Saturday, July 4, 2015

The Middle Kingdom, China, is Teetering on a Dangerous Precipice of Self-Destruction by Stock Manipulators!
Most of you have heard about China’s problem with its stock exchange. A group of manipulators are shorting a highly leveraged stock market. What they are doing is basically allowing China to fall into an economic downturn which was never intended. How this happened has more to do with Chinese National Character than any other factor.

The Chinese are very serious gamblers. So much so, that the political elite of China made the right decision to locate most of the gambling establishments in Macau [a former Portuguese colony] rather than on the mainland. If they had placed the casinos in easy access to every Chinese citizen, the political elite realized that their citizens would be gambling all day long.
How they became such inveterate gamblers is not really known. However, they have historically engaged in highly leveraged activities including real estate speculations which ended in massive foreclosures mounting into the trillions of dollars. Rather than mark the mortgages down to the market, the Chinese officials kept the non-performing loans on the books as if they represented the true value of the real estate in question.
So fiction substituted for reality.

Then along came the real serious gamblers –the stock market manipulators who numbered in the hundreds of thousands, if not the millions, who placed a margin call [payment] on a stock and when the stock failed they had to pay the full amount of the stock price plus the broker’s commission and other fees. It is not working too well. For unknown reasons, the leaders of China cannot stop the market speculators from shorting their calls and basically creating a chaotic market which has fallen almost 30% in the past few days. This type of run in a lightly controlled market like China can lead to the eventual collapse of the economy where everyone pulls their money out of the banks and remain in cash; spending or earning nothing.This type of economic self-implosion is quite rare; but it does it occur when a market is highly leveraged and there is no actual cash to back the speculations; other than wishful thinking.
This means while China tries to expand along a new Silk Road it will have to contend with internal financial turbulence that can delay its growth for months, if not years.
China cannot afford that kind of delay. The economic forecasts and central controls are based on a ‘controlled economy’ that must grow about 6-7% per year.
That is not happening now.

President Xi knows that. So he is arresting many of the senior Communist Officials whom he considers corrupt [an easy determination] and places them in prison as both a distraction from the main problem of slow/no growth and extreme high margin speculations. I wish that the great Middle Kingdom will resolve its problems as quickly as possible; otherwise the world at large will feel the ripple effects of China imploding financially.
While Greece falls, let us make certain that China will be able to endure its own miscreant behavior long enough to be able to create the New Silk Road. Otherwise, the weight of the Middle Kingdom will be too heavy for the world financial systems to bear.

Wednesday, July 1, 2015

THX Learn fr History, here's Matt Damon, Happy Independence Day!

The Once Honorable Leslie H. Gelb,  President Emeritus of the Council on Foreign Relations [CFR]; Senior Correspondent for the N Y Times; and a Ubiquitous Board Member: Appears on Hillary Clinton’s Missing Emails, Kowtowing to Her!
On this July 4th weekend when we celebrate the deeds of those who fought for the independence of this great nation, I want to honor a man whom I had admired and was a very special person in my life—Dr. Leslie Gelb.

