The Written Word: Rafe Mair Sept. 6th

By Rafe Mair

I’m constantly amazed at how those set in authority over us can’t see past the next election. Their ability to plan even medium range is simply not there.

Back in the 70s and 80s Japan was the economic flavour of the decades. The Japanese had cagillions of dollars which they could use to finance enterprises all over the world. It would go on forever too.

Back then, I once asked a stockbroker what would happen if the money Japanese entrepreneurs were throwing around was based upon a false foundation … such as Tokyo property that was badly over valued. It won’t happen I was told sharply. Well just as we should know that nothing lasts forever we should have known that the Japanese economy was due for a big tumble. Which it took.

Now it’s China, the hottest economy in the world with their growth in double figures. Everything you buy, it seems, is "Made In China". The domestic Chinese market being presented to the rest of the world is insatiable. The Chinese have truly found the economic version of the fountain of youth.

That this belief be accurate is very important to the United States which has gone from being the world’s biggest lender to the world’s biggest debtor with a big bundle of that owed to China.

Ken Chang, a Chinese-America economist has been warning for the past 5 years that the foundation of the Chinese economy was rotten to the core, principally because the Chinese Banks loaned money in accordance with government wishes not on the basis of sound business decisions. Banks show as assets loans (that’s how banks operate) that would never be repaid. We now learn of huge buildings unoccupied because they were built based on government fantasies.

I’m not an economist but I do ask questions. Such as, what the hell happens if the wheels fall off the Chinese economic rickshaw?

My answer, taken some time ago against the advice of my broker, was to take my modest savings the hell out of the stock market. This is not because I know something you don’t know it’s simply obeying what my Dad taught me … trust your tummy, son, always trust your tummy. And my tummy tells me this is a very good time to stand on the sidelines and let someone else play the market.

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