A hedge-fund investor who predicted the Enron scandal is betting on the next big economic crash
by Michael Smith (Veshengro)
James S. Chanos built one of the largest fortunes on Wall Street by foreseeing the collapse of Enron and other high-flying companies whose stories were too good to be true.
He is now working to bust the myth of the biggest conglomerate of all: China Inc. and foresees a serious economic crash coming in the Middle Country.
A crash like that, and more than likely it is not far away, will impact on the entire global economy unless we, in the West, pull back and start working “from home” and “at home” again.
As most of the world bets on China to help lift the global economy out of recession, Mr. Chanos is warning that China's overstimulated, nay hyper-stimulated, economy is headed for a crash, rather than the sustained boom that most economists predict.
Its surging real estate sector, buoyed by a flood of speculative capital, looks like "Dubai times 1,000 – or worse," he frets and he even suspects and suggests that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent.
“Bubbles are best identified by credit excesses, not valuation excesses," he said recently, “and there's no bigger credit excess” he continued, “than in China.”
The problem, as I have said above, is that if Mr. Chanos is correct, as he has been so many times already, then we better get ourselves sorted out and that quickly.
This bubble then could burst at rather short notice or no notice at all – BOOM – and the world could be left in rather dire straights that will make the Great Depression look like a walk in Central Park at a balmy summer's evening.
It would also be very good for employment and the home economy if companies would return to manufacture at home rather than far afield in places such as China, because labor is cheap there (and often is prison labor too).
Mother Earth too would thank us immensely if we'd make things at home under the environmental protection laws that stand here rather than in countries such as China where the environment counts little, and neither do people there.
© 2010
