As usual, I have to cobble together a whole lot of articles to prove my point. In this case, I made a prediction that China plans to work in concert with Russia and OPEC to engineer a replacement of the US fiat world trade dollar and replace it with a GOLD BASED system. This will happen suddenly due to all such monumental changes in world trade currencies are very sudden. Meanwhile, the G20 meeting ended with lots of promises that can’t be filled due to the fact, the US is insolvent. Everyone hopes to have the previous status quo return. It is gone forever.
Mobs of angry Brits stormed the Bank of England which is now extremely exposed, it being the world’s oldest central bank. The defunct Bank of Scotland was also attacked by raging mobs. This is only a first shot in an evolving war. The news that protestors managed to get their hands on an armored personnel carrier is another sign, these things are getting much more serious than a bunch of peaceful protestors marching, wearing sea turtle outfits.
Global leaders took their biggest steps yet toward a new world order that’s less U.S.-centric with more heavily regulated financial industry and a greater role for international institutions and emerging markets.
Already, this has totally broken down. Why do I say this? Well—this week, the US Congress bowed to howls of rage from their owners, the hell hounds, pirates and gnomes who wrecked the world’s economy, and passed a law undoing the Bank of International Settlements rulings forcing banks to accurately price paper products they hold.
The entire point of the BIS rules was to prevent hyper-lending by pirates, hell hounds and gnomes who pretended a bunch of trashy paper products filled with loans that were in default, from lending even more money to deadbeats! Now, they will resume their nefarious activity of flooding the planet with debt.
At the end of a summit in London, policy makers from the Group of 20 yesterday delivered a regulatory blueprint that French President Nicholas Sarkozy said turned the page on the Anglo-Saxon model of free markets by placing stricter limits on hedge funds and other financiers. The leaders also pledged to triple the resources of the International Monetary Fund and to hand China and other developing economies a greater say in the management of the world economy.
They are not simply agreeing to give China more power, they must do this since China has this thing called ‘Sovereign wealth’ which the US has absolutely $0 in sovereign wealth. We don’t even have a real FOREX holding, either! Germany’s FOREX holdings are doubled the US. Ditto,their gold reserves. China’s FOREX dwarfs the US. The US is around $72 billion and China’s is around $2 trillion.
As for the stricter limits on pirates: HAHAHA. The US will evade all of these by passing laws circumventing any controls thrown up by the BIS or any other world organization!
“It’s the passing of an era,” said Robert Hormats, vice chairman of Goldman Sachs International, who helped prepare summits for presidents Gerald R. Ford, Jimmy Carter and Ronald Reagan. “The U.S. is becoming less dominant while other nations are gaining influence.”…
It is not merely a vacuum. When the Soviet Union fell, we had this sudden vacuum which the US exploited in order to fill it with military bases in the insane hope, if we became a very big empire, no other empires could ever, ever defy us.
This cost a fortune and we went into wars, one after the other, trying to expand our base. This caused our military spending to expand and expand, not contract, after the USSR collapsed. Now, our mighty empire is beginning to teeter and fall of the same cliff and in exactly the same place, Afghanistan.
And instead of us filling a vacuum, we are seeing the Chinese fill the economic vacuum our wild military spending opened up.
A new Financial Stability Board will be established to unite regulators and join the IMF in providing early warnings of potential threats. Once the economy recovers, work will begin on new rules aimed at avoiding excessive leverage and forcing banks to put more money aside during good times.
ONCE THE ECONOMY RECOVERS, then they will put in rules???? See! This is all smoke and mirrors. The US has NO intention of fixing anything that is wrong. Nor does Japan want this. They both want the Japanese carry trade to resume. And the easy lending return via calling crummy deals ‘assets’ and valuing them much higher than their true worth.
German Chancellor Angela Merkel, who had unsuccessfully sought to convince the U.S. and Britain to sign on to similar steps before the crisis began in mid-2007, hailed the communiqué as a “victory for common sense.”
