 percent, home equity values are decreasing, and salaries are not keeping up with the *3 percent inflation for most middle-class families.

Yes I understand that but you miss my point as your net worth regardless of country of origin is a function of domestic inflation and domestic inflation in a function of global inflation.That's not true to the degree many people think it is due to two consideration a) the multinomial topography of many of the US' larger corporations 2) the increasing number of securities of foreign origin listed on the US stock exchanges. But gain and most important see my agreement about the interrelationship of inflation.

What you need to understand here is how inflation of the lack of inflation affects the true underlying value of the securities you hold. You need to understand how this inflation or lack thereof in this case is dues in large measure to Asia despite commodity scaremongers to the contrary.I disagree, it's what is called "climbing the wall of worry" and if anything it'd a good sign not a bad sign. In fact the day the so-called "economic pundits" claim all is well and predict a rosy year ahead, would be the day to be contrarian. Not that I am a market timer as I believe in the efficient market hypothesis and the benefits of index funds over active management.Yes it's true that the basket of goods and services used to assess inflation may be inaccurate on an individual level, however it's not hard to assess a personal inflation rate and decide for yourself. However it;s wise to keep in mind that inflation is best simply descried as too much money chasing too few goods and Asia in terms of it;s exports to North America represents to some fair degree the reverse of this concern i.e. deflation or at worst moderate inflation hence my argument for the stabilizing low inflationary force of Asia.I'll leave your last set of claims for a later date except to suggest you revisit the "wall of worry" and "economic pundit" arguments I made earlier and except to say I do not agree with what appears to be your gloomy assessment / prediction with the understood proviso that no one has a crystal ball and if you watched Wall Street Week for years (as I did) when old Louis was alive, you would well know that the pundits never got it right year over year and it was rather a running joke.

I don't think I have ever suggested you do anything since I have chatted with you over this last year but I am going to do so here.

Run do not walk (pun) and get this book:

A Random Walk Down Wall Street written by Burton Malkiel, a Princeton economist

http://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street

http://en.wikipedia.org/wiki/Random_walk_hypothesis

http://en.wikipedia.org/wiki/Efficient_market_hypothesis

Yes I understand what you are telling me, but you are not wholly correct and miss my point. Your net worth regardless of country of origin is a function of domestic inflation and domestic inflation in a function of global inflation.That's not exactly true to the degree and precisely the way you appear to think it is, due to three considerations (at least):

1) The multinational topography of many of the US's larger corporations. reflect foreign income sources.

2) The increasing number of securities of foreign origin listed on the US stock exchanges given indexing represents this change.

3) Most importantly (in the context of our dialog) is the interrelationship of regional inflation / global inflation and net after-inflation returns as discussed (don't forget "tax-creep" when assessing the implications of net after-inflation returns).

What you need to understand here is how inflation, or the lack of inflation, affects the true underlying value of the securities you hold.

You need to understand how the moderation of North American domestic inflation is due in fair measure to Asia; despite commodity scaremongers to the contrary!I disagree, this is what's called "climbing the wall of worry" and if anything it's a good sign, not a bad sign. In fact the day the so-called "economic pundits" claim all is well and predict a rosy year ahead would be the day to be contrarian and sell / go short!

Not that I am a market-timer, no way!
Not that I am a securities selector, no way!

I believe in the Efficient Market Hypothesis, the Random Walk, and thus the benefits of passive indexing over active management.Yes it's true that the basket of goods and services used to assess inflation may be inaccurate on an individual level, however it's not hard to assess a personal inflation rate and decide for yourself. I believe the government stats in question are reasonably accurate on a relative average year over year basis.

On what evidence do you claim the stats in question are inaccurate on a relative, average, year over year basis (remember I do not mean personal inflation here)?

Remember, it's wise to keep in mind that inflation is (at least simply) described as too much money chasing too few goods.

Thus Asia in terms of its exports to North America, represents to some fair degree the reverse of this concern (i.e. deflation) or at worst moderate inflation, hence my argument for the stabilizing low inflationary force of Asia's exports.I'll leave your last set of claims for a later date except to suggest that you revisit the "wall of worry" and economic pundit arguments I made earlier.

I will say however that I do not agree with what appears to be your gloomy assessments / predictions with the understood proviso that no one has a crystal ball.

If you watched Wall Street Week for years (as I did) when old Louis was alive, you would well know that the pundits never got it right year over year and it was rather a running joke.

I don't think I have ever suggested you do anything since I have chatted with you over this last year but I am going to do so here!

Run do not walk (pun) and get this book:

A Random Walk Down Wall Street written by Burton Milkier, a Princeton economist

http://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street

http://en.wikipedia.org/wiki/Random_walk_hypothesis

http://en.wikipedia.org/wiki/Efficient_market_hypothesis

Notes:

- Simply because I do not chat much about investing and economics in no way means I am in the dark!

- Why don't I join in on the investment economic threads? Because years ago I got tired of arguing that the markets are not predictable, and that you can't beat the indexes, whether they be the Wilshire 5000, the TSX etc.

In sum:
- Most to the point in our dialog, inflation dictates the real rate of return and Asia plays a large role in moderating the inflationary trends of North American markets
- Indexing rules
- Active mutual funds suck, even the great Peter Lynch finally admitted it
- Individual security selection sucks except as noted
- Individual security selection is a fool's errand unless the tax advantages outweigh the risks of decreased diversification
- Staying fully invested all the times is the only practical methodology
- Market timing is a fool's errand
- The US Fed cannot micro-manage domestic inflation given inflation's global interdependence
- The US Fed cannot predict inflationary trends without which inflationary control is not practical, but simply the equivalent to driving by looking in the rear view mirror
- The US Fed has its place, but contrary to popular myth, as an inflationary / economic moderator (outside of extreme circumstance) it's BS
- A steady state Fed Funds Rate that was mildly stimulative, would produce the same or better results as compared to all the hawkish obsessive-compulsive rate tweaking the US Fed does

CI-buddy, I do hope you read this carefully, as it took quite a while to write. As discussed I generally don't talk much about this stuff anymore, but I'm making an exception in your case as I know you view things with a more open mind then many others and don't mind doing your homework!

Here's an update on China's coal mines. 3,800 coal miners were killed last year in their mines while they mined 2.5 billion tons of coal that pollutes their environment to help with their energy-hungry economic growth.

They're paying a very high price for their economic growth that rarely does anything for the average Chinese.