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China Is Crashing … As Predicted

George Washington's picture




 

The head of China’s sovereign wealth fund noted in 2009: “both China and America are addressing bubbles by creating more bubbles”.

He’s right …

Global credit excess is worse than before the 2008 crash.

The U.S. and Japan have been easing like crazy, but – as Zero Hedge notes  [if you missed it when Tyler Durden first posted this] – China has been much worse:

 Here is just the change in the past five years:

You read that right: in the past five years the total assets on US bank books have risen by a paltry $2.1 trillion while over the same period, Chinese bank assets have exploded by an unprecedented $15.4 trillion hitting a gargantuan CNY147 trillion or an epic $24 trillion – some two and a half times the GDP of China!

 

Putting the rate of change in perspective, while the Fed was actively pumping $85 billion per month into US banks for a total of $1 trillion each year, in just the trailing 12 months ended September 30, Chinese bank assets grew by a mind-blowing $3.6 trillion!

 

Here is how Diapason’s Sean Corrigan observed this epic imbalance in liquidity creation:

Total Chinese banking assets currently stand at some CNY147 trillion, around 2 ½ times GDP. As such, they have doubled in the past four years of increasingly misplaced investment and frantic real estate speculation, adding the equivalent of 140% of average GDP – or, in dollars, $12.5 trillion – to the books. For comparison, over the same period, US banks have added just less than $700 billion, 4.4% of average GDP, 18 times less than their Chinese counterparts – and this in a period when the predominant trend has been for the latter to do whatever it takes to keep commitments off their balance sheets and lurking in the ‘shadows’!

Indeed, the increase in Chinese bank assets during that breakneck quadrennium is equal to no less than seven-eighths of the total outstanding assets of all FDIC-insured institutions! It also compares to 30% of Eurozone bank assets.

Truly epic flow numbers, and just as unsustainable in the longer-run.

And here:

So what’s the problem?

Well, the world’s most prestigious financial agency – the central banks’ central bank, called the Bank of International Settlements or “BIS”  –  has long criticized the Fed and other central banks for blowing bubbles.  The World Bank and top economists agree.  So do many others.

As such, it was easy for us to predict a crash in China when the bubble collapses.

We argued in 2009 that China’s period of easy credit was analogous to America’s monetary easing starting in 2001 … and Rome’s in 11 B.C.

We noted in 2009 and against in 2011 that China is suffering from a lot of the same malaises as the American economy, including corruption, crony capitalism, and failure to disclose bad debt.

In 2010, we asked “When Will China’s Bubble Burst?

China’s $23 Trillion Dollar Credit Bubble Is Bursting

International Business Times noted last year that China’s debt-laden steel industry was on the verge of bankruptcy.

Quartz reported in December that a huge coal company called Liansheng Resources Group declared bankruptcy with 30 billion yuan ($5 billion) in debt.

Chinese Business Wisdom argues (via China Gaze) that waves of bankruptcies are striking in 10 Chinese industries: (1) shipbuilding; (2) iron and steel: (3) LED lighting; (4) furniture; (5) real estate development; (6) cargo shipping; (7) trust and financial institutions; (8) financial management; (9) private equity; and (10) group buying.

AP notes today:

Chinese authorities have allowed the country’s first corporate bond default, inflicting losses on small investors in a painful step toward making its financial system more market-oriented.

 

A Shanghai manufacturer of solar panels paid only part of 90 million yuan ($15 million) in interest [it owed] …

 

Until now, Beijing has bailed out troubled companies to preserve confidence in its credit markets. But the ruling Communist Party has pledged to make the economy more productive by allowing market forces a bigger role.

Time asks whether China has reached its “Bear Stearns moment”:

A dangerous build-up of debt and an explosion of risky and poorly regulated shadow banking have raised serious concerns about the health of China’s economy. That’s why the Chaori default — the first ever in China’s domestic corporate bond market — has sparked fears that the country could be headed for a full-blown economic crisis like the one that slammed Wall Street in 2008. “We believe that the market will have reached the Bear Stearns stage,” warned strategist David Cui and his team at Bank of America-Merrill Lynch in a report to investors.

