scenario number one

On January 9th, 2008, I went on record predicting one of three possible outcomes to the "Chinese miracle." It appears scenario #1, a Chinese implosion is starting to materialize. Today's Washington Post article, "As China's Losses Mount, Confidence Turns to Fear," implies as much. Somewhat ironically, and just to show you that predicting the future is problematic for all, China's implosion is not just due to it choking on growth, although that growth played a key role. It turns out the Western depression -recession is too mild a word- is the proximate cause.

Although I wrote that "if we somehow started consuming less," and called it "unlikely to the point of being ridiculous," it did in fact happen. We are consuming less. Not by choice mind you, but because we overspent so wildly for so long that we could no longer pretend business as usual. We can no longer pay our bills, let alone buy stuff from China.

Now China, having grown so crazily to supply us and the rest of the world with goodies, finds itself suffering from a very nasty hang-over. It has built factories, supply chains, infrastructure, etc. to produce useless junk that people suddenly no longer want to buy.

Add in the many scandals of tainted toys, tainted toothpaste, and tainted food and you can see that a long downhill slide is very likely. That too, won't be pretty.