Tariffs are having a profound impact on the Chinese economy. China is not yet a self-sufficient economy. It still relies on American consumerism and importing most of its raw materials. These are raw materials that American companies can typically provide.
The process is as follows. America sends raw materials to China; China builds a vast majority of our goods because labor is significantly cheaper, bordering on the line of slavery. The work conditions in some of the factories are abhorrent. However, consumers around the world want their goods at the lowest price, and China is happy to oblige. Finally, China sends the finished products around the world for consumers to buy.
With this, China's economy wins. The consumer wins, and corporations wins because labor is a company's biggest cost by far. Meanwhile, the American worker (along with many others) gets the shaft. The million-dollar question becomes – how long is this sustainable?
China has been trying to become a self-sufficient economy for ages. The primary reason they took over the South Sea of China is that it has a vast amount of resources, ones that can bolster China’s economic independence.
However, there is no such thing as a free lunch. In the economic world, there is always another economic bubble. Humans are fallible; therefore, every system we create will have a degree of fallibility to it as well. When will the bubble pop? Signs are beginning to show it’s not too far on the horizon.
China's banking system, which is the foundation for any nation's economic system, is starting to feel the pressure. China is trying to clean up their mess, but is it too little, too late? China financial system is also stagnated by its majorly pervasive debt problem.
It's not just their financial system; the entire economy is struggling with a debt problem. Certain sectors of the Chinese economy are starting to be hit with unanticipated inflation. We are seeing signs of sudden asset price collapses, and China's loans to other countries are becoming a financial liability. It takes years for bubbles to form, possibly even decades. However, this quickly transforms into not if the economic bubble will pop, but when the bubble will pop.
Though we can't tell you when, what we can tell you is that every investor should have a plan in case an economic bubble does burst, sending the world’s economies into a nose dive. Here at the Welch Tribune, we do have a plan. We created a series of Motifs for a rainy day.
The motifs listed below are for short-term play. They are only meant to be used when the world is experiencing a major downturn, recession, panic, or depression. In any other scenario, these motifs are extremely risky. These motifs are not designed for long-term hold.
Unless the conditions are right, we would recommend staying away from these motifs. However, because we are all acutely aware that there is always another economic bubble ready to pop, investors should bookmark or save these motifs. Keep them on the back burner. Whenever the time comes, at least you know that you have this investment tool to capitalize on the event.
It's highly recommended that you read the disclosure statements when you set up an account before you make a decision to invest. We all heard it before, past performance doesn't guarantee future results. Investing can be risky. Minimum investment in subject to change. You know the drill by now.
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