Monday, September 29, 2014

This is from Raymond, thank you.  I found this very interesting (John Lear part 4).

Indian Curry Mixes with Chinese Sichuan Spicy Cabbage: Result is Major Stomach Ache for the World!
For a while, I have been warning about a major conflict between India and China which will have world wide consequences. Forget about ISIS, ISISL, Al Qaeda, and the Middle East conflagrations! While our collective attentions have been steered to the nonstrategic/nonsensical bombings of the newly created ISIS, ISIL; or whatever new ‘terrorist group’ convenient to bomb is called,  a real war has been percolating for some time.
In a recent article by Hari Kumar, 9/26, 2014, in the NYTimes, entitled “India and China Step Back From Standoff in Kashmir”, the reporter has described what I consider to be the real ‘hotspot’ of danger in the world.  India versus China,  a conflict that has been brewing since 1962 over ‘disputed border region of Ladakh, Kashmir…..having been sparring for decades over their borders, but the recent FACE-OFFS WAS UNUSUALLY LONG AND TENSE…. “[my emphasis].   
Like most confrontations that have been kept at a low boiling point, or what we in the profession call, “Low Intensity Conflicts”or “LIC,” if you are chic. This particular confrontation some 16,000 miles away from the USA has no immediate impact on us.  But unlike the self-created ‘phony wars’ of so-called ‘coalition bombing of ISIS, ISIL, or IS’, the Indian /Chinese discord will ring loud and clear when it blows out of control.
What do I mean?
You know by now that China is completely bereft of water for close to 500 million Chinese people who live in the western part of the country which is primarily arid, desert lands. The only way that China can conceivably access the necessary water is to invade Tibet, depose the Dali Lama and then invade India which controls water rights along the Kashmir and Himalayan borders. This is not conjecture on my part, it’s a simple matter of GEOPOLITICAL IMPERATIVES that China must access the water in the Indian regions of the Himalayan Mountains in order to provide the necessary water/sustenance for half of its population.

While our White House and the neocons concoct nonsensical war scenarios and contrived beheadings in order to allow our military to exercise its weaponry, control energy rights or whatever; there is no evidence that anyone in national security is developing a strategic plan to diffuse this imminent war between China and India. 
Why do I say it’s IMMINENT?
Two reasons compel me to say that President Xi has no choice but to confront India repeatedly with serious military intentions.
The first, as I mentioned, is the geopolitical imperative of water and greater fertile land mass acquisitions. Remember fertile is the key word here.  Most of Western China is completely arid, bereft of any capacity for mass sustenance.
The second reason is what I had recently posted: economic distortions leading to social unrest and destabilization of China. The second reason seems more complicated; but it really is not. President Xi has tried to implement a long-term strategic goal of converting China’s working middle class from a cheap export-govt investment economy to a consumer one.

I believe that President Xi made a bad decision in propping up the corrupt real estate bubble that will cost close to $100B. I am forecasting that this short term tactic to avoid the real estate burst will not work; instead leading to massive local/regional riots of Chinese workers who had entrusted their banks and central government with their hard earn salaries.  President Xi has set up unwittingly the scenario for bank runs and incredible amounts of violent protests which will exceed the normal number of annual riots which is about 75,000.  This combination of the misleading economic policy and constant high altitude confrontations with India is deadly.  Don’t forget to consider the recent re-arming of Pakistan’s nuclear arsenal, it all spells big trouble!

I am a concerned participant-observer whose major objective in national security was to avoid and defuse the conflagrations which would compel our country to enter into combat.  The opposite of what happened in the Iraq Wars; Afghanistan Wars; Syria al. My job is to spot those areas where Indian Curry and Chinese Spicy Cabbage make for a very gaseous meal---leading to a possible NUCLEAR EXPLOSION!! Btw, please remember that Pakistan and India have been fighting on a daily basis over Kashmir!! That’s more fuel on this smoldering fire!! 
What do we have to do?
Divert our assets, military/intel/diplomatic, away from the Middle East, a historical unending fight between Shia and Sunni—toward South and East Asia.
In Chinese, we say that we Americans, can no longer be:
“jing di zhi wa“ [pronounced jing dee jrrr wah]
“We cannot afford to continue to be NARROW-MINDED; We must be open to NEW IDEAS!!” 

Friday, September 26, 2014

When the oil/gas people want a war (in this case Syria) they will stop at nothing, you will need 26 mins but its amazing to hear Rita Katz from Bethesda tell how her group "found" the beheading videos first!  Thanks Barry for staying on it.

