The Chinese government is run by a bunch of old Communists who grew up under Mao. They believe in central planning.
They sent their bright young men to study economics in America’s graduate schools. These young men came back Keynesians.
The Chinese economy today is a mad mix of free market entrepreneurship, central bank counterfeiting, Keynesian mercantilism, and Communist central planning.
It is an accident waiting to happen.
The oligarchs have indebted the country to the tune of $25 trillion, up from $1 trillion in 2000.
They have built empty cities.
Here is the capper. Between 2011 and 2012, the planners built so many infrastructure projects that the nation consumed more cement than the United States used in the entire 20th century.
This cement is going to serve as shoes in the next downturn of the world’s economy. China may even lead this downturn.
The Mafia used cement shoes. He who wore them sleeps with the fishes.
The Chinese economy will implode. When it does, over a billion people will get a first-hand look at what central planning, central bank inflation, and public works projects can do to waste resources.
This will be the great challenge to the Communist oligarchs. The Chinese know only two systems: the Communist system under Mao, and the present system, based on central bank inflation and Keynesian capital allocation. They have known only political economy. The masses have placed their faith in the Keynesian system. It has performed well for 35 years. When it crashes, they will not know what to do, what to believe, or how to restore their prosperity.
There are at least 90,000 public protests a year in China today, which the government attempts to conceal. How many will there be then?