According to an article titled “China Seeks to Reduce Gap Between Rich and Poor” in today’s Financial Times, China has launched a program to tax the rich and give more to the poor. Such a concept, which is so common in the West, is pretty new stuff to the Chinese and they are working out the details.
The key point is that China still is faced with the possibility of serious political repercussions, maybe even a revolution eventually if the poor do not attain middle class status.
The rich flaunt their wealth and the poor feel increasingly left out. Since the poor far outnumber the rich, the Chinese have decided to grow their way to prosperity. They understand that growth will lead to the creation of a large middle class.
China realizes that a serious recession, or long period of slow growth, will create many new problems for them. They are determined to grow and grow fast.
Our predictions of Chinese growth have been accurate.
Understanding the psychology of the Chinese political class has allowed us to predict accurately that China will not willingly slow its growth. Further, it has allowed us to accurately predict that they will go to almost any lengths to avoid a recession. To grow the economy China will need many raw materials. The growing prosperity in China and elsewhere will drive demand for gold.
Many economists have disagreed with us and called for a slowdown in China over the last five years. They have all been wrong. They will continue to be wrong as long as the political officials have the power to keep things growing.
Our conclusion continues to be that China will continue to grow and thus demand for energy, and gold will continue to rise.