China Plays Russian Roulette with a Fully Loaded Pistol as its Immense Real Estate Bubble May Crash Soon!
Recent financial reports dribbling out of China indicate that the overdue strategic reform of converting China’s economy from an export/investment driven growth to a tactical, short-term fix of ‘an overheated housing market bubble’ has begun.
It is not easy to manage a country.  It must be  impossible to make any sense of trying to allow a substantial growth rate of 12% which China has claimed it has done over the past decade or so.  I say claimed because even Chinese President Xi has admitted to massive corruption through both the military and civilian sectors of the Chinese economy. For a while now, financial traders like myself, and more professional financiers have had serious doubt as to whether the Chinese have really attained any ‘real growth’  close to 12%. Not surprising that China plays ‘footloose with numbers’ when it comes to veracity and financial credibility. Yet I sympathize with Chinese leaders that have the huge task of managing the well-being of 1.3 Billion Chinese.
Once when I was in China, a very intelligent official calmly explained to me that when officials in Washington D. C. make a mistake that ‘mistake’ can be multiplied times about 365 Million People, our USA population. However, when the Chinese officials in Beijing make a financial mistake, it means that they have to multiply the consequences of that mistake by 1.3 BILLION PEOPLE. Quite a difference between 365 Million and 1.3 Billion!

I am not faulting the Chinese Central Committee for what they are about to do. I am simply warning that the Chinese super growth based on cheap labor which lent itself to a competitive export market now will be course corrected by the Chinese Central Committee by making endless loans to any and all government-owned industries.  Now that the domestic labor force has been effectively converted into a middle class,  the cheap labor has be outsourced through to Southeast Asia.  Countries like Vietnam, Indonesia, Laos, Cambodia become the low wage labor for the newly-minted ‘Chinese Middle Class’.
The Chinese Government has accomplished in two decades what it took America one hundred years to accomplish.  However, here is the fly-in-the-ointment for the new Chinese strategy.  They have over built the housing market as a way to employ millions of urban/rural Chinese workers.  Now countless cities have thousands of empty apartments, condos, and buildings that are being left to rot because there is no consumer demand for them.  A Chinese housing bubble has been un-intentionally created, supported by a black market of non-governmental loans and flimsy real estate schemes that we have witnessed here in the USA in the early and mid 2000s.
America, unlike China, can handle different types of financial bubbles and aberrations because we have sophisticated central banking systems that can regulate the flow of cash to the regional commercial banks all over the country.  Furthermore, we tend to practice a banking procedure that the Chinese have refused to accept, called mark to the market.  In this accounting method,  we reduce the value of a $1million note on the books to $50K if that is what the property is worth.  So we write off the rest of the loan as a ‘non-functioning asset’ and it becomes a ‘liability’.
  In contrast, the Chinese retain the $1M on the books at full value despite the fact that the same property is not worth anywhere near that price.  Therefore, their housing markets become artificially inflated and continues to rise despite the fact that no one is buying and selling any buildings or condos---much like our bankrupt Detroit but on heavy doses of steroids.
I have a major concern about what the Chinese President and the four major Chinese banks are about to do. Instead of creating major consumer driven economic entities which is the way to turn their economy around, the four major Chinese banks have decided to pump more than $80B into this “Zombie Real Estate Market”! That means that these banks will create artificial mortgages,  something akin to our subprime mortgages, which the consumer cannot pay off or hope to realize in any meaningful way.

This influx of cash will again inflate already over-priced real estate which has no basic value other than some artificially created number, and in short time there will be a collapse of the largest housing market in the world. When I wrote about deflation in Europe,  I explained that the value of the assets and growth did not justify a high currency value for the all-tethering EURO  which was really worth about half of its present value (0.85 to the dollar and not 1.27).
In China, the situation could be much worse. There is growth of about 6 % , based around a newly minted middle class which does not have anything to buy and refuses to become trapped by the increased credit flow provided by the Four Banks and the Chinese Central Committee. China will gamble with a full loaded gun on the notion that a short term solution of trying to prop up dead real estate assets which no ordinary middle class Chinese wants to buy ---will magically increase the Consumption rate of GDP.
I am afraid that the Chinese government has made a mistake, a bad bet on a dead asset which should have been written off---or ‘marked down.’  Instead, they will sacrifice $80B for a very short-term goal which will not work because dead assets without consumers are really dead!   Tear it Down!
When the Chinese real estate bubble bursts there will be a distortion of the world economy and we Americans must be prepared for it.  The world capital markets are not capable of absorbing an economic jolt of a trillion failed Chinese Huans floating around aimlessly looking for a fading safe haven.

Yet the American dollar keeps growing in strength. We can thank the genius of the WASPS at Bretton Woods Conference in NH, who denominated everything in dollars from toilet paper to camel dung and Arab oil.  So you gold, silver and metal hoarders keep on “hoarding” while the price of these precious metals keep falling further and further. Witness how low the price of these metals have gone while Americans have engaged in war after non-wars [i.e extended combat] all over Iraq, Syria and North Africa. Gold and such are antiquated assets that have diminishing real value in this new economic world market based on the good old principles of Yankee Pragmatism.  Thanks to the sagacity of those leaders during WWII.
Good luck China!!
In Chinese, we say the following:
Dong Chuang Shi Fa [pronounced doong farng shrrr far]
Literal meaning: East window affair exposed.
My meaning:
“The Game Is up”! 

Thursday, September 25, 2014