China is the same old game

My comments to this news article that I originally found at seekers blog here:
http://seeker401.wordpress.com/2010/01/13/china%e2%80%99s-hyperstimulated-economy-is-headed-for-a-crash-james-chanos/#comment-4480

“Bubbles are best identified by credit excesses, not valuation excesses,” he said in a recent appearance on CNBC. “And there’s no bigger credit excess than in China.”
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That right there is it. It’s the credit excesses which only happen because of artifical decreases in interest rates by a central bank. China has been giving out stimulus’ too. It’s the Keynes approach. It’s an old statist game gone global, especially since the 1030’s. Bank of England did it before beginning ca. 1690 when it was founded and these central banks have slowly crept in pretending to be legit but they only debase the currency and create booms and busts. Fraud happens as gov’ts are out to increase their power so whoevers in play their chips and if they bid high enough even the country of choice own Justice Dept. will protect those that increase or sustain the power of the gov’t. Keynes even wrote in his economic book that they were doing this to keep the elites in power and didn’t want others to get in on the game. He said they knew what they were doing and so all other theories and insights into economics don’t provide the gov’t the power it desires so they’re out of the game.
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Then he says this:
“The Chinese,” he warned in an interview in November with Politico.com, “are in danger of producing huge quantities of goods and products that they will be unable to sell.”
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That’s what happens when there is credit excess. There are not real savings in the market so all this credit is going into making stuff that the consumer isn’t demanding. Malinvestments form right from the very beginning. It’s centrally planned from the very beginning simply by having fiat money, thus, a fractional reserve banking system, and artifical, in this case, decrease of interest rates.
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And this:
“…Mr. Chanos researches companies, pores over public filings to sift out clues to fraud and deceptive accounting, and then decides whether a stock is overvalued and ready for a fall.”
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They are looking at real savings. The actual wealth. If they are able to get ahold of such records of what a company has in terms of real savings and real concrete assets, which undoubtedly they are for the most part but the real corrupt companies can cook their books so well it becomes harder and harder to shift through all the legalize and non-sensical business jargon that Greenspan was so good at. He could go on and on talking about stuff at Congressional Committees seemingly saying the most profound things when he actually was beating around the bush saying nothing much at all. Only the very few in Congress that exactly understand banking could see through the magical jargon speak, like Ron P. and make them reiterate and actually answer the question.
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The guy’s right. The bust is coming because they already made the bust by artifically creating a boom that simply wasn’t there. A boom based not on anything real. Debt – increased credit expansion not having real savings backing – isn’t sustainable. It’s the whole circular economic ballgame that they’ve been playing for decades. It’s because it’s economics and the average person isn’t interested in the deeper qualities of what goes on in fiat money or fractional reserve banking, artifically lowering or raising of interest rates – that’s the maker of booms and busts. And all the fraud that goes on behind it all shielded by powers that want to maintain their status quo. That’s really all it is. They can’t let other companies get in on the game too much. They are selective. Some companies will be in and others out. The artifically control the ebb and flow, booms and busts, by raising and lowering interest rates. And what’s the propaganda on TV or what have you? Oh, the fed or central bank of China is going to lower interest rates cause this will stimulate the economy, blah, blah, blah. No, it makes the boom go bust.
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I also said this:
they’re fudging the books because right now the big companies, especially, have to look good. They are making investments in things that consumers are not buying. There isn’t a demand for some things out there. I would need to know China more to know what exactly it is that China is investing in heavily. For instance, the Fed. Reserve gave out specific low interest rates for housing. These low interest rates, amongst the many they give out, but these in particular had the legislative backing, ie. Fannie and Freddie, and sympathy from the voters, ie. everybody has to have a home it’s unAmerican not to. So they funneled specific interest rates targeted at housing which was enacted by the Fed. Reserve. Then the stock market gets involved too blowing it up like a ballon to astronomical levels. It was going to crash without even having the stock market involved, ie. derivatives, etc… It was going to cause the interest rates were so low that contracters could get loans from banks very easily. They were low interest loans so banks needed to hand them out like candy to earn back bigger profits. Since the Fed. Reserve had low interest rates on housing loans to the banks themselves, then the loans were low risk for the banks to take with hardly any repercussions to come from trying to pay back the Fed. in which the loans always originate from, even for all the regional banks. They are tied into the Fed. system as the Fed. backs all banks and controls all banks by various regulations and controls how much money they are allowed to have or not. They usually control the reserve supply in banks by