China at the Crossroads, by Charles Hugh Smith

China faces economic challenges. How it resolves them will play a big part in global affairs for the next few decades. From Charles Hugh Smith at

Watch where capital is flowing. That’s pretty much all you need to know to predict the future.

The word “China” evokes strong emotions, so let’s set it aside in favor of a simple syllogism:

1. Certain things matter in all economies.

2. China is an economy.

3. Therefore these certain things matter in China.

Four things matter to all economies:

1. The flow of capital and talent in or out of an economy.

2. The productivity of that capital and talent.

3. The availability and cost of energy.

4. The stability of the primary foundation of the majority’s wealth.

Capital and talent flowing into an economy and being productively invested generates prosperity. Capital and talent squandered on unproductive speculation generates bubbles of phantom wealth that eventually pop, destroying the illusion of wealth.

Capital and talent fleeing an economy generates stagnation and collapse. Capital and talent are democratic in the most basic form: both vote with their feet. Dictators can strut around ordering everyone to wear their underwear on the outside of their clothing, but if people can vote with their feet, he soon finds he’s talking to himself and a handful of clueless cronies.

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