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BookmarkI am focused on East vs. West. The World Bank said that China may already be the largest economy in the world, and if they are not, they will be by the end of the year. The U.S. reaction was, ‘So what.’…
China’s reaction was, ‘No, we’re not. The statistics are wrong, and even if we are, we still have low per capita purchasing power. We are a poor country. We don’t have much of anything.’
One of China’s main studies is the book The Art of War. One of the principles in the Art of War is that you show everybody your weaknesses and deny your strengths. China is going to be the largest economy in the world. When China says that on a per capita basis they trail the U.S. and all of the other Western economies, they’re right. In many ways China does.
But the most important way China does not trail the U.S. is in the area of energy infrastructure. It’s tough to run the world without energy. China has been working on and planning their energy needs for decades. Between 2011 and 2015 China will add as much to their electric grid as the current size of the entire electric grid in the United States. That’s amazing.
On a per capita basis, clearly by the end of this decade China will have 5 times as much transmission wire than the United States has. China has also been critiqued because technologically they are behind us. Well, they are not behind us in smart grid development. China has the fastest connectors — high voltage cables — that connect one part of their grid to the other.
One reason you need a ‘smart grid’ is that you have to be able to integrate all sorts of energy, from coal to solar. And speaking of solar, that’s a plug for silver, and I think the price of silver is just remarkably cheap. 5 years from now silver will be trading in the triple digits. Silver is not only essential as a monetary metal, but it’s also essential for solar voltaics, which is very, very strong in China.
I have no other explanation for why silver is as cheap as it is, other than to say it should not be. Don’t ask why silver is cheap, just buy it, and if it gets cheaper, buy more. Despite all of the propaganda regarding fracking, the U.S. is not going to be energy independent. That’s going to leave us begging for energy from somewhere.
But China will have all of the energy they need. China also has a very strong pact with Russia. Not only does Russia have energy, but Russia is also a gateway to China for countries such as Germany because of Russia’s control of the rail lines.
But coming back to China, if you look at what they are doing, they are ordering these municipalities to sell off some of these state-owned enterprises, which are currently very inefficient. This will raise capital. Now, the sale of these state-owned enterprises will dwarf any debt that people are claiming puts China on the verge of some sort of collapse.
So the sale of these assets will not only solve any balance sheet problems for China, but by selling them to private enterprises it will make these assets much more productive. It’s true that China is considered much less productive than the United States is today. But by selling off these assets, China will greatly enhance its productivity of what will then be privately run and extremely efficient enterprises.
As far as China’s monetary system goes, they are going about as fast as they can at making their monetary system transparent. China will be introducing a new currency, first for Asia and then for the world. Believe me, that currency will include gold. It may also include the ruble and the mark as a combined currency.
Meanwhile, the U.S. is fracking and saying, ‘Why worry? We don’t need infrastructure.’ Again, this is the mindset, even though we don’t have anywhere near the infrastructure we need to be energy independent. You are talking to one very worried American right now when I see what’s happening.
This arrogance on the part of the United States is why you need to protect yourself against the collapse of the dollar. I don’t know of any way for investors to do this other than to buy physical gold and silver. Eric, I would love to be able to give you an interview saying the West is finally doing things right but I just don’t see any evidence of it at all. But the bottom line is no one is going to believe the price of silver 5 years from now. No one is going to believe they could have bought this metal for under $20 when it is trading well over $100.”
