This will never happen, of course. Automatic withholding taxes are a key source of government revenue at a time, the world over, where liabilities are rising fast. But it would be a lot more efficient than having Canberra, Washington, or London sprinkle out the money on projects that may or may not enrich politicians and their donors.

That is part of the big picture. In the littler picture, news came out yesterday that Chinese GDP growth may not reach the eight percent target set by the old men in Beijing. It will, perhaps, be just six percent growth this year.

Six percent GDP growth-if the number can be taken at face value-is no small feat during a worldwide recession. But China's policy makers have said in the past that in order to meet employment objectives (you need factory work for the millions moving off the farms) the economy has to grow at eight percent.

How will rising unemployment and closing factories affect China's political stability? Hmm. We have no idea. But we do know that according to yesterday's data, China's exports fell for the second consecutive month. They were down 2.2% in November and another 2.8% in December. It's the worst export performance since 1999.

More ominously for Aussie investors who would like to find the bottom in mining shares, China's imports fell 21.3%. As China imports a great deal of raw materials, this is not good news for the Aussie share market. In fact, the market was down nearly two percent intra-day, before finding the courage to close just in the red for the day.

Today, though, some of the world's biggest miners announced cost cutting measures. Rio Tinto is suspending underground work at its copper and gold project at Northparkes in New South Wales. It's also shelving plans for auto-mated trains at its iron ore operations in the Pilbara.

Mining shares are down at the open today. But behind the scenes, it looks like Chinese companies are using the commodity price crash as a chance to secure long-term off-take deals with Aussie companies. "Emerging West Australian iron ore producers are facing renewed Chinese interest in long-term off take agreements before an expected drop in contract prices," reports Sarah-Jane Tasker in the Australian this week. "Hartleys resource analyst Andrew Muir said Chinese steel mills were still looking for long-term off take agreements, but he warned that companies would now be more selective."

This is what Diggers and Drillers editor Al Robinson calls the "Pebbles" phenomenon. While BHP and Rio were engaged in a soap-opera like love/hate fest over conquering the resource world, Chinese banks and steel mills have been diligently sifting through the wreckage of the resource market for projects they want to finance, own, or invest in.

For example, Dow Jones Newswires reports that Gindalbie Metals has received conditional approval of a $1.8 billion loan for its iron ore project at Karara. Gindalbie is also funding the project by selling equity to Chinese outfit AnSteel.

So you see, business is still getting done. Let's not forget this. Someday, this crisis is gonna end. All the things we've discussed here in the Daily Reckoning will have come to pass (perhaps not exactly as we've forecast) and the world will get on the business of life, replacing one financial growth model with something less leveraged and more oriented to the growing places of the world. But just when that it is and whether or not it will be good for investors in Aussie resource juniors this year is unclear.

What is clear? Ben Bernanke is terrified. "Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system," Bernanke told fellow terrified people yesterday at the London School of Economics. "More capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets."

Here we are, 525 basis points lower on short term U.S. interest rates, a doubling of the Fed balance sheet to US$2 trillion and growing, and US$750 billion into a TARP that can't cover the rotting corpse of the financial system, and Bernanke told the world yesterday that the basic problem-bank balance sheets impaired by assets they can neither value nor sell-is no closer to being solved.

That seems like bad news.

Bernanke went on to explain the various policy tool kits at the Fed's disposal. You can break it down into three big hammers: lending directly to financial institutions, providing liquidity to key credit markets, and the direct purchase of assets. The Fed has already begun purchasing assets like mortgage-backed securities. But in theory, there is no limit to what kind of assets it may choose to buy and add to the balance sheet. It could even buy gold mines if it wanted.

"You don't really think it's the government's plan to make people poorer do you," one of our sceptical friends asked last night over a cold beer on a scorching Fitzroy Street in St. Kilda. "If they did that, you'd have social chaos. Revolution even. This isn't Batman. Bernanke isn't the Joker. He doesn't want to watch the world burn. He's just trying to start a little inflationary camp fire to fight deflation in financial assets."

"Should I get marshmallows?"

"Be serious. You write to people every day and predict things that...well if they were true, would truly be disastrous. The only reason it's not so monotonous reading the same thing every day is that it's often scary in some new way you've managed to think up. Don't you feel bad for all your fear mongering?"

"No. Do you realise how few people the Daily Reckoning reaches? And on any given day, I have no idea who's choosing to tune in. So we have smash our way through the garbage in the paper to let people know that things are happening in the world that have real consequences. There's a lot at stake. I don't feel bad for trying to highlight that. Plus, daloob."

"What?"

"Look, the answer is no. Bernanke is not trying to burn the world down. Maybe there are some people in government who are happy with that outcome, though. More than you'd like to think. It leaves them stronger and more powerful and the rest of us weaker. I don't know. Disorder is one way of keeping people busy and weak. But no, I don't think Ben Bernanke goes to bed at night plotting ways to turn the world's savers into serfs. But I do think that the destruction of paper wealth is going to be the end result in America and other places. This is how fiat money ends. And fiat money is what we have."

