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QE2: Last Rites for the World’s “Reserve Currency”
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QE2: Last Rites for the World’s “Reserve Currency”
By Mike Whitney (also published at CounterPunch)
Millions of Americans have no idea what Quantitative Easing is or how it will effect them personally. That’s why Wednesday’s announcement that the Fed will purchase another $600 billion in US Treasuries merely reinforced feelings of helplessness and a sense that government spending is out-of-control. Unfortunately, Ben Bernanke’s rambling explanation of QE2 in a Washington Post op-ed on Thursday only added to the confusion. The article is loaded with half-truths and omissions that are meant to mislead the public about how the program works and what the Fed’s real objectives are. It’s another missed opportunity by Bernanke to come clean with the people and let them know what policies are being enacted in their name. Here’s an excerpt from the article:
“The Federal Reserve’s objectives — are to promote a high level of employment and low, stable inflation. Unfortunately, the job market remains quite weak; the national unemployment rate is nearly 10 percent, a large number of people can find only part-time work, and a substantial fraction of the unemployed have been out of work six months or longer. The heavy costs of unemployment include intense strains on family finances, more foreclosures and the loss of job skills…..Low and falling inflation indicate that the economy has considerable spare capacity, implying that there is scope for monetary policy to support further gains in employment without risking economic overheating. The FOMC decided this week that, with unemployment high and inflation very low, further support to the economy is needed…..the Federal Reserve has a particular obligation to help promote increased employment and sustain price stability. Steps taken this week should help us fulfill that obligation.”
Bernanke mentions employment/unemployment 5 times in the first 3 paragraphs to give the impression that QE is about creating new jobs. But everyone knows that’s baloney. If Bernanke was really worried about jobs, he would have appealed to Congress for a second round of fiscal stimulus in his speech, which he didn’t, because he remains hawkish on deficits like his colleagues in the GOP-led congress.
Also, if QE2 is mainly about jobs, than why not settle on benchmarks to determine whether the program is successful or not? In other words, if unemployment is still hovering at 8 or 9% in June 2011, when the program ends, then we can assume that Bernanke was either wrong in his calculations or deliberately misled the public about what the program really does.
The truth is, Quantitative Easing will not reduce unemployment, narrow the output gap, or increase aggregate demand. At best, it will lower long-term interest rates (slightly) and buoy asset prices. That may be good for the stock market, but it won’t lay the groundwork for a strong recovery. In fact, it might not even be enough to keep the economy from slipping back into recession. As last Friday’s report from he Bureau of Economic Analysis indicates, most of 3rd Quarter GDP was from rebuilding inventories. Remove inventory restocking, and final demand was a sickly 0.6%. So, how will Bernanke’s bond purchasing program increase final demand?
It won’t. If the Fed buys Treasuries, Treasury yields go down which pushes investors into riskier assets (like stocks). That pushes stocks higher, investors feel richer, spending takes off, businesses hire more workers, and the economy grows. It’s a great theory, but it doesn’t work. Yields are already at record lows and businesses are still not hiring because there’s no demand for their products. The problem cannot be fixed from the supply side, which is to say, that it doesn’t matter how cheap money is, if no one is borrowing. And no one is borrowing because they are either broke or out-of-work. Bernanke’s grand plan doesn’t get money to the people who need it, so the economy will continue to sputter.
Also, Yields on the 10-year and 30-year Treasuries have already dipped in anticipation of QE2, but is there any sign that businesses are planning to start hiring again? Of course not, because low interest rates don’t matter in this environment. Case in point; record-low interest rates haven’t increased home sales at all. Cheap money doesn’t generate demand when personal balance sheets are underwater. Bernanke knows this because he’s studied Japan’s Lost Decade and understands what happened. They initiated two massive QE programs and got zippo—bank loans and credit continued to go sideways. So, Bernanke is being disingenuous. But why?
The reason is that the Fed is locked in a violent exchange-rate war to push down the value of the dollar. Bernanke wants to trim the current account deficit to boost exports. But he’d rather not tell the American people that he’s using their currency as a bludgeon to beat trading partners into submission. It’s easier just to scribble some gibberish about “generating jobs” and send it off to the Washington Post.
