Friday, March 21, 2014

More Happy Talk About China Including The Mainstream Financial And Media Blather That The Communists Are In Control Of The Yuan

I’m going to tie all of this together in detail when I get my series of posts finished.  But until then, there are major issues coming to pass that I have forecasted years ago.   China is the biggest turd in the pool so these issues are worthy of timely discussion because they are catching almost everyone off guard.  That includes the entire global financial and economics bureaucracy.  Which just goes to show you why central planning doesn’t work.  Be that corporate capitalist central planning or state central planning.   And why centrally-planned finance and its sister ward of the state, the economics profession, is so wildly incompetent in corporate capitalist systems. 

I forecasted what is happening with the yuan in detail over the last nine years.  Most of my detailed posts about China were finished off half a dozen years ago, give or take.   It was just sitting back and watching the forecast unfold.   By the way, way back before China’s stock market collapsed I wrote on here that the commies had lost control of their economy and the Shanghai stock market was about to implode.  It obliged almost immediately.  Now, I am stating  that the commies have or soon will lose  control of their currency.  Same outcome.  The exact opposite outcome predicted by nearly every economist, financial master of the universe, politician, corporate bureaucrat and gold pumper. 

Frankly, I could have forecast what was going to happen to China when they were gearing up to enter the WTO if I was blogging or had some compelling reason to write a book.  By the way, a book that no one would have bought because in the world controlled by the inverted merit pyramid of perfectly incompetent bureaucrats, credentials mean well more than competence.   Which, might tell you a little about much of what you pay to read in a world controlled by credentials and money.  The two go hand in hand.  Which is also why we have a university education bubble that has manifested itself through a tuition debt bubble.   Gotta have that credential of a degree that bureaucrats love. 

That some hick blogging in his underwear can foretell what the entire communist party bureaucracy of 80 million members couldn’t figure out over the last fifteen years is not a testimony to my abilities but more a testament to the incompetence of hierarchical, class-based bureaucracies.   An inverted and perverted system of class that suppresses talent, virtue and, more importantly, as it pertains to the state and corporations, suppresses our divinity and its expression of human empathy, community, connection and love for our fellow man and for the natural world.

People are trying to piece this Chinese mess together as it unfolds.  I’ll tell you what happens.  I wrote it on here long ago.   Complete implosion.  Collapse of the yuan.  Collapse of China’s centrally-planned society.  Collapse of communism.  And, potentially the global collapse of corporate capitalism.   And, if any of those are subverted, it will be through the use of state violence.  In other words, the commies attempting to stoke nationalism, blame the U.S., team up with Russia or any other number of forms of violence.  Again, discussed on here long ago.  

Two recent stories in The Wall Street Journal and The Telegraph are below.  In those articles they cite “experts” that are telling us China’s brilliant central planners are letting the yuan float to curb speculators.  Hahaha.   One more time.  Bahahaha.  China’s communists created the speculators.  And they loved and encouraged them as long as it was granting the state the perception of class privilege, power and wealth.  How does a speculator get access to a currency that is not convertible?  Why, they get it from the communist central planners, the central bank; The People’s Bank of China.  The commies gave the speculators their money through their currency peg.  And they knew exactly what they were doing.  This is China’s mess.  The U.S. just helped them create it being the supportive, nonviolent society that we are.  Smile with tongue out    

To believe that the Chinese central planners are allowing the yuan to float in a wider band in some virtuous and noble attempt to curb fraudulent speculators is fundamentally based on a belief that the commies are virtuous and that they know what they are doing.   Only a finance or economics ward of the state could surmise this is what’s driving the action of the yuan or the commies.  But that is what these article’s authors and cited experts believe.  The Chinese central planners don’t know shit from shinola and placing faith in the action of the state to solve this yuan crisis that state violence created in the first place is absurdity defined. 

If it isn’t happening today, and no one has the inside information to make that determination as I type this, it will happen at some point that China will have absolutely no way to defend the yuan.   It’s not a matter of choice.  It’s a matter of fact.   Central planners cannot control the value of a currency through mistake mounded upon mistake.   Or, the multiplication of incompetence mounded upon incompetence.   Plus, they will burn their dollar holdings attempting to hold the yuan’s value.  Something that is noted in these articles and that I wrote long ago.  Something that no one in finance, economics, the gold community or otherwise seemed to understand.   Well, until it was too late.  It’s not a matter of “letting” the yuan float to stop speculators as these articles portray, it’s a matter of whether the yuan is collapsing now because central planning has lost control or whether the commies are trying to devalue it out of fear for what is happening because of central planning.  Their actions are an attempt to save their entire political and economic system from collapsing.  A system they created.  This is no different than the central planning actions of Bernanke, Obama. Paulson, the EU, the Soviet Union, Russia and on and on.  Which, as I wrote long ago, will likely set off trade sanctions with all things being equal.  In other words, the Chinese commies are eventually going to attempt to devalue the yuan to dump goods at below market costs on international markets using a worthless currency, the yuan.  A sort of centrally-planned “quantitative easing” meant to save their manufacturing and employment.  Manufacturing and employment they created by their predatory, violent, centrally-planned mercantilist economy.  A system that enriched the power of the state at the expense of China’s citizens.  Or, for that matter, American citizens or any other citizens.  A mercantilist or colonial capitalist economic system is state violence defined.   China’s reaping what it sowed.

