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Guest Post: How China Can Cause The Death Of The Dollar And The Entire U.S. Financial System
Submitted by Michael Snyder of The Economic Collapse blog,
The death of the dollar is coming, and it will probably be China that pulls the trigger. What you are about to read is understood by only a very small fraction of all Americans. Right now, the U.S. dollar is the de facto reserve currency of the planet. Most global trade is conducted in U.S. dollars, and almost all oil is sold for U.S. dollars. More than 60 percent of all global foreign exchange reserves are held in U.S. dollars, and far more U.S. dollars are actually used outside of the United States than inside of it. As will be described below, this has given the United States some tremendous economic advantages, and most Americans have no idea how much their current standard of living depends on the dollar remaining the reserve currency of the world.
Unfortunately, thanks to reckless money printing by the Federal Reserve and the reckless accumulation of debt by the federal government, the status of the dollar as the reserve currency of the world is now in great jeopardy.
As I mentioned above, nations all over the globe use U.S. dollars to trade with one another. This has created tremendous demand for U.S. dollars and has kept the value of the dollar up. It also means that Americans can import things that they need much more inexpensively than they otherwise would be able to.
The largest exporting nations such as Saudi Arabia (oil) and China (cheap plastic trinkets at Wal-Mart) end up with massive piles of U.S. dollars...
Instead of just sitting on all of that cash, these exporting nations often reinvest much of that cash into low risk securities that can be rapidly turned back into dollars if necessary. For a very long time, U.S. Treasury bonds have been considered to be the perfect way to do this. This has created tremendous demand for U.S. government debt and has helped keep interest rates super low. So every year, massive amounts of money that gets sent out of the country ends up being loaned back to the U.S. Treasury at super low interest rates...
And it has been a very good thing for the U.S. economy that the federal government has been able to borrow money so cheaply, because the interest rate on 10 year U.S. Treasuries affects thousands upon thousands of other interest rates throughout our financial system. For example, as the rate on 10 year U.S. Treasuries has risen in recent months, so have the rates on U.S. home mortgages.
Our entire way of life in the United States depends upon this game continuing. We must have the rest of the world use our currency and loan it back to us at ultra low interest rates. At this point we have painted ourselves into a corner by accumulating so much debt. We simply cannot afford to have rates rise significantly.
For example, if the average rate of interest on U.S. government debt rose to just 6 percent (and it has been much higher than that at various times in the past), we would be paying more than a trillion dollars a year just in interest on the national debt.
But it wouldn't be just the federal government that would suffer. Just consider what higher rates would do to the real estate market.
About a year ago, the rate on 30 year mortgages was sitting at 3.31 percent. The monthly payment on a 30 year, $300,000 mortgage at that rate is $1315.52.
If the 30 year rate rises to 8 percent, the monthly payment on a 30 year, $300,000 mortgage would be $2201.29.
Does 8 percent sound crazy to you?
It shouldn't. 8 percent was considered to be normal back in the year 2000.
Are you starting to get the picture?
We need other countries to use our dollars and buy our debt so that we can have super low interest rates and so that we can afford to buy lots of cheap stuff from them.
Unfortunately, the truly bizarre behavior of the Federal Reserve and the U.S. government over the past several years is causing the rest of the world to lose faith in our currency. In particular, China is leading the call for a "de-Americanized" world. The following is from a recent article posted on the website of France 24...
For decades the US has benefited to the tune of trillions of dollars-worth of free credit from the greenback's role as the default global reserve unit.
But as the global economy trembled before the prospect of a US default last month, only averted when Washington reached a deal to raise its debt ceiling, China's official Xinhua news agency called for a "de-Americanised" world.
It also urged the creation of a "new international reserve currency... to replace the dominant US dollar".
So why should the rest of the planet listen to China?
Well, China now accounts for more global trade than anyone else does, including the United States.
China is also now the number one importer of oil in the world.
At this point, China is even importing more oil from Saudi Arabia than the United States is.
China now has an enormous amount of economic power globally, and the Chinese want the rest of the planet to start using less U.S. dollars and to start using more of their own currency. The following is from a recent article in the Vancouver Sun...
Three years after China allowed the yuan to start trading in Hong Kong’s offshore market, banks and investors around the world are positioning themselves to get involved in what Nomura Holdings Inc. calls the biggest revolution in the $5.3 trillion currency market since the creation of the euro in 1999.
And over the past few years we have seen the global use of the yuan rise dramatically...
International use of the yuan is increasing as the world’s second-largest economy opens up its capital markets. In the first nine months of this year, about 17 percent of China’s global trade was settled in the currency, compared with less than one percent in 2009, according to Deutsche Bank AG.
Of course the U.S. dollar is still king for now, but thanks to a whole host of recent international currency agreements this status is slipping. For example, China just recently signed a major currency agreement with the European Central Bank...
The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.
"It's a way of promoting European and Chinese trade, but not doing it with the U.S. dollar," said Brooks. "It's a bit like cutting out the middleman, all of a sudden there's potentially no U.S. dollar risk."
And as I have written about previously, we have seen a bunch of other similar agreements being signed all over the planet in recent years...
1. China and Germany (See Here)
2. China and Russia (See Here)
3. China and Brazil (See Here)
4. China and Australia (See Here)
5. China and Japan (See Here)
6. India and Japan (See Here)
7. Iran and Russia (See Here)
8. China and Chile (See Here)
9. China and the United Arab Emirates (See Here)
10. China, Brazil, Russia, India and South Africa (See Here)
But do you hear about any of this on the mainstream news?
Of course not.
They would rather focus on the latest celebrity scandal.
Right now, the global move away from the U.S. dollar is slow but steady.
At some point, some trigger event will likely cause it to become a stampede.
When that happens, demand for U.S. dollars and U.S. debt will disintegrate and interest rates will absolutely skyrocket.
And if interest rates skyrocket that will throw the entire U.S. financial system into chaos. At the moment, there are about 441 trillion dollars worth of interest rate derivatives sitting out there. It is a financial time bomb unlike anything the world has ever seen before.
There are four "too big to fail" banks in the United States that each have more than 40 trillion dollars worth of total exposure to derivatives. The largest chunk of those derivatives is made up of interest rate derivatives. In case you were wondering , those four banks are JPMorgan Chase, Citibank, Bank of America and Goldman Sachs.
A huge upward surge in interest rates would absolutely devastate those banks and cause a financial crisis that would make 2008 look like a Sunday picnic.
Right now, the leader in global trade seems content to use U.S. dollars for most of their international transactions. China also seems content to hold more than a trillion dollars of U.S. government debt.
If that suddenly changes someday, the consequences for the U.S. economy will be absolutely catastrophic and every single American will feel the pain.
The standard of living that all of us are enjoying today depends largely upon China. They can bring down the hammer at any moment and they know it.
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The biggest lie of the central banking system is that it doesn't have central control.
If you think the same fuckers pulling the levers in London and New York AREN'T also pulling the levers in Beijing then you're crazy.
Ok sure China could do it. But the directive still came from the City.
Roundeye used to make funny fun of Mr. Chan. Now Mr. Chan has better house and richer friends. He laughs at White Devil....
Now Mr. Chan owns the White Devils
"But the directive still came from the City..."
..and few know what corporation that refers to.
The US is going to suffer when China collapses, not because China overtakes the US. Sorry, communist gov't don't make good long term bets. Right comrade?
At this point, most of the people still paying attention are waiting to see which communist nation falls apart first.
The U.S. or China?
I think China will cave first, because the citizens of the U.S. have prozac in unlimited supply.
This is the 2nd ass backward essay re-published by ZH in the last 8 hours (the Martin Armstrong rubbish being the prior one).
China has literally been in real economic contraction for a minimum of 5 quarters (and arguably much longer), and is pumping out falsified economic data as furiously as the PBOC is pumping out fiat which China's provincial banks are just as quickly distributing to paper over the very steep losses being suffered by major state owned enterprises (SOEs), the majority of which are export-dependent.
I'm not advancing any argument that the U.S. has a healthy economy; it does not by any stretch, and is papering its way to alleged nominal GDP growth via debt & fiat games.
I am advancing the proposition that not only is China in worse economic shape than the U.S., arguably being more sickly than a quite sickly Brazil (due to China's intense reliance in exports & overcapacity), but that China is a million light years away from offering up anything that could remotely be deemed an alternative currency as readily & widely accepted as the USD or Euro.