No, it was fake. It is like a drunk swearing to his wife, ‘I won’t drink anymore’ and then going out behind the shed and getting totally blotto.
The U.S. did, though, take the lead in getting the summit to agree on an increase in IMF rescue funds to $750 billion from $250 billion now. Japan, the European Union and China will provide the first $250 billion of the increase, with the balance to come from as yet unidentified countries….
HAHAHAHA. Japan, Germany and China [there is no EU here!] all agree to put up another $250 billion for the IMF. The US will do what? Print up more money for the IMF? Actually, we hope to sell more debts to Japan, Germany and China at 1% interest or less and then hand it over to the IMF? What on earth is this? Then, the IMF will lend it to third world nations and order them to sell all their resources to US based pirates and gnomes? Right.
The G-20 also agreed to an allocation of $250 billion in Special Drawing Rights, the artificial currency that the IMF uses to settle accounts among its member nations. The move is akin to a central bank such as the Federal Reserve effectively creating money out of thin air, except it’s on a global scale.
The IMF always depended upon the US taking on more and more debt to fund the IMF so the US gnomes could raid poor countries in financial straits. Now, everyone, including the third world victims of the IMF, knows the US can’t get China to buy up US IOUs. And why should China fund the US stranglehold on the IMF?
CHINA PLANS TO TAKE OVER THE IMF.
This is pretty clear now. The Chinese will use the IMF to impose the gold-based lending/international trade system.
The increase in Special Drawing Rights will allow countries to tap IMF money without having to accept changes to economic policies often demanded as a condition of aid. The cash is disbursed in proportion to the money each member-nation pays into the fund. Rich nations will be allowed to divert their allocations to countries in greater need.
HAHAHA. They don’t have to do what the US gnomes, pirates and hell hounds as well as the CIA want! From now on, China will call all the shots. Instead of the US going to China to sell Treasuries, the US will have to go to the IMF for more money!!!!
As Sheng, when he was living with me, said twenty five years ago, when he finally figured out how magic money really works, ‘I be bank!’
The G-20 said they would couple the financing moves with steps to give emerging economic powerhouses such as China, India and Brazil a greater say in how the IMF is run.
No kidding! India and Brazil are thrown in as a sop to hide the rise of Chinese influence! The Chinese have the immense sovereign wealth fund, not Brazil and certainly, not India.
China will be the one leading this change and forcing it along. In alliance with Russia and OPEC. For the third time, OPEC has been ‘cheated’ by the US who forces OPEC to always reinvest in US paper systems only to see everything suddenly lose value. If OPEC could park profits in GOLD at the IMF central clearing house for world trade, it won’t be inflated away by US printing presses! See? Look at the next story: another major player who advises the UN and who worked for the IMF in the past, suggests we do as the Chinese say.
A UN advisor has suggested that a basket of currencies – including a regional currency in Asia – could replace the US dollar in shaping the global financial system.
“I think China should play a cooperative role with Japan, South Korea and other Asian countries to introduce a regional currency while the world is trying to replace the old reserve currency system,” Jeffrey Sachs, special advisor to UN Secretary General Ban Ki-moon, told China Daily on Wednesday. Sachs is also professor of Columbia University.
- Sachs is known for his work as an economic advisor to governments in Latin America, Eastern Europe, and the former Soviet Union. A trainedmacroeconomist, he led many countries in the transition from communism to market economies.
- In 1985, Bolivia was undergoing hyperinflation and was unable to pay back its debt to the International Monetary Fund. Sachs, an economic advisor to the Bolivian government at the time, drew up an extensive plan, later known as shock therapy, to drastically cut inflation by liberalizing the Bolivian market, ending government subsidies, eliminating quotas, and linking the Bolivian economy to the US Dollar. After Sachs’ plan was implemented, inflation fell from 20,000% per year to 11%, though according to critics, left the country worse off than before due to a rise in unemployment, a fall in industrial output, and a fall in per capita GDP.