The Fed is at war; that’s the truth of the matter. Economist Michael Hudson calls Quantitative Easing (QE) “a form of financial aggression.” But Hudson probably understates the case; “monetary terrorism” (moneterrorism?) is probably closer to the truth. QE is flooding emerging markets with cheap capital that’s forcing their leaders to take defensive action to protect their economies. EM’s have already seen the first wave of liquidity surge into their markets raising havoc with prices and forcing central banks to raise rates. But emerging markets aren’t taking it laying down. They’re throwing up protectionist barriers and monitoring capital flows. If Bernanke’s going to print more money, they’ll print, too. Mass competitive devaluation will ignite a full-blown currency war that leaves the present trade regime in tatters and the dollar in the dustbin.
This is from Richard Portes in an article titled “Currency wars and the emerging-market countries”:
“If the large developed market countries do more QE, however, then the flow of liquidity to the emerging markets may force the latter to respond. They may try to resist exchange-rate appreciation by intervening in the foreign exchange markets. Here we do have competitive devaluation – the “currency wars”….
This is why we see statements like “The US will win this war: it will either inflate the rest of the world or force their exchange rates up against the dollar” (Wolf 2010). But there is a potential downside for the US. Substantial dollar depreciation will weaken the global position of the dollar, as it did in the late 1970s. (Chinn and Frankel 2007)
The Fed will proceed with QE. It will not accept foreign constraints on its monetary policy, nor will it run an internationally “coordinated” or “cooperative” monetary policy.” (“Currency wars and the emerging-market countries”, Richard Portes, VOX)
See? This isn’t about jobs at all. It’s about power. It’s about who is going to dictate policy to the rest of the world. Bernanke wants emerging markets to bear the costs of a financial crisis that originated on Wall Street and was nurtured every step of the way by the easy money policies of the Federal Reserve. Rather than accept responsibility for his actions–by restructuring the banking system and forcing them to write down their debts– Bernanke has decided to create inflation by opening the sluice-gates and releasing a wall of liquidity that will (inevitably) produce asset bubbles and turmoil in foreign markets. The plan will put the dollar under severe pressure and could trigger a flight from dollar-backed assets, particularly US Treasuries. That would spark the Doomsday Scenario; a disorderly unwinding of the dollar and a swift plunge into crisis. That possibility is not as remote as many think. Here’s a clip from the UK Telegraph’s Ambrose-Evans Pritchard:
“The Fed’s “QE2″ risks accelerating the demise of the dollar-based currency system… a chorus of Chinese officials and advisers is demanding that China switch reserves into gold or forms of oil. As this anti-dollar revolt gathers momentum worldwide, the US risks losing its “exorbitant privilege” of currency hegemony.” (QE risks currency wars and the end of dollar hegemony, Ambrose-Evans Pritchard, Telegraph)
Or, this from Nobel prize winner, Joseph Stiglitz:
“The world is on the verge of moving to another regime of managed exchange rates and fragmented capital markets….A new global reserve system or an expansion of IMF “money” (called special drawing rights, or SDRs) will be central to this co-operative approach. With such a system, poor countries would no longer need to put aside hundreds of billions of dollars to protect themselves from global volatility, and these would add to global aggregate demand…. with such a system, the US would no longer enjoy the extraordinarily cheap borrowing that comes with being the minter of the most important global reserve currency. But the current arrangement is an anomaly. The world is at a critical juncture.” (A currency war has no winners, Joseph Stiglitz, The Guardian)
Or this from economist Michael Hudson who believes that the rising powers Brazil, Russia, India and China (BRIC) will challenge the current dollar-dominated regime leading the way to a new multi-polar world order. Here’s what he says:
“The most decisive counter-strategy to U.S. QE II policy is to create a full-fledged BRIC-centered currency bloc that would minimize use of the dollar….A BRIC-centered system would reverse the policy of open and unprotected capital markets put in place after World War II. … In September, China supported a Russian proposal to start direct trading using the yuan and the ruble rather than pricing their trade or taking payment in U.S. dollars or other foreign currencies. China then negotiated a similar deal with Brazil. And on the eve of the IMF meetings in Washington on Friday, Premier Wen stopped off in Istanbul to reach agreement with Turkish Prime Minister Erdogan to use their own currencies in a planned tripling Turkish-Chinese trade to $50 billion over the next five years, effectively excluding the dollar.”
It won’t happen overnight, but the transition away from the dollar has already begun. The financial crisis has greatly eroded US moral authority and the trust that’s needed to preserve America’s role as the steward of the world’s reserve currency. Bernanke’s misguided hyper-monetarism is merely hastening the dollar’s decline. QE2 could very well be the straw that breaks the camel’s back.