Wait, watch & see the Chinese economy continue to contract in real terms for not just the next few quarters, but the next few years (in the best case scenario), as they try and manage a soft landing of the MASSIVE toxic loan hot air balloon that sailed sky high over the last decade, which if not managed with absolute precision, could actually see China enter economic depression territory.
"China is a million light years away from offering up anything that could remotely be deemed an alternative currency as readily & widely accepted as the USD or Euro"
WTF?! Have you seen the rate at which China is sucking in the world's gold reserves over the past couple of years?
That's exactly it!
China is trying to de-Americanize the world.
This could lead to collapse.
http://www.planbeconomics.com/2013/10/china-to-de-americanize-world-coll...
Could? It is assured by design.
BFD, the real reserve currency is oil and while you may pay for oil with gold, a simple calculation shows that the amount of physical gold available is dwarfed by the size of the oil market...
~6000 tonnes of gold buys ~18 months chinese oil imports....
It is the same problem Nixon and his advisors faced 40 years ago...
That only shows gold is heavily undervalued.
Oil-Gold ratio has been fairly stable for years...
There is a very good reason for that, maybe you can figure it out...
Hint: it has something to do with how oil is used to create wealth...
I agree with Truth in sunshine. The Chinese also should realize that they can sell any of the cheap thingsthey produce to the chinese because the majority of them live off 2 dollars a day. They need the idiots in the US and Eupore to buy all the crap from wmt. If they decided to dump the dollar causing a spike in interest rates and hence a explosion in derivatives, the whole game is over and they would shit out of luck as the worlds greatest spender (US EU) would be fineshed.
Savers always get fucked and the chinese will be no exception. Just look here in the US. You save and your screwed. The US holds all the chips because they owe and they have the strongest military
Nice analysis, both of you, BUT China is no longer the cheapest the cheapest are Laos, Vietnam etc. Because China moved to midle priced products (or at least moving) as cars, iPods, PC components, TV etc if you found some cheap staf from China, it just means they put it together in China but the parts were made in cheaper destinations.
So they are moving in to midle priced products and they are looking for the high-end products.
"So they are moving in to midle priced products and they are looking for the high-end products."
While wolrd-wide per-capita spending capacity is dropping... Think that China can sustain itself by selling BMWs?
It's all predicated on growth. It's like trying to step harder on the accelerator as your tank is supplying fumes...
Death dance is what it is. If you stop the dance you die. If you continue you die.
You have a point, BRICS countries have a big problem they don't have middle class or their middle class is tiny, so they need build up middle class.
So they are doing what they can to build it up and moving to middle priced products, of course they are trying creating environment for middle class and for internal consumption for they own goods, well lets wait and see.
Savers always get fucked and the chinese will be no exception.
Not those who save in gold and silver.
If one has Food, Shelter and Water then gold and silver really don't mean that much. If I had no excess in these things then of what benefit would it be to trade them away for gold or silver? (there is NO guarantee that I'd be then able to find someone else willing to trade in order to get what I'd given up)
ALWAYS hold your ground/land, for it is that which sustains us.
I'm not arguing against PMs. Just emphasizing what proper priorities ought to be.
And who 'pray tell' now makes all the semiconductor/chips for that wonderful "strongest military" that you speak of?
What happens when we decide to go to war with them for dumping all the trillions of dollars they hold with that enormous manufacturing base now in the hands of both China and India for critical development and most important of all delivery to the United States that Lockheed, Raytheon, GD and Northrop Grumman use in there weapon systems?
Sticky situation when you want to start a war over someone refusing to buy more of your debt but has control of some of your most strategic manufacturing technology -No?
BUT! The CIA/NSA has injected those very chips with US-eaves-dropping capabilities! It'll be the US and China going to war with each thinking that they're pointing at the other when in fact the barrels are facing rearwards (http://2.bp.blogspot.com/-l7m34zsGzME/Tp4pf2l3DxI/AAAAAAAAB5s/K4ohkX3OOj...)
Human hubris will prevail! (it'll churn out what it always does- a big fucking disaster)
China needs the U.S. solvent more than the U.S. needs China to be solvent. It's the old story. Borrow ten grand from the bank, you can't pay it back, you got a problem. Borrow a trillion from the bank, you can't pay it back, the bank's got a real problem.
The paradigm shifts when your best customer starts paying you in worthless paper, backed by nothing and debased to the point where toilet paper is more valuable. At some point, you hedge your investment, then cut your losses, taking out the deadbeat that jerked you around. The FACT that the US is the biggest bully on the planet only makes that much more palatable.
Yup. At some point you just take your losses and move on, as there's no use in compounding them!
China will snuggle up to Russia for more market activity. This makes all the sense in the world as Russia has the energy that China needs.
This is the scenario I don't see discussed much. What do people think the actual global economic effects would be if China's house of cards collapses before ours?
First...
Then...
Then...
A collapse of China's economy would be massively painful for the global economy, but nowhere near as painful as a collapse of the U.S.'s economy.
For evidence of this, just look at current account trade balances for the last decade, and realistic future projections.
The U.S., U.K. and many Eurozone nations (including France & Italy) are huge net importers from huge net exporters such as China, South Korea & Japan.
The real problem that the net exporters face is that the world & global economy is structured in such a way today that much of what is exported is highly elastic, and not essential, and really has as its selling catalyst the fact that this "stuff" is derived of cheap labor and minimal red tape or governmental regulations.
Could the U.S. survive in a world where LED flashlights from China were no longer available at inexpensive prices or even at all? I think so.
What about Chinese engine blocks or transmissions? Sure.
The result of China no longer supplying/exporting such things or at a much lower volume would be inflationary, at worst, for developed nations that are net importers, ASSUMING THAT A REPLACEMENT FOR CHINA COULDN'T BE FOUND.
But these replacements are already lined up, ready, willing & increasingly able to fill that gap, and two such countries are Mexico & the Czech Republic, as just two examples that export such goods already to the U.S. and EU, respectively.
Okay. What if, instead of focusing on the effects of a full-on collapse of China's economy, the question is about what happens if their stock market collapsed next month (due to say, some unexpected sunshine exposing their magical "official" numbers) via a Chinese Snowden?
If they suddenly had to lay off millions of workers (would they?), no doubt there would be astounding levels of unrest, maybe even a potentially viable revolutionary movement. If they had that kind of chaos within their borders, would the world largely just be looking on from a distance? Or would there be spillover--militarlly, economically, or otherwise?
What would happen to the U.S. stock market if China's market crashed next month?
I guess I'm mostly thinking about all the spinning plates out there that I can't control, but how I might (barely) protect myself financially should one or more plates starts to fall.
Good insight, thanks.
I don't think that anyone would be willing to step in and intervene. As noted above, China doesn't really export stuff that's highly critical that others absolutely have to have.
China's stock market is pretty much irrelevant. The Chinese govt, on the other hand... I'm pretty sure that they'd lock down whatever they needed to to ensure that they were able to import the required energy. And it's the energy imports that's KEY, just as it is with any other energy importing nation. Australia and Canada would take a bit of an economic hit (I've figured that a Chinese turn-down would finally kick a leg out from under Canada).
There really isn't any way to "financially" protect oneself when you're talking about doing so while living in a house of cards. Start from the fundamentals: Food, Shelter and Water.
I have to comment: We are manufacturing tooling for metalworking in Florida and we are flat out fucking slammed. We are buying machine tools some of which cost in the $700k range with robot loaders and we cant get them fast enough. Two we paid cash. Tooling is HUGELY busy and we are the tip of the economic spear. We are the first to get cut in a recession and the first to come back in a recovery. Been doing this for 20 plus years and we are slammed. I am hiring and I can choose the best qualified of the hundreds that apply.
Some of this goes to Detroit Area (yes they still build shit there) and Ontario, but all over the world we ship. GM and General Dynamics, Rolls Royce (INDY) and others are making shit like there is no tomorrow. Military? Yup some of it, probably a lot of it. They dont tell us and we dont ask. Goes through brokers and distributors. Some don't want visitors or our sales people coming in. Dont need it. We get orders and we fill them ASAP. Everyone is paying and we are making tons of money. So what is going on? I don't know but I just want to say that there is manufacturing going on here in the US and it may be quietly happening but it is happening for sure.
Out.