When I first met him decades ago, he was a senior official in the Carter Administration which was filled with all types of forthright men and women who were willing to stand up for their personal and professional beliefs—including President Jimmy Carter. From that period in my life, one person stood out in my mind-- Leslie Gelb. During this time, he had refused to acquiesce to Zbig Brezenski and resigned. I found that act very impressive. Soon Cyrus Vance and I were to resign afterwards over the issue of the Iran Hostages.
I found that Les was an honorable man who stated his convictions; stood by them; and then acted accordingly. His subsequent career became an admirable trajectory, where Les became a senior correspondent for the NY Times [even a senior editor];  and eventually attained the then much-vaunted position of President of the Council On Foreign Relations. At the CFR, where I attended few meetings, I had the rare pleasure of talking to him and renewing old acquaintances.
Subsequently,  I resigned from the CFR, after having realized how toxic they had become from an inherent inertia of creativity; alongside the perseveration of old thoughts and self-aggrandizing mantras.
Then, I happened to read a letter by Leslie H . Gelb where he apologized to whomever for having used his august position at the CFR and in Washington society to take a cowardly stance on the Iraq War. He urged our brave American Warriors to enter distant conflicts which Les knew from his past experiences[as a senior official at DOD having  overseen the production of the Pentagon Papers] that our warriors would die needlessly; as would, thousands of innocent civilians.
This is the letter Les wrote for future posterity:
“My initial support of the Iraq War was symptomatic of unfortunate tendencies within the foreign policy community, namely the disposition and incentives to support wars to retain professional and political credibility.”  No truer words were spoken from a man who eventually succumbed to such unfortunate tendencies.
Now we can’t really say that he owned up to his own miscreant behavior. Yet we can say that he became a man who pandered to the whims and ways of an amorphous  community of neocons and idiots who had never fought in a war [neither did Les]. However, I would have given Les a pass and written off his cowardly behavior as an insecure Jew who needed the approval of the WASP and military community in order to be heard and accepted.
A king of inferiority complex.
No problem there!
Yet flash forward to current headlines, what do I find in today’s Wall Street Journal article regarding the missing Hillary Clinton emails?
Let me quote directly from the email:
“A loyal supporter and Democratic activist, Lynn Forester de Rothschild wrote Mrs. Clinton that she has spent the day on Nantucket with Leslie Gelb, a former State Department and Pentagon hand who wanted to write a Parade Magazine piece about the Secretary, detailing her daily life and the impact she is having on national affairs..

“He said he would give you a veto over content and looked me in the eye and said, “SHE WILL LIKE IT.” Ms De Rothschild wrote. The resulting [Gelb] piece was INDEED QUITE POSITIVE.
Mr Gelb wrote that diners in the State Department cafeteria burst into applause upon seeing her and concluded that she is “absolutely determined to make her tenure as Secretary of State a success and to accomplish important things.”
As usual, Les was wrong in this puff piece on Hillary.
As most of you know by now, Libya, Benghazi and the 100 plus nations she had visited amounted to a complete disaster as Sec State. However, my concern is not with HC. She is at least a well-known entity to Americans.
The reason I wrote this blog is to show you how it is the ‘good, decent men’ of our nation who hide in the shadows of the Pentagon and State Department; as well as the countless Think Tanks camouflaging as ‘neutral analysts’ –who send us into the wars in Korea; Vietnam; Iraq; Afghanistan; et. al. Leslie Gelb is an Honorable Man who has shown himself to be a “panderer to the rich and famous”; and a sycophant of those he serves.
I might remind you, all, that Les won the ‘Famous Father Of The Year’ in 1999. How ashamed I would have been of my father had he hid behind the skirts of women and men in order solicit favors from them in return for a flattering portrait in the shlock propaganda magazine—Parade.
What we have here is simply frailty of mankind. Neither malicious nor nefarious; just too frightened to assert his true beliefs lest he lose his job and reputation as ‘one of the boys’. How often have I heard those rationalizations in the Nazi prisoners whom I had seen as a child in the French Displaced Persons Camp—‘I was just doing my duty!”
It did not stop there! The Soviet Communist System also offered me a panoply of excuses and reasons for the retention of that corrupted system.
However, the 9/11 Stand Down and the consequent outcry of silence by those in the know—the Foreign Affairs Community – was simply deafening.
Now, Les is offered by me as the Personae of the Year 2015, as an American in his twilight years who becomes most cowardly and disgustingly ingratiating to the rich and famous. I give Leslie Gelb as the model of what has happened to our Honorable Men ----they have descended into perfidious insolence and dastardly deeds for which they still refuse to assume personal responsibility and attribute them to outside forces beyond their control.
Let me end with a quote from a famous French novelist, Honore de Balzac:
“Bureaucracy is a giant mechanism operated by PYGMIES!!” 


Tuesday, June 30, 2015

Just one more tidbit of banking history they won't teach in schools
A little video stroll down memory lane.