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The Ben Bernank knows exactly what "His" actions are going to result in: generational fortunes of megawatt magnitude for his employers.
And that is all that matters to him.
By now a great many people should have been indicted but Mueller and Holder have been muzzled, their balls, if they ever had any, sliced off.
Heaven knows what fortunes they have waiting for them in some safe domicile.
We have a congenitally corrupt government. We are the citizens of the 50 states whose country has betrayed and deserted us.
My facebook credits are skyrocketing relative to the USD!
"A new global reserve system or an expansion of IMF “money” (called special drawing rights, or SDRs) will be central to this co-operative approach."
This will be total evil! IMF having the world currency in hands... yeah right!
"One to rules them all!...."
Like this silver buying dude has. Too funny this vid....
http://youtu.be/0bJK9K05Hgo
This is a great article,
but like all truthful accounts of Fact and Reality,
it will aggravate all those who would rather continue to believe in fictional spin and megalomaniac dreams of romanticism and Goldilocks behind neatly sub-primed white picket fences and an unthinking respect for "higher" Authority who promises to stimulate and safe-guard this idyllic little world forever.
Ben Bernanke looks like father Christmas,with his carefully groomed wise beard and softly spoken words.It is the perfect Image of a kind and gentle paternal and fatherly figure and when Ben folds his hands many of the blind and faithful are transported into another world, an almost biblical religious world,where all is good and right with the World.
This is the promised Land, where neither sub-prime nor the gfc ever happened,this is America.
But like all great fairytales - great Kingdoms and powerful Empires will all eventially come to an end.
Already there is a sense of loss, a great sense of pain felt all across America.
When the Truth,Fact and Reality become obvious to People,they will feel betrayed and bitterly disappointed and let down. Disappointed People grieving for their lost dreams will experience five stages of emotional reaction. First there is Denial, then Anger, some Bargaining, the darkness of Depression and then finally Acceptance.
Only then can there be a Renaissance, a Rebirth, a true change for better things to come.
All these things will happen and will lead us out of these dark ages
into a new and glorious Age of Enlightenment.
"When the Truth,Fact and Reality become obvious to People,they will feel betrayed and bitterly disappointed and let down"
Well, you know, that's funny, because I know plenty of people who are on the right general page. And every last one of them over the age of, say, 45-50 or so, all takes the same position -
"Fuck everyone else, I'm getting mine"
They don't care about a "change for the better". They just want things to stick together long enough to get what they feel is their slice of the pie. They want their pension, they want their SS check.
As long as these people are still above ground I don't think we'll see any solution to these problems.
Debasement of currencies, trade wars, hyperinflation, QE, government spending, and rapid debasing of reserve currencies have one thing in common:
WORLD WAR
Come now; you must remember the chap with the little mustache (not Chaplin), and the big man with the big cigar (bravo), and the brow-beaten little man with the cigarette in the holder (who confiscated privately held gold), now don't you?
Yes, like that.
http://www.youtube.com/watch?v=sTUIHK7gHRE&a=GxdCwVVULXfLwUiIVFhSirhskGrTF-IH&list=ML
It seems that by China and the rest of the BRIC countries creating more interdependence and less dependence on the US and the dollar, the dollar will decline in value.
China's direct dealings outside the dollar will help devalue the dollar and play into the Fed's hands (sort of).
And they thought spreading the wealth around was fun.
Spreading the wealth around backwards by spreading the debt is way more funner!
Look at me, Ma! No Hands and no Taxes, either!
SOunds like socialist drivel pointing out one mistake in a looooooong line of a million little mistakes over time. The blame game is done, now shut up and watch it burn already and quit crying over something that wasn't yours to begin with. There are bigger problems on the horizon and fiat currency isn't one of them anymore, it's been dead as a stone for three years.
Bwaaahh............ Drip, drip i am not crying, my eyes are allergic to fiat.
One of the unmentioned beauties of silver coins is that bacteria die on it. A cleaner money in an unhealthy time.
Kill JPMorgan. Buy silver
http://crashjpmorgan.net/
I don't buy the argument that long bond yields are going to stay low as a consequence of QE2. There is no compelling case for the Fed to be active on the right side of the yield curve, in fact it would be far better if it stayed away and bought the shortest bonds available (with the Treasury focusing on issuing left as well).