- In 1990, the Polish government introduced shock therapy to break from communism. Sachs and ex-IMF economist David Lipton advised the rapid conversion of all property and assets from public to private ownership. After initial economic shortages and inflation, prices in Poland eventually stabilized.
In late 1991, the Russian government invited Harvard to give advice on reproducing the Polish success. Harvard economist Andrei Shleifer advisedPresident Yeltsin on privatization and macroeconomic issues during the early stages of Russia’s reforms. Sachs resigned shortly thereafter.
He said China’s central bank governor Zhou Xiaochuan has come up with an innovative idea to introduce a global currency in an effort to redefine the rigid global financial regime, which has undergone no major change since World War II.
“However, I think the US dollar, British pound, euro and a regional currency in Asia can shape a basket of global reserve currencies with their own special drawing rights,” said Sachs, who is with the UN delegation attending the G20 summit.
Sachs was one of the crew who tore apart Russia. Putin repudiated him pretty fast. So has Brazil, for that matter. Now, relentlessly, Sachs is going to tell us to drink the same poisons that nearly killed Russia and Brazil. But then, his prescription does kill inflation!
Killing the Goddess of Inflation is very, very difficult. Usually, the banking systems that elect to release Her from the Cave of Wealth and Death, are reluctant to kill Her due to the high social costs. So they put it off, as She flies ever higher. Adding zeroes is very, very easy indeed! So they do it until things totally are out of control. I notice that Zimbabwe’s epic inflation barely makes the news in America.
On the other hand, it has been big news in China and Germany, for example. This is due to real fears of the Goddess of Inflation. The Chinese also know that zero is a magical force and its allure is its easiness: anyone who dares to use zero to increase wealth end up dead. 0% inflation, 0% savings rate, 0% reserves leads to total poverty in the long run. We just saw most of the savings of the West vanish in a puff of smoke in less than two years even as the US apes Japan and imposes a zero-zero-zero system on a culture that wants infinite wealth while not managing production or trade at all.
A lot of people admire Krugman. I think he is blind as a bat. Increasingly, I am annoyed with him, almost as annoyed as with Friedman, the other clueless NYT financial commentator:
But these days, both sides of that deal are breaking down. On one side, the world’s appetite for Chinese goods has fallen off sharply. China’s exports have plunged in recent months and are now down 26 percent from a year ago. On the other side, the Chinese are evidently getting anxious about those securities.
Krugman is talking about the $700 billion in Chinese-held US Treasuries. As per usual for the blind fools who write for the mainstream media, he ignores Japan’s nearly equal-sized Treasury holdings as well as their immense FOREX holdings.
But China still seems to have unrealistic expectations. And that’s a problem for all of us.
This sentence alone, shows Krugman to be a total idiot, a fool, a blind blundering, lost soul. One thing about the Chinese leadership: they are ruthlessly realistic. They play a hard and fast game based on really understanding what their real options are. They are playing Go while the US is playing hopscotch.
The big news last week was a speech by Zhou Xiaochuan, the governor of China’s central bank, calling for a new “super-sovereign reserve currency.”
Understandably so! The Chinese are now in the position of being able to dictate immense changes in how money works.
The paranoid wing of the Republican Party promptly warned of a dastardly plot to make America give up the dollar. But Mr. Zhou’s speech was actually an admission of weakness. In effect, he was saying that China had driven itself into a dollar trap, and that it can neither get itself out nor change the policies that put it in that trap in the first place.
I see NO talk in China about being trapped at all. Nor do I hear them saying, ‘We are weak!’ Six months ago, they had very quiet talks with Putin about all this. Now, Medvedev is echoing Putin in all this. Iran was first in announcing, the dollar was no good for energy markets. Since that day, two years ago, things have moved very rapidly forwards.
Both Russia and China alternate in telling the world, the shift away from the dollar regime to the New World Order system is rapidly approaching. The latest articles in China today makes this crystal clear. Smart people are listening to these warnings.
Some background: In the early years of this decade, China began running large trade surpluses and also began attracting substantial inflows of foreign capital. If China had had a floating exchange rate — like, say, Canada — this would have led to a rise in the value of its currency, which, in turn, would have slowed the growth of China’s exports.