 

The concern of Cui and others is that the Chaori default will be the tip-off point for an unravelling of China’s financial system. The default could wake investors and bankers to the realization that companies they thought were safe bets are potentially not, and they could begin to reassess other loans and investments to other corporations. In other words, they might start redefining what is and is not risky. That could then lead to a credit crunch, when nervous bankers become wary of lending money, or lending at affordable interest rates. More bankruptcies could result. That eventually causes the financial markets to lock up — and we end up transitioning from a Bear Stearns moment to a Lehman Brothers moment, when the financial sector melts down. “We think the chain reaction will probably start,” Cui wrote. “In the U.S., it took about a year to reach the Lehman stage when the market panicked … We assess that it may take less time in China.”

The Financial Post reported in January:

The U.S. and Europe learned the hard way about the dangers of shadow banks in the financial crisis but, five years later, China appears set to get its own painful lesson about what can happen when large capital flows get diverted to unregulated corners of the financial system.

 

***

 

“We estimate that 88% of the revenues of Chinese trust companies is at risk in the long term,” said McKinsey and Ping An.

 

***

Billionaire investor George Soros recently wrote on a popular news website that the impending default and the growing fear reflected in Chinese markets has “eerie resemblances” to the global crisis of 2008.

The big picture:  the $23 trillion dollar Chinese credit bubble is starting to collapse.

As Michael Snyder wrote in January:

It could be a “Lehman Brothers moment” for Asia.  And since the global financial system is more interconnected today than ever before, that would be very bad news for the United States as well.  Since Lehman Brothers collapsed in 2008, the level of private domestic credit in China has risen from $9 trillion to an astounding $23 trillion.  That is an increase of $14 trillion in just a little bit more than 5 years.  Much of that “hot money” has flowed into stocks, bonds and real estate in the United States.  So what do you think is going to happen when that bubble collapses?

 

The bubble of private debt that we have seen inflate in China since the Lehman crisis is unlike anything that the world has ever seen.  Never before has so much private debt been accumulated in such a short period of time.  [Note: Private debt is much more dangerous than public debt.] All of this debt has helped fuel tremendous economic growth in China, but now a whole bunch of Chinese companies are realizing that they have gotten in way, way over their heads.  In fact, it is being projected that Chinese companies will pay out the equivalent of approximately a trillion dollars in interest payments this year alone.  That is more than twice the amount that the U.S. government will pay in interest in 2014.

 

***

 

As the Telegraph pointed out a while back, the Chinese have essentially “replicated the entire U.S. commercial banking system” in just five years…

Overall credit has jumped from $9 trillion to $23 trillion since the Lehman crisis. “They have replicated the entire U.S. commercial banking system in five years,” she said.

 

The ratio of credit to GDP has jumped by 75 percentage points to 200pc of GDP, compared to roughly 40 points in the US over five years leading up to the subprime bubble, or in Japan before the Nikkei bubble burst in 1990. “This is beyond anything we have ever seen before in a large economy. We don’t know how this will play out. The next six months will be crucial,” she said.

As with all other things in the financial world, what goes up must eventually come down.

 

***

 

The big underlying problem is the fact that private debt and the money supply have both been growing far too rapidly in China. 

 

According to Forbes, M2 in China increased by 13.6 percent last year…

And at the same time China’s money supply and credit are still expanding.  Last year, the closely watched M2 increased by only 13.6%, down from 2012’s 13.8% growth.  Optimists say China is getting its credit addiction under control, but that’s not correct.  In fact, credit expanded by at least 20% last year as money poured into new channels not measured by traditional statistics.

Overall, M2 in China is up by about 1000 percent since 1999.  That is absolutely insane.

 

***

 

But I am not the only one talking about it.

 

In fact, the World Economic Forum is warning about the exact same thing…

Fiscal crises triggered by ballooning debt levels in advanced economies pose the biggest threat to the global economy in 2014, a report by the World Economic Forum has warned.

***

 

What has been going on in the global financial system is completely and totally unsustainable, and it is inevitable that it is all going to come horribly crashing down at some point during the next few years.

