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Head Of China Sovereign Wealth Fund Openly Admits Asset Bubble Addressed By Creation Of More Bubbles
In a phenomenal demonstration of frankness and true economic assessment, the head of the China Investment Council, Lou Jiwei, who controls China's $298 billion sovereign wealth fund, admits the ponzi nature of today's markets:
Both China and America are addressing bubbles by creating more bubbles and we're just taking advantage of that. So we can't lose.
Indeed, they can't lose thanks to the criminal silence on behalf of Mr. Jiwei's US financial counterparties. It doesn't get any simpler than that folks. Keep in mind Madoff was thrown in jail for a few hundred years for much less: what's $55 billion when you are dealing with a $20 trillion+ global equity market Ponzi scheme. And yet both China and the US continue their struggle to perpetuate a Ponzi, with the full implicit backing of all financial, regulatory and legal authorities. The system is now officially broken, even ignoring the conspiratorial ramblings of fringe bloggers.
And as for who, aside from TradeBot and HAL9000 are speculating in equity markets, look no further than China, which is dead set on exporting its tulip mania to US stock markets:
Asked whether CIC would be a keen buyer in the United States, Lou
said CIC can buy anywhere in the world, but it cannot avoid buying U.S.
assets because the American economy and capital markets are so large.
Lou said CIC was building a broad investment portfolio that includes
products designed to generate both alpha and beta; to hedge against
both inflation and deflation; and to provide guaranteed returns in the
event of a new crisis.
He said the risk of a decline in the dollar risks was more of a
national issue for China than for CIC because its capital is in dollars.
So, dear investors, now you know that you are officially playing in the world greatest Ponzi scheme. One wonders at what point the US authorities will have the guts to at least admit what China is now openly saying is one big pyramid scheme. And as for the Fed's prudent approach to fighting bubbles - well, that is now completely discredited, as the only goal for the US Federal Reserve is to make sure that Wall Street's "VIP club" manages to cash out before all the stupid money and other retail investors, presumably before all hell breaks loose, and the latest bubble pops once more. Good luck to all.
h/t Michael Pettis and Dave
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Pretty pathetic when we have to hear the truth from the Chinese government.
And of course our government continues to play the role of "Pravda".
At any rate, it is nice to hear the truth coming from somewhere.
Great post!
The truth coming out??? this was obvious, they need not say it.
Lies are implanted by repetition. So truths must follow the same path if they are to be belived.
That's not the only thing that was said at that forum, read here:
http://www.chinadaily.com.cn/china/2009-08/31/content_8634541.htm
Quote:
"So far the US government and the Federal Reserve have failed to provide China with any details of how its countermeasures against the financial crisis will not lead to serious capital losses to China's holding of its treasury bonds and foreign reserves," Yu Yongding, a renowned think tank economist with Chinese Academy of Social Sciences, told China Daily. Yu said the US has tried to reassure China that its huge $2.1-trillion foreign exchange is safe and that the US dollar will remain strong. "But nobody knows whether the US, if it gets desperate, can refuse the temptation to inflate away its debt burden."
All the bubble-blowing aside, the Chinese aren't amused. The Chinese have had ambitions of being a regional power for quite some time now. Read "The Grand Chessboard". Their only real stumbling block? The United States. Peter Schiff is right when he says they can decouple any time they wish. That's why they just bought up 400t of gold. If their treasuries go south... it'll hurt, but they'll survive.
The United States, however, will not.
And what about this article:
http://www.nytimes.com/2009/08/22/business/economy/22charts.html?_r=2&re...
Hmmm, selling off US Treasuries at the rate of 25b a month in order to avoid flooding the market with them all at once and thus destroying the value too quickly, they could rid themselves of their entire stock of 800b in 32 months, or just under three years. Of course, the Dollar would collapse at some point in this process but they would have gotten a good deal of value out of them by that time and most likely converted it to gold or something like that which would retain its purchasing power.
Next stop after collapsing the US? Taiwan, to sieze control of their tech industries with military force and repatriate the giant art collection that the Nationalists took with them when they split. If you don't understand China's national ambitions, then none of this makes the least bit of sense. I was in a conversation with a friend yesterday where I said, "We just lost a war with China." He told me it wasn't a war, just a friendly disagreement. "We were thinking about it that way, you're right. The Chinese weren't. That's why we lost."
Hahahahahahahahahahahahahahahahah,Huhahahahahahaha.
The whole world has gone F C U K ing MAD it seems. That was an unbelievable ADMISSION.
I am SURE the guy will lose his job. TOMORROW,he will be axed. GOD save him. He is an honest guy,nevertheless. I pray for him and his family. What a sorry state of affairs.
you missspelled one of the words in capital letters
Not IMO, because that's how FKUCED the financial system is.