another interest rate on bank reserves. Right now it’s very high to encourage regional banks to hold onto their reserves so too much money is not released into the open market or else hyperinflation. They have so many rules, interest rates, actions taken here and there all to stop a sinking ship and they do slow it down as this has been going on for nearly a century now but it really is getting to the point that they are running out of options. If they get China to have huge booms then they could ease the U.S. market to fall back down slowly. It’s possible, but it would take a lot of juggling between how they control China’s market and the rest of the world’s markets. It is what they have been working on currently. They are coordinating their markets. Not only the end of the year 2008 interest rate lowers that happened simultaneously in a number of countries on the same day, but also stimulus packages were handed by a number of countries on or near the same day too. They are doing this on a global level, but they don’t have an escape route anymore. There is no inter-planetary level yet in which they could jump up to. And they will try to ease the U.S. markets to fall slowly but it will not work. They have already done the damage. All of this stuff, all the harm, happened years ago, even last year or two years ago they made moves that they can’t change because they already enacted them. Unemployment is still dipping and it is supposed to go up during low interest rate times. But it’s not cause they really f-cked it up. Stagflation is a new concept. An economic event that never happened before in known history. It boggled their minds when it first happened. They didn’t know what it was. So they called it stagflation. Rise in unemployment with a lowering of interest rates (increase in credit expansion). That happend in the 1970’s. When they say they are taking create steps – you’ve heard them say that – when they say that now. They really mean it. Everything that is happening is new and they’ll be coming up with new words to describe it sooner or later. And all these new events are not good. So these new words will be describing not good events.
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When the stock market goes up, companies have to look good. This has been the new game since at least the late 1970's but really hit it big during the 1980's. Each quarter companies on Wall Street had to look good. Had to show their stocks going up. How they made this happen was CEO's of the companies sold their own stocks low to have a big buy. The stocks had a big buy and were sold low so the market saw the big buy up. Instantly people in the market move to that company in their interests and begin buying up their stocks too. The stocks were sold very low but with all the buying going on, the stocks go up rather quickly. Their stock goes up. The company looks good and bam! Their stock shows an increase and the company is doing well. Meanwhile there were no new stocks really being bought, but rather the CEO selling off his or her stocks very low to create an appearance of a big buy up in stocks. There's more to this that has been documented in the book "The Great Bubble and Its Undoing: Origins of the Crash" by Roger Lowenstein. A lot of it is really fradulent. Even the SEC knows but turns its back cause it's sucked into the game too. SEC's interest are in Wall Street status quo players thriving. Their stuck in the big scam. Even the U.S. Justice Department is involved. Goldman Sachs owns the U.S. Treasury Department and that's not a surprise on Wall Street anymore. The accounting practices are the biggest scam. They can fix numbers into equations that mean nothing except when the numbers spew out of the other end of the formula it shows a magical, non-existent profit. For example, Sara Lee. A big bakery. The owner sold it all except the name. He only owns the name and contracts the rest out and yet he's still operating on Wall Street (or at least was, I don't know if he still is). Because Wall Street turned not into real savings, real hard assets to show what their companies profits were about. It was no longer about what a company had in hard assests anymore. In the 80's and then 90's it became on Wall Street about marketing ones company to show no assets. To show no bills to pay. The guy from Sara Lee was thought of as a genius cause he owned nothing. So his profits on Wall Street when his stock would go up was only about his owning of a name. Cause if Sara Lee lost or had a downturn in their stock options it wasn't him that lost anything. Cause he didn't own anything to begin with. He only owned the name Sara Lee and it was only the name making money on Wall Street. So the more these Wall Street companies show that they don't actually own anything except more and more abstract things - no real hard assets - then it was thought and still is undoubtedly, that those companies were doing something new and different. They were the new way to make money. So companies sold off all kinds of stuff. If they made losses companies would get together and form a fake company called for example TBM. All the companies would pile their losses into TBM which is a fake company that is non-existent. So their company records show no losses because they put all their losses in TBM. SEC turned a blind eye to that kind of stuff too. There's more to it, and it seems so unbelievable but that's Wall Street. It really is a bunch of companies in which most anymore don't even own anything and simply make money off of their stocks going up. And their stocks are only going up now because of the inflation of the money supply by the gov't and the Federal Reserve dumping it into the market or bailing out companies. It's all fake with fudging of numbers. Lots of companies on Wall Street are empty shells of nothing. Japan's zombie banks are really what Wall Street has loved and has been striving for. Firms that are the walking dead, living by fraud with no real assets at their disposal in the total scheme of things.