 

It is just a matter of time.

 

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Sat, 03/08/2014 - 08:21 | 4524605 andrewp111
andrewp111's picture

They already have ChinaCare. When you are no longer wanted by the regime, you get a bullet in the back of the head.

Sat, 03/08/2014 - 11:12 | 4524852 logicalman
logicalman's picture

Better than rotting away in some underfunded 'care' home, IMHO.

 

Fri, 03/07/2014 - 23:07 | 4523978 Mediocritas
Mediocritas's picture

China is ramping up military spending; a sure sign that the writing's on the wall. If the West is not already deeply active in setting up balkanization pressures within China then I'd be very surprised. China is not an ethnically united nation despite the regime's efforts, so there are pressure points.

Seeing as the Chinese have so willingly embraced / cloned Western financial systems, getting them to blow themselves up will be a pushover when the time comes. Effectively, the whole country is booby-trapped / rigged to blow in economic terms, and the West has one of the big red buttons. China doesn't have oil or much in the way of nukes, so any hot war won't last long. Russian nukes are the only real threat, which is why taking Ukraine to install a NATO missile defense system is such a high priority.

Standard NWO playbook against socialist regimes. Blow them up economically, encourage physical infighting and balkanization in the subsequent chaos (divide), impose sanctions against any emerging strong player, selectively bomb if necessary to keep the fighting balanced (optimal destruction), then when the entire country has destroyed itself, move in and take ownership of any assets of value, particularly the asset known as the government / legislature (and there's the conquer part). A new neoliberal vassal state is born.

Sure, the US economy is in serious decline now, but the hawks don't care. They retain nuclear dominance and the highest tech, field experienced, most powerful military on the planet. They play a long game, and in that game, the current state of the US economy isn't particularly relevant because they know it all changes when the decision is made to pull the trigger on China.

Is the world a better place under a single world government (run by America)? Who knows for sure, but I very much doubt it given that the worst events in human history are always preceded by concentration of power into the hands of a few.

Sat, 03/08/2014 - 10:42 | 4524775 Raging Debate
Raging Debate's picture

Mediocritas - Why would the Senate of America and their corporate buds blow up trillions of dollars in investment with China? There investments and statements are for China to be the next reserve currency. China got the better part of trade for 20 years. We lost the jobs and went broke, sure we got cheaper goods but we got an ass-ton of debt to cover for the lack of increased wages.

China has there OWN leadership. Nobody put a gun to there head and said "hey blow this really huge real-estate bubble". They have there OWN banking system. They witnessed first hand the result of our RE bubble but magnified it many times over? But somehow America is colonizing them? Ya right, piss off buddy. More like we drained our best assets and sold them off for pennies on the dollar to China. End of the story.

They did what we did to keep the party going and now the hangover comes. I am getting pretty sick of all the 'blame America" shit. The world grew with Laissez Faire for 40 years and now must correct and become dull as the globe reorganizes and decentralization (doesn't mean balkanization but contract more times than not during reorg) is inviteble.

We have a lot of problems here at home and I for one am sick of subsiding the military to protect oligarch interests overseas where like China, the American people receive little in return while they get superwealthy off the imbalance at my expense. China and Russian leaders also go fat while the global citizen was turned into peons. Being a global policeman has also turned our country into a police state. What we really need is few years of protectionism.

Sat, 03/08/2014 - 16:54 | 4525521 Mediocritas
Mediocritas's picture

#1: I never said China was a victim of US colonization. That's a straw man argument. I said they "cloned" the US financial system, which is what China is so good at in general.

#2: Aside from the military-industrial complex, the hawks and the corporates are different people. I doubt they'd (the Pentagon) lose much sleep over a little collateral damage to Western assets in China. Of course they'd selectively target state facilities rather than "friendly" facilities. I never said they'd just raze their own assets to the ground without care. But still, this is not an event that will be probable until the mid 2020's.