Canada is mostly an OPEC-style country. They sell lots of profitable energy. They also are a manufacturing export country as well as a GOLD mining country! And thus, the allure of a new system that couples all of these elements is quite powerful. So far, Canada, like Mexico, loves the US system because both run big trade surpluses with the US, too. And both are being ripped off by the US not keeping our dollar’s value steady.
But China chose instead to keep the value of the yuan in terms of the dollar more or less fixed. To do this, it had to buy up dollars as they came flooding in. As the years went by, those trade surpluses just kept growing — and so did China’s hoard of foreign assets.
THIS WAS THE ENTIRE PLAN OF PART I OF THE CHINESE 50 YEAR PLAN, YOU DOLT! China needed to lure the US into shifting all our manufacturing to China. China studied Japan’s Tankan system and imitated key parts of it.
Japan’s Nikkei average rose 1.6 percent on Wednesday as banks such as Mitsubishi UFJ Financial Group (8306.T: Quote, Profile,Research) climbed following a rally on Wall Street, but dismal economic data and a volatile currency market kept a lid on gains.
Japanese business confidence tumbled at its fastest pace on record to an all-time low, the Bank of Japan’s tankan corporate survey showed, illustrating the plight of an economy in its worst recession since World War Two. [ID:nT188568]
The dollar swung in a wide range of over one yen following the data, causing the Nikkei to see-saw in early trade.
“There was a little confusion in the market as investors were not sure how they should interpret the tankan survey,” said Shinji Igarashi, an equity manager in the sales department at Chuo Securities. “Bank shares gained as the rise in their U.S. peers prompted investors to buy them back.”
The see-saw yen/dollar mess is extremely important and nearly totally ignored by virtually all major US commentators on international trade. This goofy refusal to even begin to try to understand the vitality of the duality puzzles me. Why does Krugman ignore it? HAHAHA. He was trained well to not question our Japanese overlords after they won WWII in 1987.
Now the joke about fraudulent securities was actually unfair. Aside from a late, ill-considered plunge into equities (at the very top of the market), the Chinese mainly accumulated very safe assets, with U.S. Treasury bills — T-bills, for short — making up a large part of the total. But while T-bills are as safe from default as anything on the planet, they yield a very low rate of return.
T-bills are kept artificially cheap due to ALL of our trade RIVALS doing the same thing: weakening their own currencies vis a vis the dollar so they can do more business with us and thus, remove all our industries from the US. This would never have happened if the US kept using ancient trade restrictions called tariffs and barriers!
Was there a deep strategy behind this vast accumulation of low-yielding assets? Probably not.
HAHAHA! See? This man is a certified lunatic. Not only is there a very deep strategy behind this, it was cooked up very rapidly by the Chinese within less than three years of arresting Madame Mao.
China acquired its $2 trillion stash — turning the People’s Republic into the T-bills Republic — the same way Britain acquired its empire: in a fit of absence of mind.
Britain fought very long and very hard and some very, very bloody battles in order to grow that empire. There was nothing absent minded about it at all. Ask the Irish about that. Or the Scots, for that matter. These battles raged for CENTURIES. Always on the lookout for more places to control or conquer, the Brits fought furiously to keep the US a colony, just for one example.
There was NOTHING absent minded about the Chinese accumulations of US debts! When Zeng left my house, he told me, the plan was to be the world’s banker and for China to accumulate so much US debt [which Reagan doubled and then redoubled in his time in office!] that China could dictate terms to the US. And trust me: creditors ALWAYS dictate terms in the bitter end.
And just the other day, it seems, China’s leaders woke up and realized that they had a problem….
See them crying! HAHAHA. This whole, obscene and stupid US narrative that the Chinese accidentally did all the things they planned ahead, planned to do from day one of opening China to capitalism, is typical. Our hubris is perfectly expressed by Krugman here! China does NOT have any problems at all except one: how can they disarm the US?
