How To Play The Economic Death Spiral In China

Wealth Whisperer Team

2,059,000, or 8.7%.


That’s the number of unemployed youth aged 16-24 in the United States in July.

How does that compare to China?

We’ll never know.


In June, the Chinese government reported youth unemployment at 21.3%.

Then, they decided the numbers made them look bad. So, they stopped publishing them.

Experts who study China’s politics and economy say it’s bad… REALLY BAD… like 50% of all youth aged 16-24 are unemployed bad.

This isn’t just another effort from a communist regime to muddy the waters.

It’s a domino in the “Shadow Crisis” sweeping through China, one that’s threatening to take out the world economy in a matter of months.

But there’s a way we can stay ahead of the curve.

In response to the leftward push by the current administration, Dr. Mark Skousen developed his Biden Disaster Plan.

It offers an analytical blueprint we can use to easily dissect the Chinese problem and draft a plan of attack.

Because let’s face it, who wants to avoid the calamity when there are once-in-a-lifetime investment opportunities?

Poorly Planned Economies

Governments serve a purpose.

Nationalizing and planning the economy isn’t one of them.

Even the most centralized systems react slowly, with bias and with incomplete information.

For the last 20 years, China pushed its youth to study hard, preparing them for the new age of technology and manufacturing.

As policies liberalized, the economy expanded.

At some point in the last few years, President Xi decided he didn’t like that trajectory.

Pushing the Politburo, he clamped down and regulated business into submission and then decay.

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After COVID-19, the Chinese economy is in shambles.

Now, an overinflated real estate market is imploding, setting the stage for a total economic collapse.

According to the Wall Street Journal, one of China’s largest real-estate developers, Country Garden Holdings, missed payments on some of its bonds. That’s after it said it suffered record losses in the first six months of the year.

On top of that, you’ve got a Chinese population that’s shrinking. Without any immigrants, who is going to buy these vacant properties?

Face it, the once vibrant Chinese real estate market is kaput.

And consider this — while the rest of the world is hiking interest rates, China is lowering them, desperately hoping to stimulate growth.

It isn’t working.

Just look at companies like Apple, or Starbucks, which told investors to expect sluggish sales in China.

And the trade war is starting to take its toll.

Once reliable investment from the United States has evaporated, as companies moved manufacturing to other countries or even back home.

These are all things we can see.

The real danger is what we can’t.

Shadow Debt

Several years ago, all anyone could talk about was China’s “Shadow Banking” system.

Essentially, off-book loans through private lenders or other derivatives made China’s debt problems appear better than they actually were.

While the government allowed some of this debt to go bad and cycle through the economy, there are still billions of bad loans hidden in the shadows.

Current reports put China’s debt-to-gross domestic product (GDP) ratio at 300% and rising. The U.S., for reference, is at 122.8%.

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Central government debt is only 20% of GDP. But local government debt is more than 70% of GDP.

So, where is the rest of this debt?

Domestic debt is tied to typically stable deposits. And you can bet your bottom dollar that the central government won’t let people yank their money out like we saw with Silicon Valley Bank.

But the lack of a bank run doesn’t indicate a healthy economy. Quite the opposite.

What we’re seeing now is debt shift from the private(ish) sector to the public.

To illustrate this point, let’s go full circle.

Country Garden Holdings often builds properties in second- and third-tier cities.

Right now, those cities don’t have enough cash flow to pay the interest on their debt, let alone principal repayments.

So, you have people without jobs not paying cities who can’t service their debt and houses being built in those cities for a shrinking population.

It’s like a whole new way to destroy your economy from multiple angles.

The Dominoes That are Going to Fall

Whether we like it or not, China is a major supplier to the United States and the global economy.

A slowdown there means fewer goods exported, supply chain snarls and lower supply.

Inflation isn’t the highest it has been in nearly half a century because of high demand.

Supply has failed to keep up.

A slowdown in China can worsen, and that will prolong, if not deepen, our high-interest-rate environment.

Fortunately, we’ve got a plan.

When we referenced Dr. Skousen’s work earlier, we mentioned the same blueprint could be applied to the situation with China.

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You see, we need a strategy that focuses on high growth and stability.

It sounds like an almost impossible combination for anyone to find.

You either get growth or stability, not both.

But that’s what makes Dr. Skousen’s plan so brilliant.

He’s found a way to marry the two using his deep understanding of macroeconomics and investing.

The results are extraordinary.

Click here to see for yourself!

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