Quote:
Originally posted by turbo6bar
I am not sure that a falling Chinese economy won't take down other economies, as well.
I have been in the camp that commodities are in a bubble, but I'm beginning to wonder if this is the beginning of a worldwide rush to all things material. Has the investment community lost faith in the central bank's ability to restrain inflation? If so, my investments are 100% wrong.
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1. Yes...if the Chinese economy falters, it will have huge ripple effects. A bigger issue would be if the US economy falters, we will probably take down China and India with us. And...
2. Yes...we are probably in a commodities bubble, driven by speculation but...
3. Yes, the underlying demand for commodities is real. There is a worldwide rush on material items because China and India are growing at over 8% a year. Until technological substitutes can be found for raw materials, prices will go up. What do I mean by "technological substitutes"? Think fiber optics substituting for copper cable. And...
4. Yes, the investment community has lost some faith in the Fed's ability to restrain inflation. It has become increasingly obvious that with the free flow of funds across borders, that the Fed's ability to "tighten" the money supply is not what it use to be in decades past. Funds will just come from elsewhere. Remember that the rest of the developed world has a savings GLUT and they are looking for people to loan it to. Wonder who that might be?
But that is just my opinion.