So what Mr. Zhou’s proposal actually amounts to is a plea that someone rescue China from the consequences of its own investment mistakes. That’s not going to happen.
I know for a fact, the Chinese leadership is reading Krugman and laughing their heads off today! The US is going to have to go to China AGAIN and beg for more money! And we think China has a problem? HAHAHA. And China needs to be rescued? Good grief, who, pray tell, got France to apologize for supporting the CIA uprising in Tibet? Just three days ago? And who is forcing the US to try to suppress Muslim fighters in Afghanistan? NATO has to do the dirty work there.
And the call for some magical solution to the problem of China’s excess of dollars suggests something else: that China’s leaders haven’t come to grips with the fact that the rules of the game have changed in a fundamental way.
The final quote here mentions ‘MAGIC’. I keep yapping about magic because money is, in the end, a magical thing, not real! It was born in the temples of ancient civilizations thousands of years ago. Zeroes were invented by religious fanatics seeking to understand the riddle of eternity and infinity! Money is very, very magical.
China has an excess of US dollars because the US created an excess of debts. Now, we are doubling our efforts to create MORE debt which means MORE dollars and our trade RIVALS will then flood us with more imports which we will pay for with more DEBT. Got that? And during all of this, our own industrial base vanishes overseas!
The party that can’t come to grips with the way the rules of the game have changed is the US and Mr. Klueless Krugman! The US cannot print money to make up for our loss of industrial base and world trade. We will soon find out that the Chinese wish to consume at least 20% of world resources since they are 20% of the world’s population. And the US now consumes 20% while having only 3-4% of the world’s population. This is what is going to change, fast.
The yen weakened to above 100 per dollar for the first time in five months as the Group of 20 nations pledged more than $1 trillion to revive global economic growth, sapping demand for Japan’s currency as a refuge…
“The market thinks the world is suddenly a better place,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. “That is largely reflected in increased risk appetite.”
They think the trillion dollars which will be LENT to the world, will fix this economic mess caused by way too much lending. This childish desire to spend our way to prosperity will not die, not yet. The yen MUST be at least 120 to the dollar so the Japanese can resume flooding our markets with high-end industrial output! The many players in this game want this, too. All US hell hounds, pirates and gnomes gnash their teeth with the end of the Japanese carry trade and are very, very anxious to restart it.
So what, if it kills the last of our industries? So what, if it bankrupts the US? They don’t care. Now, they can play ‘risk’ games again! The risky behavior which the G20 solemnly swore, would end, will not end! The same game we saw this last decade will resume, not end! And they want this very badly. The Chinese are happy to see this resume, too. For they are exploiting this so China will be stronger and stronger.
Oh Crap: (Triad)
The insurer, which put itself into run-off and ceased writing new mortgage insurance policies in the middle of last year, said late Wednesday that it had received a corrective order from its regulator, the Illinois Director of Insurance, limiting its payout on claims to 60 percent. The remaining 40 percent of a claim will essentially take the form of an IOU, or a deferred payment obligation (DPO), meaning the lender/investor will not recover the full amount of its claim.
This is going to result in insane severity increases on losses taken by Fannie, Freddie, and anyone else in the mortgage business that has wraps (PMI) written by Triad (think BAC, WFC, etc)
Another sign that the US system is collapsing. When everyone issues IOUs instead of payments, this is bad news. Just like the US decided, in 1971, WITH NO WARNING AT ALL to not honor the gold contracts the dollar represented , so it is here: instead of paying up, they pretend to pay up but don’t. This is a 40% drop in value being disguised. Pray tell, who is in trouble here? China or the US? Now, on to GOLD:
Absent legal action, clearing members are now being allowed to hand out little slips of paper, called “warehouse depository receipts” (WDR). These are being substituted for “vault receipts” (VR). The WDRs, in contrast to the VRs, merely promise the customer that he owns a 1/3 interest in a 100 ounce bar. The customer is not allowed to take delivery, unless he can accumulate 3 WDRs, which equals 1 VR. NYSE-Liffe shares its warehouses with COMEX. The warehouse is predominantly stocked with 100 ounce bars. The COMEX ETF also stores 100 ounce bars, and clearing members can withdraw baskets of them in order to meet delivery demands. But, the COMEX ETF doesn’t store any 1 kg. bars.