As the author correctly recognizes, suppressed long yields trigger equity bubbles and put pension funds in the shit. Not good. Sure, it benefits mortgagees who want to refinance but this is pretty pointless given that a huge number of mortgagees are saddled with a massively overvalued principal. Who gives a shit what the interest rate is when the principal is way above reality? They will default regardless.
Next, it's one thing to say that QE flooded emerging markets with capital, exporting inflation but it's quite another to suggest that QE2 will do the same. QE1 had this effect because it was targeted at locked credit markets. A liquidity infusion that, in the end, should result in thawed markets, resolution of inter-financial institution positions and finally return of the injected cash to the Fed. The problem of course is that the settlement winners did not park their cash within the financial sector, they released it out to the real economy as bonuses, investments, speculation overseas, etc. The only way for the Fed to recover that is indirectly, via the govt, hence the focus on Treasuries in QE2.
Now QE2 is an entirely different story. Money here is flowing directly to the govt instead of to the financial sector. It will not find its way into speculation as readily as QE1 meaning that people trading the inflation play are going to get burned here. Instead it will be spent (inefficiently) in government programs.
So here, again, I find issue with the article claiming that QE2 will not help employment. Oh yes it will: government employment. Under QE2, all those who pull a paycheck from the government are going to benefit. The size of government will increase but this is not necessarily bad for the private sector provided the private sector takes its opportunity to grab cash from the govt (contracts, grants, etc).
In the long term, of course a private sector recovery is desirable and QE2 might stand in the way of it a bit there, but to lump QE1 and QE2 together is a mistake. That is the error that this article makes.
I put my money where my mouth is on this one and bought the USD/EUR into the QE2 dip. This is a position I plan to hold for a while. The USD isn't as dead as people think.
you sound like an over optimistic fiat machoist, or masochist. I am a fool for labeling, i could , but wont be an apologist for having fun with words and ideas. "I put my money where my mouth is..." Oh boy , would i like to see that!
hey, have a better night, dont mind me funnen you, we are all in this together.
Merehuman
Quote
"Now QE2 is an entirely different story. Money here is flowing directly to the govt instead of to the financial sector. It will not find its way into speculation as readily as QE1 meaning that people trading the inflation play are going to get burned here."
Could you please explain how you came to the conclusion that QE2 money is going to the Govt and not the banks?
Since you say your put your money where your mouth is I am sure you will put your brains into where your writing is.
QE1 was directed primarily at locked credit markets. Reserves were swapped primarily for MBS which came from the GSEs and various shadow-bank entities. It could be said that QE1 was aimed at the shadow economy.
QE2 is directed primarily at the real economy but also kills 2 birds with one stone, allowing the Fed to soak up excess liquidity leaking from QE1 (from the shadow economy into the real). Under QE2 the Fed is targeting Treasury paper, swapping reserves straight into government coffers (of course when I say "straight" I'm ignoring the middle-man PDs but the skim here is chump change in the grand scheme of it all).
Treasury will then funnel that cash wherever the govt decides to spend it which, ironically, might end up being a bailout for retirement funds that were put into the situation they're in now by QE1. (QE2 is a patch for QE1).
The pension funds were not put into the situation they're in now by QE1. They are in the crapper because of outrageous assumptions and commitments by gov't sector bureaucrats and politicians to curry favor and votes and payoffs to gov't sector labor unions. The San Diego Union-Tribune just had an article describing how CALPERS economists, back in 1999, assumed the DJIA would be at 25,000 by 2010 and made a huge commitment of increased pension benefits based on this. Commitments ultimately backed by taxpayers. Plus, with the market doing so well, they reduced cash contributions by fund participants. Just let the stock market fund your future with free money. Just like Barney Frank was going to let the rising real estate market provide his constituents with free, easy money too.
That's why I'm dead set against bailing out the pension funds. They make pension payouts based on just the last year's salary, so that salary is manipulated higher. Scam and fraud. Screw them. Let them go bankrupt.
It's sad isn't it? That pension funds dived into equities. Big, big mistake. My point is that this dive is made worse by the fact that bond yields are artificially low, forcing otherwise well run funds to desperately seek income somewhere else.
I don't think it's politically, socially or morally acceptable to let pension funds go bankrupt *but* retirees are going to have to take a haircut, no doubt. The pain is going to have to be shared around.
