Beggars Banquet

Beggars Banquet

“Never underestimate the power of the State to act out its own massive fantasies.”

Don DeLillo

By: Erreh Svaia

Remember that great 2003 book by Don DeLillo called Cosmopolis? It was about an asset manager travelling in a limousine thru violent downtown streets in order to get a haircut, during the trip world financial volatility goes berserk and he starts to lose millions until he is nearly ruined, Canadian filmmaker David Cronenberg made a great stylish adaptation of the book, it seems that DeLillo novel has in a way started to become a reality, in Cosmopolis, financial volatility was caused by a revaluation of the Yuan, in real life, Chinese government opted for manipulation and devaluation of their currency in order to look for a more competitive edge on their exports.

A couple of weeks ago we talked about the loss of strength China was suffering in its recent growth economic reports, a number was defined by the Communist Party, but analysts were doubtful than in a full authoritarian style, China simply tossed a fantasy number, once again analysts started to speculate that perhaps China wasn't fully in control of its enormous growth machine, and that in reality there wasn’t a plan, fear of a global crisis in a larger scale than the one ignited by the Greece conflict in past months began to be felt around the world.

It looks like China is really worried about showing that their economic growth was a more than mere accident, devaluating the Yuan is the latest strategy taken by the oriental giant in order to stimulate the exports sector, the alarming thing here is that China is looking desperately for consumption outside its borders, a sign that its former voracious appetite for raw materials is over, and that internal consumption is not growing as fast as they wish, China strategy is a mix of desperation and aggression, as a currency war might not be too far given the fact that the U.S. dollar is starting to reevaluate again hurting U.S. exports, in a world where Europe, Switzerland, Japan and even India are fighting to become more competitive by becoming the lowest bidder, it's a matter of time for the U.S. to react, and once again other developing markets start to suffer in this complex stage, affecting inner economies by the large.

China's intention to return to their old strategy of being the cheapest player in the world might be a too dangerous plan if they doesn't back it with a an efficient plan to keep the internal markets moving on, otherwise, the amazing achievement of taking all millions of people out of extreme poverty achieved recently by China might have a costly backlash of global proportions.

China is no longer seen as a cheap manufacturer, and the strategic deviation may hurt countries like Mexico, who took their place in the global economy, also the reduction in growth is sending alarming signs to countries like Venezuela, Brazil and Argentina who benefited from China's economic rise, and whose future economic plans were based on China growth a dangerous dependency that is slowly beginning to show a cost too high to endure.

These days we are all learning that economic growth is finite and nothing is carved into stone, sooner or later either world powers or developing countries could fall into the deadly trap that momentum could be sustained forever, capitalism and globalization are starting to show us very complex stages as inequity, production, consumption and economic short term, long term strategies are variables changing the nature at amazingly fast rates.