The Dead Man’s Hand

Harry S. Dent | Thursday, October 17, 2013 >>

He was dealt four great cards.

The jackpot was promising and it all depended on the next card.

But before it was dealt, a shot rang out in Nuttal & Mann’s Saloon, and Wild Bill Hickok hit the floor… dead from a gunshot to the back of the head.

His four cards – aces and eights – were forever immortalized as the Dead Man’s Hand. The symbol of gambles gone wrong, where hidden risks outweigh the rewards.

People gambling for money is one thing. Gambling with people for money is an entirely different thing altogether.

And that’s exactly what China’s chosen to do…

The Red Dragon is moving forward with plan to relocate 250 million rural people into high rises by 2025.

While that’s just 18.5% of China’s massive 1.35 billion population, it’s still almost the size of the U.S.

To move that many people is no easy feat. It’ll take moving about 21 million people or 1.6% of China’s population per year for the next 12 years.

Of course, rapid urbanization is not a new phenomenon in China. But this latest move, just like the country’s massively overbuilt housing, commercial real estate, infrastructure and industrial capacity, could well become the straw that breaks this camel’s back.

You see, the government plans to pay rural farmers a small stipend for their land, which it will then pave over and fill with high rises and other commercial buildings. That means the farmers will no longer own land.

So what will these unskilled people do?

They’ll live off this government stipend for a few years and hopefully help to build these new infrastructures. But what happens after that?

If the country sees no longer-term jobs being created from domestic or global exports, there will be a lot of angry, idle farmers trapped in high rises… that’s what.

That’s right. China’s greatest risk is civil unrest.

Trying to turn farmers into city slickers is a slippery slope.

So why is the Chinese government irrevocably converting these rural citizens to permanent city dwellers?

Because it sees the need for a new growth source in a slowing economy with aging demographics.

It wants to accelerate its urban population, as such consumers earn two to three times as much and become consumers instead of self-sufficient farmers.

China doesn’t want to depend on exports that drive 35% or more of its GDP, as it has in the past. It wants a consumer-driven economy more like the U.S., that’s about 60% to 70% of GDP versus China’s 30% to 40% range.

But mark my words: China is taking a major gamble by taking rural workers’ land and converting it to high rises and temporary construction jobs. The government hopes to create 250 million more consumers who earn and spend more domestically. What it’ll likely get is 250 million jobless citizens that revolt or move back to rural areas.

Two risks threaten the country.

First, exports continue to slow in a global downturn. And second, China’s overbuilding boom and unprecedented real-estate bubble will finally collapse, creating an implosion in consumer spending, especially by the most affluent 10% that garner 60% of income.

My exhaustive research increasingly points to China as the biggest trigger for the great crash ahead.


Harry

P.S. I will give more details on what my research continues to reveal with alarming consistency in the November issue of Boom & Bust. And Adam will provide the details of how you can profit from what lies ahead. Make sure you get that issue.

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About Author

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.