Harry Dent, of HS Dent Investments, discusses China and the bubble that has been created as a result of global stimulus. While most investment advisers suggest that China will help lead the world out of this economic crisis, Dent takes a different position on the matter:

Almost all countries orchestrated stimulus plans to fight this crisis. But in relative terms it was China that saw the greatest direct stimulus compared to the size of their economy. China has the greatest bubble in growth and has seen one of the greatest bubbles in stocks in the past decade. They are feeding a bubble in growth that is simply not sustainable with a slowing world economy and their high dependence on exports.

China will see their bubble collapse strongly when the U.S.-led stimulus program fails due to rising defaults and foreclosures later in 2010, at the same time that the world is looking for China to pull it out of this global downturn.

source: HS Dent Forecast ~ December 2009

The Chinese economy has not decoupled from the US economy and neither has the rest of the world. As we’ve said in previous commentaries, when the US catches cold, the rest of the world catches swine flu. Trends Research forecaster Gerald Celente agrees according to his October 2009 remarks This is Going to be Felt Worldwide.

The US consumer was the engine for the global economy. We provided an analogy for what is happening right now in Good times ahead, or is this the beginning of the Greatest Depression:

Visualize a car engine. When there is enough motor oil, the pistons are firing up and down rapidly and the system runs efficiently. When the oil dries up, the engine begins to deteriorate. It’ll go for a little while longer. And it’ll become much more violent and volatile each time it fires. Invariably the engine seizes up and fails.

When the engine finally seizes up the whole car is going to be shot to hell.