#3: Read my other posts and you'll find that we're actually on the same page regarding your broad overview (US police state, militarized neoliberalism, need for decentralization instead of globalization, need for protectionism, etc). Here's an example from post 4444477:

The proper solution is never discussed: pay workers a bigger slice of the pie and DE-GLOBALIZE, thereby allowing interest rates to rise and welfare to be cut back. In other words, admit that the neoliberal agenda that took over the world starting with Reagan and Thatcher is wrong.

 

Here is what killed America in a nutshell: products made overseas under conditions that would be illegal in America are allowed to compete equally with products made in America. US products, complying with US law, are then more expensive, consumed less and jobs then entire industries are subsequently lost overseas. The primary solution must therefore be, shock, horror, that dirty word: protectionism.

 

Those laws were created for a reason, representing what America defines as an acceptable ethical framework, yet the neoliberal, anti-protectionist economic system doesn't give a flying fuck about laws and just overrides the whole thing. How is this acceptable? By allowing products made under an oppressive regime onto US shelves, the US is tacitly supporting said regime.

Of course I'm simplifying there, it has to be considered in the context of the post. in another context I'd be predominantly blaming financialization for the ailments of the US. There are many other factors too, such as the effect of the Chinese currency "peg" (officially a managed floating exchange rate); the most powerful weapon in China's economic arsenal, ensuring that industry flows are one way.

Sovereignty and nationality mean nothing to Open Society advocates. While the utopia they dream of is great in theory, it ignores the reality of human tribalism, that we as a species will always split into warring factions. Consequently, their attempts to homogenize the worlds nations into one, via economic means, only lead to war.

Sat, 03/08/2014 - 10:42 | 4524774 Raging Debate
Raging Debate's picture

DUPE -

Sat, 03/08/2014 - 08:24 | 4524609 andrewp111
andrewp111's picture

China has enough nukes to wipe out the USA a few times over, and they are on mobile, survivable missile platforms that are moved in a vast network of tunnels.  Russia has a lot more missiles than China, but so what. China has plenty of nukes.

Sat, 03/08/2014 - 09:03 | 4524631 Mediocritas
Mediocritas's picture

To the best of my knowledge, China only has ~40 missiles (DF-5A & DF-31A) capable of delivering a nuclear payload to continental USA, and their submarine fleet is not in contention (this is the best they have: http://www.deagel.com/Nuclear-Attack-Submarines/Type-095_a001843001.aspx).

If China and the US went to nuclear war right at this moment (and everyone else stayed out of it), it would be bye bye China. Call back in 20 years (assuming the world stays peaceful until then, which it won't) and it might be a different story.

Russia's nuclear delivery systems pose a far greater threat.

Sat, 03/08/2014 - 11:11 | 4524849 logicalman
logicalman's picture

The consequences of even 2 or 3 nukes used in anger doesn't even bear thinking about.

Anyone contemplating using them is either totally insane or totally ignorant of the results of their use - or both.

 

Sat, 03/08/2014 - 16:01 | 4525470 Mediocritas
Mediocritas's picture

They aren't insane and they're well aware of effects. This is what makes psychopaths (and sociopaths) so scary.

Sat, 03/08/2014 - 08:07 | 4524598 JoeSoMD
JoeSoMD's picture

Nukes?  Nukes?  You and I have a different perspective of the unimaginably disasterous consequences of a nuke strike.  I think your perspective is shared by many though, so you are in good company.  Just one of these high-yield weapons is unimaginably powerful.   I don't think that there can be such as thing as selective nuke bombing.  Once one high-yield nuke is released the initiator MUST continue to nuke their enemy until there is nothing left of them to ensure that there can be no response becasuse any retaliatory strike would be disasterous.  You would have to be sure that you targeted all of their launch sites.  None could be missed.  This requires perfect knowledge of which there is none, so you have to destroy everything, everywhere. There would be nothing left worth taking from the bombed country.  You wouldn't be able to put boots on the ground for a very, very, long time to exploit assets of value.  There would be global consequences too.  I can't see it as an option.

Sat, 03/08/2014 - 14:32 | 4525297 sgt_doom
sgt_doom's picture

Ditto, JoeSoMD, and the major question is, just how many of those missiles are MIRVed?

One nuke can equal many, many nukes....