Your business probably has a high correlation to automotive component production, whether the end components are fabricated in Canada, the U.S. or Mexico.
Auto sales are up from an annual rate of less than 11 million at the bottom in '09 to the mid-15 million range this year, or a near 50% increase in 3 1/2 years.
On top of that, automakers are investing heavily in retooling production facilities to allow for much greater flexibility on the line in terms of building different products on the same line so as to more quickly and cost effectively adapt to changing consumer preferences and adjust their product mix accordingly.
And as you already stated, military hardware orders are a big part of your industry, even though that sector has been contracting (at least if expenditures according to the DoD are an accurate guide as to what's occurring).
All of the above, IMO, is merely an end result of the fact that the Fed & Congress have merely created another debt-fueled consumption bubble, the likes of which are always unsustainable, and that end in busts, over the last 4 years.
Look no further than the article published in ZH today about how 500 FICO score consumers are able to purchase new vehicles at 4% interest currently, and how, generally speaking, subprime buyer purchases of everything from autos to furniture (not to mention a 1 trillion USD student loan market) is the largest driving factor of whatever real increase in consumption has taken place YoY since '09.
We've simply seen the reflation of another giant debt-driven bubble, based on poor quality loans and lending criteria, backstopped by government directly (FHA mortgages) or indirectly (too big to fail bank continuous Fed injections), and this has been exacerbated by the fact that yields on government and corporate bonds have been massively suppressed by central bank interventionism.
It will all end in another meltdown the same way it did in 2008. The parallels are incredibly striking, even if the reasons for the underlying bubbles this time are different.
I've been wondering about a company I know about (I know the owners). They produce aircraft ground support equipment: towbars, passenger stairs, baggage carts (turnkey and custom) and they too are going like gangbusters. I get the auto industry explanation, but I don't get this. It doesn't seem to jibe with the flat economy news.
Thanks for this. I'm in the same kind of manuf. business up north - and am seeing exactly the same thing. We're busy, reinvesting in equipment, and making profit. We ain't JPM, but we're alive and making money.
Even have early 20th century equipment still going and always looking for life-time experienced tool & die, machinists, to come work - tell us where we're making things more complicated than they have to be - and pass on their considerable knowledge to a much younger generation.
I agree. It just depends on what your industries are. Auto, aero, med & mil do pretty well. Home construction got hit pretty hard. Service stuff seems to do well.
I'll ask you this question however. How easy is it to find people off the street that can run those machines to their full potential, and be accurate?
TruthInSunShine pretty much answers this all, but I'd like to add that it ALL eventually comes down to whether end-consumers are there: yeah, the military makes for a more controllable end-consumer, but with govt budgets under huge stresses... It's a dead-cat bounce. Plan accordingly...
NOTE: automation reduces human labor; if no one's working then who can buy? (unemployment is pretty much proven to be extremely high, higher than the "official numbers" [and the "officials" themselves even had to bump those numbers up]).
Maybe if they're in contraction and want to divert attention from it (the same way our politicians do), they might figure now is the time to act by stopping the purchase of treasuries. It seems to me that if they wanted to force a de-americanization, they would want to do it while at their peak of financial power.
As I understand things, China has already stopped buying additional Treasuries... and are converting long-term maturity bonds to short-term bonds.
ding, ding, ding, hold all calls...... we have a winner.......
There is also this - http://articles.latimes.com/2013/oct/14/business/la-fi-shutdown-china-20...
And this - http://www.forbes.com/sites/jamesgruber/2013/10/19/china-is-embracing-bo...
And this - http://www.vancouversun.com/Business/asia-pacific/China+yuan+makes+waves...
@vampyroteuthis..
Have you recently looked at how we are living and who is running the show...need I say more?
Manchester City?
It's MAD...no country will pull the triger because the only winner will be barely alive to reconstitute a new monetary system......it's a tangeled weave as they say
Learn to love and embrace chaos as there is $$$ to be made.
'"But the directive still came from the City..."
..and few know what corporation that refers to.'
@ Manthong,
would you care to elaborate further to name the commanding corporation(s) or institution(s)? :-)
The Crown Corporation
It does not refer to the Queen/King...
Interesting the USSA CIA factbook does not mention it as a nation-state!
I remember looking at their homepage a few years ago. THey have their own police and mayor. its a city within a city
Once had a Chinese girl friend, she called me a' bi gway' (we were feuding). I said what's that? She said White Devil. I said just out of curiosity what do you call black people? She said 'hey gway', Black Devil. So what do Chinese people call themselves? She was pretty pissed off at this point and glared back...'we are human beings'...don't know how much of its true but it sounded right.
I have noticed that like most people when it comes to their main identity group they can be touchy. Amy Tan in one of her books quotes her grand mother as saying 'Chinese torture...BEST torture.' That's some pride.
I'm sure eventually the Chinese will do what we would do if we were in their place....and THAT should worry all Americans.
comes down to how bold the m.i.c. get. fine lines over in the pacific and we are at the door step and in austy land stirring.
Yeah this is true.
All of this is now academic and self inflicted from Pox Americana.
Short term scenario we start a war with them because they refuse to buy more of our debt. Long term scenario we start a war with them because we've given so much of our strategic manufacturing base away over the last two decades that we are no longer viable competitively in any technical engineering fields most significant among them computer and semiconductor technology.
We're somewhere in-between these two and my guess is we will be predictable like we always have in the past to start a war with either scenario involved.
Almost forgot the best part in examing these options. How do we successfully fight a war with them and control the masses who will be rioting here at home right after they dump the remaining dollar reserves they have and refuse to purchase anymore?
P.S.
"Austy land" is all about that latest oil find called Coober Pedy that the U.S. wants desperately to be a part of but rest assured won't because the "Austy's" will be trading in something other than $$$ to protect their long term interests.
"Long term scenario we start a war with them because we've given so much of our strategic manufacturing base away over the last two decades that we are no longer viable competitively in any technical engineering fields most significant among them computer and semiconductor technology."
I wish we'd stop saying that we "gave away." Mega corporations were involved, and, in so far as I'm aware, most are NOT charity organizations- money was made by shareholders (many of which likely resided in the US). So, "we sold" would be better description. And, yes, I realize that there's also the "acquisition" of technology via reverse-engineering (and spying), but that's not the same as "gave away."
On the war angle... there's nothing to gain by going to war, for either country. Sure, there will likely be all sorts of ugly words and what not, but that will only be a front for the inevitible that the death dance has to end. REAL wars happen when there's desperation for resources, and neither the US or China supplies the other with key resources. And from the US's view-point it's really about Russia- no stick-poking is going to happen without drawing in Russia, and, well... the US cannot take on both Russia and China (if expecting anything other than a suicide pact).
Internal "disturbances" will be dealt with as they always have been- demonizing an outside entity. This marketing program has been in the works for a LONG time: just holler "Commies" and blame China for all our ills and we then circle the wagons... (no direct war, only trade war will come of this).
Seer
Valid point you made on the issue of "give away" vs. "sold" as far as the tech industry is concerned. But at the end of the day when you are paying taxes to a system that you can no longer find work in because the Corporations you use to work for found cheaper labor somewhere else at your own expense which includes training that new labor before the door shuts on your own ass, "give away" and "sold" to a certain extent become interchangable as your creativity, innovations and experience went out the window with those jobs as well.
As far as the U.S. not getting it's way by the use of other than economic means I beg to differ.
We've been taking the slow train to hell for more than 13 years now starting with the market crash in 2000 which became a natural strategic extension for our use of force and state of emergency doctrine after 2001. "We" or I should say our elected leaders who allegedly represent us made the decision that if we could no longer obtain those resources through a heavy wallet because we "sold out" our technology base, we would obtain them instead through the use of force and create what we perceived as the "win win" of beating our competitors to the banquet table with our reserve currency status still intact to sell those resources to the highest bidders -or so we thought.
It hasn't worked and will never work and now it's time to pay the piper. I do believe we are maniacal enough (our partners in crime aside) to start another major war if we do not get our own way which is what happens when you have a monopoly on power financially as well as resources for as long as we've had it in this Country since the end of the second World War.
The only ones who can put a stop to it is our military through dissention in the ranks that would hopefully result in a coup which some believe has been fermenting since 2009 with the current Administration.
Let's hope this is what is happening, because if we had to rely on the American people collectively to do the necessary and honorable thing to disarm our government from declaring WWIII and hold them responsible 'finally' for the treason of war crimes and martial law they've committed in our names we would be totally and completely FUCKED!