So, maybe we should encourage Microsoft to manage the economy. I hear they are good at patching past products.
which is inflationary
Which the Fed *hopes* is inflationary, but as Japan has demonstrated, probably isn't going to be. Bear in mind that at some point, the Fed will need to reinstate the reserve which will undo (plus some) any inflation that arises from expanding the *perceived* money supply (by engaging the reserve). So far, bar a few targeted regions of inflation, the overall effect is that we still have deflation. M3 money supply (calculated independently) is still well below the peak
.
Yep. The govt will be spending new dollars where the federal budget says it shall be spent.
So when the Fed buys the Treasury paper what does he use to buy? And to whom does this money go?
The Fed is buying US bonds using the Reserve (money deposited at the Fed (as electronic cash) or kept in bank vaults (as cash) by member banks as required by the 10% reserve ratio).
When the Fed buys Treasury paper, a small amount goes to broker-dealers, the rest goes to the Treasury that then disperses the money all throughout the government to be spent on whatever the hell the government wants to waste it on.
This summary of QE2: "Now QE2 is an entirely different story. Money here is flowing directly to the govt instead of to the financial sector. It will not find its way into speculation as readily as QE1 meaning that people trading the inflation play are going to get burned here. Instead it will be spent (inefficiently) in government programs." is not quite right. The money does not flow directly to the government. The primary dealers skim it. The treasury sell to PD's, PD's hold for a few hours and sell to the Fed. Another risk-free profit to banks. That additional money can go into stocks. I believe the Fed wants it in stocks, particularly next week, when the Treasury is selling GM.
I would respectfully disagreee with your take on the mortgage market and long bond yields as well. Any increase in mortgage rates will further deccelerate the housing market and put more adjustable rate mortgages into default. The Fed cannot let the default rate rise too much further, it jeapordizes the balance sheets of the banks that the Fed protects. I think the Fed must ask themselves, "For every 100 basis point increase in the 30-year yield, how many more home mortgages go into strategic default?".
The Euro is surely a doomed currency - but I don't know why it has to fall faster than the USD. What if Portugal were to announce it is leaving the Euro? The Euro might well strengthen.
Sure, the brokers take their cut but I don't buy into the ZH argument that primary dealer profits are the primary source of the S&P being so overvalued. It contributes a bit, but it's a minor story. The major source of S&P overvaluation has to come from funds being driven out of fixed income and into chasing equities by artificially low yields. Partially accept your statement in the second paragraph. The Fed has to walk the line here, if long bond yields moonshot then yes, defaults will rise but bear in mind that the Fed took a significant chunk of banks' MBS onto its books so a great deal of the consequential writedowns will be carried by the Fed itself. The Fed is in no risk of default so it can mark that stuff to fantasy forever. Expect to see a whole lot of dark houses sitting empty for many years with no sign of any desire to sell. My stance here is that busting pension funds are now the greatest danger, moreso than defaulting homeowners. My USD/EUR position is based on the US Fed being nowhere near as incompetent as it appears contrasted against the ECB being far more incompetent than people realize. Europe is implementing austerity at exactly the wrong time, its PTB have lost their minds. When, inevitably, the people of Europe retaliate, the ECB is going to have to change course very rapidly. Euro down long term.
If a nation leaves the Euro, the effect on the Euro would be to send it south, fast. The only way it could go up would be if the ECB reacted extremely fast to absorb the now surplus Euros of the leaving nation and overshot. Political tensions this would cause would also be a negative force for the Euro.
Bottom line .. Buy up Silver and Gold and sit tight..
The US Dollar is dog food...
In the end I find it rather naive to reduce everything to the mismanagement of policy by the Federal Reserve.
Debasement of the USD has become a mechanism to normalize the labor gradient between the US and EM Asia for years.
The mercantilists understand this and have been debasing their own currencies for years, hence the grotesque and distortionary USD denominated FX reserves.
A free market is only free if it is regulated properly by a sufficiently strong participant. Where do you find truly free markets? The utopian ideal of a free market is just that.
With that said, the practical aspiration to free markets is certainly not exemplified by Communist China and its mercantilist rush to growth, manipulating slave labor and destroying its own environment.
The FED can be changed if it is indeed unable to fill its role as regulator of free markets. The same cannot be said of the CCP.
What about reducing potential targets for outsourced jobs to EM Asia and even better EM Asia to China?
