China Monthly Auto Sales Overtake US

Wealth and money are two different things. We have had a lot of money over the last 30 years because we have been borrowing it from foreign countries. We have been giving away our wealth by sending our capital (manufacturing equipment, factories, etc) overseas and by spending our savings and going into debt.

After WWII, the reason why the United States became so affluent in the world was because we had a massive reserve of manufacturing capacity. Americans sacrificed their standard of living during the war to build factories that could produce the necessary goods to win the war. There were shortages of metal, rubber, nylon, food, you name it. People planted victory gardens for the war effort and women painted lines on the back of their legs so it looked like they had nylons on. After the war we had an amazing capacity for manufacturing. But instead of building tanks and planes, the factories switched to building cars and appliances. We became a net exporter of the goods we produced and became wealthy because of it.

For the last 30 years, we have been shipping that manufacturing capacity overseas, mostly to China. We have become a "service" economy which essentially means we consume more then we produce. Seventy percent of our economy is based on services. Meanwhile, China has been sacrificing their standard of living in order to lend us money and make us goods. There has been a massive transfer of wealth. Some believe that China is now poised to take over as the manufacturer of the world and will become wealthy because of it. Their standard of living will rise while ours falls. You can read more about all this in Peter Schiff's book, "Crash Proof".

Today, the following article caught my attention. China monthly auto sales overtake US for 1st time. It says, "China's vehicle market has grown dramatically in recent years, overtaking Japan in 2006 to become the world's second-largest by annual sales. With 1.3 billion people, China will inevitably leapfrog the U.S., with a population of 300 million, into the No. 1 spot, industry experts say." I think this is evidence that this theory of wealth transfer is correct.

China is also suffering from the world recession, but they are in a far greater position to weather the storm then we are. Their savings rates are near 50% for individuals, and there government has very little debt. Once they realize that they can stop lending us money and start using that money to increase their own standard of living, look out. They'll move into the No. 1 spot for pretty much everything.