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Weaknesses of the EUProfessor Niall Ferguson also sees a number of weaknesses in Europe. France�s dream of making the EU a counterweight to the US hyperpower will continue to slumber. The EU's growth will counteract such a view in the end. Fertility rates are dropping rapidly (see AI-Janes forum discussion on �Zero Population? Worse than "The Day After Tomorrow?" at ai-jane.org). "Germany will lose the equivalent of the current population of East Germany in the next 50 years. Russia is contracting by 750,000 per year. Japan's population will peak in 2005 then fall by 1/3 over the next 50 years. The decline is the equivalent of that experienced by medieval Europe during the plague years (according to demographer Hideo Ibe). " Western European societies in less than 50 years will have a median age in the upper 40's. The only real remedy is opening their borders in a similar manner to US immigration policy, but such large immigration will have drastic (though not unquestionably bad) changes on the society. Problems would include a lack of assimilation creating a less cohesive westernized society. Such immigration in Europe will also create the difficult possibility or choice of "Americanizing" their economy as opposed to becoming the largest economically fortified retirement community in the history of the world.China's economic crisisChina presently suffers from a dichotomy that is presently being assuaged by its growth. It has opened up its economic sluice gates but maintains rigid control over key economic and civil sectors. Economists generally agree such control creates broad inefficiencies in the economy. These inefficiencies, while the economy continues to rapidly expand, are easily overlooked, however there will come a time when the growth rate will slow (it is inevitable), and at that time such inefficiencies will be strongly magnified. There is simply an incompatibility between property rights of the free market and a monopoly of power (which is presently held by the communist party in China). Regulatory institutions in China generally follow the power of party rather than the rule of law. Creating long term uncertainty during tighter economic periods. The Chinese economy is also heavily dependent on exports as its domestic market falls further and further behind. As discussed in AI-Janes discussion of �The Coming Implosion of the Chinese Economy?� the lack of transparency in the regulatory agencies is making many bond investors nervous and can easily be reflected in other Chinese investment markets. No one is sure of the full extent of those weaknesses since China doesn't have a transparent system of laws and regulations open for inspection.Per Dr. Ferguson, banks that purchase Chinese debt in Asia to establish themselves should learn from history that such a strategy was used a century ago during the "Open Door Policy" when US and Euro firms ran into China, only to see the investments disappear in the turmoil and civil war that ran rampant through China. China�s growth then, was as it is now, rapid and seemingly invincible. Just remember when you invest, you can't repatriate factories in China and your investment will be sunk should any problem arise.
Weaknesses of the EU
Professor Niall Ferguson also sees a number of weaknesses in Europe. France�s dream of making the EU a counterweight to the US hyperpower will continue to slumber. The EU's growth will counteract such a view in the end. Fertility rates are dropping rapidly (see AI-Janes forum discussion on �Zero Population? Worse than "The Day After Tomorrow?" at ai-jane.org). "Germany will lose the equivalent of the current population of East Germany in the next 50 years. Russia is contracting by 750,000 per year. Japan's population will peak in 2005 then fall by 1/3 over the next 50 years. The decline is the equivalent of that experienced by medieval Europe during the plague years (according to demographer Hideo Ibe). " Western European societies in less than 50 years will have a median age in the upper 40's. The only real remedy is opening their borders in a similar manner to US immigration policy, but such large immigration will have drastic (though not unquestionably bad) changes on the society. Problems would include a lack of assimilation creating a less cohesive westernized society. Such immigration in Europe will also create the difficult possibility or choice of "Americanizing" their economy as opposed to becoming the largest economically fortified retirement community in the history of the world.
China's economic crisis
China presently suffers from a dichotomy that is presently being assuaged by its growth. It has opened up its economic sluice gates but maintains rigid control over key economic and civil sectors. Economists generally agree such control creates broad inefficiencies in the economy. These inefficiencies, while the economy continues to rapidly expand, are easily overlooked, however there will come a time when the growth rate will slow (it is inevitable), and at that time such inefficiencies will be strongly magnified. There is simply an incompatibility between property rights of the free market and a monopoly of power (which is presently held by the communist party in China). Regulatory institutions in China generally follow the power of party rather than the rule of law. Creating long term uncertainty during tighter economic periods. The Chinese economy is also heavily dependent on exports as its domestic market falls further and further behind. As discussed in AI-Janes discussion of �The Coming Implosion of the Chinese Economy?� the lack of transparency in the regulatory agencies is making many bond investors nervous and can easily be reflected in other Chinese investment markets. No one is sure of the full extent of those weaknesses since China doesn't have a transparent system of laws and regulations open for inspection.
Per Dr. Ferguson, banks that purchase Chinese debt in Asia to establish themselves should learn from history that such a strategy was used a century ago during the "Open Door Policy" when US and Euro firms ran into China, only to see the investments disappear in the turmoil and civil war that ran rampant through China. China�s growth then, was as it is now, rapid and seemingly invincible. Just remember when you invest, you can't repatriate factories in China and your investment will be sunk should any problem arise.
