askJZ: The Chinese Bubble
Mar 04, 2010Thanks to Jim Maxfield and @HarilaosMichael for providing two of last week’s top questions. Remember, get your questions about advertising, business, the economy and more answered every Wednesday by posting comments to blog posts or, better yet, on Twitter via #askjz.
“Jordon, give us your business perspective on the U.S. debt issue.”
The U.S. debt is out of control. President Obama currently has the smallest number of relevant business advisors of any president ever in the White House. Most presidents surround themselves with advisors that have spent numerous successful years in the business community. In fact, these people usually make up well over 30% of their total advisors. President Obama only has 8%.
Without the proper business advice, without the support to scale back government, without the support to cut excessive spending, and without a complete business understanding, our country will continue to spiral out of financial control.
“I’ve been following what people like Robert Prechter and Marc Faber have been saying about the world economy. What’s your take?”
I neither agree nor disagree with what Faber and Prechter have to say – it’s a split decision.
Marc Faber says that central banking doesn’t work: “Central banking, and the fiat money it produces, inflates economies dreadfully, until one day they just explode…People (and investors) pick up the pieces and start over again.” I agree. Most people don’t see how screwed up our central banking system is because they don’t understand how it works. The banking system in this country works on debits and credits. Years ago, our dollars were backed with gold. Today they have no real value other than the fictitious amount we assign to them. For instance, the federal deficit hit a new record high of almost $1.5 TRILLION at the end of 2009. What does that even mean? Nothing! It doesn’t have any real value.
In his article, Robert Prechter says, “The bond market is the biggest bubble in the history of the world,” and that municipal bonds have already started to suffer. I agree with him: municipal bonds are going to be a huge bust. But not for the reasons he thinks. Municipal bonds are obviously tied to municipalities. They are protected by the taxes of that municipality. With the value of mortgages and home values decreasing, the taxes aren’t what they once were. Meanwhile, fire and police personnel and postal workers (and we all know the post office is a bust) have continued to get raises, continued to get overtime, and continued to get big fat retirement pensions. I’m not putting down our dedicated civil servants. What I’m telling you is that the municipality bond market is broken. It’s going to come back and haunt consumers that have their cash in municipal bonds. Municipalities need to figure out how to run a more efficient municipality the same way Governor Romney did in Massachusetts by shrinking government.
Faber and Prechter go on to make other statements that are absolutely incorrect. For instance, Faber says there’s a 30% chance that China’s economy is going to “crash-and-burn, taking most commodities with it.” Faber says China is a bubble. That’s bullshit! China will be fine. Its economy will ebb-and-flow just like any other economy. China is becoming more capitalistic, and like other capitalist countries, its economic growth may be slow for a while but it will ultimately recover and the country will thrive again.
And according to Prechter, “Nobody should be taking risk right now…This is a time to be safe.” I couldn’t disagree more! I totally, unequivocally, passionately disagree!! This is the time to make hay. There’s never been a better time to buy real estate – residential or commercial. How can Prechter say go to cash? He’s probably out there right now buying up real estate himself and doesn’t want to compete with you! If you have any money at all, go out and buy real estate. It is dirt-cheap right now, but it’s not going to stay that way. Robert Prechter, I’m sorry, but you just don’t get it.
Thanks for your questions. Keep them coming so you can get straight answers from me here or at #askjz.
LINKS:
Right Side News – Marc Faber: 30 Percent Chance China Will Crash And Burn
Business Insider – Prechter: It’s The End Of The World
Jordan-
Have been reading your blog for the past week- very refreshing to hear someone tell it like it really is.
Good afternoon, Jordan:
I absolutely agree — I’m studying abroad in Shanghai, China this upcoming Fall semester. It is highly unlikely ‘China will crash and burn;’ between its corporate appeal for low-cost manufacturing, 101- story World Financial Center, the $45 billion investment for its Expo 2010, and the 20 million population in Shanghai alone (March 2010 National Geographic) there appears… lol appears to be some economic opportunity afloat. I am uncertain upon which assumptions Faber’s claims are founded.
Yesterday, I came across your productivity article in Inc. Magazine. How do you maintain such a rigorous schedule??
Apologies for such personal-based questions; you certainly do not have to answer these: is any family time reduced? Does you wife work the same schedule? How did you come up it? Do you drink coffee, energy drinks, diluted caffeine or is it entirely work-out based energy? How do you maintain the schedule if you’re traveling? What do doctors think/tell you???
I’m almost a junior now (20!!) at U of I, Champaign-Urbana working towards a triple major in Finance, Supply Chain & Management, trying to start two companies (software to reduce banking expenses & a micro incinerator for waste management) and working 4-5 jobs for some cash flow. Your schedule is… remarkable as Seth Godin might say. I’ve outsourced a handful of people to work for me to become more efficient but this schedule could put me over the top.
Any feedback, advice on how to start, etc. is well regarded & appreciated.
Thanks for your response. I wish I could give you more specific answers to your questions regarding my sleep schedule (or lack thereof). Unfortunately I can’t, other that to say that’s the schedule that works best for me. I’ve always been able to get by on little sleep, which has worked to my advantage over the years. I will also say that it’s a constant challenge to find the right balance between work, family and everything else in my life – I’ve gotten better at it, but it’s still not perfect. I really think it’s a process of trial and error to find out exactly what works for you.
Good luck!!