China Will Be the World’s Next Economic Leader

DRIGGS, IDAHO – China has defeated COVID-19. Its economy is booming.

From this weekend’s Wall Street Journal…

[Chinese] Cities are bustling with crowds of office workers and traffic on streets. Restaurants, shopping malls, and gyms are packed. Movie theaters are open…

Now look at this…

Estée Lauder, maker of expensive perfumes and skin creams, reported quarterly results last week. Global sales were down 9%. But its China sales were up 28-30%.

Same story with Cummins, the engine maker. It also reported results last week. While global sales fell 11% last quarter, Cummins’s China sales rose 46%.

Coca-Cola, L’Oréal, Walgreens, Archer-Daniels-Midland (ADM) and all the major car companies – including Daimler, GM, Ford and Toyota – all say the same thing.

“China has come roaring back from the pandemic” says the CEO of ADM, the agriculture giant.

“China’s demand has been at record levels for 6 months,” says the CEO of Cummins.

“This was another extraordinary quarter for Chinese consumer consumption,” said CEO of Estee Lauder…

(More below.)

Dyson Mountain Schoolhouse: A Libertarian Education

Greetings from our little schoolhouse in the mountains…

My family and I are a modern nomad family. We have no home, no possessions (except what we can carry in a suitcase), and no roots in society (like a job or a school for our kids.)

We just drift around, having fun and learning together.

We’ve been living like this for almost three years. We’re currently in the Teton mountains, hunkering down in an Airbnb for the winter. While we wait for COVID to pass, we’re going to learn to ski…

For most of the last three years, we’ve been on the road, visiting countries, seeing tourist sites, and meeting local people.

We’ve used these experiences to discuss history, art, politics, science, economics, and personal development with our children.

The homeschool community calls this type of education “world schooling.”

Here in the Teton mountains, we’re in one of the coldest, snowiest places in North America, and we’re now spending most of our time indoors. I’m taking the opportunity to bathe the kids in libertarian ideas and free-market ideology.

In effect, Kate and I are trying to create the ultimate homeschool curriculum for raising libertarian kids. It’s pretty exciting…

These are some of the “libertarian” resources we’ve used recently:

• Tuttle Twins by Connor Boyack – book series

• Uncle Eric by Richard Maybury – book series

• Hidden Secrets of Money by Mike Maloney – YouTube series

• Free to Choose by Milton Friedman – YouTube series

• Cashflow by Robert Kiyosaki – board game

• Western books and movies, which show kids how the world worked when there wasn’t a big nanny state looking down on everyone

Some of our favorite, kid-friendly Westerns are:

• Heartland – TV show on Netflix

• Little Britches by Ralph Moody – book series

• Texas Rangers by Elmer Kelton – book series

• Shane and Monte Walsh books by Jack Schaefer

• Sackett by Louis L’Amour – book series

• Have Gun-Will Travel – TV show on YouTube

Now, back to China and the economy…

Trying to Hold Back the Bear

Bull markets are followed by bear markets…

The 1980-1999 period was the greatest bull market in American history. But since 1999, we’ve been in a bear market in stocks. (Measured in gold terms, that is… which, in my view, is a much more accurate way of looking at the markets.) I believe history will show this to be one of the greatest bear markets in history.

Most of the macroeconomic news we see in the media these days is generated by governments attempting to hold back the great force – and the effects – of this powerful bear market.

Low interest rates, new central bank policy goals, government spending bills, central bank digital currencies, and bond purchases are all examples of this…

What all these initiatives add up to, in effect, are governments attempting to hold back the bear market by printing wealth. But as any child can tell you, you can’t print wealth.

Wealth comes from production… from sweat… from muscles and brains… and from dedicated hard work. There are no shortcuts. And yet, here they are trying to print prosperity in some government backroom. It’s absurd…

Gold and Dollars Flowing East to China

Also, there’s another important phenomenon taking place.

A billion people in China are becoming U.S.-model consumers. Instead of just being a source of cheap labor and cheap production, the Chinese are getting rich and now emerging as big consumers.

The more central banks attempt to print wealth, the more dollars and gold flow east… and the richer China seems to get. It’s ironic.

The bear market will get its way in the end, and the campaign of printing money and trying to hold back the bear will seem terribly foolish.

I believe it will end with a terrible loss of value in paper currencies, anger at our financial overlords, and a big shift in geopolitical influence from West to East… (He who has the gold has the power.)

How high will gold go? It’s impossible to say. But here’s one way of looking at it…

The total value of the M2 money supply is $18.839 trillion. This includes all cash outstanding, plus dollar deposits in the U.S. banking system. Meanwhile, the U.S. government holds 261.5 million ounces of gold.

For the M2 money supply to have a 20% backing in gold, the U.S.’ gold stash would have to be worth $3.76 trillion. (20% is sort of a standard mark for banking a currency in gold.) That would require a gold price of $14,378 an ounce.

