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State of the Economy, Parts I, II, and III -- downloadable PDF version posted
From The Daily Capitalist
As promised, I have compiled my "State of the Economy, Parts I, II, and III" articles into one downloadable PDF document. All graphs are included as seen in the posts. You can download, save, and print. I would appreciate it if you would send it out to those who may be interested in economic analysis from a free market perspective.
Here is the link: State of the Economy.
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Thanks for putting all three in a pdf for us
I don't believe China will burst their bubble any time soon. Their bay-steps "tightening" is meaningless considering the current pace of lending expansion and hot money inflow. Moreover, their reserves will make it easy for them to both recapitalize their banking system (still quite limited in size), and cool their inflation (for while) by selling some US$-denimiated assets.
If they start using FX reserves in the manner described above, that may of course explode the greenbuck and the UST market, so most people think they'll stay away from that. However, China is not EU where things remain stable even with negative growth. If their growth is just halved - that'd be enough to cause a revolution the country. Moreover, Chinese leaders will find it very difficult to explain to their population why they should keep growing their UST portfolio when it hurts so much at home..
I'm not so sure that the emerging "middle class" in China is aware of the US debt that China is buying. The investor class is, but that group is, essentially, the CCP. So, yes, it will come as quite a surprise to the majority of Chinese when they find out. But I'm not sure about the revolution. This is really only the first generation since the Cultural Revolution to have some personal freedom and the hope of having more. There will be a great personal battle between that hope and the fear of returning to the days of their grandfather. And the CCP propaganda machine is no less effective now than it was then. So, too, their desire to remain in power. I'm not so sure that the majority of Chinese are ready to sacrifice what they have gained economically to this point for a philosophical revolution with tragic outcomes. They'll follow the CCP for a long time before revolting.
When I mentioned a "revolution", I was talking of one caused by further job losses in export-oriented and construction-related industries. Trivial things are more powerful than ideology. Desperate people can cause extreme mayhem to others just to make sure everyone suffers equally. The people in China understand that their country is financing US deficits, and they don't like it. When things reach a point where China will have to sell some of its US$-denominated assets to ease the economic pain at home (which will be felt sooner than many assume, the Chinese real estate bubble is a pretty mature one), the Party officials will not resist popular wishes. Of course, Chinese masses don't realize that their country's reserves are basically fake, and their export-led growth has been 1/3 real, 1/3 fake and 1/3 at other nations' expense. But that's a different story altogether..
I meant to type "US$-denominated assets", sorry)
thanks you
Econophile, this is one of the clearest, most comprehensive and understandable explanations of our current economic crisis, including the exposures we are facing, that I have yet to read. On all the vital questions and answers, your treatment and research were exceptionally lucid and convincing. I will be referring to your State of the Economy throughout the year, and only hope that you will have the time to keep us updated from time to time.
Many thanks for this powerhouse of information and road map for the upcoming year,
J.R.
You are right about American common
people: they are more dynamic and
industrious than Europeans !
However you may possibly underestimate
how perverse the American political
machine is: likely it is even worse
than our own current ones in Europe,
a hard competition nonetheless!!
The American Empire won't survive
the current economic collapse.
The American people can, if they will
hold together. However don't give it
for granted: the over three centuries
long history cycle started with the
Glorious Revolution and Enlightment
is soon to die out with this very
crisis.
.
Hope you're wrong.
Dear Econophile,
I knew you would have replied so (Hope
you're wrong").
However I know from my past forecasting
that I have been right on other economical
and historical recent and not so recent
cases. As I'm under anonymous, I know I
can't quite claim that.
However let me give you a tip: it seems
you didn't really consider one main
point with debt and therefore money:
the legittimacy issue!
If the Sovereign is illegitimate also
the coinage (aka the money issued)is
illegitimate, is a fraud. That's why I mentioned
The (un)Glorious Revolution of 1688.
James II was by all means the only
legittimate and constitutional King.
William of Orange was an usurpator and
to pay back his supporters in the City
who gave the throne he established the
Bank of England. The fraudolent system
of central banking started then.
The Dubai World official default is
just the beginning, other "sovereign"
debt" will default !
If Dubai World is not very much "sovereign"
debt" as it has been claimed, also the
Federal Reserve will be said to be not
so "sovereign".
The revolutionary cycle is towards the
end, expect either world dictatorship
(under a world government, er, governance)
or the restoration of legitimacy.
Which one do you prefer ?
If the illegitimate sovereign issues gold based currency, then ... ? I'm not arguing against the evils of central fractional reserve banking, but not sure where you are going.
Do you know in history of any illegitimate
sovereign who did issue 100 % gold based
currency ? Not many or even none I would
say !
I know you are not arguing against the
evils of central fractional reserve
banking. You are just looking downstream,
convinced that upstream is separated,
has nothing to do with it.
You seem also inclined to think that even though
not all is fine and just, well, it’s certainly far
better of those dreadful centuries of the dark ages.
Long live Enlightenment.
This is an unfounded assumption fostered by the propaganda,
the control system of the regime, on historical issues .
The downstream economy is determined to a large
extent by the financial system and this one is closely
interconnected upstream with the institution we inherited
from the Parliamentarism and Enlightenment .
What I mean is that you fail to connect
the dots and you do not see that not only
the entire financial system is broke and
corrupt to the core but that all other political
institutions and the current society is on the verge of a total collapse.
We have reached a junction from whereon no
way back is any more possible.
It's a systemic crisis and not just a
financial one.
More, much more, I could tell you but let’s leave it there.
Making it short the original sin is lack of legitimacy.
Time will come, maybe soon, when also the rest will be known.
In all cases congratulations for your analysis.
"Free market" is a fantasy which has NEVER had a basis in reality, nor does it seek one. It is not economics: it isa brand of police state politics. Thanks, Hitler.
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Great article