As I wrote long ago, China will either have to proactively devalue the yuan, or if gets too far away from them, which it may have already done, they will lose complete control and the yuan will go where it will go.  Which is south to some unknown value.  And, by unknown, that includes the possibility of zero at some point.  Do you think the foreign exchange market is going to give the Chinese dollars for the value of the yuan today when their system is imploding?  Hahaha.   They are going to start demanding more yuan because it’s worthless.  There is absolutely no way they can defend their currency without blowing through their dollar holdings and then begging the U.S. for a bailout. 

As I noted long ago, China will either burn their currency through excessive printing or they will experience a massive deflation by attempting to stop the economic madness the communist party has created.  And, they will be required to abandon the yuan peg to do so.  Either way, the yuan is head south and economic deflation will ultimately ensue.   And, as noted long ago, at some point the Chinese will likely come begging the U.S. or the IMF for a bailout.  And, I doubt they will get it.  That is, unless the U.S. extracts terms that will be brutal.   How about all of China’s gold?  lol.  I doubt that would happen.  But China might have to start selling gold to raise capital as I did note long ago.  

Regardless, this future has a substantial possibility of creating massive unpredictability as the state responds through violence in its effort to save itself.  That includes every global state that will first seek to protect and perpetuate its power.  China and Russian trying to align themselves as may be happening as I type this, the U.S., Europe and other western capitalist societies doing the same, Japan responding in some fashion possibly with the backing of western democracies.  Who knows?   But, the state will make it very interesting.  That’s not a good thing either.  Remember, post 2008 I mocked the G20 meetings that were a show of unity and wrote that these predators would eventually turn on each other.  That is exactly what is happening. 

Once again, as I have noted many times, debt is not the issue for China.  People are trying to tie this current issue to debt.  Or a credit event.  Meh.  That’s not what’s going on under the surface.   Debt in China did not start exploding until after 2006/2007.  In fact, debt was relatively flat for years leading into 2006/2007.   Look at any debt charts.  China always had bad debt on its balance sheets.  And a lot of it.  But it was reasonably stable in scope.   The bad debts are why the central bank could never raise rates and why it had to use reserves and other clownish methods to control the money supply.  Well, and other reasons that would fuel speculators and arbitrage.  But, it was post-2006 when the massive swell of debt started in China.  That’s because debt in a capitalist system that is producing wealth is containable and repayable.  It’s only when wealth collapses that debt swells into a mountain.   Fractional reserve lending or not.  As long as the money supply is  being allocated to capital production, debt can and will be repaid.    In 2006/2007 all of that changed.   Since economists, politicians and bankers think wealth is derived by money, they believe the answer is to print more of it.   Wealth is not money.   Remember all of those comments over the year about the mythical service economy, created by the dunces who control our lives in the U.S. , not being able to inflate its way out of debt?  Ahem.   The global capitalist economic system is and has been in a state of terminal and permanent failure since 2008.

You won’t read much of this anywhere else because there is a dogmatic ideology blaming fractional reserve lending which is complete and utter bullshit.   Our issues have nothing to do with fractional reserve lending as I have noted on here before.  Now, giving private banksters unlimited ability to print money is a fool’s game but forget fractional reserves.  No reserves are necessary in a public banking system that is investing in sustainable economics.  Savings and reserves are bullshit anyway.  Money is bullshit too.  Wealth is not derived through money, savings or reserves.   We don’t need any of those to create wealth or abundance.  But, if we do have an economic system employing these institutions, wealth creates money, savings and reserves.    Both the Soviet Union and supply-side economics proved that as I wrote in my first post in the series of upcoming posts.  Which is why all of these ideological Mises morons telling us the U.S. is broke are ignorant and wrong.   The U.S. is rich beyond our wildest dreams.  Class and private interests are simply suppressing that wealth through the application of corporate state violence.  (I’ll repost that original post when I roll out the series).

China’s capital bubble collapsed in the 2006/2007 time frame as I wrote on here many times.  And, it is the hyper-consumption bubble of noncapital spending and consumerism that created China’s debt crisis over the last five years.  More on that in my series.)  That debt can be wiped, cordoned off, given haircuts or sold off to investors if debt is the only issue.  It’s not.  It’s not even close.  Debt is the mirage hiding the real crisis.   Debt is what your masters want you to believe is the issue because that allows them to control you.  To divert your attention from the real issues.  Believing the mirage, be it debt or whatever the powers-that-be are waiving their hands about, is typical of people who think with their eyes.  I used to write that time and again on this and other issues.  That the world would eventually reveal itself to those who think with their eyes.  That is exactly what is happening.  More, when I get up my series of posts. 

We are heading for some type of trade settlement system crisis.  That doesn’t necessarily mean a dollar crisis.  We shall see.  But the currency settlement system is going to experience some massive, possibly terminal shocks as noted on here time and again over the years.   But, I do expect the dollar will eventually lose its power globally as one of my long time theses on here is the U.S. corporate empire will likely disappear by 2022.   The dollar’s diminished capacity may not be through any method people believe.  It may be because globalization simply fails to exist.  Again, coming localization is another long-time thesis on here.  So, there could be an outcome where minimal global trade exists.   That would likely mean the global capitalist cabal implodes.  So, the power of the dollar would be negligible over other nations if trade levels diminish substantially.  Regardless, loss of empire is good news for the U.S. or whatever will exist in its place.   And it will be good for the dollar.  That is, if the concept of money (control) actually survives.   

Falling yuan curbs cash into China.

Tumbling yuan sets off carry trade rout.

posted by TimingLogic at 1:19 PM