Greece is the  Opening Act of the Fiscal Tragedy Called “Over-Leveraged/ Under-Funded Economies” 
Including Brazil; Turkey; Italy; and Most Importantly –China!!! 
For some time now, I have felt like the Greek seer—the infamous, Cassandra. Clearly, I did not create the fiscal tragedies that I could foretell. However, I had the unique experience of having been involved in the crisis management of the Maryland Savings & Loan disaster of the late 1980’s.
One unidentified S&L requested my help to stem the flow of dollars leaving that particular institution in a suburb of Maryland. I soon learned that America can also suffer liquidity shortages. During that time, any check from any Maryland S&L was not accepted as a legitimate currency, even if the person had more than sufficient funds to cover that check. In particular, I remember how ordinary people were refused service at Giant Food Stores for the most basic consumer goods [bread, meat, vegetables]. Cash was king yet these S&Ls were forbidden to dole out more cash that a small stipend. Sound familiar? Thousands of Marylanders had to suffer because a S&L crisis was precipitated in a Colorado S&L called Silverado.

Who were the culprits in the Silverado fiasco?
None other than two spoiled, noisome, entitled brothers who never had any experience doing anything more than leveraging their identifiable names into dangerous deals that frequently ended up raping the public. By now those two brothers are well known—Neil Bush and Marvin Bush.
What made the S& L crises so hard to manage was the convenient editorial ignorance of the major newspaper in Washington D.C. In particular, the then highly esteemed team of Ben Bradlee and Bob Woodward were completely incapable of helping to stem a rush on the S&Ls because they had no comprehension of the difference between net worth and liquidity. That was the beginning of my crisis experience in managing a dysfunctional banking system and the ancillary variables that contributed to that S&L meltdown.
I will say that the Maryland prosecutors in Baltimore, along with the FBI, prosecuted those individuals who had started the rush on the S&Ls. Of  course, Neil and Marvin were never indicted. 

Now, for the present situation.
China has just entered a stock market crisis where the large amount of leverage in their markets have created a ‘bubble’ where the highly inflated values will lead inevitably to a crash. That is not wishful thinking on my part. China has had an artificial economy where in the political leaders have granted large sums of liquidity to friends, family members of the elite Communist Party. The political cronyism has led to a depressed economy where the GDP may be entering negative territory. All these highly leveraged assets, stocks and housing will fall in value because there is not enough liquidity to maintain the artificial values created by the inveterate Chinese speculators.

Unlike the EU, China has its own currency. However that currency, once lauded as the next substitute to the dollar, is basically a worthless piece of paper based on the bad faith of the political system.
What do I mean?
China for too long has based its economy on political cronyism and not the principles of economic entrepreneurial growth. As a result, the present leader, Premier Xi has no other option than showing that he is in charge of a failing economy by arresting many of his former comrades who had helped this princeling to attain his position of leadership.
In addition,  Premier Xi has created an elaborate strategy of reviving the concept of the Silk Road Trade from Russia back to the Middle Kingdom [China].
At best that narrative is a distraction from the more serious issue of unemployment for millions of highly trained university students; as well as, inculcating some hope in a desperate China which can barely provide water for over 500 Million of its inhabitants in the western part of the country.

So like the Bush family that keeps on giving us miscreant crises, the Chinese, like the corrupt Turkish, Brazilian and Italians are now in the cross hairs of financial meltdown.

Nothing taints a currency more than self-delusion and wishful thinking conflated with self-serving political corruption. For now,  Americans will weather out the storm; despite the fact that our political elite have absolutely no idea as to what to do.
The reason is simple. 
This country is so big geographically and blessed with all the natural resources that we could literally seal our borders and remain viable.
Also, we must thank those geniuses at Bretton Woods [N.H.] who had the foresight to dominate all future assets, commodities and properties all over the world in United States Dollars. Now that is American ingenuity!

Let’s see if we can’t bring it back one more time with someone who has economic experience and strategic foresight.
Let’s work to get that individual amidst the herd of bovine contenders.
Choose wisely!