I would like to believe we could find a resolution towards a new beginning as the Russians did after the fall of the Soviet Union as a guide but I think we both know that we no longer possess the intelectual capacity and sanity to pull something like that off.
cheers
This is stupid. China owns ~1 trillion. Our debt is how many more times than that? They can't torpedo the dollar - they could devalue it marginally.
At what point do you cut your losses on an investment, write off the bad debt, take out the deadbeat creditor and move on down the road? We are rapidly approaching this scenario...
American treasuries sold against a gold backed renmimbi would leave a mark I'd imagine.
BUT... it's all about margins, and in this case it's about increased sales to sustain the growth in debt. It would be the chain-reaction of dumping that's the issue. I suspect this was readily foreseen by TPTB and is the reason why the Fed (a local entity) is reeling in the slack: the Fed ain't going to go to war against the US (bankers made a pact with the devil- rather than shutting down the parlor game several years ago they've been given time to prepare for the EVENT, at which their game ends [as it was always certain to do]).
NOTE: I see the Fed as a necessary evil, the least of the evils: kind of like folks that come in and do foreclosure work. I think that it was the only real strategy to allow for bracing for the Big/Final One (the end of the game). The Fed ain't going to dump; if China were pumped up like the Fed there's be a bit more unease with the thought of China dumping... and all the hand-waving by the Chinese is only an attempt to try and get a better deal (before it really gets ugly).
Perhaps. We are in the midst of a major paradigm shift in humanities 'story'. Man has again arrived at a place of folly, proving (again) his collective inability to be God like in any sustainable definition. That which attempts to defy the truth is a lie and lies always fail to deliver the false 'promises' of deceptions allure.
In plain English?
The shit is going to hit the fan.
How many times does history have to repeat itself before stupid humans begin to pay attention? Never mind, it's a trick question. The answer is never as humans are not that far removed from swinging in the trees.
I tend to believe it's in our inablilty to BE god-like in the aspect of culling...
In Peter Kropotkin's book Mutal Aid he makes a pretty compelling argument that humans tend to be more cooperative than competitive. I figure that our 7+ Billion numbers backs this up: if we weren't so cooperative I very much doubt that we could achieve such large numbers.
While wars and "secular entities" (in addition to "religious entities") might have made dents in population sizes they haven't been all that "successful" in even coming close to what one might call "population control." So, predation by humans doesn't appear to be sufficient, which leaves only the enviornment as the controlling parameter.
We are not, and I really don't want to sign up for figuring it out, able to self-regulate. Many religions attempt to provide us with guidance on all of this in the context of when it's acceptable to kill, but it just doesn't work on the broader scale: maybe "Armageddon" is meant to handle this, I don't know...
"....proving (again) his collective inability to be God like in any sustainable definition."
Ah, but which god? There are so many to choose from!
China doesn't need to do much in killing the US$ , the federal government/ Fed are doing that in mighty fine style.
Actually, the surge in chinese interest in Bitcoin alludes to another possiblity. What if China decided to use Bitcoin in some official capacity? It would be the ultimate middle-finger to the USA, and they could be the ones dictating terms when it comes to trade agreements, especially when the US Dollar is continually at a disadvantage.
Just a theory, but it would truly shake things up in a massive way.
Its also very telling that the official government TV stations have been running Bitcoin-oriented shows with zero interference, and there are 7 Chinese Bitcoin exchanges, currently.
Nominated for the dumbest fucking article ever posted to ZH
I'm pretty sure this one gets recycled once a month.
Rehypothecation?
Most obvious, maybe.
Why dumbest?
Dumbest because Chinese are doing exactly the opposite and for some reason the author doesn't note that which goea against their premise...plus nearly every other foreign country isn't selling their bloated positions in T's they've been buying since '08.
China T ownership, as follows:
'94 - $17 B
'00 - $71 B
'05 - $297 B
'08 - $530 B
'09 - $915 B
'10 - $1.1 T
'11 - $1.3 T
'12 - $1.2T
'13 - still the same...does this look like a country dumping T's??? Look at what they do...not what they say.
Anybody looking at foreign held Treasury data would see countries (Brazil, Ireland, Norway, UK, Switzerland, Russia, Taiwan, Belgium, and obviously Japan) have absolutely loaded up since '08...nobody selling.
Interestingly, the only country of note that hasn't increased Treasury ownership since '08 - Germany. $60 B then and $60 B now. Norway owns more w/ $68 B (up from $4 B) and Ireland up from $20 to $90 B...even Belgium has increased from $16 B to $143 B.
Every year until '10 has an increase in T holdings. Are you sure you want to extrapolate a continuation of trend when the trend was clearly broken in '12?
Much like Wall Street thought in 2008 that real estate prices would never go down. And oh how they larfed.
The most likely reason Chinese purchases stopped going up was an increase in QE alongside a decrease in US budget deficits...so fewer T's to be bought and a bigger portion being purchased by the Fed.
The problem is that the author's description of the "petrodollar" befits an underwear-clad basement dweller, not an adult with ANY experience in global finance.
Garbage In (Article) = Garbage Out (Comments)
Once you step outside of the US- banking and finance (in any single country) are conducted on a multi-currency basis. USD (which takes the form of treasuries) is owned internationally to facilitate trade settlement and offshore financing (building the local debt ponzi). As developing countries have grown, their LOCAL BANKING SECTORS have also grown, increasing the domestic need for USD. Saudi Arabia hasn't bought US Treasuries for some BULLSHIT/non-existent "return on investment" or "safety" since the early days of Alan Greenzirp- oil in the ground is safe wealth as long as you control that ground- the Saudis have been building manufacturing, trade, and infrastructure with their oil profits, the USD (in the form of treasuries) facilitates convertibility/collateralization/hypothecation within the LOCAL BANKING SECTOR --- it's the same story in China.
Central Banks own UST/USD to backstop their domestic banks, and their stockpiles of UST/USD flow through the domestic banks constantly. Your analysis of UST ownership falls short because it ignores the fact that China (SAFE) continues to nominally grow its F/X reserves (of which USD comprises a DIMINISHING SHARE). If UST ownership is not growing in direct correlation and proportion to a blended average (the precise math is dismal pseudoscience) of total F/X reserves, trade volume, and domestic banking assets -- then a given country is diversifying away from UST.
As the global Money Supply grows nominal foreign ownership of USD/UST can also grow, and it doesn't mean that countries are not dumping or moving away from the dollar. On a geopolitical/BIS level it's a ZERO SUM game, they're running a multi-faceted strategy for market share/control of the GLOBAL MONEY SUPPLY (increasing both demand and supply of their brand of currency while keeping price as low as possible to facilitate more tangible domestic exports), and the US is losing, the scale of that loss is masked by the FED's purchases of Treasury debt.
Lots of people love to rant about a global banker cartel, but since they have NO FUCKING IDEA how that cartel actually operates on a day to day basis, what they say amounts to the following (from the perspective of a knowledgeable banker or policy maker)-
Step 1. Central Bank
Step 2. Fiat Currency
Step 3. ????
Step 4. TPTB PROFIT!!!
My guess is they're buying US debt because its the only (current) way to keep their export prices reasonable. When they shift to multilateral agreements, or some other twist - say using Bitcoin - then the tables are turned and they can dump all that paper without a second thought.
Its like a boyfriend putting up with an abusive harpy of a girlfriend, all the while moving his shit to another apartment. When he's ready, all he'll leave is a note and large cable bill.
lets see for the Yuan to become king, it would have to be appropriately valued, value it appropriately, they chinese cant afford chinese goods let alone the folks at Wallymart. Production moves to vietnam and other low cost centers... Game over china....
Happened in Taiwan, happened in Japan, and china is next.....
The Chinese can afford things. They actually produce. Their government siphons their purchasing power away and suppresses their standard of living.
The Chinese have huge surpluses. Their downfall will be like any other planned economy, though, and obviously a big part of the visible misallocation are all the ghost cities whereas that capital would have been saved and used for something more productive.
Production is a means to consume.
gator? are you implying the dollar is fairly valued?
Fairly valued relative to what becomes the question, its all fiat. It overvalued against gold, overvalued against the Yuan, undervalued against the euro.... its all a race to the bottom.
when the chinese workers can get away from 12 hour work days 6 or 7 days a week and have some discretionary income and then have some job security for 5 years or longer ... it will all work out just fine.