Next on the block: The monetary system.
That was deliberate. I was extremely angry at the admission. I felt like nucking some banks etc. But, I had to take out my frustration. At the same time, I had to be careful. TD would have whacked me on my head for being so explicit!
Thanks mate, thanks for reading the comment.
not a big deal
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
When the music stops, "someone" IS going to lose. Will it be you?
I dedicate the following skits to Mr. Lou
http://www.youtube.com/watch?v=z-oIMJMGd1Q&feature=fvw
http://www.youtube.com/watch?v=y3G_gViM9OU
There is a shocker. It was he only option (and the right choice)
and to provide guaranteed returns in the event of a new crisis....
in the event of?
good luck with those guaranteed returns.
groundhog day, since september 1998.
so, will China repeat the old 'let's buy US real estate cuz it's so cheap' gig?
DH - You know that China decided to divest from their US RE exposure. They must be thinking that if the US will fold up and sop up their agency holdings with 3 & 6 mo treasuries while propping up REIT value to facilitate their extraction from the space then it is best to just ride the wave for the time being. While China does so they are working hard to extract some volume from other emerging markets.
i didn't know that about the chinese and their us re exposure....thank you layne. I'm kind of wondering where they might start putting all the CIC dough.....seems like they have already purchased lots of commodities, too much USA confetti, etc.
maybe they will just step up their ultimate purchase of Africa?
There has been a strong start with respect to integration with Brazil. I am speculating that there will be efforts to add Argentina, Peru and perhaps Chile to some sort of integrated trade agreement after the US-Colombia pact signed recently.
Of course CIC will continue their attempts to take stronger positions on all commodities countries through initial positioning then regional trade & investment pacts. This is their attempt to play the "kill you later" space in a smarter way. See these links for an idea of how this space has generally developed and gain an between the lines idea of how the process could be used in a larger context:
http://www.rgemonitor.com/financemarkets-monitor/255919/i_will_kill_you_...
http://www.thestandard.com.hk/news_detail.asp?pp_cat=36&art_id=86366&sid...
Greenspan said the Fed couldn't recognise or prevent bubbles.
What? Even when the Fed is deliberately creating them as a matter of policy?
To solve a temporary problem the current adminstration has destroyed institutions that took generations to build. The financial and credit markets and contract law systems was one of the fundamental advantages that countries like the US had to ensure better allocation of capital, higher levels of investment and thus a higher standard of living for all the people and they've destroyed the very basis of this advantage and turned the US into a 3rd world banana republic with living standards for everyone but the elite to be adjusted to third world banana republic levels shortly.
No matter what you think of previous administrations, 300 years of government recognised the importance of honesty (imposed by government to ensure it) in developing an economic advantage over other nations and this lot have thrown it all away in a few years and for what? What did we get in return for destroying the hard fought for superior functioning capital markets? We got to save some already very rich men from having to pay out on their losing bets.
They have destroyed a great nation, but being a large nation there's a certain inertia that allows them to get away with it as the people who are really going to suffer, (anyone not in the connected elite) won't notice until its too late that their nation has been destroyed and they now live in a northern Argentina.
And I guarantee that the vast majority will never notice that the institutions that their forefathers built over many generations have been squandered to benefit a tiny minority as they'll be constantly fed with artificial panics that will be used as distractions and smokescreens to mask the real cause of their declining standard of living and the US's decline as an advanced nation.
Exactly what institutions have been destroyed? Goldman Sachs? Well, no, they just paid back the government loans and warrants and the government made $1.4 billion on that investment. Morgan Stanley? Oh, well, they just paid back their debt and the government made $1.3 billion on that investment. Instead of high-falutin' talk, please use specifics.
The government is stepping in only because the private markets have failed. Only conspiracy nuts believe that the government wants to continue owning or investing in these hallowed instutitions that you're wailing about. Once they're on their feet, the government will get out of the way.
And the "importance of honesty"? What would that be? Like the incestous relationship between the credit rating agencies and the institutions generating those wonderful Credit Default Swaps and those "honest" Mortgage Backed Securities. Is that the "honesty" of the last decades that this current administration has destroyed in about six months? Give me a break.
And, please get off this "this administration" versus "that administration" nonesense. Who do you think is really pulling the financial levers? If you think that it is some nefarious government officials rather than Wall Street, Big Banks, and the Feds then you need to go do some serious reading and research and quit listening to talk radio.
