Monday, August 31, 2015

A Little More Pepé Le Pew

I want to add a few more comments about the China situation.    One of the long time themes on here is that China is in a Nash Equilibrium with the United States.   And that equilibrium was based on the self-interests of each party in a non-cooperative mathematical game.    For many years I have noted that equilibrium would eventually be broken.  China is the first to break it due to their evolving economic crisis.    China is far worse than anything being reported anywhere.   Time will prove that statement accurate.   Their capital economy has been in collapse since 2008; something noted on here in past posts.    I noted the uptick in consumption in China since 2008, rather than being a positive as was reported in the mainstream financial and economics news, was a sign of coming doom.    China’s monetary stimulus post-2008 was the largest in recorded history comparative to GDP.   All it did was lead to massive debt-fueled consumption as their capital sector was deflating.    This was predicted on here and now we clearly know this without any equivocation because China’s debt, which was meaningless in 2008 has skyrocketed about 500% since.   What this tells us clearly is that capitalism in China started collapsing seven years ago and they have been on a spending binge ever since trying to prop up their economy.  (Sound familiar?)    I’ll be writing more about this in some detail so that you understand this statement very clearly.   But, just some intrigue for now.   Some people will put my statements together to understand what I am talking about but very few people in today’s world actually understand economics or capitalism so much of what I will write will be new and disturbing.  

In the last week I have seen some really ludicrous reports that China is moving away from the dollar, that this global collapse is contrived and that there is a conspiracy of the Federal Reserve buying Treasuries that China was dumping.   Because otherwise the U.S. Treasury market would have had some degree of crisis with that much supply being “dumped”.  

Let me delve a little further into all of these.   First, they are all inaccurate.   China is not moving away from the dollar.   Period.   It is, in fact, raising dollars through the sale of Treasuries because of their liquidity crisis.   It’s part of the global unwinding I have been talking about for ten years.   They sold Treasuries because they need cash.  It’s no different than why we saw on unwinding in U.S. financial markets in 2008.   It’s a forced march to raise cash in liquidity crises.   There’s no conspiracy.   Just people that don’t know what they are talking about so they blame everything on conspiracy.    Buying yuan decreases supply and, therefore, increase its value.   Selling dollars against the yuan weakens the dollar by increasing its supply.  Both operate together to achieve China’s goals of propping up the yuan in the foreign exchange markets.  This is how China maintains the value of its currency.   This is a losing strategy that will ultimately fail.   The yuan is going much, much lower.   And the lower it goes, the less purchasing power China will have in the international market.   So, the greater metastasis we will see in their crisis.  

Eventually it is quite plausible as noted on here many times that China may be forced into liquidating their gold positions.    No one in international markets wants yuan right now.  Or rubles or countless other currencies.   Mind you, currencies of just, transparent and democratic nations don’t collapse.   Currencies collapse under fraud and corruption.    There is no virtue in China.   Not even in a currency backed by gold.   No one is going to want yuan even if it is backed by gold.   And soon, China will be forced to deliver more yuan in exchange for dollars.   That is, if anyone will exchange for yuan at all.   I wouldn’t give you a nickel for a yuan, let alone the existing rate of $6 because I know how utterly massive their crisis really is.   I would take gold in exchange for dollars if the Chinese want to offer it to settle trade.   Not yuan backed by gold but gold itself.   The potential promise of delivering gold to a yuan backed by gold would be a hilarity.    China is in no position to make any promises about anything let alone a worthless currency with a limited supply of gold.  How many times has the state defaulted on its promise to deliver gold for gold-backed currency?   Too often.   They can’t deliver on those promises and the world is now waking up to that fact.   Gold bugs should be worried.   Very, very worried.  

Additionally, China cannot back free of the dollar because they rely so heavily on U.S. investment and U.S. consumption of their mercantilist economic model.   That’s the reason why they own so many U.S. Treasuries.    Because they essentially pay us through loans (the purchases of Treasuries) to overconsume everything they make.   Otherwise we literally can’t afford anything they make for us.    They finance the United States’ purchase of their own overproduction.   And that has been a key point talked of on here regularly.    China is now trying to take this same economic model and spread it to all of Asia with the announcement of their Asian development bank.   And, as very uniquely noted on here, it is a Hail Mary that will fail.   You know it’s bad for any manufacturer when the only credit a consumer can get is from the manufacturer itself; that being China.    

