The Canary In The Coal Mine Died
Portents of Things To Come
British miners used to carry canaries down in the mines. Because of their sensitivity to noxious gases, they were the early warning sign of bad things to come. My news web scrapers have picked up some no-so-nice things that may happen, because the signs are there that the news canary-in-the-coal-mine is showing signs of untowardness.
It starts with China. China has reached a point of no return in its battle to contain what could be the biggest property crash the world has ever seen. Any exposure, business or investment could potentially be in big trouble, no matter where they are in the world. Adding to the turmoil, we have the zero-COVID lockdowns and the massive drought hitting eastern China. What does that mean for geo-political events?
Economic disaster looms for China. History has shown that a centrally-managed economy can prosper to a point, but when you have dogmatic-driven decisions from an autocratic leader, well things don’t often go to plan. Witness what is happening in Turkey. The president, Recep Tayyip Erdoğan has no idea of sound economics. His low interest policies have decimated Turkey’s economic and the suffering is borne by the poorest and the common man. His decreed low-interest policies has seen the Turkish Lira in a freefall. This happened before in history. After the Russian Revolution in 1917, the centrally-mandated policies resulted in an economic crash, and Vladimir Lenin was forced to enact NEP (or New Economic Policy) in which free markets were instituted to alleviate the suffering. The economy flourished until Stalin shut down the program to regain control. A resultant famine in Ukraine killed millions by starving the population.
China is the same economic boat with President Xi Jinping. The nationalistic, autocratic ruler has made decrees that have buffeted the economy. He decimated the tech sector and his Three Red Lines policy killed the real estate sector which was a major part of China’s GDP. Then COVID hit, shutting down exports and global supply chain. Now he has a drought, and an oncoming food shortage, as well as the economic turmoil in the real estate sector. The current heat wave and lack of fresh water is a clear and present danger to China’s food security and its manufacturing output. For the first time in 50 years, the American GDP will outstrip the Chinese GDP — and the American GDP declined for the first two quarters.
China is noted for its secrecy and it is now obvious that they are on the brink of an economic catastrophe. Further impacting China’s economic output, the global price of raw materials and fuel has skyrocketed due to the war that Russian is waging on Ukraine. The troubles don’t end there. China is facing a population bomb. The declining population is affecting the cheap labour that make up their massive export markets. There is also a debt crisis for the local governments. Their prime sources of income comes from selling land to developers like Evergrande. We all know what happened there. There has been unprecedented social unrest and riots over the millions of people who have lost their life saving through their investments in real estate.
There is further trouble for China if we take a look at their agricultural and food imports. Despite the trade war with the USA, the year 2020 saw a massive increase in imports from the USA. Take a look at this chart:
In 2017, China’s pork production was decimated by swine flu. They hurriedly tried to rebuilt the porcine protein sector by import over a billion dollars of pork products, and soy and grains to feed the animals. It seemed like they had some success and American imports dropped in 2018. However things did not go according to plan, and agricultural imports rose again in 2019. In 2020 COVID hit. Agricultural imports skyrocketed. In 2020, China was forced to import over $14 Billion dollars in soy imports. Every category jumped. Pork product imports more than tripled from $662 million to $2.28 billion in 2020. Things aren’t looking good with the current troubles.
With the social unrest, shortages and economic woe, there is clear and present danger from China for world events. To placate the populace, we can expect more nationalism, jingoism and a potential war to overrun Taiwan and draw attention away from China’s domestic troubles. This is a very real threat. China’s vast military spending was allocated at $230 billion USD — money that could have been spent to improve the economy. They now have the second largest military expenditures in the world, behind the USA. In the past, China concentrated their expenditures to be the manufacturing factories of the world instead of military spending. This shift is troublesome.
Experts say that the Ukraine situation has given them pause, but the rhetoric of assimilating Taiwan has increased, as well as military activity in the South China Sea.
We live in dangerous times and the future has dimmed for everyone around the world. Let’s hope that sanity, truth and altruism triumphs — both at home and abroad. Me? I am going to try to accustom myself to buying domestic products — just in case that I may be forced to in the near future.