They are doing vendor financing in Africa now and receiving physical assets of value as collateral instead of T-bills.
It is nothing short of insane how people believe the 'logic' that is spewed by the MSM and the statist econ folks that they 'need someone to consume their goods'. Just like the idea that foreigners 'need' dollars as though trade cannot be facilitated without them.
What about Say's Law which just states the obvious that people pay for goods and services ultimately with goods and services?
If all the U.S. people can give are ever depreciating fiat notes, the foreign suppliers of real value are going to balk.
At the end of the day the misallocations and siphoning away of value from the real wealth creators out there will destroy standards of living, and it already has. These CBs can print all they want but they cannot print anything of intrinsic value, and they distort the valuation processes so critical to efficiently allocating capital.
Ok, lets run with your ideas for a minute. I produce a good, no one buys it but I still create value.... unfortunately without a market that good is just as valuable as a pile of paper fiat. The good only has value at the market price and if the market price is less than the cost of the production of good, than guess what....
Yep, let them develop African resources, spend trillions, it will be all nationalized some day and gone from their control. Name one country that hasnt done that yet?
I think you're talking about something different than I was. I was just saying that the Chinese can consume their own production. Cheap exports via a cheap currency doesn't hold water because then imports just become more expensive. And so what if everyone has a job but they are getting paid in worthless currency?
The vendor financing is not a viable model, just like the Germans to Greece. Free trade is about getting something of what is deemed as sufficient value in return, otherwise why sell your goods at all?
The Chinese are not giving away their production for nothing obviously, i.e., they are buliding up huge amounts of foreign currency. Question is will they at some point say enough is enough and use that leverage/clout to try to take control and impose their will with a perhaps gold backed yuan?
Jumping in here, not jumping on you. Just wanting to inject a very KEY point.
"I was just saying that the Chinese can consume their own production."
What's missing here?
TIME
GROWTH in consumption
While it might be true that, on the whole, the Chinese can abosrb their production, I'm not so certain that it's possible to do so forever: well, I'm being gentle here- it's totally impossible to do so as that would suggest that perpetual growth is possible.
Where China runs into trouble is with energy. While decreased consumption for most of the globe means more oil for China it also suggests a future problem that unless China can keep the energy markets stuffing the barrels (as everyone else continues to taper off) that energy margins will start to come under huge pressures. The story would play out that China imports more and more energy (costly) and exports less and less: I think that this is shifting this way; this same pattern can be seen with just about every country that's gone through a maturation of industrial production, and in every instance it shows up as a clear decline in trade balances, if they haven't already gone negative.
I would just simplify it and say that this whole 'reserve currency' paradigm is absurd as well, and is totally orchestrated by the Western CBs and govt, and probably also the Eastern ones.
Free trade just happens; it does not need to be 'institutionalized'. Individuals pursue profit and go beyond their borders to do so. Jobs per se are not the goal; productivity is. More stuff with less inputs. That is what leads to rising living standards.
China does have some major reserves of oil they've discovered, from what I read recently.
Again, as I said malinvestment is malinvestment. The Chinese have a proclivity to save and forego consumption, much like Americans did in the 19th and early 20th century before they became very privileged with USD reserve currency/petrodollar, and things like Marshall Plan that was pure corporate welfare.
With their pursuits in Africa, they are getting real assets and accumulating things of value, whereas Americans generally are not borrowing to build factories and invest, but rather consume. The Chinese at some point one would think would look to convert their USD holdings and treasuries into real assets, and I think they slowly are now with gold and also with getting as collateral physical assets/commodities from Africa. It is very calculated, but again, malinvestment is malinvestment, and they have their own bubbles.
'GDP' does not reflect true value created. No aggregate measure can. High GDP in China does not mean they are creating that much value. If anything it reflects the squandering of raw resources into investments that were not market-driven/warranted.
that's the problem with your example...if you create it and can't sell it, then you didn't create 'value'. value is in the eye of the individual.
Fully agree that value is subjective. Malinvestment is malinvestment, whether it is too much consumption to drain resources needed to be invested for future consumption, or the wrong kind/too much of a certain kind of production.
Their opening up of markets has risen their living standards, but they need to let market forces work fully just as does everybody else. Actually accumulate capital instead of instantly investing it when it is unwarranted (no purchasing power to actually afford it).
Many U.S. people have been privileged beyond what they can comprehend. It is not a working of the free market that their output is worth such higher income than the work the Chinese are doing.
The Chinese have declining surpluses. They have also misallocated capital on a scale never before seen on this planet. You don't see international REITs lining up to invest in China's ghost cities or bullet trains-to-nowhere. All of it built with loans that can't be paid back, the money just printed like there's no tomorrow. Lots of Chinese have got rich on these boondoggles of course, and they all have getaway homes in Vancouver, or San Francisco or Rio de Janeiro for when the pile of cards collapses.
Indeed. Central planning always fails. The Chinese are productive but malinvestment is malinvestment.
I'm just reiterating that it is about as absurd a thing as I have heard this idea that consumption is what drives the economy, and the U.S. citizens being 'instrumental' in that role as takers on of debt. The Chinese can consume their own goods.
Production is a means to consumption. Demand is practically infinite; what is scarce is supply/things of value.
I agree for sure that there is and always has been rampant cronyism there. It is all about keeping control, but the malinvestments around the globe with all the debasement of currencies is going to eventually be cataclysmic as the productive people keep getting the fruits of their labor expropriated to the politically connected and their constituencies of lower income people who don't bite the hand that feeds them.
Ultimately it comes down to they can't print purchasing power. There is not enough supply to back up all the IOUs that leave people thinking they have a claim on real wealth. I'll keep buying PMs.
Central plannning always fails - doesn't bode well for the U.S. economy.
I've seen worse.
The Chinese need to start arresting foreign Central Bankers for International Financial Terroism. Give em a dose of rat cage and bamboo shoots.
The Chinese want a bigger slice and control of that racket, not to put it out of business.
While this is better than another '69 reasons why...' article, I'm pretty much disinterested in anything Michael Snyder submits.
do it, thats what they want
cheap plastic trinkets? chances are your computer components were made in china, as well as your Iphone. power tools, air conditioners, refrigerators, microwave ovens etc.
So China wants to destroy its biggest customer and put millions out of work in its own country? Don't think so.
nothing is stasis. We're only 300 million of billions and our disposable income is falling every minute
Exactly. China has 1.2 Billion new consumers waiting. Chinese personal savings have increased from $1 Trillion in 2000 to $7 Trillion in 2012.
Recognize.
Ah, there it is again! That mysterious and gigantic box of cash just sitting idle, doing nothing, waiting for opportunity!
I wonder what the armchair economists in this comment's section think funded China's capital spending boom, real estate boom, shadow banking system boom, etc.? Apparently, at least according to these economists, China must have a velocity of money equal to zero.
Now I admit I get confused when I think of that now $3 trillion shadow banking system in China, where savers are promised 8-10% per annum, while borrowers sometimes get gouged as much as 10% per month. I know Chinese are Middle Kingdomers, which makes them nearly divine, so covering that 10% vig per month should be no problem. Savers needn't worry, I suppose. Similarly, those savers who haven't put their cash into shadow banking Po Ng Tse Schemes, but instead put their faith into the major banks, are fully comfortable with all those loans made to SOEs, since those are backed by the full faith and credit of the PBoC, the entity that has exchanged freshly printed yuan for US Dollar export revenues at a pace that would make Bernanke envious.
It's all good in China. All good. A lesson to us all.
Yes, but "we" consume as billions.
This.
China is running a huge surplus of 20 year old guys. For now, they're keeping them occupied working in the sweatshops, making rubber fake dogshit 24/7. When that stops, and these guys don't get so tired that wanking off keeps them pacified, they're gonna start some kind of big fucking trouble.
Unless they're planning to bring back the opium dens, it's gonna break all sorts of bad ways. Those fuckers are gonna run riot looking for trim.
The Chinese and Chinese govt are all about social harmony and keeping everyone working. Don't rock the boat. The want stability. They build absurd ghost cities and endless skyscrapers to keep people busy. Wiping out your biggest customer does not enhance stability. This may happen eventually but I think they will slowly move away from the current status quo. The wild card is the US is falling apart and being destroyed by Obama faster than expected,
One possibility for keeping them occupied would be to direct their energy into hatred of the U.S. because we owe them so much money. They could then blame any economic badness on the U.S.
