Archive - Jul 2011 - Blog entry

There's a drunken debt party going on right here...

Essentially, growth is not the problem for China, but nor is it the solution.

Consider those power and money hungry people who want more and more. It is not the quantity that matters because the rush from the control and power is no longer fully realized or experienced since long ago they became desensitized and essentially dead to the world you and I occupy.

From the televised speeches of Obama and Boehner, to the hard-line tactics of the Tea Party, to the pitiful cobbled-together agreement the House put together late Friday - there has been no shortage of grandstanding, posturing or spouting of rhetoric.

Watch for a big cry of, "Success!!" from DC. I think the markets will fade the politician's glee.

I want everyone to take a deep breath and stop inhaling all that bad debt dope...

Resolved for a moment or not it's time to give this chasm in American political and economic life a closer look from a decidedly off South Main Street USA perspective.

Got gold?

Whether 'tis nobler at this time to suffer
The slings and arrows of outrageous financial misfortune,
Or to take arms against a sea of rising debts

Economists will long debate the efficacy of our traditional policy response but, whatever the results so far, there are constraints that place severe limitations on the effectiveness of such policy going forward. The US deficit and the trajectory of US spending is unsustainably high and, as the late economist Herbert Stein famously observed, “what cannot last, will not do so”. Any further fiscal stimulus risks pushing US finances past the tipping point, which would be a reckless gamble. At near zero short term interest rates, traditional monetary policy has become impotent, QE has been ineffective and the Fed has entered uncharted waters with its massive increase in the monetary base, risking inflation once private sector deleveraging ceases and velocity picks up. So neither traditional remedy is available any longer.

With US unemployment lodged stubbornly above 9%, what is to be done? Our policymakers, economists and commentators appear trapped in the confines of a paradigm that is no longer viable. Is there any other policy that might help spur recovery, or must we become resigned to waiting it out?

The recession still has not ended, but Bernanke's hands are tied by inflation.

Sen. John kerry comments that the Chinese "are laughing all the way to the bank" on a downgrading of US Treasury securities.  China owns about 8% of the U.S. debt, so does that mean the rest of 92% debtors, including the U.S. taxpayer, would also be "laughing"?  

Hyperinflation.....

The Banana Debt Republic saga continues

In 1978, the year China emerged onto the world stage with its four modernizations, China, a country with four times the population of the United States, had a paltry gross domestic product of $216 billion, less than eight percent of the United States. China exposed her strategy of four modernizations to the world as if to say, “Please invest in China and we will ensure that our workforce is educated, and that our business infrastructure is stable for your investment.” Yet, this openly expressed strategy, that may have seemed to the rest of the world as a difficult but noble goal for China to achieve, was only the tip of China’s Grand Plan, and only the part she wanted the world to see.

EurAmerica’s history with China was one of gunboat diplomacy, exploitation, and forced trading. When China opened her borders again in 1979, EurAmerica’s merchants were enthusiastic to exploit an opportunity again. Yet, China had not forgotten EurAmerica’s role in the Opium War, the Sino-Japanese War, and the Boxer Rebellion. China would never open her border again to be exploited. When she finally opened her border in 1979, it was from a position of power, deep strategy, and long lived planning that suggested EurAmerica was finally ripe for reverse exploitation. China’s grand plan was to emerge as the 21st century world power.

Via The Sceptical Market Observer.