China’s Fall, Not Its Rise, Is the Real Threat to the Global Economy: View

(Last Updated On: October 12, 2011)

China’s Fall, Not Its Rise, Is the Real Threat to the Global Economy: View


China’s rise to global prominence has long preoccupied the leaders of the developed world. They should be more concerned about what happens if the country’s growth falters.


This would be a true black swan event both economically and sociopolitically.


a black swan event as summarised by Nicholas Taleb in his book on the subject has as its first attribute ”it is an outlier that lies outside the realm of regular expectations because nothing in the past can convincingly point to its possibility.”
Because of the exhaustive analysis already undertaken on the likely effects of a China ‘fall..’ this does not qualify as such but I agree with you its event would be incalculable and totally unpredictable making all ‘theories’ of its impact a complete waste of time as Taleb demonstrated most eloquently.


I am more than happy to stand partially corrected, as much as we tend to speculate on crashes and their downstream effects, just like the Japanese tsunami and earthquake shocks on reactors, any Chinese collapse and its collateral damage is likely way beyond our imaginings. Just imagine the effect on global retail having little or no supply


Well we could go back to rebuilding manufacturing capacity again – just like the good ole days! and all those clever guys in finance can switch over to help stimulate our creative sciences which created our wealth in the first place. Every cloud has a silver lining my grandmother taught me……


But then what would happen to the “service industry” which the talking heads believed was the new economy.


Would Taleb classify 4Q 2008 events as a Black Swan?



Taleb went on to say the second attribute was it carries an extreme impact, and third in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. Whether one thinks 2008 is properly explainable is potentially a moot point perhaps?
He also said that many Black Swans can be caused and exacerbated by their being unexpected eg as in 9/11. Black Swan logic makes what you don’t know far more relevant than what you do know.
What I especially like with him is when he points out is our blindness with respect to randomness, particularly the large deviations. Whether scientists or not, hotshots or regular Joe’s see the pennies instead of the dollars, focusing on the minutae not the possible significance of large events and why reading the newspapers actually decreases one’s knowledge of the world……..


It’s something I feel quite often as well, unless one is some kind of genius being able to extract itself out of the daily news and make out a pattern, it’s hard to see the big things.

So here my question to you and everybody else: What would be the best way to read or follow developments in order to be able to spot the longer term trends properly. Who are the best future or trend predictors?


The Spx drop in September 2001 was predicted by me, so it was not a Black Swan event. During a class at GT on 08/23/2001, I stated that the Spx would drop 25-30% during the month of September 2001. Some of my classmates laughed at me. He who laughs first does not always laugh last. Unfortunately, I did not copyright that prediction, but I have since. Thank you.


–Making a pattern out of the daily news is a combination of very many factors such as experience, understanding, knowledge and so forth. By observing the known factors one can focus on the unknowns or less obvious factors using the above skills. You know what is, ‘hot’ is history (buyers have bought) what is cold could become hot. Which is why following the news distracts one soemtimes from looking somewhere else instead. I was once in Kuwait meeting with the deputy governor of the Central Bank and I asked him if he thought Iraq would invade and he said No America would not allow it. I decided he was incorrect and bought oil fuutures for clients and the Bank, two weeks later Kuwait was invaded. Sometimes it can be intuitive. In 1987 I had an awful premonition Wall St was looking terrible and in September sold two thirds of client holdings, and shorted a few leading stocks. In May this year I was convinced silver was going to go parabolic, encouraged I have to say by the charts then but there are no market physics as far as I know ! but some people such as Ed Yardeni and Peter Schiff have great track records.
For the record I am sure that gold and silver will be higher in 3 years time than now and much higher in ten, certainly the upside is greater than the downside. Why? a combination of all the above. Hope this answers your question somewhat.



NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

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