Is America ready for a big economic crash in China?

In this Friday July 31, 2009 photo, an investor stands in front of the stock price monitor at a private securities company in Shanghai, China. Beijing is trying to tighten credit controls without derailing the economic revival or causing a market crash _ a risky path at a time when Chinese leaders say a recovery is not firmly established. (AP Photo/Eugene Hoshiko)

Used to be that you could get rich relatively easily in America, by having a business you were starting that threw around the right Internet buzzwords. Get funding, IPO, get out and count your money. That bubble burst obviously, but this period of “irrational exuberance” ended up causing a great deal of pain to people who rushed in to cash in, despite the famous warning by Alan Greenspan.

It’s even worse in China now, and the Communists are getting increasingly heavy handed in their attempts to prevent people from profiting from it.


In this Friday July 31, 2009 photo, an investor stands in front of the stock price monitor at a private securities company in Shanghai, China. (AP Photo/Eugene Hoshiko)
In this Friday July 31, 2009 photo, an investor stands in front of the stock price monitor at a private securities company in Shanghai, China. (AP Photo/Eugene Hoshiko)

Let’s be clear: there is a massive bubble in China. We’ve known this. They build entire cities (with international monetary assistance) due to promises of economic growth. The fundamental growth never comes, and the city stands empty. This process has repeated across China.

The Chinese could do a few things about this bubble. They could remove government regulations that distort the economy. They could liberalize and abandon planned economy, in favor of free markets and free people. But they refuse. Instead, they’re imposing even more capital controls in the hopes that they can contain this craziness. Read this from Caixin Online:

It’s not uncommon for a retail investor in China to dabble in numerology, even subconsciously, while playing the stock market.

But after share prices surged for Shanghai-listed companies with the number “360” in their ticker symbol-like market codes, regulators found a new reason for alarm over backdoor listings that don’t add up.

Numerological speculation results in firms rushing to list on Chinese markets to cash in. It’s like the Internet boom, only without an Internet at the base. It’s superstition all the way down.

When this crashes, we could be in great position to take advantage on the global marketplace. But to do that properly, we need to avoid the same mistakes. We need to avoid overregulation, subsidies, and capital controls that are making things worse in China.

Sadly in the Obama-Trump-Clinton era, there’s nobody speaking up for freedom, so I don’t know if we can win from this.