Friday, December 16, 2011

China And The U.S. Exchange Tariffs - The World Continues To Unfold Exactly As We Said It Would

We have written for years… well before anyone else in the financial community….. that this would be one of the outcomes of globalization.   And, as we have uniquely written since the 2008 collapse, globalization is dead.  There are reports of social unrest in China, which we said years ago was imminent, and we know its economy is again starting to teeter because the state just cut bank reserve requirements.  This time the teetering will be the last as we have now seen economic capital in China work through its entire cycle.   The recent consumption cycle was the last stop in the flow of capital before substantial crisis sets in.  Now, as anyone who truly understands economic capital flows would understand, there is nothing left to inflate.  

Remember, we wrote that China surpassing the U.S. in auto production a few years ago was incredibly bearish as opposed to the consensus headlines of it being a sign of the rise of China and the decline of the U.S.   The massive rise in auto production was simply another sign of the rotation of out collapsing capital investment and into consumption.   And the size of that massive swell of money was measured in both the enormous rise in auto production and the incredible rates of inflation in real estate.  Could the mainstream media and the economics community understand any topic any less than they do economics?  Seriously.  Horrible and systemic incompetence with seemingly no comprehension beyond what they see with their eyes.  

As we wrote before China’s stock market collapse, which, for new readers, we also anticipated, reserves rather than rates are being used by China’s central bank in some attempt to control the money supply because the vast majority of China’s loans were not repayable at higher rates.   In other words, China’s banking system was in complete shambles even before the real estate bubble of the last handful of years.  Raising rates as opposed to raising reserve requirements would have had a more immediate and disastrous effect.  What does that make their banking system now?  A puddle of dog poo I do believe. 

Jim Chanos, whom I respect as a contrarian, recently clarified his position on China and said he expected real estate to be a problem in China but that he didn’t expect a serious economic crisis.  This flies directly in the face of what we have written since starting this blog.   That is, China is in a capital bubble and a major economic bust is coming.  As we have written countless times, China’s biggest crisis isn’t even close to being a real estate bubble.  And, people who focus on this are showing how little they understand about what is happening in China. 

Let me restate that if anyone thinks China has the upper hand in this growing tension with the U.S., they would be very wrong.  This view that China has sway over the U.S. because they hold our debt is absolute nonsense.  The U.S. has no foreign debt.  Zero.  I would encourage you to think about what I mean by that because when I have tried to explain this with others elsewhere, I generally get this histrionics response of people who rely on emotions rather than understanding monetary policy and debt.

The U.S. dominates global trade and sets the rules to the global game through two dynamics; far and away the largest economy and through the reserve currency.   Conspiracy theorists who write that there is some global cabal of elites running the economy while the rest of us are puppets are curve fitting their paranoia to a belief they have made up in their own mind.  Global finance and globalization is about one thing – American hegemony.   Why do you think Germany was behind the European Union?  It wanted a piece of that hegemony for itself by enslaving all of Europe.

As we have said numerous times over the years, China’s economy is a mirage.  China’s economic revolution has been predicated on a transfer of wealth primarily from Japan, Europe and the United States.   China on its own could never have become what we see today for it has no economic rule of law protecting property rights, patent rights or innovation.  That doesn’t even address the fact that they have no human rights and freedoms written into any incontrovertible rule of law protected by a free society.   As we wrote years ago, it is laughable that anyone would ever believe a communist country would ever challenge a free society for economic leadership.   China’s economic miracle is driven by massive fraud and corruption by the communist party and the systemic cronyism that such a culture inherently involves.   And that pliantly self-interested, corrupt entity took the bait offered by a crony-led, corporatist Clinton/Gore/Gingrich government and the corporate toadies running our two political parties.   Yes the dimwitted ghost of Newt has made a new appearance in the endless spawn of the confederacy of dunces manufactured by the two corporatist political parties in our country.  And, now by taking millions of people out of a generally self-sufficient agrarian model into a model where untold tens of millions of people are reliant on this corrupt Chinese state-dominated economic system, enormous volatility will eventually ensue when the state can no longer provide for those newly “industrialized” workers. 

As we have written numerous times, anyone who tells you that tariff spats caused the Great Depression is either an economic dunce or a shill for the status quo.  Have you ever noticed the only people who howl about free trade are banksters, corporations and shills for the corporate state?  Well, and unknowing useful idiots for the status quo.   There is such a fundamental lack of understanding of the foundational elements of economic capital within this argument that these people are truly economic dunces or con men bent on destroying our liberties and our freedoms.   As I have written on here numerous times, we will eventually disprove all of the lies of this economic model and the foundational elements of the crookery and corruption of the economics profession using mathematical proofs rather than endless and useless ad hominen opinions.  In other words, reason and the written rule of law rather than an economy determined by the whims of man. 

We need an economic constitution to protect our economic liberties from this endless stream of crooks, con men and the power-mad who seek to impose their unstable view of the world on the rest of us.

As we wrote years ago, the seeds of war have been laid.  Now we must do what we can to keep the status quo from destroying all of us.   Remember, we once wrote on here that it would not be surprising to eventually see mass mutinies in the U.S. military just as we saw in Europe during World War I, as the average foot soldier was driven to the point of breaking in a war serving only the interests of elites.   The macro parallels to today are substantial. 

The world continues to unfold exactly as we said it would.  Albeit, slower than I expected due to the endless methods of profligacy and corruption that the status quo is employing in an attempt to keep their schemes going.   In the end they will fail as the search for truth exposes more and more of their illegitimacy.  

Title link here.

posted by TimingLogic at 12:10 PM

Links to this post:

Create a Link

<< Home