But M2 money supply is a very narrow definition of money supply. The actual number of dollars in circulation must be far higher… so the ultimate gold price to back these dollars must also be far higher than $14,378 an ounce.

– Tom Dyson

P.S. We joined the local library. Libraries are a great source of free children’s books. Here’s Penny in the library…

Like what you’re reading? Send your thoughts to [email protected].

In today’s mailbag, a book suggestion… and an inquiry into the Dyson family’s trip to Turkey…

Reader comment: Tom, have you heard of or read any of Peter Zeihan’s work? He is a geopolitical scientist and his latest book is Disunited Nations. His take on America and China is totally opposite of yours.

His take, from a geopolitical viewpoint, is that China is basically headed for an implosion. With your time to study economics, I would highly suggest you consider taking the time to explore his writings. I would be very interested to hear your take on his viewpoints.

Tom’s response: I will read the book you recommend and comment on his work when I finish reading it.

Reader comment: Turkey! Amazing! Did you encounter any distrust/prejudice by the Muslim population? The pictures of you and your family reveal that you weren’t trying to “pass” as Muslims. Then again, the president of Turkey doesn’t wear traditional Muslim garb. He wears Western-style suits! I didn’t start following your “fringe” adventures until you were in China, so I welcome these highlights from earlier on your trip.

Tom’s response: Not at all. We found the people in Turkey to be very gracious and hospitable.

Meanwhile, others continue the bitcoin conversation… and one reader shares the idea of “sellable goods”…

Reader comment: I agree with you about bitcoin. It has value because people think it has value. I got interested in it when it was bouncing between $10 and $20, but it was not very easy to buy and for me $20 was a lot of money.

My problem is it does not really do anything. I own some ether because it is used to verify contracts and other coins use it. I also have some other crypto that have a use. To me, bitcoin is like the Beanie Babies fad or tulip mania. Enjoy the snow.

Reader comment: I agree with you that bitcoin is overvalued and a fad that will fade. It has only one advantage over traditional stores of wealth that I have seen: It allows the holder to move large sums of “cash” from one nation-state to another without any declaration or any confiscation… so long as there is someone in the welcoming nation-state who will fairly exchange the bitcoins for some locally useful form of currency. Bitcoin and other popular cryptos are more toys for speculators than real means of exchange.

Reader comment: This is a true story. My father’s Chinese-language instructor’s wife escaped from Red China when Mao took over the country. She was from a wealthy family and bribed/bought her way out of the country. With gold coins.

I just mailed to each of my children and nieces a roll of silver dimes and a roll of “Forever” USPS stamps (100 stamps for $0.55 = $55.00) as tradeable government tender that should increase in value with inflation. Not a lot to start with, but I hope the concept of “sellable goods” plants a seed. Enjoy seeing and reading about your wonderful family.

Finally, one’s reader’s take on the new Friday mailbag editions… an offer of hospitality… and advice on how to survive Midwest winters…

Reader comment: Great that you plan to ski this winter. Dusty, Miles, and Penny are the perfect ages to learn to ski. Hope you get them lessons. Over one winter, I learned to ski well from a job that came with free lessons. Get lessons until each is riding a chair lift. Then, take some periodically through the season, until everyone comfortably skis parallel on Black Diamond trails. Kate, be prepared for the kids to pick up skiing faster than you; they are at the learning stage of life.

Reader comment: I read your Postcards every day. Thank you for continuing to write them. Regarding the new Friday format, it doesn’t seem to be different from any other day except that – rightly so – it is an easier format for you to control, without stories. The time it takes to read, sort, and respond to the mailbag daily is inconvenient and time-consuming.

Your charismatic stories about your family and what everyone is doing are encouraging. One day a week for the mailbag works for me. Keep up the good work for the benefit of yourselves, and those of us who love hearing from you.

Reader comment: My wife and I loved the picture of your family sitting around the table putting together a 1000-piece jigsaw puzzle. It reminded us of so many happy times in our own family. If you ever wander back to the south, stop by Nacogdoches, Texas, to visit us.

We are in a town of 35,000 that is over an hour from any bigger cities, surrounded by the verdant beauty of the Piney Woods. We would love to have y’all over for dinner, and if we have any vacancies in our apartment complex at the time of your visit, you would be welcome to stay in one of them. God bless your family.

Reader comment: Everyone has advice for you regarding winter. Here’s mine. I have 56 winters of experience here… lol, many of them spent hauling logs in the British Columbia mountains.

The van is fine. Get really good tires. Not the place to cheap out, if you can afford it. If the weather is too bad, just stay home. The first snow always seems to be one of the worst for driving. This all goes double if you have no winter driving experience. Try and get good clothes for everyone. Winter is much more enjoyable if you are comfortable. Stay safe.

Tom’s note: As always, thank you for your messages! Please keep writing us at [email protected].