Here's a good article by an Austrian school economist. Jonathan is still in school but I've read his posts for nearly a year now at the Mises Institute and he's way more insightful than I when it comes to explaining markets. But as you'll notice he points out basically the same stuff I do when it comes to China, ie. fractional reserve banking (which inherently means fiat money) and central banking, these being the problems to China's bubble about to pop. He even points out some parts of the market in China that are being inflated, ie. barley and garlic.

article:
http://www.economicthought.net/2009/11/china%E2%80%99s-bubble-economy-re-appears/

Government stimulus results in increasing consumer demand. The question is of course what happens when government removes the stimulus..

hi ian, glad to see yo here

i am happy you reposted that wildy as it was an excellent piece of writing..and its very pertinent for us right now i reckon..

I am retired. Plenty of time on my hands. If you need me to post more. Just let me know....

thanks ian, post away mate..just include a brief after each one

ianadds wrote:Government stimulus results in increasing consumer demand.

nothing wrong with people having savings

Wilderness, awesome article! Clearly and precisely lays it all out there. Nice work!

iannadds..glad to see you

wilderness wrote:

ianadds wrote:Government stimulus results in increasing consumer demand.

nothing wrong with people having savings

I agree. Beijing elites will encourage Chinese peasants to consume more. 20-30 years from now, history will just repeat itself...Sure glad to see you again. Intrigued.

When government wants to stimulate economy, they deregulate. When they want to depress the economy, they regulate...
Lower tax on new vehicle purchases
2010-1-19 | NEWSPAPER
http://www.shanghaidaily.com/article/?id=426166&type=Business

AUTO buyers who enjoy the subsidy for replacing their old vehicles are also eligible for a reduced tax rate for the purchase of a small car this year, the Ministry of Commerce said yesterday.

The move is designed to spur auto consumption and maintain healthy economic growth. The Chinese government has retained incentives in the auto industry this year. A subsidy has been raised to as much as 18,000 yuan when someone trades in an old vehicle to purchase a new one.

ianadds wrote:When government wants to stimulate economy, they deregulate. When they want to depress the economy, they regulate...
Lower tax on new vehicle purchases
2010-1-19 | NEWSPAPER
http://www.shanghaidaily.com/article/?id=426166&type=Business

AUTO buyers who enjoy the subsidy for replacing their old vehicles are also eligible for a reduced tax rate for the purchase of a small car this year, the Ministry of Commerce said yesterday.

The move is designed to spur auto consumption and maintain healthy economic growth. The Chinese government has retained incentives in the auto industry this year. A subsidy has been raised to as much as 18,000 yuan when someone trades in an old vehicle to purchase a new one.

indeed. good find, and China will need to keep this up as they are the new bearer of the ring.

wilderness wrote:There's more to this that has been documented in the book "The Great Bubble and Its Undoing: Origins of the Crash" by Roger Lowenstein. A lot of it is really fradulent. Even the SEC knows but turns its back cause it's sucked into the game too. SEC's interest are in Wall Street status quo players thriving. Their stuck in the big scam.

as I said here above. And to provide more records of this activity, I wanted to bring this over from seeker's blog in which I've only gotten a chance to begin reading it today:

"So the S.E.C. – which is responsible for monitoring the honesty and integrity of securities trades – was itself used as cover to establish and operate an off-balance sheet trading platform which was to be employed to clean up vast accruals by illicit means. This mechanism followed the standard intelligence deception principle that the most effective cover to operate from is from within the entity that is charged with monitoring and exposing the criminal activity to be perpetrated. It’s called a form of ‘sib’ operation."

http://seeker401.wordpress.com/2010/01/14/cmkm-diamonds-inc-case-versus-the-sec-outrageous-fraud-alleged/

I think I'll visit this lounge next time when I am in Shanghai...
The Dao of luxurious nightlife
By Yao Minji | Jan 28, 2010
http://live.shanghaidaily.com/column_detail.asp?type=column&id=297



A DJ plays gigs during the opening party at Dao Lounge.

Ancient Chinese Taoist philosophy tells humans to always be aware of their relationship with the cosmos and to seek harmony with nature. Monks are supposed to lead reclusive, simple lives, often deep in the mountains.

The ideal is minimalist, subdued.

Tao, or Dao as it is pronounced in Chinese, means path. Seekers turn away from the excesses of modern society and seek moderation, balance and harmony.

Many designers have borrowed "minimalist" ideas from Taoism and woven them into design concepts - a modest (but obvious) luxury and harmonious elegance - as in Shanghai's latest nightlife addition, the Dao Lounge.