Sat, 03/08/2014 - 08:28 | 4524613 andrewp111
andrewp111's picture

The best way to wipe out a country is to do a covertly directed asteroid strike, and to sink your enemy's nuke subs right before the asteroid hits. Make sure it comes from the direction of the sun so they never see it until it hits them. A country the size of Russia could take 2 or 3 asteroids. Iran would only require 1 smaller one. This is one reason we need to get a serious space program, and not a NASA director dedicated to Muslim outreach.

Sat, 03/08/2014 - 10:27 | 4524747 weburke
weburke's picture

a missle made of metal will do. there is a serious space program, but it is not talked about, and nasa.....stands for "never a straight answer". but why do you want to take out russian people and iranians? they do not rule their countries, just like americans dont. so, some sympathies to folks around the world, the planet managers are planning the mass deaths, so you dont need to wish such things yourself. smile andrew, carpe diem !

 

Sat, 03/08/2014 - 10:48 | 4524788 Raging Debate
Raging Debate's picture

Yes Weburke, you are correct. They are called Rods of God. The world has changed. Few see dead customers as a good option for global depression.

Sat, 03/08/2014 - 10:49 | 4524786 Raging Debate
Raging Debate's picture

DUPE -

Sat, 03/08/2014 - 11:30 | 4524889 thestarl
thestarl's picture

Think you boys have had to many bongs

Sat, 03/08/2014 - 13:26 | 4525131 weburke
weburke's picture

sorry, but no easy out for your lack of deciphering. no drugs. 

Sat, 03/08/2014 - 11:16 | 4524859 weburke
weburke's picture

correct term, but only applies as far as you can see. accepting the script while knowing (somewhat), the many generations of willing murderers who spent precious life moments dedicated to the one world ruler goal, seeing fall 2015 is days away, settleing into the carp diem mode for the benefit of those I encounter, knowing the sun will rise on their new god king soon, fits more the wisdom category.  A tip of the hat to the murderous dreamers, who make way for the divine dream.                                                                                                                                    http://www.youtube.com/watch?v=T_xS5gxyzPA

Sat, 03/08/2014 - 00:47 | 4524255 Aquarius
Aquarius's picture

What does " and ethically united nation  " mean?

Context: The US stratgey, which has been openly announced, ad continuum, and ad nauseum, is that the USA intends to atatck China from Australia (which is great for the USA and its unwashed) with the result that not only the Southern Hemisphere of the planet becomes saturated with nuclear radiation, ss that of the Northern Hemisphere thanks to Tepco, GE and the Japanese government, et al, but we the people of Australia, roughly 23m, will become charred and or flashing red beacons which signal dangerous radiation limits. Mind you, our Australian "leaders" are eagerly enthusiastic about this adventure, so much so, they are making arrangments for alternative residence in other countries North of the Equator.

The plan appears to be that the US will blanket (or attempt to) China with clear "nukes" (maucho Washington DC venacular) from the desert of Australia and China will retaliate with the dirty "nukes"). Of course, the deamons of death will be sailing off the East Coast of the USA with the senile and criminally insane John Kerry.

http://verbewarp.blogspot.com.au/2011/03/operation-death-star-australis....

Whatever, China heeds the increasing maniacal noise levels emanating from the US cult of neons that control the White House and Congress (and about every level of US Government) and prepares to defend, much to the objections of those heads with mouths that just seems never to shut up but never say anything much as all except for torture, killing, drones, spying, lying, thieving, and dropping nukes all the foregoing known as utter senseless crap.

So don't you Yanks worry about the War with China, or Russia, or Mars, or wherever, for, it will be others that pay the final price. Personally speaking, death will be a welcomed reset from having to listen to any more of the institutionized horse-shit (store high in transit) that just oozes out of all things 'Merican these days.

There is something really sick with your Generals Clapper and Alexander of the NSA; just where did they receive their training?

Ho hum

 

Sat, 03/08/2014 - 17:22 | 4525577 Mediocritas
Mediocritas's picture

@Aquarius (ethnic, not ethic)

What's the strategic value in nuking Oz population centres in the South of the nation? Even if Perth built a fully-fledged US navy base (expanded from now), isn't Darwin a more likely target, being so much closer? Woomera and Pine Gap would also likely be targets, but there isn't much of a civilian impact there. (Pine Gap NOTAM includes a laser warning, so I wouldn't be at all surprised to find that there's a functional missile defense installation there).