Yep, China got a tiger by the tail!
As well as a lot of "big name" high-value products. A lot of "American Manufactured" big names are re-badged Chinese - one typical example is Agilent re-branding Rigol 'scopes for the lower-spec. end of their market. In the Marine arena, Lowrance, Raytheon (consumer electronics, hopefully not Military!), even Brookes & Gatehouse, rely on Chinese manufacture (open the devices up and simply look at the PCB printing).
Decades ago, "Made in Japan" had the same "poor quality" stigma as Made in China has now. All changed by one company - Sony.
It has happened before; it will happen again. It is foolhardy to underestimate one's opponent - and doubly so to underestimate the Chinese.
I don't see Japan running anything other than themselves into the ground... they went full retard trying to wrest financial control of the world away from the USA and look what it got them... China, same playbook, same fate... book it, done
You've never played the board game of Go. The Chinese aren't trying to achieve World Currency Status, they see the endgame of such silliness.
the Chinese can sit around and play Go all they want... the USA, however, brings tech and logistics to bear to the point where Checkers and Chess are _solved problems_... Go is next on the list, and the Chinese can't do that... they will end up like '80s Japan, they need only look narrowly across the water to see their end game in play
the Chinese play Go, the USA plays Ogre... and the North American Combine (NAFTA bitchez) rules the planet
Until PBoC floats the yuan. (not mid-rating/pricing everyday) it won't happen. China is accumulating (tangibles) so it doesn't have to float the yuan.
China has, for 5000 years been about one thing. (cultural assimilation) Imagine the population of earth in 206 BC ( year the great wall was opened)
AnAnonomous must be wiping his chinism citizenism roadside skunkism ass.
China is an "ant's nest"...
There's a reason why the RMB is not floated, and it has a lot to do with lessons learned during the asian financial crisis as well as the lessons learned from the Plaza Accord. The Plaza Accord spelled the end of the Japanese economy. That destruction of the peg, sure it boosted the book value of Japan, but in real terms it was devastating, because "GDP" numbers are absolutely worthless. During the AFC, China emerged without any damage. Why? Due to capital controls, speculators were shut out. We live in a time of economic warfare and currency manipulation. Unless you are on "team america" (and sometimes even if you are), they will not hesitate to fuck you over for profit. The ways to prevent this are to gain control first. Japan flat out didn't. Thailand and whatever else, they were in no position to do anything either. They all got fucked hard. China... there's zero reason for them to change anything drastically. The system works just fine as it is right now. The Chinese objective is to move up the value chain and increasing domestic consumption. You see it with autos especially. 2 generations of cars ago, they were a joke, file cabinets on wheels. Recently however, the quality is getting there. Give it another generation to reach Korea-level quality, and another generation to be world class. Exports are already starting to pick up. The major conglomerates such as Haier, Lenovo, Huawei, Wanda, Cofco are building up steam in a major way and arguably are already world class players. The key to success is to control the IP, rather than simply being a factory. When you have BOTH, you get a US-style boom that was experienced from 1950-1970. Control over IP alone is enough to partially sustain, but it does not last. It's a losing battle to stay ahead of the curve as the rest of the field starts catching up. Automation of manufacturing is a disruptive force indeed, however it does not result in the employment levels required to create a prosperity boom, it just sends more money to the top. Outlets must be found to spread the capital around and "raise all boats", or it just flat out fails.
The Chinese strategy is rather obvious. This is a time of transition, and various experiments are being trialed for nationwide deployment of the next phase. Objectives are clear, but the best way to reach them is still murky.
Chinese objectives for this decade:
Clean up the Country: Pollution is becoming an issue, if not in reality, then perception-wise at the very least. With the Siberian High fading, winter "pollution" seems more severe. Expect to see some great studies coming out that analyze the reality of what this "pollution" consists of. Spoiler: it's not all pollution.
Energy: Coal must be controlled with alternatives deployed. Capacity is not so much an issue anymore, the days of blackouts are long since past.
Government: More transparency to cap corruption and involve the public more. There's no need for elections as long as leaders are qualified and competent and the public can recognize they have lines of communication available. Social media is playing a LARGE role in this.
Consumption: Boosting it is required to reduce reliance on exports. This is why you are seeing "scandals" regarding quality so much lately. It all existed before, but there was nary a word about it. The news is more than happy to name and shame now. Why? To clean it up. There runs a risk in harming confidence, but that is a short-term impact.
Health Care: China is in the process of rolling out UHC which will cover 99.9% of the country with decent, base-level care. The social insurance as it is now, is modest, however due to familiarity, many fail to see the benefits of it. Supplemental insurance is seen as far better, however I think that's the point. Ensuring quality, base-level care nationwide with medical emergencies no longer being asset-destroying will tap into much of the domestic savings.
Education: Reform is already in progress. It is being delinked from hukou status with more focus on quality education throughout the system. Universities are greatly improving in quality and becoming world class in their niche areas.
IT: This is a big industry that's given a lot of attention, as is Pharma. China seeks dominance in this and is attracting talent back to the mainland to get it. Underpaid tech monkeys in the US who do all the heavy lifting tend to be Chinese in origin, and capturing them back with good packages is something happening.
Monetary Reform: Something is happening, but it's still uncertain what exactly. The US can whine all they want, but China doesn't have to do much of anything it doesn't want to. The goals are to become a reserve currency. Currency swaps seem to be the preferred method at present. When combined with decent interest rates and an increasing value, those who get a taste of it early will be moving forward with larger swaps. I doubt very much there will be full convertibility until China is in a position where it cannot be attacked.
Transport: China wants to be a hub. High Speed Rail, like it or not, is the future. The barrier to breech is ~500km/h. Once that can be hit, there will be an explosion of new development. Most track laid can handle 550~600 even though the engines are not ready for that. Energy plays a large role in it as well as going from 350 to 400 uses as much energy as going from 0 to 350. Hitting 500 means Europe-by-rail is feasible. Flight times from Beijing to London are currently about 11 hours. 500 means a train can do it in around 16. That's very reasonable. China is expanding lines to SEA, the Middle East and Europe. Effectively making China an international hub. Not just for passenger, but for freight as well. High speed freight is already a priority domestically, as it's far cheaper than road transport. Standard rail is already beyond capacity for freight. Air freight is also beyond capacity. There is major development in all major cities for subway systems as well. The idea being that you can walk 10~15 minutes, get on a subway, go to the train station, take a high speed train, transfer to a subway, get within 10~15 minutes walking distance of your destination. It's all electric-powered, which is the way to go.
Water security: The north-south water transport project is nearing completion for the first few phases. This will help a great deal with the problems. Most water is used in industry, it doesn't have to be the cleanest. Desalination is also a thing. China is in a position wherein all major water sources originate domestically. The only internation disputes would be from OTHER countries losing Chinese water.
Food security: This goes hand-in-hand with rural development. XinNongCun is a massive reform project. The idea being to consolidate villages that are scattered. Allowing for better education, better utilities, and better use of land, while at the same time giving residents better living standards. The corn and soy imports are for animal feed and cheap cooking oil. GMO is only for animal feed, no one wants GMO crap however, at the same time, R&D is being done in China for strains that are acceptable domestically, again, shutting out foreign IP. Furthermore, Monsanto IP does not apply in China. Any seeds coming from an imported strain are up for grabs. Cash cropping is growing, but there is still large emphasis and subsidies for the staples.
Military: All about more modernization still. Huge strides are underway in this. Complain all you want about "theft", but it doesn't mean anything in the end, everyone does it all the same. Expect to see a lot more drones and some surprising moves with the navy and domestic aviation. The US military is still just a paper tiger enemy. Under attack by a superior force, China will not hesitate to deploy assymetrical weapons up to and including nukes, the knowledge of this detracts any nuclear power from trying anything. Other foes, such as Japan, it would be insta-nuke. India would be interesting as well. Everything else, China's just fine with conventional forces. The US on the other hand, due to the contractor corruption, they have a bunch of shiny toys that cost WAY too much to be able to afford losing any. The fun toys are simply not deployed until the conventional cheap platforms have cleared the way, it's too much of a risk. As such, shit like the F-22 are a joke. Carriers are not deployed if there's a chance of them being sunk. The carriers of today are not your grandpa's carrier. Knocking out shitty rustbuckets is easy, the stuff nowadays takes considerable time. The Chinese strategy is based around platforms that are economically efficient. Anything serious would kick China into total-war mode, and with the industrial base that exists now, it would be fucking scary. No real point to worry too much about war with China, everyone would be fucked just the same regardless of who has the shiniest toys.