"You say that all the time. But you're going to pay for my beer with fiat money."

"Well, I always pay for your beer. And you never listen. Money is not wealth. Money is a commodity, a simple means of exchange. Paper money that is not backed by something real is not real wealth. It's not capital. It's just paper. And once people lose confidence in it, it's gone baby gone."

"What happens next?"

"Argentina. Weimar Germany. Zimbabwe. Take your pick. Us Americans and Briton and you Aussies as well, like to think it can't happen to us because...well because we have a high opinion of ourselves and the world's most powerful military. But the bills just keep piling up. It's a lousy way to live and a lousy thing to do to your kids. And it just doesn't last forever."

"Unlike your daily reckoning."

At that point, your editor left and returned to his home office to find this plan of action from a fellow reader. We liked it so much-and it's roughly what we have been steering toward for the last few months, that we reproduce it for your benefit. We're tentatively calling it the Emergency Private Pension Plan.

Hi Bill

"I just want to boil things down a bit - the DR can be a bit long winded (But it's free so who cares!) What we really want to know though is how we can retire in luxury within 2-3 years or less - perhaps you could develop the following for us a bit:

1. Now: We are basically in a recession with a tendency for deflation

2. Now: Governments are reflating / printing money to reverse the recession and deflation

3. Now: Governments are reducing interest rates to unprecedented lows - to reflate

4. Within 6 month: When inflation starts to rocket, so do interest rates

5. Within 12 months: When/if the recession "ends" we then get even more amplified inflation there being heaps of cash about

6. Within 18 months: To pay off the massive debts, taxes rocket but production also remains stunted so economies tend into a long slow recession with continuing high inflation again

So from this we conclude what we should do:

1. Now to four months: Expect a choppy Bear Market rally: great for leveraged traders and high dividend quality blue chips: double your money.

2. Four to six months: Swap into gold, puts/shorting and fixed interest securities: double your money in 6 months

3. Up to Twelve months: Swap into rebounding property but keep the gold: double your money again

4. Before 18 months: Cash in again and go into recession/ inflation resistant assets such as staples, telecoms etc, but probably retain 25% of the gold: double your money again over 2 years.

So after multiplying your initial cash by a factor of 16: cash-in, open a gold current account and go and live in luxury in Thailand (Where there's no capital gains tax!)

What do you reckon?

Cheers, SJC

--We'll drink to that.

Dan Denning
for The Daily Reckoning Australia

• Red Bear Rising: Russia’s Resource Based Geopolitical Strategy
• Australia’s Response to the U.S. Bailout Plan
• Argentina Government Will swallow $26 Billion Worth of Private Pension Funds
• Australian Iron Ore Shares on China’s Menu
• Pirates of Private Equity Flying Colours Off Australia’s Shores

My friends and I exited the train onto the long, cracked concrete platform. A drainage stream littered with rusty steel barrels trickled by. On the northern bank, a retaining wall backed by an even more daunting barbed wire fence served to support the numerous lookout posts dotting China's most traversed southwestern border. This wasn't the Rio Grande.

Lo Wu is called a "control point." I imagine the Chinese authorities used the Korean DMZ as a suitable inspiration.

Consequently, I saw no need to draw the army's attention. My friends, Western journalists from Hong Kong, certainly weren't the red-carpet type. So we hung back, letting the hundreds of Chinese scurry by.

The rush for customs ensued. The soldiers, dressed in their long pea-green military topcoats, suspiciously surveyed the masses. And the masses nudged to and fro, like cattle in a stockyard, hoping to find the most expedient line to re-enter the mainland.

My fire engine red North Face duffel bag drew some stares, but Western garb doesn't fascinate as much in Shenzhen as it would in the more remote, rural regions of northern China. After all, I should thank some among the Chinese hustling all around me for stitching it together. That's probably also true for just about every item of pure Americana attached to my privileged self. And if the Chinese didn't construct the authentic item, they could easily point me to an alley where I could haggle the repro.

Shenzhen, Deng Xiaoping's first attempt at capitalism, Chinese-style, received the elevated status of China's first Special Economic Zone (SEZ) in 1980. Seemingly overnight, factories popped up along the hot, humid delta like a nasty, uncontrollable case of Southern kudzu. Naturally, more factories required more transportation. Shenzhen became the world's fourth busiest port by 2005.

Within 20 years, market reforms turned a relatively remote city the size of Green Bay, Wis., into an industrial and financial powerhouse on par with Chicago.

Wal-Mart shelves and Christmas mornings in the West have been built on a 90-hour, six-day workweek in the East. The last 20 years of growth have produced more than 90,000 export-oriented processing firms on the mainland, with nearly 70,000 based in Shenzhen's Guangdong province alone.

It's no wonder Chinese officials fear what a slowdown in the export economy may bring. Domestic growth and stability have risen with Chinese workshops. And make no mistake, the first three long-term domestic priorities on Beijing's list are and will remain stability, stability and more stability.

The yuan-dollar peg has gone a long way in ensuring constancy. Chinese economic growth - we would argue, all economic growth - ensues under the auspice of a stable currency.