AFAIK, China sees Australia as just a big patch of dirt to be mined, and a place for rich local businessmen to send their families (thereby jacking real estate prices). The mines are in the north where the population isn't and the nation is so flat that it's essentially indefensible from the ground. Air superiority is required, and AFAIK, the oz air force is only intended to defend against an Indonesian attack and can't even do that well seeing as it sacrificed the older (but superior) F-111s for F/A-18s.

Sat, 03/08/2014 - 10:57 | 4524814 Raging Debate
Raging Debate's picture

Aquarius - I really like most of your comments but I do not agree. This is saber-rattling, a distraction for the masses. China may go to war if they get too much revolt, also as a distraction.

Remember "War is a Racket" by Smedely Butler? I could perhaps see a regional war where the MIC's of both countries make a pretty penny killing a few thousand of one and ramping up defense spending but nuking? Please fucking stop... If anybody nukes in my opinion it will be the Russian Bear. It is being backed into a corner despite Putin's skill at energy consolidation and keeping the country from totally disintegrating. If your Russian leadership you watched Saddam dangle from a rope after dwelling in a dirty, spidey-hole. They are a paranoid country but I think they do have legitimate reason to worry.

Sat, 03/08/2014 - 10:57 | 4524813 Raging Debate
Raging Debate's picture

DUPE -

Sat, 03/08/2014 - 02:31 | 4524377 old naughty
old naughty's picture

All trainings are done here, in the maze.

All -ism; behaviors (kings and sheeples alike); technologies are back-engineered. We move (LIVE) backward. 

All nations are labs; citizens, rats. There are no borders; nuclear scientists allowed to return to homeland...drones myteriously crashed and transported; etc.

All markets ran by well-trained to keep liquidity flow; and clogs taken out. 

War with China, or Russia, or Mars, whatever...

In [their] mind, doing God's work, no?

 

[global]

Sat, 03/08/2014 - 00:01 | 4524136 TheReplacement
TheReplacement's picture

That would all depend on who runs America wouldn't it?

Fri, 03/07/2014 - 23:33 | 4524057 cro_maat
cro_maat's picture

The assumption here is that the US holds all the cards and that China hasn't been paying attention to the IMF led banking cabal's playbook. If China does a unilateral debt jubilee and others have to follow suit, who wins? I would say China would be in great shape because they have just built out all new infrastructure and have most of the world's manufacturing capacity. Oh and they probably have more gold than the US now. And if the US decides they don't want to trade with China... well there are a billion chinese who wish to become middle class and will buy from chinese companines.

Sat, 03/08/2014 - 09:02 | 4524170 Mediocritas
Mediocritas's picture

Quite right. But from the perspective of US hawks, many of whom are Cold War dinosaurs and haven't evolved out of that mentality, I assume that they DO make the assumption you present here. One of the problems with winning [the Cold War], is that a lot of legacy systems, and people, are maintained.

Given the misplaced Cold War rhetoric we've seen applied to the Russia, Ukraine situation, I'm not convinced that the hawks have the right read on China either. Communist China is not the same as the USSR so treating it as such is an error. There may be a lot more resistance to change at the ground level than the hawks realise and a debt jubilee / redistribution of wealth to build popular support in a flagging economy is distinctly possible.

What always catches China in the end is a severe lack of oil. If the leadership there were playing smart, they'd try to avoid conflict with the USA at all costs, even going so far as to demilitarize, thereby providing no excuse for an attack. All they have to do is keep winning the economic war.

It won't go that way though because although Chinese communism is different to USSR communism, it's not *that* different.

Sat, 03/08/2014 - 14:48 | 4525335 11b40
11b40's picture

Ummm.
Russia may have some to sell.

Sat, 03/08/2014 - 14:42 | 4525324 11b40
11b40's picture

Ummm.
Russia may have some to sell.

