The China Narrative That Really Matters
Submitted by Ben Hunt via Salient Partners' Epsilon Theory blog,
Most directly on the topic, read "When the Story Breaks". It's a quick read and introduces an Epsilon Theory perspective for how to think about China.Most recently on the topic, and why the Chinese currency devaluation kicks US equity markets right in the teeth, read "Storm Warning".Most fundamentally on the topic, and why the Chinese currency devaluation is an existential issue for the Beijing regime, read "The Dude Abides: China in the Golden Age of Central Bankers".There are other notes on China if you're so inclined, including: "The Donkey of Guizhou", "Rosebud", and "The Power of Why, Exhibit 4,512 in a Continuing Series".For a related note on the overall Emerging Market story, read "It Was Barzini All Along". For an Epsilon Theory perspective on oil prices, read "The Unbearable Over-Determination of Oil".
"This is a completely different Narrative than the growth story, and it’s the story that one-party States rely on to prevent even the thought of a viable political opposition. In highly authoritarian one-party nations – like Saddam's Iraq or the Shah’s Iran – you’ll typically see the competence Narrative focused on the omnipresent secret police apparatus. In less authoritarian one-party nations – like Lee Kuan Yew’s Singapore or Deng Xiaoping’s China – the competence Narrative is more often based on delivering positive economic outcomes to a wide swath of citizens (not that these regimes are a slouch in the secret police department, of course). From a political perspective, this competence Narrative is THE source of legitimacy and stability for a one-party State. In a multi-party system, you can vote the incompetents (or far more likely, the perceived incompetents) out of office and replace them peacefully with another regime. That’s not an option in a one-party State, and if the competency story breaks the result is always a very dicey and usually a violent power transition."
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SDR inclusion, AIIB, SGE, BRICS, CIPS, just acquired largest gold/silver vault in London and the physical ownership of vast amounts of precious metals to fill said vaults on foreign soil (in preparation for the gold-backed RMB) who are we kidding...they will demolish what's left, that is still barely holding the West together financially.
It's only a question of time...the hour of the petro-dollar's demise, is at the leisure and pleasure of the East.
I am confused, which single party state that does not entertain the thought of another are we talking about...
a collapse in the Narrative of Chinese Government Competence is the biggest systemic risk out there right now
One of my comments yesterday included this very important point. If the government loses the trust it has built up with the Chinese people since Deng Xiaoping started initiating reforms and their prosperity has expanded their goose is cooked. The various generations in the population now participating in the fake global stock market will cast it out very quickly to protect themselves. And any resulting market effects will carry over globally.
Some of the problems here are that the existing market in the West was a fraud that has expanded and progressively gotten worse as China had entered into it. On top of this China had its own pre-existing problem areas that weren't dealt with before entering this market (i.e. shadow lending). These compound their risk and consequently the risks of others. Not only in the market but with their currency and position in the IMF. The IMF which is just another extension of global fiat fraud.
Ben used "Heads will roll" for a communist government which I found amusing because that's the famous fascist character Major Hochstetter's line. Heads will roll is a common reaction of all types of governments that rule tyrannically over their people after they fail in their duty and their jobs effectively. I'm confident the Chinese government is more than capable of managing their situation in a way that retains the confidence of the public without being heavy handed and addresses their existing issues without escalating tensions.
China won't be able to do this without international financial cooperation. And the more the world's economies are integrated the worse this will all get. At least until everyone's preexisting issues are identified and fixed, the global marketplace is allowed to find its actual realized value and all nations have stopped positioning for self-serving goals. This patchwork can't continue indefinitely.
I was especially impressed by how the author quoted HIMSELF in the article.
Well Done!!
The most important narrative is that both the Chinese government and investers are learning. Their market will be less volatile as they accumulate more experience.
Mr Hunt quotes the Murdoch media which “has the impression that Chinese authorities are out of their depth”.
That does not apply to the US Fed?
Mr Hunt predicts “heads will roll.”
Isn’t that what’s needed at the US Fed?