But ties to the greenback have recently come with a price. American policymakers have facilitated a weak dollar. The Fed, for its part, announced another $200 billion injection on March 11. Its most recent funding equals the $200 billion Bernanke set free on March 7. For its part, the dollar didn't know what to think ($400 billion in four days). Or else, it's in a rather cruel denial.

For the first time since Word War II, owning U.S. Treasuries is a riskier bet than owning German bonds.

On the basis of credit default swaps, which are used to speculate on a government's ability to repay debt, the 10-year note reached a record high of 16 basis points on March 12. German bonds traded at 15 basis points, also a record. A decline in these spreads shows improving confidence in the government's ability to pay... an increase shows the opposite.

"That's certainly eye-opening," writes our esteemed colleague Chris Mayer. "The market consensus is that you stand a greater chance of default investing in U.S. Treasuries than in German bonds."

Officials in Beijing must keep shaking their heads. China holds more than $387 billion in Treasury securities.

For China, a weak dollar makes critical imports (wheat, corn, iron and soy) more expensive. Expensive imports mean higher prices. Higher prices mean more inflation. More inflation means less stability.

Chinese Premier Wen Jiabao addressed the equal and opposite reaction on the other side of the planet.

"The primary task for macroeconomic regulation this year," he decreed, "is to prevent fast economic growth from becoming overheated growth and keep structural price increases from turning into significant inflation."

In his annual policy speech to China's legislators, Wen clearly labeled rising commodity prices and the subsequent food shortages as China's No. 1 policy issue for 2008.

So Beijing finds itself in a bind.

Going forward, yuan appreciation would certainly help alleviate rising prices (commodity imports would be cheaper). Export dependence, however, has thwarted this policy. On the other hand, protecting the export industry by enforcing a close yuan-dollar peg only intensifies further inflation as the dollar continues to slide.

In the meantime, Beijing has turned to price controls. But price controls are nothing more than a short-term stopgap. Price controls disincentivize ample production. Shortages ensue. Prices, therefore, rise even higher.

Beijing may have hope. China's appetite for consumption keeps growing. We see signs that China's GDP growth is no longer so export dependent.

According to The Economist, "The World Bank's latest China Quarterly Update suggests that net exports contributed only 0.4 percentage points to GDP growth in the year in the fourth quarter of 2007. Overall GDP growth slowed only modestly (to 11.2%) because of faster growth in domestic demand, which contributed an impressive 10.8 percentage points."

These recent numbers suggest that the Chinese economy appears to be transitioning into a sustainable form of adolescence. Achieving a more proper balance between domestic production and consumption should enable Beijing to gradually allow more currency appreciation as a means of fighting inflation.

What that will mean for the American consumer remains to be seen. Political threats of more American protectionism combined with a rising yuan won't do much to alleviate John. Q Public's pain. If anything, he'll have to spend more of something he already doesn't have.

On the other hand, companies with assets denominated in Chinese yuan should see a boost. Companies earning profits from people with money to burn (the Chinese) shouldn't do too badly, either.

And I've found a company that satisfies both conditions.

This company owns the franchise to manufacture, market and distribute the products of the Coca-Cola Co. And we're not just talking 7-Elevens on Hong Kong Island. This company also distributes Coca-Cola products in Taiwan, as well as in 11 states in the U.S. and seven provinces in mainland China. This represents a total franchise population of over 420 million people, or, if you prefer, 6.4% of the world's population.

And that's just the tip of the iceberg.

At Free Market Investor, we've warned investors to be very cautious on stocks reliant on American consumers. We stressed shifting focus from companies that produce luxury items (such as Apple, Starbucks or P.F. Chang's China Bistro) to companies that provide staples (such as Altria Group, Budweiser, Coca-Cola, Exxon or Johnson & Johnson).

Even if John Q. Public lost his house and credit card, he'd use that last $20 to buy what he needs. The list would read something like this: toilet paper, Diet Coke and a pack of smokes.

Every month brings us closer to this reality. In February, over 223,650 American homeowners filed for foreclosure. On top of that, unemployment insurance applications increased nearly 20-fold. Investingwise, that puts us back to the basics. Forget the MacBook Air and start thinking consumer staples.

For investors, companies that own or produce revenue streams from tangible assets (rental income), consumer staples (Coca-Cola) or natural resources (oil and natural gas) should prosper. Finding a single company - a conglomerate - capable of producing cash flow from all three seems even better.

That's the beauty of many conglomerates. Conglomerates often operate within a diversified group of income-producing industries. Meaning revenues aren't tied to any one particular division. Diversified income streams typically strengthen a company's margin of safety.

Christopher Hancock
for The Daily Reckoning Australia

• Chinese Economy Seems to be Growing
• Chinese Steel Price to Rise in Wake of Coal and Iron Price Hike
• Chinese Consumers Are Getting Shiny New Credit Cards
• China is a Key Driving Force in the Gold Market
• Rumours Swirl Over Chinese Equity Stake in BHP Billiton