Sat, 03/08/2014 - 18:06 | 4525745 Mediocritas
Mediocritas's picture

Yep, pipeline from Sakhalin-1 across the Tatar Strait to Khabarovsk and China.

If the US keeps making Ukraine a problem, then it might just end up being Putin who says "fuck the EU" and Nuland has a whole lot of new enemies from "old Europe". China's more than happy to take up the slack, and will.

Back in 1995 I guessed that ~2026 would be the year that the US went to war with China+Russia. Europe wouldn't want to get involved but would have little choice and honor NATO. Japan would more willingly stand against China but wouldn't be much of a power.

A lot has changed since then, particularly in China, but it still seems like a reasonable guess (I've not seen a need to revise it).

Sat, 03/08/2014 - 14:22 | 4525270 Optimusprime
Optimusprime's picture

You had me until your absurd proposal for the Chinese to demilitarize.  Idiotic.

Sat, 03/08/2014 - 17:48 | 4525706 Mediocritas
Mediocritas's picture

The US is effectively operating with a bully mentality. There are two ways to defeat a bully: 

1: bring superior force to bear and crush them. Two problems there, first that bullies deliberately pick weak targets, second that in the rare event of a successful retaliation, the winner tends to become the new bully.

2: publicize their assaults broadly and loudly. Bullies *must* have a crowd, but they shrink to nothing when the crowd is against them.

To support #1 is to support a new Cold War where America faces China + Russia. Given growing resource constraints that will cause conflict, this stance effectively guarantees a nuclear war in the mid 2020's. As idiotic as this is, it's highly likely.

Supporting #2 is more intelligent. Under this scenario, the rest of the world ignores US sabre-rattling and never gives the US military a good excuse to attack. Assaults against peaceful nations are widely broadcast and loudly protested against, leaving the US increasingly isolated diplomatically. Over time, the US either bankrupts itself supporting an excessive military (USSR style), or it backs down, demilitarizes and accepts its role in the world as a more equal partner. This way the world decays relatively peacefully rather than under nuclear fire.

China militarizing simply gives the US an excuse to fight. Assuming it comes to a head around 2026, we all lose. 

Fri, 03/07/2014 - 23:05 | 4523968 TheRideNeverEnds
TheRideNeverEnds's picture

Does this mean the SPX will only be up .5% next week instead of over 1%?

 

I dont know if I can deal with that.  

Fri, 03/07/2014 - 22:58 | 4523948 geotrader
geotrader's picture

This time is different.   

 

~MillionDollarBonus

Fri, 03/07/2014 - 22:33 | 4523890 williambanzai7
williambanzai7's picture

Some day they will once again have bond defaults in the US. No?

Sat, 03/08/2014 - 15:42 | 4525445 Infinite QE
Infinite QE's picture

One could state the QE is effectively default.

Sat, 03/08/2014 - 14:35 | 4525304 Kayman
Kayman's picture

"bond defaults in the US."   So far, the Fed can print money just as fast as the Treasury can print debt. You want us to pay the coupon?  Here you go, I can print some more if you'd like.

But when the world recognizes that the claims on world assets by the U.S. central bank's printing press, especially oil and precious metals, is essentially stealth theft, then bond defaults can begin. But only then.

Regards

K

Sat, 03/08/2014 - 16:05 | 4525473 Rafferty
Rafferty's picture

"when the world recognizes that the claims on world assets by the U.S. central bank's printing press, especially oil and precious metals, is essentially stealth theft"

 

But a 10 year-old child can see that by now.  So why hasn't there been a reaction?

Sat, 03/08/2014 - 17:52 | 4525724 JuicedGamma
JuicedGamma's picture

Because your first reaction upon hearing that the Toothfairy and Santa don't exist is denial, it takes time to digest that Mummy and Daddy have created a fantasy.

Sat, 03/08/2014 - 00:25 | 4524194 fasTTcar
fasTTcar's picture

Not when you can print the money that the bonds are denominated in.

