China stockpiling comodities. US bonds no longer palatable.
Several interesting articles and news videos like this one from the New York Times, floated the internet today. The subject mater was about China’s buying spree for commodities. The worlds largest population is snapping up iron ore, oil, aluminum, copper, canola oil and soy beans to name a few. I had to read the stories several times because opinions for the reasoning behind the buying spree seemed to vary.
As far as the steel market, China is betting big that prices will rebound and fat profits are just around the corner. The country continues to struggle at controlling the price of steel, so stockpiling makes sense. Being communist in nature, don’t forget that China still yearns to control everything. Other things like oil are also being stored up. China is now building a 90-day strategic reserve just like the US. Getting hit hard by last year’s price hike stung China’s economy so they are hoping to avoid a repeat. Remember, the Chinese government has a surplus of ‘our money‘, so they could buy more if they wanted.
A lot of this buying activity is artificially growing the world economy, and making many economists believe that we are exiting the recession. Still, some others believe this could backfire on China. For one thing, steel exports were down 26% in April from a year earlier. Without America’s fake housing money, who will buy all China’s exports? Remember, Americans with a lust for shopping are the reason they got so rich in the first place. A Chinese population, by comparison is normally very frugal.
In the end, it’s coming back to the US. China used to be happy to grab at our bonds because of our good track record at paying them back. Now, US bonds are becoming increasingly worthless as our nation loses wealth. I think CNN hit it on the head when they suggested that the Chinese are looking for a new replacement for US bonds in commodity stockpiling. Iron ore is the new Gold.
He who has the natural resources and energy has the gold.
Several funny analogies come to mind right off the bat. Let’s remember, for a moment, Mad Max Beyond Thunderdome. Bartertown was controlled by Master Blaster because he had the pig-shit.
Another one is the funny skit from Chris Rock where is talking about the difference between being ‘rich’ and being ‘wealthy’. He’s focusing on the black community in his skit, but it really applies to all Americans at this point. We don’t understand that ‘wealth’ is education, natural resources, energy, manufacturing, transportation and infrastructure to name a few.