Once again, the outsourcing happening in the Western world is one resulting from internal pressures. The only part the exterior plays into this is offering a release outlet.
The whole US landscape was shaped by the same pressure that is leading to outsourcing. The process never self contained to a city perimeter, to a state perimeter, how would it come it has to stop at the US borders?
Once this fact re established, the EM markets compete among themselves to attract what is thrown out of the west. Your position is as silly as claiming that people fighting over junk thrown at them are responsible for junk being produced and thrown at them.
The article has a great point: responsibility. A word US citizens are adverse to as during all their history, they have been willing and successful at finding scapegoats to endure the poor consequences of the US actions.
As to mercantilist policy, laughable. The US is looting the rest of the world big time and people come up with mercantilism?
I agree, but....
"Regulate" - to control or manipulate
"Free" - not subject to control or manipulation
Got a problem w/ the choice of words here, you're contradicting yourself with your definitions there Sport.
Fraud and theft, on a long enough timeline, would probably be weeded out of a free market. But you know the quote by Keynes.
As above, my point is that a "free market" is not free unless it has rules that are adhered to by all players. Nomos is the ancient Greek for law and Oikos the word for household. An eco nomic system is in essence a market governed by laws.
Adam Smith used the metaphor of an "invisible hand". I find it interesting to read that as an emergent force of law. Emergence, as an agency which develops out of a disparate group or plurality, like a flock of birds evading a predator or swarm of insects which seems to take on its own presence. The whole is greater than the sum of the parts.
http://en.wikipedia.org/wiki/Emergence
That could be a very interesting area of study for our discredited economists who have gone hook line and sinker for cheap parlor tricks with mathematics that assert control and knowledge of a reality which is far more fluid and dynamic than is captured using current methods.
Short of a spontaneous emergence of the rule of law it seems abundantly clear that that fraud, cheating, influence peddling and outright theft are endemic in our so called "free market", which therefore requires a regulator to ensure fair play.
If you are private equity manager earning $1 bn and paying a 15% tax rate, you are laughing all the way to the bank. And the legislators have approved this. So it goes beyond the regulator. Those tablets need to be broken and rewritten.
As Kafka writes (thanks again WilliamBanzai7), no one is above the Law. Certainly not the FED. In a free political system, you are ostensibly free to fight the good fight against the FED if the conclusion is that they are a market manipulator contravening their job as regulator ... You are free to fight with your first amendment rights as you are doing now, right here on ZH. You are free to extend your opinions to your legislative bodies, through letters, political activism and the vote.
What has been lost in this country where entitlements are drowning out common sense however is that you will always have to fight for what is right.
Sound money is a concept near and dear to many on ZH, as is a gold standard as the basis for sound money. However, sound money by itself is not going to lead us to the promised land of the free market in an absolute sense. And the world of Real Politik that we live in is not going to be resolved as easily as a freshman binary logic class would make out.
Very well said, Dollar Bill.
:D
: )
Who needs to advocate an oxymoronic concept like "regulated free markets" when you can just use sound money? I'd like to see how far the imbalance of trade would get if the Fed couldn't just print up some nice, crispy fiat. I'd also like to see how successful Chinese mercantilist polices would be, and for how long, if they had to devalue against gold. My guess is not very, and not for very long.
Okay, so how are the US and China different again?
Nobody hates China for its freedoms?
Was that sarcasm?
No one hates the US for its freedoms. People hate the US for its arrogance and heavy handed rape of the rest of the world. Tell me one other country that has anywhere close to 1000 military based in 130 foreign countries? How about another country that starts one unjustified war after another (all in the name of freedom? Puulllleeeeze!!), killing the citizens of the other country and replacing their leadership?
Bad people often think that people do not like them because of jealousy, when it is in reality simply because they are bad people.
Well said: That's an Eric Cartman-ism, I believe.
Regards
Are you posting from a jail cell ? If not, I would venture to guess that you are not in China.
You've got to be kidding. Check out the relative proportion of the population in prisons. The US wins hands down.
And you're not in Afghanistan or Iraq. Or Pakistan, Lebanon or Palestine; Waziristan or Uzbekistan.
The US and China have emulated the negative aspects of their respective government/economic systems to the point that in function, there isn't much difference.
We pretend we are free, they pretend they are the "peoples" republic. Elites still win. Please drive through.