Dragon Tales

"A good fight should be like a small play but, played seriously. When the opponent expands, I contract. When he contracts, I expand. And when the opportunity presents itself, I do not hit. It hits all by itself."
--Lee (Enter the Dragon)

Many folks, including smart cookies that I respect, are hailing the 21st century as the China's century. But as my friend Vitaliy argues, this proclamation is no layup.

First and foremost, China is a socialist country, meaning that central planning determines how resources are allocated. There is no doubt in my mind that significant capital misallocation is currently taking place. In recent months, for example, credit and loans have zoomed higher as planners step on the gas trying to revive China's economy and financial markets.

This massive credit expansion fueled by bureaucrats will certainly end badly. Given the gigantic bets that the rest of of the world is placing on China's sustained growth, what does a Chinese bust imply for the globe?