Oh, by the way your comment about "superior functioning capital markets?" That was an ironic joke, right? I mean, Tech Bubble followed by Housing Bubble followed by The Next Bubble -- oh, yes, a really superior system.
yes i believe that the government wants to
own and operate business enterprises....and in
fact there is much evidence to support that
notion with government subsidizing and having
control of such enterprises as amtrak, fannie,
freddie, gm, aig, chrysler, etc....there
is much political advantage to be had by controlling
such enterprises....
private markets have not failed....public /
government run markets have failed...greedscam
and bernanke have created bubbles of biblical
proportions - those were anything but private markets...
the government will not get out of the way because
failed business models will never recover....gm
is a shell, amtrak has never become profitable,
fannie and freddie are insolvent and will need
government bailouts unto ages of ages....
government power is run through an oligarchy
part visible and invisible....who was called upon
to whisk nixon out of the white house? - a group
of political figures and emminences grises which
included rockefellers and others...
your convoluted and mind numbing statements
were rather extravagant for the genre but hardly
convincing...
You're not responding to my actual point.
The institutions I'm talking about are those of a modern society. Do you think most people are law abiding because they think they're being watched by the police all the time? What if everyone thought that it was fine to break the law so long as you're not likely to be caught? What do you think society would like?
Do you think every investor should do forensic accounting before buying a share? How well would the capital markets work if there wasn't a presumption that things could be taken at face value.
These SOCIAL institutions are far more important than any particular company. I live in what economists call a "Low Trust Economy" I know how much it slows down and prevents business. The "friction" it adds to use an economist term. I come from a High Trust advanced western economy and have started and run businesses in both simultaneously. I am aware of the additional costs and lost opportunities incurred through what is such a basic thing as a presumption of honesty. Behavioural economists study the economic behaviour of individuals amd how that behaviour alters based on their perception of the likelihood of honesty of their counterparties in any economic transaction and the differences are vast.
And the tragedy is that there is a kind of tipping point at which most people presume that most other people are honest and behave accordingly and also the other way where most people presume that most other people are dishonest. It takes a long time to reach those tipping points both ways.
Right now a larger and larger proportion of people no longer believe that the foundations of our social and economic system are fundamentally honest. They now believe that the highest levels of government are corrupted by Wall Street and are no longer representing the people. They no longer believe that democracy works and that all candidates are just puppets of the financiers. That the financial system no longer acts in good faith. That government statistics can no longer be trusted. That the leaders of society are not acting in the best interests of that society, but are exploiting the majority in favour of a tiny, rich minority. That company accounts can be believed to be a fair, honest and accurate description of a company's condition. That products aren't deliberately engineered by companies to be more profitable even at the expense of consumer safety and that the government regulatory agencies have been captured by corporate interests. That the media and the news they receive isn't directed towards supporting the agenda of corporate and elite interests. That large corporations won't exploit consumers and be mostly above the law.
Now many people have believed these things since 5 minutes after the birth of the Republic and the accuracy of all these statements may have been higher at times in the past. That's not important. What is important is that all the various branches I've listed have all been corrupted and the institutional trust has been squandered recently and society is reaching a tipping point at which enough people lose faith and behave accordingly which forces everyone else to behave accordingly and you tip from a high trust to a low trust economy. This will cause a dramatic lurch downward in living standards and quality of life.
FDR recognised the important of the fundamental institutions of society and the faith of the people in those institutions. His fireside chats were there to get people's confidence back that their government was working for them. His regulatory changes were there to bring back trust to the financial system. His accounting and auditing of government spending programs was there to bring back faith that the organs of government were working for the people. The establishment and beefing up of organisations such as the SEC were there to bring back trust in the accounts of corporations and the operations of the stock and credit markets.
FDR and many administrations before and after understood that the foundation of a society must be based on a presumption of trust to have an effectively functioning society.
And yes, the last two Administrations have squandered this to a greater degree than any in American history. Obama is more disappointing simply because he promised something different.
When Geithner and Bernanke are denying monetising the debt and are then are found out to be liars. When the government massages economic statistics. When Bernanke and Paulson lied to Congress about the use of TARP. When companies are allowed to falsify accounts with official blessing. When regulatory agencies such as the SEC have so obviously been captured and I'm sure dozens of other examples that readers of this site can think of. The damage is not just any drop in the stock market or however many billions of taxpayer money wasted, but the loss of trust by people in the institutions that form the foundation of their society, and that loss is beyond price.
TD,
NY Fed's president William Dudley indirectly admits to extending the Fed's after-party:
"My own personal view is, I think it's a little premature to be so confident that you want to pull all these things back right now," Dudley said.
I'm totally committed to taking away the punch bowl at the right time," he said during the same interview."
http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090831/REG/90...
Yes, they sell off the institutions, like they own them, rather than being held in trust. What claim of entitlement these poseurs? That of carpetbaggers and scalawags.
While I'm not sure those comments were fully endorsed by the Chinese Communist Party, it's strangely ironic to see where we can rely on honest brokers.