Again, the paper IOUs being issued instead of papers being settled properly! Another obvious sign of a failing system! The US mint can’t mint enough gold coins to meet demand, another sign of severe trouble ahead and not for China but for the US.
To prop up the international US dollar business, Germany just disgorged a tremendous amount of gold in the hopes, this will stop the run on international central banks, namely, the US dollar. Why?
Germany normally runs a huge trade surplus with the US! Like Japan, they want the euro weakened and the dollar propped up even as the US gorges on more and more debt and our own finances have already obviously fallen off a very tall cliff. Look at any charts and graphs I have posted in previous stories! It is painfully obvious, the dollar is totally dead.
Former AIG CEO Maurice “Hank” Greenberg says the bailout has “failed” and he’s proposing a 10-point alternative focused on saving, not breaking apart, the mega-insurer.
Greenberg will reveal his plan during a hearing before the House Oversight and Government Reform Committee today, slated to start at 10 a.m.
His proposal includes pressuring the counterparties at the other end of AIG’s toxicto reinvest in AIG some of the $100 billion in taxpayer money they received as part of the firm’s bailout, according to a copy of Greenberg’s prepared testimony obtained by POLITICO.
Critics have blasted the feds for not forcing AIG counterparties to take a loss on the complex financial contracts, but rather allowed them to be paid off in full. Particularly galling for some is the fact AIG paid out billions of U.S. taxpayer money to Europe’s largest banks….
“News reports indicate SEC action against Mr. Greenberg on these securities fraud charges could come at any day and there are good reasons to believe he could face even more significant legal problems involving the alleged misappropriation of shares from Starr International Company, a trust fund to be used solely for the purpose of providing long-termfor AIG employees,” Issa wrote in a letter to Towns.
As for his alternative rescue plan, Greenberg says that “AIG’s problem was a liquidity problem, not a solvency problem. In such circumstances, the goal of government should be to provide temporary liquidity to save jobs and keep the gears of the financial system operating smoothly. The goal of government should not be to liquidate large companies that have demonstrated that they can succeed if properly managed; it should be to restore them so that they can be employers and taxpayers.”
What, pray tell, is the difference between a ‘liquidity problem’ and a ‘solvency problem’? What Greenberg is saying is simple: AIG will be just fine so long as they can access INFINITE LENDING!!! This is a cry from the heart for the resumption of the eternal Japanese carry trade that poured infinite lending into world finances for a decade.
AIG is ALSO insolvent! He won’t admit this, of course. If they are insolvent, then they are dead. Instead, the US is trying to flood AIG with liquidity! And it vanishes to other places like Goldman Sachs or Deutsche Bank who are keeping solvent via AIG passing this loot to them while the US, NOT AIG or the others, suck up all the expenses of this lending spree.
The Federal Deposit Insurance Corp. is considering giving banks the chance to share in future profits on loans sold into a U.S. government-financed program to remove distressed assets.
The FDIC may allow the sellers of a loan to get an equity interest in the vehicle that buys it, meaning they would gain from any future increase in the asset’s value. The aim is to give healthier banks an incentive to sell loans at a cheaper price, encouraging more investors to make bids.
“One option is for the seller to retain an equity interest as a part of the consideration for the sale,” Jim Wigand, the FDIC’s deputy director for resolutions and receiverships, said in an interview….
Under the FDIC-run Legacy Loans Program, the agency will extend financing of as much as six times the capital contributed by investors and the Treasury Department to buy assets in auctions of distressed-loan pools.
Ouroboros snake eating tail business as a means of fixing the Horns of Dilemma. THIS NEVER WORKS in the long run. Indeed, it only makes everything much, much worse.
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