Housing: As much as everyone screams "bubble", it's not really one. Outside the 1st tier cities, housing is cheap. Just because an apartment in Manhattan sells for millions, doesn't mean that a house in Bumfuck Oklahoma is overpriced at $50k. Location is everything. Cheap city housing just isn't in the cards, cities are already overcrowded, cheap housing attracts more who really do not belong in the cities. It's like an economic form of hukou control. You're free to try your luck, but unless you are special, you'll be miserable... better off in smaller cities. Beijing Hukous are better than gold now. Economy housing and housing projects are available cheap, but only to locals. In the event of a "pop", there are so many restrictions and controls in place that are there specifically to LOWER prices, that there are tons of tools to use in controlling the event. It's not a problem.
Whine bitch and moan about China all you want, but it's not going to "fail" anytime soon. In fact, it's going to keep growing, mainly due to the fact that it has actual strategy and plans beyond "the next election", and the ability and will to enact them.
Westerners seldom realize that the Chinese will only reach for their goals indirectly, off to the side -- not head on. Getting all huff-puff ready for a head to head confrontation, economically or otherwise, means the West simply took the bait.
This article is intended for stupid people.
Intelligence has nothing to do with it. Many people are just waking up and this information will come as a surprise to them. Don't be proud to those who follow you. Lift a hand and help them.
The American Republic is no more, this is now the American Empire. The only way to restore the American Republic is to slash both parts of the Welfare/Warfare State, and if it takes the collapse of the dollar to do it then so be it. I also hope to someday see the elimination of the Executive branch of the Federal Government, and most Federal power devolved down to the States.
the catalyst for this is being set up as we speak. if the usa manages to make peace in the mid east, ex israel and saudi arabia, there will be a false flag that will plunge the world into chaos triggering a collapse in the dollar as the new safety trade moves into the yuan or yuan linked currencies instead of treasuries.
this, ironically, will be the samson option israel has talked about albeit unintentionally.
http://www.youtube.com/watch?v=qK6ftzkX7xc
Still more to report, QE injections are inlcuded in GDP numbers... Nice huh!
the gross value of every trade that is made is added to the gdp also. the real value of most of the financial part of the economy is low single digits percentage of the counted number.
I feel like I read this exact article last Friday.
swear to god… i was thinking the same damn thing at the moment i read your post.
the experience left me shaken, but not stirred.....
You did.
It was on a different website.
ZH just got around to posting it.
I saw it on WRH and BLN and some others during the week.
Tell us something, would you?
When you open the blinds and see a brushfire outside your living room bay window, looking like it might actually come and burn your house down, and you have your television on, and the pretty girl/boy on the news says that the firemans have it 'contained', what do you do? Turn the channel and watch foosball, or pack up the car and get you and the family out of danger?
Hey, you can't actually FEEL the heat or smell the smoke yet, so your eyes must be lying...
SO, what's the score? is 'your team' winning? (Don't pay any attention to the sirens outside. Probably the LEO's strip-searching a girl for failure to show her tits)
You want to sample IRONY> The largest exporting nations such as Saudi Arabia (oil) and China (cheap plastic trinkets at Wal-Mart) end up with massive piles of U.S. dollars...
Is that co-dependency, or symbiosis? I'm confused ?
But dollars are debt. Our debt. And if you wanted to control or dominate someone or some country, you can either do it with guns and bombs or with debt. The inscrutable Chinese always think in the future. Americans, on the other hand, are lucky if they think a month out, and thereby are driving blind and vunerable. The Chinese, like Obama, care not one bit about their people beyond how we might impact them. We saw how Mao was willing to murder and starve millions in pursuit of his dream. The current leaders are no different. Do not think that they would hesitate to damage their own economy to defeat us. Hell we see Obama doing it every day. The Chinese leadership's absolute control of their media is Obama's wet dream and they will use it to manipulate their population to suffer almost anything if so needed. This has always been a competition. Americans have been winners so long they have forgotten that fact. Our arrogance will likely be our undoing.
I thought? I made my point Oldwood. After reading your ¶ unbroken thoughts ¶ I'm beginning to understand.
There's no disputing your wisdom. You remind me of my Grandfather.
@Yen:
It's co-dependancy, no question.
UNFORTUNATELY, the U.S. is the so-called 'co-dependant enabler' (I.E., the one always giving the abusive child/wife/husband whatever it needs to get them to shut up/quit hitting them). in the end, the enabler ALWAYS gets slaughtered.
A 'co-dependancy' relies on two twisted, warped, and needy partners (more partners, in deeper scenarios). 'Some of them want to abuse you, and some of them want to be abused'. Think of it as geopolitical sado-masochism.
How does a sadist torture a masochist?
When the masochist says, "Hit me! Hit me!", the sadist replies, "NO!, NO!"
At this time, I must insert the obligatory video that describes the sadomasochistic relationship (along with the quote used):
http://www.youtube.com/watch?v=qeMFqkcPYcg
I have an idea! PRINT MOAR MONEYS!
well said Oldwood. Pride goeth before the fall
Not only Pride but outright trickery under good ole Ronnie.
To understand what is happening today to USA just read what the US of Reagan IMPOSED on Japan during the Plaza monetary Accords obliging it to reappreciate its YEN and shove it ALL into RE at home; in order to allow the USD to depreciate and US current account deficits to decrease.
RR played financial hegemon with the rest of the world to protect his own industry. So much for free markets. He did the same with Fahd of Saud in 1982, with the Iraq Iran war breathing hot, by IMPOSING : Open wide your OIL tap. We need cheap oil.
The effect of Plaza agreement on Japan was to send it to sleep in malinvestment bigtime like US is now witnessing.
What goes around comes around in the end. Japan is now deep in shit and so is USD now 'plaza'd' by the Euro and Yuan currency wars.
Plaza Accord - Wikipedia, the free encyclopedia
"Our entire way of life in the United States depends upon this game continuing."
It is not “Our entire way of life” if you think I’m included in your “Our” here is a clue for you.
I was never a part of your “Our” and don’t plan on joining your club soon.
Good luck to you on gamming continuity.
Count me out of your We, Our and Us thing.
It does not exist.
That is not particular to China/Mao and USA/LBJ-Nixon-RR-Bush-CL-GWB-OB regimes.
Its the game of Oligarchs and hubris since the house of Atreus.
Just look at history : every nation's Hegemon in search of total power has been down that road ready to sacrifice its people in that "holy grail" vision. MOar wars, currency or otherwise (including maybe Oppenhiemer's toy in asymmetric plays) !
Its Pax Americana's turn and that 1980 ramp up at RR's election has now made this a blind alley. Too late to turn back due to flawed hubristic mindset.
What is very critical to understand is that Pax Americana still holds the upper hand. If it wants debt jubilee and new reset at the price of sacrificing its Oligarchy wealth and exchanging it for debt write off in TRILATERAL developed economies + surrogates (Chindia + ME Oil), locked into its economy, it STILL can. IT STILL CAN.
As all economies are so fragile if that $ fall comes like in 1929 crash squared or cubed. Economic war and what follows can still be avoided.
Its still time to create a debt jubilee and ORGANISE a retreat from global debt by shutting down the casino and reigning in the TBTF and the financialised global economy. PROACTIVE instead of REACTIVE thinking is necessary.
But alas, its beyond the means of the current surrogate political class and their paymasters : rich offshored Oligarchs in Caymanista wealth. The guys who have benefitted from the Outsourced casino.
We are heading for the Cliff. Those whom the Gods condemn they first drive fiat crazy by the looks of it. Play on currency wars and derivative casino.
For the record : the tipping moment in this hubris was the 1981 US deregulated about turn into asset ramp to curtail welfare state spending (which it didn't as hubris got them pumping both FIRE assets and consumer appetites in unlimited debt bonanza).
We in the West had the illusion we had our cake and ate it!
Now it looks like the Trilateral Oligarchy thieves are falling out. Every man for himself or in short term expedient alliances. And damn the 99%.