The U.S. government endorsed perpetuation of this Ponzi is likely to have severe implications for our political system down the road... and I'm not very sure our political leaders "get it".
We are (slowly) turning from a nation of the disillusioned/passive to an electorate that is going to actively demand serious reform-- and that may well mean scrapping the old 2 party system. The only question remaining is: when do the massive demonstrations begin in earnest?
Of course the Fed is monetizing (even if the main thrust is indirect
via the Agency & Agency MBS programs).
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
DEVELOPING: Meanwhile, over on the set of Cramer's Mad Money, a crew is feverishly working to remove the "this rally is real and led by China," Chinese gong prop. Sources report it will be stored in the CNBC basement next to Cramer's Housing Bottom Calendar.
The CIC is just following the Pension Ponzi scheme that we have in the developed world. At least they are honest about addressing one bubble with another. The problem they have is they are too big, just like the Norwegian Petroleum Fund, another huge wealth fund. No matter what they do, their returns will be subject to the volatility of global stock markets. Welcome to the new world of Casino Capitalism.
In order for the dollar to be stabilized we would have to have a stable Federal budget. yes ? no? If we reduced the Debt the Government owes how much would that increase all of our taxes? I would like to use oil at $40 a barrel as a stable US dollar. How much stronger would that dollar need to be to get to that point?
It seems that this is one big ponzi scheme carried out by every nation in the world to appease the masses! Us. I do not feel very appeased.
Great article. I hope the WSJ picks up where this left off.
The "deeply honorable men" in charge of this #$%& will hopefully be exposed and locked up.
Unfortunately, it likely won't be until a major disaster happens (bigger than the one before) and the entire government gets shaken up. The cronies all sitting in Congress have been a part of this whole scam (whether they even have the brains to know about it or not).
I would say sorry to Washington, Jefferson, Adams, Lincoln...since, we took the shiny new start and crapped all over it....but they probably already know that humans are bound to repeat the same story over and over again.
"A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done."
--Walter Bagehot, Lombard Street, VIII.20
http://www.econlib.org/library/Bagehot/bagLomCover.html
Where is the new US political party to put a stop to this madness?
Take It Back
THE AMERICAN PARTY
America for Americans
Check out
http://www.federationist.org/
It will take some time before the US and its friendly people realize that they are not the biggest guy in the class room any more. It will be painfull, but just start getting used to it, as the British did some decades ago. One of the changes is that someone else decide which game to play and by what rules.
+1
It was Phase II from late 1931 to early 1933 that tipped half Europe into fascism and brought America soup kitchens.
This time Fascism is coming home to America and Europe will have the soup kitchens! Maybe we'll be lucky and elect Sarah Palin to lead us...
The bubble quote is already being scrubbed from the
Chinese press so far as I can tell. This guy had to
have been told "the plan" by his own superiors and then not knowing any better, naively repeated it to the press. Unbelievable!!!!!
Quiet fashionable worlwide, to address this mess with a laughter,a universal complicity,a great hidden design.An agenda in progress.
Those working,would wish to have a better grasp of their operating environment whilst knowing that deliverance will not be a mouse.
but Anon, a mouse is all they've got. Sneering at their meagre resources is most unreasonable.
where is your sense of generosity & fair play? be a sport good fellow. while you're at it get a name.
So they say openly what we already know, now what? Do we arrest the Fed and Treasury for running a 500 uintillion ponzi scheme?
arresting is useless. better kill them all quick. their families too.
I hope youre not serious. Violence is never the answer unless the question is survival. It is best to keep our humanity through all this.
Fund managers always talk their book. What's the hidden agenda?
"So we can't lose." OMFG that is priceless. Spoken like a true gambling addict who thinks he's figured out the system.
Anyone want to chip in on a luxury condo in Shanghai down the road? 10 people at 0.10 Euro should about cover it.
Isn't our survival at stake?
Psychopaths are running the show, and they clearly are shock-testing the population to see what they can get away with.
You got a better idea on how to deal with psychopaths, other than using what they FEAR MOST against them?
Personally think that Pettis comment "and I am sure he didn't intend it the way it read" is an important point. More to the comment on bubbles, I think that the divestment by CIC of USD into a diverse range of assets is to minimise the impact of the burst in bubbles in the future. This is more a historical reference to the US. China has created a bubble and they know it hence the indications from the Government that changes are due in the underlying liquidity.
Nothing should really happen in China until after Oct 3. A long way off.As Pettis' states China lacks the necessary tools .. reliance is on liquidity and government signals.. ke sera sera.
Bernanke's liquidity flood v. jobless consumers
Who will win at the end? Just ask Ted kennedy's cancer cell.
If this is a problem in all equity markets, then let this be a message to all markets.
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