Fri, 03/07/2014 - 23:08 | 4523988 Reaper
Reaper's picture

Yes. The Fed's printed paper dollar will strike out. Somewhere else, the currency will have value. Somewhere else, the sun will shine brightly on a new empire's currency. The mighty dollar will be rejected. Its true-believers will be dejected. Their Fed will be scorned.

Fri, 03/07/2014 - 23:59 | 4524128 UselessEater
UselessEater's picture

But will the 'new empire' be a nation (albeit a bankers nation)? Or a composite global corporation (of the likes of the IMF, WB, BIS, and other crony bankers under the guise of some NGO or global central bank)?

And what will their 'new currency' be? Will it be a gold back trading 'currency' for nations with pre-determined valuations of some new fiat crap for ordinary people to use? And since everyone and everything is in debt who's going to be the arbitar of what value that debt has under the new currency(s) and how interest payments are calculated and extracted and to whom will the infinte debt re-payments go to?

Just wondering....

Sat, 03/08/2014 - 03:33 | 4524427 lasvegaspersona
lasvegaspersona's picture

I don't think many here are clear on the term 'gold backed currency'. In the gold standard CBs defined the value of gold in terms of their currency.

The Euro however has 10,800 tons on the balance sheet but it is marked to market.

If you have to defend your currency by  comparing it to gold you will always have problems. When you let the market decide the value of gold it also decides the value of your currency. It is risky but if the CB behaves and limits printing the currency becomes strong. Add to that removal of a single nation state controlling the printing and you might just have a currency deserving reserve status.

It doesn't matter what we think about this it only matters what the world's producers believe.

Sat, 03/08/2014 - 08:45 | 4524627 new game
new game's picture

so you think these very bankers are going to relenquish thier power to a gold backed currency?

are you forgetting about the mic?

they fucking control the whole system; media, minds of people, banking, judges, they are corporate control

pulling strings of puppeters in dc. hello, anyone doing critical thinking.

as someone said o is bringing this ass ream right along fast - so be it, because as china goes so does the rest.

this article is a warning to mathematical inevitability...

Fri, 03/07/2014 - 23:58 | 4524127 UselessEater
UselessEater's picture

But will the 'new empire' be a nation (albeit a bankers nation)? Or a composite global corporation (of the likes of the IMF, WB, BIS, and other crony bankers under the guise of some NGO or global central bank)?

And what will their 'new currency' be? Will it be a gold back trading 'currency' for nations with pre-determined valuations of some new fiat crap for ordinary people to use? And since everyone and everything is in debt who's going to be the arbitar of what value that debt has under the new currency(s) and how interest payments are calculated and extracted and to whom will the infinte debt re-payments go to?

Just wondering....

Sat, 03/08/2014 - 09:02 | 4524644 Dick Buttkiss
Dick Buttkiss's picture

"But will the 'new empire' be a nation...?"

No, not a nation but the leaderless, truly democratic, paradigm-shifting Empire of Bitcoin and/or one or another of its offshoots.

Fri, 03/07/2014 - 23:58 | 4524125 UselessEater
UselessEater's picture

But will the 'new empire' be a nation (albeit a bankers nation)? Or a composite global corporation (of the likes of the IMF, WB, BIS, and other crony bankers under the guise of some NGO or global central bank)?

And what will their 'new currency' be? Will it be a gold back trading 'currency' for nations with pre-determined valuations of some new fiat crap for ordinary people to use? And since everyone and everything is in debt who's going to be the arbitar of what value that debt has under the new currency(s) and how interest payments are calculated and extracted and to whom will the infinte debt re-payments go to?

Just wondering....

Sat, 03/08/2014 - 00:01 | 4524139 UselessEater
UselessEater's picture

jees sorry folks about the triple post not sure what happend there....

Fri, 03/07/2014 - 23:01 | 4523958 George Washington
George Washington's picture

Yeah ... maybe the U.S. could start practicing free market capitalism again ... WHAT A CONCEPT!

Sat, 03/08/2014 - 08:37 | 4524621 YuShun
YuShun's picture

This analysis ignores the balance of payments.  Given China's BOP surplus
and the USA's deficit (each multiplied due to fractional reserve banking),
the Chinese increase seems low, and the US increase looks much larger.

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