Debt Rattle Jan 23 2014: In Debt We Trust

[Raúl Ilargi Meijer]

Jack Delano “FOR THEM, BOMBS : Chicago, Union Station” January 1943 Does the Chinese alphabet have a question mark? If not, this would be a good time
[See the full post at: Debt Rattle Jan 23 2014: In Debt We Trust]

[Rebecca]

Here’s the wild card with China: they are not as far along the Imperial expansion curve as the U.S., and its leaders have NO compunctions about doing whatever they think is necessary to keep their country “on track.” China has been quietly allowing its citizens to colonize Siberia for nearly a decade (and Russia has allowed this, well, because its Siberia) and China has already turned several small African nations into de facto Chinese colonies. When the SHTF in China, I see it as very likely they will just move full steam ahead into Imperial expansion. Taking over smaller countries would be a great way to refill the national coffers a la Rome and every other empire in history. A shooting war would also give them a use for all those young men with no prospects and no hope of marriage. Not that they would go directly up against the U.S. or even Japan (at least not yet), but there’s plenty of small African and far Eastern nations with resources that a country like China could easily take over and exploit.

[Raúl Ilargi Meijer]

The Chinese people had been allowed a taste of money and freedom. From there on in, it’s just a matter of time. As one my daily links said yesterday: complex systems need freedom of action. Now they’ve let it come this far, for Beijing clamping down would mean killing off the economy, if not all out warfare with the underground systems, shadow banking, mob. Going to war with Japan? Kills the economy. Smaller prey? Would not be accepted. Total state control doesn’t rhyme with an economy based on profits. A 1000% rise in money supply is nothing something you easily reverse. And then there’s voices calling for more of the same, because the Chinese don’t spend their money fast enough. Half the politburo is already in bed with with the shadows, and for the other half reinstating full force is not an option anymore. Hard to predict how it will turn, but back to same old same old looks undoable.

[Raleigh]

Great article, so interesting. “Ambrose talks about China as well, and also writes about the need to pour more money into the system.” Good God, how much more is enough? This is going to be one for the record books when it falls; that is, if they ever let it.

Charles Hugh Smith (who I believe has a Chinese wife and friends who fill him in) had a good article as well re China and India entitled, “Two Powder Kegs Ready to Blow: China and India”:

“The conventional rose-colored view is that corruption will inevitably decline with modernization and economic growth.

This is simply wrong on multiple levels: as the opportunities for crony/neofeudal skimming increase, so does corruption. As the scale of the economy increases, so does the scale of corruption. […]

Even the top number is a gross underestimate, as $4 trillion only accounts for the skim of the top layer; beneath that 1/10th of 1% is the rest of the top 1%, tens of thousands of lower-level political functionaries who skimmed billions of dollars forcing peasants off their land and selling development rights to crony developers–to name but one common skim of many. [He then talks about the various skimming methods and how they get their money out of China].

All this systemic corruption is accepted as long as the conveyor belt of wealth is moving: that the previous political Plutocracy skimmed their $4 trillion and absconded with their ill-gotten gains is OK to their replacements, as long as there is another $6 trillion to be skimmed.

The problem is there isn’t another $6 trillion to be skimmed. It has taken an enormous credit bubble of $23 trillion (The $23 Trillion Credit Bubble In China Is Starting To Collapse – What Next?) plus the monumental credit expansion of the shadow banking system in China to enable the skimming of $6 trillion by the political/financial Plutocracy.

This $23 trillion credit bubble is roughly twice the size of China’s entire GDP ($12 trillion). That this credit bubble is generating less return in the real economy is obvious–diminishing returns have set in with a vengeance.

The revolution never starts with the oppressed peasantry–it starts with the bourgeois who bought the fantasy of another $6 trillion to be skimmed and credit bubbles/ real estate valuations that never go down. The leadership in China has managed to create a propaganda bubble of epic proportions: Chinese leaders are supposed to have a long-term view that puts the West to shame. [,,,]

The spark that ignites the powder keg cannot be predicted or suppressed. Don’t look to the disenfranchised peasantry as the source, though they are ready enough to cast off the Powers That Be; look to those who believed the gilded promises issued by the looters and discovered that the fruits of their labor and their hopes is disillusionment on a scale as vast as the skim looted from their nation by their self-serving leadership.”

https://www.oftwominds.com/blogjan14/powder-keg-Chindia1-14.html

So the current leaders will try to keep the gravy train going (so they can too escape with their loot). If they can’t do the same as the previous looters, then watch for the sparks to fly.

[cserrate]

Ilargi and Nicloe:

Thank you for your articles. I have been reading about the monetary issues in Venezuela and Argentina. I have a hard time understanding it all-foreign reserves, capital controls, currency stability, how it relates to inflation/ deflation, gold reserves, imports/exports, standard of living, etc. What would a country do to match the offiicial exchange rate with the black market rate, and how would this move affect its citizens. I have a hard time getting my brain around all this(too much wine in my youth, I suppose). Maybe you could devote an article around the above issues, and compare with US monetary policy.

Thank You in advance

[Viscount St. Albans]

To I&S: How far into the future do we need to go to imagine scrappers and strippers prying apart the complex metal alloy turbines at the three gorges damn, to sell the scrap shreds on the black market for pennies on the dollar of production cost. That is a mad max world. Is it 10 years hence? Or 50 years? Do you venture to even guess at that sort of thing?

[Viscount St. Albans]

Physical cash will soon be gone. We’re going digital. Negative interest rates require it.

The short end of the Treasury curve will go significantly negative in the next leg down for equities. You want the medium dated 3-year and 5-year T-notes. Mario Draghi and Larry Summers have now floated the trial balloons on negative interest rates. They will require severe restrictions on cash and bank fees galore.
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