The quiet lounge, which had a soft opening two weeks ago, is on the second floor of a commercial building on Nanjing Road W., near People's Square.

Unlike stereotypical extravagant nightlife venues, Dao Lounge is a balanced fusion of ratcheted-down Las Vegas flare and ancient Chinese simplicity.

"Each person has his or her own Dao, which leads him or her to succeed," says Evelyn Chen, Chinese-American owner of Dao Lounge. "Dao is a positive attitude, a sense of taste and a fun life philosophy. We hope guests can experience all these at the lounge, which can inspire them in their own Dao."

The somewhat puzzling entrance is lighted in red and leads to a dim and tasteful interior with touches of red and candlelight. The large Buddha statue in the middle of the main room presides over a calm space for convivial drinks and intimate chats.


Guests have fun and enjoy the “minimalist” decor that features a balanced fusion of ratcheted-down Las Vegas flare and ancient Chinese simplicity.

Under the red lamp in the room is an inviting sofa. The music is light and chilled. Subtle and intriguing signs and metaphors for the five elements - fire, water, gold, earth and wood - are incorporated harmoniously with the modern decor.

The red lamp, a delicately framed mirror, the modernist metal bar area, darkened private rooms and obscure wood carvings create a mysterious aura and suggest a hidden path.

It's a relaxing environment where guests needn't concern themselves with how other people see them. It seems to express the Taoist saying - to act through inaction.

More than a nightlife venue, Dao Lounge also offers all-day dining with a menu of Asian fusion food and imported wines. Developed from Japanese cuisine, the lounge menu features its specialty Dao hand rolls, each with an elegant name.

wilderness wrote:

wilderness wrote:There's more to this that has been documented in the book "The Great Bubble and Its Undoing: Origins of the Crash" by Roger Lowenstein. A lot of it is really fradulent. Even the SEC knows but turns its back cause it's sucked into the game too. SEC's interest are in Wall Street status quo players thriving. Their stuck in the big scam.

as I said here above. And to provide more records of this activity, I wanted to bring this over from seeker's blog in which I've only gotten a chance to begin reading it today:

"So the S.E.C. – which is responsible for monitoring the honesty and integrity of securities trades – was itself used as cover to establish and operate an off-balance sheet trading platform which was to be employed to clean up vast accruals by illicit means. This mechanism followed the standard intelligence deception principle that the most effective cover to operate from is from within the entity that is charged with monitoring and exposing the criminal activity to be perpetrated. It’s called a form of ‘sib’ operation."

http://seeker401.wordpress.com/2010/01/14/cmkm-diamonds-inc-case-versus-the-sec-outrageous-fraud-alleged/

if the SEC are corrupt which is a fair chance they are..the whole thing falls over..if the regulator is corrupt..who is guarding the guardians..just us

This sounds nice on paper. You are thinking at least the king is thinking about the peasants....However, the results will surprise outside investors. People with connections will usually end up buying up all the available housing units. Then the elites will lease the units back to the peasants...Sounds familiar ??
Thursday January 28, 4:01 PM
Mayor wants budget homes near Shanghai Disneyland
http://sg.biz.yahoo.com/100128/1/4smdz.html

Shanghai's mayor has said he wants to build affordable housing on some of the valuable land around the city's planned Disney theme park, state media reported Thursday. Mayor Han Zheng said he planned to negotiate with district officials to allocate some of the land surrounding the massive complex for budget homes, the Shanghai Daily reported. "I must stress that we don't expect housing prices around the Disneyland project to be too high," Han was quoted as saying at the municipal government's annual meeting. The newspaper said the budget homes could sell for up to 50 percent less than market price. Land surrounding Disney's five resorts around the world is normally highly sought after by hotels and restaurants seeking to cater to holidaymakers. It has been estimated that Shanghai officials will have to pay six billion yuan (880 million dollars) in compensation to residents who are living on the four-square-kilometre (1.5 square mile) block of land where the park is to be built, previous state media reports said. However, a quarter of residents and 60 percent of businesses have yet to sign resettlement agreements, the newspaper cited Yu Hong, head of the area known as Chuansha Town, as saying. Authorities aim to relocate more than 2,000 homes and nearly 300 businesses by the end of June so the first phase of construction can begin. Disney has not released any figures or a timetable for its first resort in mainland China, but the newspaper said the first phase -- a theme park, a hotel and shopping outlets -- would cost an estimated 25 billion yuan.