One of the recurring themes are those “expert” economic analysts that keep pointing to China and predicting that the Chinese economy will be the world’s number one economy, pulling quickly away from the United States. I can see where they might believe such a claim, the financial news doled out by the Chinese government being so wonderfully full of good news and numbers. I mean, how could you not believe it’s true? China’s economy reminds me of that Earl Scheib paint job for your car back in the sixties. For $29.95 he offered to paint your car and make it shine like new as long as you kept a tolerable distance, say fifty feet. I remember that one of my friend’s father had his old VW bug painted. Personally, I think I could have done a better job using a broom. Ever since China embraced Capitalism, sort of, the party faithfuls have engaged in cooking the books. When the man at the top demands results then you show him results even if there aren’t any. For years we have heard tell of cities built with very few inhabitants. The mass of factories that have been build and never used is astounding. I mean, it’s all there if do due diligence research. But if you work for CNBC or one of the other financial news outlets, whether is be as a “investigative reporter (who does little investigation) or as an honored expert who holds court more by reputation than by results, then you have glowing and glorious numbers to report and remarks that show you know what is what. Except it ain’t true, not one word of it. Raw materials such as copper, iron ore, coal, and much more are growing, not being used. The electric grid energy use is down by 25% and unemployment is rising. Inflation is starting to hit hard for consumer goods. Credit has been passed out like candy in a school yard. There have been several bank failures, The real estate bubble hit popped and values taken a nosedive to the bottom. Manufacturing has taken a long decline from the highs of 2007. Large bulk carrier traffic (cargo ships that carry ores, coal, etc) have reached record lows. Container traffic has been hitting ten year lows. Capital outflows, meaning the party faithful have been selling assets and buying real estate all over the world as well was small corporations in foreign countries. The Bank of China is now doing quantitative easing, which only promotes more bubbles in assets. Steel production is trending down severely as is new construction. And the population is aging considerably from that old government policy, one child per couple. Pollution has become a severe threat to the population and minorities are getting to the breaking point, ready to start revolting. More robots are being employed to replace Chinese workers. There are fewer cars on the road, oil consumption is down. Average income per capita is lower and trending lower.
So here it is, I can find all manner of web sites that keep tabs of China, websites that have good sources of information because they have many people in China reporting, including the Chinese themselves, and all is not well. China is not the economic super power it poses as being. Yes, it has military power, but that is not the same. Everyone is so focused on the AIIB and all the projects that China is going to undertake for so many of the allies of America and many third world countries. But who will pay for all this? Oh yes, fiat currency is the preferred means. But China is still pegging their Yuan to our dollar. Now how can they become the reserve currency, that currency that international loans and contracts use for currency settlement if they are still pegged to the US Dollar? Eithe you are number one or you’re not. The Euro is, to a small degree, a reserve currency but the Dollar is still the number one means of settlement in international currency accounts.
Could these experts on the media be wrong? Oh hell yes. These are the same people who don’t understand that credit is printing money and that it is the banks doing the printing and not the Fed or other central banks. Remember that your credit card has an approved credit level, meaning that you can purchase up to that level. Your credit card will spend just like cash in your wallet. Tell me that is not printing money. And your friendly federal government does that all the time, authorize spending bills that spend money the federal government doesn’t have. But thanks to the issuance of vouchers for payment to contractors, the government has its own set of credit cards. Need some more money, simply issue more treasure bills. Those bills are fungible, meaning that they spend just like cash. Do you start to understand why balancing the budget is important? Do you start to understand that deficit spending is bad, living beyond your means as the ultimate guarantor of government debt? You, the tax payer pick up the tab for government overspending through your tax payments. The government can keep on borrowing until the lenders stop lending. Think Argentina, lenders have stopped buying their government bonds. You want consumer goods shiped to the country? Pay in advance in a foreign currency other than your own.
So yes, China is going to hand out all this money, but it is fiat currency and only worth what the rest of the world believes it is worth. That’s a bitch when your fiat currency is only backed by promises that you can’t meet. Suddenly everyone doesn’t want your currency. Ask Argentina if that isn’t true. The Chinese economy may not grow more than about 1.5% this year, a far cry from the 10 and 15 percent of previous years. But understand, its economy never really grew by such amounts. The local and regional leadership kept lying about the numbers, literally making them up. People, if you continue to watch and believe CNBC, MSNBC, CNN, PBS, BBC, and a whole host of dumbass journalists you have no one but yourselves to blame. Bad information is worse than no information. And when you tell me that so and so expert has said such and such, you are appealing to authority in your argument. Nothing is ever true simply because an expert said it.