Maybe, maybe, China today is where the USA was in 1900...
if any of you beleive that the dollar will be the reserve currency for ever I got news for you.
If you believe/think GM has stronger sales in 2013 vs 2008 I've got news for you...
Forever is a very long time. Even the biggest dollar bulls would never believe such a thing. But once you state a specific time frame, it is a different story.
Russia lost the USSR - a big currency collapse, reset, the insiders bought up everything important and strategic for cheap. Now Russia is smaller and no longer an empire. Same thing will happen in USA.
History won't repeat. The USSR was very vulnerable to collapse because it could not feed itself. The USA does not have that problem. There may be some rhymes in history, but not a repeat.
Good point.
Now riddle me this. Does China import or export food?
china is not a food power by any stretch of the imagination... the USA most certainly is
"The USA does not have that problem" You sure bout that? The folks on the local radio station were bringing attention to efforts by a local organization to feed the 1 out of 4 kids in the state are going hungry. This was being done just this morning while I was driving to work.
Yeah, and the next beg a thon will be for "warm hearts" to keep their thermostats at 85 degrees. And don't forget the winter coat drive for the little parasites, or August's school backpack chock full of supplies.
And there were headlines today about the CEO of some food pantry organization lamenting how the 9.00 a week cut was catastrophic.
You see, begging is big money. Idiots feel COMPELLED to give, be it sad little kiddies and puppies, or kids with distended bellies and flies blowing their runny noses, all you have to do is play a little mournful soundtrack the rubes shell it out. It would be interesting to see the payrolls of some of these "charities", fuckers make more money than some NBA players.
@ 'andrewwp111:
Hey, Rojer Ramjet,
You aren't paying ANY attention, are you?
This is actually old news. The United States has been a NET IMPORTER of food for probably 7 years.
http://www.wilderness-survival.net/forums/showthread.php?1895-Is-Bonner-...
How about electronics? WHERE is the keyboard or computer or television made, Buckley ('Homer Simpson')???
Oh, and the CARS...
Your clothing?
Shoes?
Hell, the French company NESTLE is getting so desperate to gut this nation that it is buying up WATER RIGHTS. YES, you get to buy FOREIGN bottled water as well, Bitch-Boy. They can't even make chocolate here, as the plants close up in the CONUS...
YAY! TEAM AMERICA! It could NEVER happen HEER!
You best take that brown bag off'n yer head, neocon bullshitter!
The worst lies are the ones that you say, and believe yourself, you foolish poster!
Wait for it: WHAT are the gross exports of the United States?
You can fact-check this but it falls in to TWO categories:
RECYCLABLES (garbage), and MILITARY WEAPONRY. Ever wonder about the massive recycle project after 9/11? Hell, there was SO MUCH STEEL over at 'Fresh Kills' landfill...AND, it all went to...CHINA!
Obligatory video link:
http://www.youtube.com/watch?v=tX5ZRE26YWM
NET EXPORTS in the last 10 years:
DEATH!
no... USA is largest producer and exporter of food... not to mention the undisputed champion of 'food power' in the world today... sorry, but if you're trying to create doomsday scenarios for the USA based on USA's inability to grow food and feed its people... well, good luck with that
China has to unload their trillion dollar stash first if they want to crash the dollar. China is not going to intentionally shoot itself in the foot. China may be preparing for a De-Americanized world, but I really don't think China is going to pull the trigger. Someone else will. Someone else who has nothing to lose and everything to gain. There is only one such Someone that stands out like a sore thumb - Iran. Once Iran deploys deliverable nuclear weapons, it is Game Over for the Petrodollar. We are very close to that point.
You just don't get it, dickweed.
China doesn't GIVE A SHIT about some worthless ponzi currency. They couldn't care LESS about the welfare of the population there OR anywhere else. It's NOT about the FAKE DOLLAR RESERVE STATUS, or the fact that it has 2 trillion or so in CHARMINS.
Nevertheless, you might be correct about China not causing the crash.
WE DID IT TO OURSELVES, a long time ago, and the ponzi keeps rolling on and on, only forestalled by the stupidity and ignorance of the American sheople, combined with the whole 'empire' thingie brought about by simpleton bankster neocon/neodems who don't give a shit about their populations EITHER (or any other 'collateral damage' while they pursue the ultimate soft totalitarian superstate of the 'future').
What was that famous quote about giving the Americans enough rope to hang themselves with?
Didja think that this fucker was KIDDING when he declared this in the U.N. General Assembly in the fucking 1950's?
WELL, so it's IRAN, is it?
BOMB BOMB, BOMB, BOMB BOMB IRAN, you neocon fuck!
GOD! What an OBVIOUS SCHILL for the LIKUDS!
FUCK YOU, McCAIN! FUCK YOU, Israeli DUAL CITIZEN! FUCK YOU, over there in HAIFA!
http://www.youtube.com/watch?v=o-zoPgv_nYg
I suppose YOU are the one asking Songbird McCain the 'tough question'!
Don't think the Chinese want to crash the US economy but they are obviously pissed off that their 'safe' investment in $US T bills turned out to be uber risky. Game plan? Gradually move away from using the $US by using all that cash to buy assets, including gold. Once they are happy with their position they can allow the $US to drop thus helping US exporters and ensuring the US doesn't go down the toilet (don't want to lose a good customer entirely) but also strengthening the position of the Yuan as the best and safest currency with strong gold backing.....at some point international contracts will be settled in Yuan as it will be a more reliable currency than the debt ridden and highly manipulated $US. When will this happen?...... I don't know, next Tuesday?
Chinese stopped buying T-Bills in 2008. Their balance had dropped form a high of $1.35T, then, to a current balance of $1.05T (and falling).
US military power is our ace in the hole. China will experience massive unemployment and social unrest if the current US $ status is changed. Also other countries are not willing to trust China. the US has been the world biggest military and economic power since WWII. Change will be gradual over decades. China will move to a super power in Asia, then the world.
us military is our ass driving us further into the hole. It is not an economy and no longer works to control or intimidate the world economy. It only makes more enemies and more resistance and is now being used against its own people. It is the same historical pattern of most empires.
China has nuke's right?
Intercontinental's aimed at our east coast and our west coast targeted by their submarines.
So now they may defend their own reserve currency if they choose.
the USSR had more nukes than modern china ever dreamed of having, but never at any time was the ruble a threat to become the world's reserve currency... next!
If the russkies had went to a gold standard it may have had a chance.
@ 'tempo':
One
Stupid
Cowardly
Mother
Should have gotten you away from the television when you were watching. NO? Well, too much of the Zbrinski books, I suppose.
YAY! PNAC!
REBUILDING AMERICA'S DEFENCES...
Your' ace in the hole' is getting GUTTED, and spread all over the globe, while the CHICOMS are preparing to participate in JOINT MILITARY EXERSIZES in HAWAII in the time between 12 and 14 November (or so), you fumb ducker.
http://canadafreepress.com/index.php/article/59113?utm_source=CFP+Mailou...
HMMM. The Japanese were known to have given actionable intelligence in preparation for Pearl Harbor; taking pictures and drawing diagrams of the American defences there in preparation for the attack on december 7. you should trust them, or else you are 'RAYCISS'.
Some people are blind; willfully, I suppose, 'tempo'.
How about that whole 'reverse-engineering' thingie of the AWACS plane, back in '99?
US Dollar daily shows upside into next week
http://bullandbearmash.com/chart/dollar-daily-close-sharply-euro-continu...
USD weekly and monthly show upside too
Let the nukes fly, it will be worth it, even if I am vaporized within a few milliseconds at some point, to see the blankfeins', dimon's, obama's, rubin's, paulsons', bush's, and clintons' of the world fry with the rest of us.
the reality of all this is china would really like the usa to put off its collapse for a few more years to make sure they are prepared to take over the world. they are willing, in the short run, to continue to prop up the usa and dollar. they would also like he usa to go peacefully like the ussr. on the other hand, they know they cannot time the collapse of the usa so they probably have all sorts of contingency plans working for the different scenarios they foresee and they are rapidly building up a defensive military. one of the reasons for the land dispute was to test usa committment to japan and measure the capabilities of the japanese navy.
so, the collapse will not happen soon without some external catalyst but when china is ready the usa better beware of a direct chinese catalyst for usa collapse. americans have a hard time realizing the extent of the deamericanization movement in the world. the fact that china has mentioned it directly aimed at the usa should create a lot of fear.