The average American has only gained wealth in the last five years because his house rose in price. Now even that is going away. And unfortunately for him…and for the US economy generally…he already spent the wealth that is now disappearing. Each year, the MEW (Mortgage Equity Withdrawal) grew higher…until it reached a peak in 2005/2006. Consumer spending rose too – and pushed GDP growth for the economy. Housing contributed 90% to 100% of the gains from the last five years, according to some estimates. But this year, MEW has been cut in half…and house prices nationwide are falling, for the first time since the Great Depression.
While wages in the USA haven’t risen in 30 years, in Asia they’re going up about 10% per year. The Asians are making money…and getting richer. And in the process they’re accumulating huge stacks of dollars. Many of those dollars end up in the new Sovereign Funds – immense private equity funds owned by governments. Lenin said that capitalists would sell the ropes that he’d use to hang them. Well, the communist Chinese are ready for a buying spree. Currently, those funds have about US$2 trillion in them. They’re expected to have about US$17 trillion by 2010 – enough to buy every publicly-listed company in America…with change left over.
What will they do with all that money? Well, what would you do?