Dear Reader,

American media loves talking about a market crash.

It triggers our threat response. It gets the clicks.

It’s the same reason they love talking about how “China is lapping the United States”...

How they have the EVs, the robots, the factories, and the engineers…

All while poor America is divided, distracted, and drowning in debt.

Now, I’m not saying that America doesn’t have its problems.

You’ve heard me talking about many of them both on my YouTube channel and this newsletter.

But when you look beneath the surface, the truth may be almost the exact opposite.

America is more resilient than the Doomers want to admit.

And China is far more fragile than the “China is winning” crowd wants you to believe.

In my latest YouTube video, I broke down the first half of that argument.

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Yes, total household debt is higher.

Yes, credit-card balances and delinquencies have risen.

But when you compare debt to assets, U.S. households are in their strongest position in 50 years.

The median household credit-card balance is ZERO.

Only about 47% of households carry a credit-card balance month to month.

So while some households are absolutely hurting…

In general, private balance sheets are not loaded with the kind of leverage that can force a violent systemic unwind.

And without that debt-fueled boom, it’s very hard to get the kind of bust the Doomers are predicting.

Meanwhile, The Opposite is Happening in China

China has the shiny surface.

America has the ugly headlines.

But underneath, America’s private economy has resilience China is actively losing.

The Wall Street Journal just published a damning article on the true state of the Chinese economy.

It described it as a country with dazzling technology and growing military muscle – but also an economy under serious strain.

Their property market has erased all gains from the last 20 years.

And while some uninformed people are cheering this as some sort of “affordability win”...

Considering that 70% of Chinese household wealth is tied up in property (compared to an estimated 30% for Americans)…

This is essentially wealth destruction on a grand scale.

Millions of mortgages are now at risk of being pushed underwater…

Just like what happened in America in the Global Financial Crisis of 2008.

All this is creating disastrous knock-on effects on jobs, consumption, and even government debt (as China’s local governments rely heavily on land sales for funding).

Youth unemployment is now touching 17%.

Corporate earnings are lagging.

And total outstanding debt – both public and private – have risen to 300% of GDP…

Higher than even the “indebted” U.S. (and without having the benefit of the world’s reserve currency).

All the while, China’s communist government continues to channel increasing amounts of state resources into the technological arms race in the hopes of catching up to America.

Contrast this with America right now, where unemployment is stable…

Corporate earnings are crushing expectations…

And debt – at least private sector debt – remains manageable.

There’s a stark perception-reality gap between how America and China are portrayed.

What’s behind this gap?

Well, state control of the media is definitely one factor (I mean, a picture of Winnie the Pooh could get you in serious trouble over there).

But there’s one bigger factor that most people don’t think about…

One that has to do with the underlying structure of their entire economy.

Building Trophies =/= Efficient Capital Allocation

China’s uniparty government and centrally planned economy allow it to quickly build trophies.

It can build the factories…the high-speed rail line…the robotics parks – even entire cities.

It is undoubtedly impressive…

And it makes for some attention-grabbing news stories.

But that is not the same thing as efficiently allocating capital.

That is not the same thing as creating real demand.

And it is definitely not the same thing as building a resilient economy.

This is the Economic Calculation Problem in action – something I’ve touched on in this newsletter before.

It doesn’t matter how smart or “far sighted” you are…

Or what kind of technology you have access to.

It is impossible to know what millions of consumers, entrepreneurs, workers, savers, investors, and businesses would have chosen if they were using their own money under real market prices.

Central planning can never replace the information carried by prices, profits, losses, and voluntary exchange.

America may look chaotic from the outside.