All hail our new overlords.

For those of you who haven’t heard the news, Kraft has offered a very attractive bid for Cadbury. Cadbury’s board is recommending that shareholders accept the offer. The deadline for the bid is Feb 2, so if everything goes to plan, Kraft’s ownership of Cadbury will be effective Feb 3. That’s all I can say about that.

The times, they are a-changing. Over the last month or so, with the turning over of a new year, every business writer or economist or analyst and his/her mother has taken the opportunity to write an article about what to expect of our economy in 2010 and beyond. By our economy, I mean mainly the US economy. It seems like there are essentially two schools of thought on this: 1) We’re on the road to recovery, and all is well – the US dollar will make a comeback; or, 2) We’re on the road to hell, paved by US hyper-inflation.

By and large, the first camp seem to be operating on some kind of faith in the dollar, treating this most recent recession the same as any other – recovery is inevitable because the dollar has never failed to recover before. It reeks of some kind of arrogant manifest destiny, and we all know where empires with that attitude end up.

The other school is mostly formed of (what appears to be) Libertarians of one kind or another. They use historical models of hyper-inflation to illustrate how the US economy is doomed, but also fail to explain how the US economy hasn’t failed already (since according to their models, we shouldn’t be able to maintain 4 consecutive months of growth the way we have…). The Libertarians argue that the US economy is being manipulated by… greedy bankers? No. China? Nope. Jews? Wrong again. Black people? Close. They’re accusing Obama and the US government itself (like we’d expect anything else of Libertarians) of manipulating the markets in order to maintain control over the country. In this conspiracy, the Department of Homeland Security is the rough equivalent of the Gestapo, installed by the former regime (but kept around by the current one) to maintain control over the population when the shit hits the fan. These people (Libertarians) are scared. Like, stocking up on water, food, guns and ammo scared.

So, what to do? I have no clue, but I’ve always been risk-averse in my investments. Ordinarily, I’d put my money somewhere safe, with a guaranteed return, but in light of the hyper-inflation doom and gloom, not even those are safe anymore. Real Estate maybe? No, the combination of low interest rates and good health of Canada’s financial institutions has created a local housing bubble. Gold? Yeah, but not GLD gold, maybe solid gold (the real stuff, like the kind they used to use to buy wives with).

Is it embarrassing to want to buy solid gold? Does it put you in the same camp as the gun-toting, forest-dwelling, crazy-for-cookie kooks? Yeah… I think so.

So what should you do? I haven’t the slightest idea. All’s I know is that things HAVE to change. The way we’re doing thing is not at all sustainable, even for the near future. Historical examples of hyper-inflation give us clues as to what’s going to happen – the US will cease being the world’s economic superpower. So who’s next? As much as I hate to say it, and as much as I poo-poo like predictions, the next world superpower looks like it might be China. Why’s that? 1. Solid manufacturing base. 2. High level of personal savings (ie. untapped credit market). 3. Military might (both in a conventional and electronic-warfare sense). More importantly, the US economic hegemony is waning, and the time is ripe for opportunism. All that wealth we've accumulated needs to be invested in the next great scam, and a lot of people are looking at China.

This is not to say that our way of life, as we know it, is doomed. Many former empires still enjoy a comfortable lifestyle. No need to worry. If you're interested in taking the future by the horns though, it'd probably be a good idea to learn Mandarin.

-d