Friday, November 03, 2006

Roll a pair of dice, put up a parking lot

Guambat has seen many versions of the thought expressed over the last year or so to bolster the idea that commodities in particular and the world economy in general is on a parabolic curve with sound fundamentals owing to the strenght of demand from
China, such as the following from Fuller Money:
Thursday 2nd November 2006
The car in China is evocative of 1920s America where it transformed the aspirations of the middle class. China is now the world's third largest car market with sales of 5 million units last year. At the same time, there has been massive investment in roads similar to that in America in the 1950s but compressed in a much shorter period. In 2004 China had constructed 21,000 miles of motorways, more than doubling the size of the network in 2000. Seventeen years ago there were none.

America was a wide-open country in the 1920's, with a population that grew to 119% of its 1920 base (from a population of 106 million to 123 million) in the decade to 1930. If China were to have the same growth rate, its population would be in excess of 1.5 billion people in 2013; just the growth in population would be about twice the size of the 1930 US population.

How in the world would China have the space, let alone the wealth, to accommodate anything like the number of cars per person or family that America has? Yet, the people selling the "if we only get 1% of the market" proposition continue to extrapolate from the industrialized economy models and build that extrapolation into their economic growth models.

Guambat thinks those folks won't get their molasses and biscuits to come out even.


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