Now, how does any of this big mess serve the average Chinese citizen?   It doesn’t.   It all serves the state.   It enriches the Chinese state and corporations who have enslaved China to capitalism’s overproduction schemes.    Do you actually believe people in China enjoy making your cell phones, clothes, car parts, electronics, furniture and everything else for you and me at $2 a day?   And then spending that $2 to live in the company housing and shop at the company store?   Why wouldn’t everyone on this earth be working first for their own economic benefit and that of their communities?  Why wouldn’t they be making these things for themselves rather than for you and I?   If the people in China  or elsewhere were free, they would be making those things for their own consumption and that of their local communities to consume or trade rather than making them for Americans.   But they aren’t free.   They are enslaved to the tyrannical dictate of China’s communist party and the pathological autocracy of both its and America’s corporate and state elite aka class & hierarchy.

Another long-time theme on here is that the U.S. and its allies are headed for confrontation with China.    Whether that is economic, military or both.   That call has been working out very nicely in the past few years with China’s belligerence in the South China Sea, endless hacking attacks between the two nations, endless theft of America’s economic and intellectual capital, China’s recent devaluation, tiffs with Japan, Vietnam, India, the Phillipines, etc,  rising nationalism (which I noted a decade ago was coming) etc.   Bernie Sanders and Donald Trump are both banging the drums of nationalism and just yesterday it was reported with little fanfare that Obama is readying unprecedented economic sanctions against China.  The rise of political rhetoric of who will stand up to China that has become so common in this country is patently absurd.   Why do we need to stand up against China?   As a free society shouldn’t we determine who we wish to trade with?   Why are we trading with a communist country that murders millions of its people?   The reality is the United States and western capitalism created China.   Now, they are threatened by its rise.   A regime that cannot be controlled and has its own designs on spreading its economic and military violence around the world.   It’s the exact same dynamic as Nazi Germany as I wrote many years ago.   Capitalism has no moral compass.   It is driven by all of the foibles of self-interest such as greed, megalomania, narcissism, violence, covetousness, vanity, hypocrisy, ignorance and on and on.   The capitalist class has no problem selling your soul or mine for a nickel.   And that is what they did with Nazi Germany.  They invested heavily in Nazi Germany and made huge profits.   They may have actually helped Hitler get elected.   They shared western technology that allowed Nazi Germany to wage war, and then democracy and humanity had to step in and sacrifice 50 million dead to stop the f*cking mess they created. (World War II)  And as noted on here many years ago, they have done the exact same thing today with China.   Now, who will be left dealing with the consequences of a belligerent, paranoid, repressive, dictatorial communist China?

Let me make some final comments about China being forced to liquidate U.S. Treasuries.   And who could possibly be the buyer for hundreds of billions of dollars of those Treasuries.  A lot of people have posited that the Federal Reserve was secretly buying these Treasuries.   While nothing is impossible, this is highly improbable and flat out unlikely.   The U.S. Treasury market is the most liquid market in the world.    Every major financial firm and nation trades in Treasuries daily.   While a few hundred billion dollars may be a large block trade, this could have easily been transacted with a private placement.   Or, it could have been done “at the market”.   In either case, this is a distress sale.   So, there is just about no doubt that the counterparty who bought those Treasuries made a killing at the expense of China.   If this sale was done openly, there were probably firms slobbering at the opportunity to pick up China’s holdings of Treasuries at discounted prices.   When you are a distressed and forced seller, you always get taken to the wood shed.   Always.  So, why would the Federal Reserve need to step in and buy anything when buyers were probably lining up around the proverbial block to get in line to buy from the bag holders in China?  

I’ve also seen conspiratorial and paranoid remarks in the last week about this global crisis being manufactured.   I’ve written about dozens of outcomes that came to pass in 2008 and have come to pass since.   I didn’t do that using paranoia and conspiracy.    I did that through understanding complex systems, causational variable inputs and associated outputs, and how the global economy works.   The only true conspiracy theory about this crisis that probably exists is the conspiracy theory in our minds.   There doesn’t need to be any conspiracy theory provided for any of what is happening around the world.   We willingly submit to corporate capitalism, private banking, debt-based money and the politicians who enforce this endless violence; all forms of anti-democratic control systems enforced through massive violence.  What conspiracy theory is needed to explain this?   We have given away all of our individual and democratic rights and our power to class and hierarchy or the state.   And we willfully submit to a system of economic slavery and massive emotional, spiritual and social violence because state propaganda tells us that is what free people do.    There needn’t be any conspiracy theory to explain anything.   We willfully accept our slavery and even play the role of useful idiots supporting it.   And the state didn’t even need to fire a single gunshot for that to happen.   But, now we are waking up.   And they can’t put the genie back in the bottle or put us back to sleep.

posted by TimingLogic at 8:17 PM

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