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Friday, September 26, 2014




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”! 


13 comments:

  1. OT: THE WAR IN SYRIA AND THOSE FAKE BEHEADING VIDEOS
    The goal in Syria is to remove Assad, not to destroy ISIS. ISIS was funded by the CIA and other allies (such as Saudi Arabia). The action in Syria must be approved by Congress, but the warmongers in the GOP are happy not to have their votes on the record.

    It appears that ISIS was tipped off about the air attack. The U.S. is sending Tomahawk missiles (they cost 1.41 million each) to attack completely abandoned buildings:

    YouTube
    US Caught Bombing 'Empty Buildings' in Airstrikes on ISIS in Syria!
    DAHBOO77
    Published on Sep 25, 2014

    The Syria military action was prompted by the infamous fake beheading videos. They appear to have been distributed by Rita Katz of Search for International Terrorist Entities (SITE):

    YouTube
    Woman who found the ISIS execution video !!
    Pajo
    Published on Sep 3, 2014
    Rita Katz says that her organization released the beheading of Stephen Sotloff video 'before ISIS had a chance to' - " we actually had that video beforehand and were able to beat them (ISIS) with the release " - Woman who found the ISIS execution video

    YouTube
    James Foley, Steven Sotloff, David Haines beheading videos ALL staged? More lies to invade Syria?
    PublicEnquiry
    Published on Sep 20, 2014

    Big Dan's Big Blog
    Wednesday, September 3, 2014
    Queen of the FAKE Bin Laden videos Rita Katz/SITE is the "source" for the fake ISIS "beheading" videos...as usual

    UPDATE II 9/23 COMMENT: THEY DID IT AGAIN! THE MEDIA, GOVERNMENT, AND SHILLS LIKE SITE/RITA KATZ FAKED US INTO ANOTHER WAR WE CANNOT AFFORD!

    UPDATE 9/14: AGAIN!!! RITA KATZ/SITE is the only one who gets the latest beheading video - ISIS has beheaded 44-year-old British aid worker David Cawthorne Haines, according to the SITE Intelligence Group, which first reported the deaths of American journalists James Foley and Steven Sotloff.

    ReplyDelete
  2. OT: LINKS ON SYRIA, 2001 ANTHRAX
    The link on Syria should be listened through to the end....There is a new book on the 2001 anthrax attack. As well all know, a patsy was framed by the U.S. government.

    YouTube
    Iraq War 2: 2014 Plan To Attack Syria sidestepping the UNSC? 9/11 Truthers 'as dangerous as ISIS'
    PublicEnquiry
    Published on Sep 26, 2014

    The Corbett Report
    Interview 944 – Graeme MacQueen Reveals The Anthrax Deception
    Corbett • 09/25/2014
    In his new book “The 2001 Anthrax Deception,” Dr. Graeme MacQueen, co-editor of the Journal of 9/11 Studies, lays out the case for a domestic conspiracy in the 2001 anthrax attacks in the US. In this conversation, James and Graeme discuss the context in which these attacks happened, the way they were portrayed by the government and the mainstream media, their ultimate effect, and the voluminous evidence that disproves the FBI’s assertion that the attacks were the work of Dr. Bruce Ivins.

    Visit the book’s website: http://www.claritypress.com/MacQueen.html

    Washington's Blog
    The Smoking Guns of the 2001 Anthrax Attacks
    Posted on September 15, 2014 by WashingtonsBlog
    Must-Read: “The 2001 Anthrax Deception”

    ReplyDelete
  3. The area of Kurdistan in Iraq has been found to have yet untapped oceans of oil but they have land route to move it out and the US threatens to punish anyone who buys it because the US is still trying to hold the country of Iraq together somehow....

    The Kurds are a fair-skinned, light-eyed race of aryans with European haplotypes and genetics who somehow have found themselves in a central asian hell surrounded on all sides by tribal primatives.

    Kurdistan is the only growing economy in the whole region by virtue of the intelligence and creativity as well as integrity of its people, who have nothing in common with the craven, brutish and criminal Arab Iraqis, the officers of their "army" having flown out of Kurdistan in jets upon the first sight of the ISIS legions heading their way.

    It's time for the US to face the reality that Kurdistan doesn't belong in Iraq, and they are entitled to their independence. Once they are independent they will be the one civilized and progressive country in a swath of backwards, kleptocratic feifdoms.

    Let's let the Kurds sell their oil, and let's at long last let them be independent.

    Let's let the horrible nightmare called "Operation Enduring Freedom" at least have this ONE POSITIVE RESULT.

    All it will take is the stroke of a pen...no charge.

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    Replies
    1. yea but that stinky russia and stinky orthodxy is keeping us from carving up propery sick man turkey

      Delete
  4. As for China....

    I'm not of the financial or speculative class as yet so what happens to the price of real estate there is not high on my list of priorities.

    Yes it's true that wages are somewhat higher than their former abyssmal depths and that there is a "middle class" barely emerging....

    But by any standard we would know they are still very penury except for a one percent of billionaires who are acting like total assholes with the kind of horrible excesses which characterized the feudal situation there which preceeded communism and which brought communism about.

    China is an old culture, having been there in the same place for thousands and thousands of years. All they needed to jump start things was to shed their feudal and then Maoist systems. However they still have a long way to go in terms of integrity, rule of law, criminality, and so forth. I like doing business with the Chinese I find outside of China, but inside of China they can be total assholes.

    This is the opposite of the Cubans. In Cuba they are wonderful people who I love to do business with, but outside of Cuba they are total assholes.

    Go figure.

    ReplyDelete
    Replies
    1. way to go? go where? continue in wrong direction... having communist government and capitalistic economy makes you equal just to latin america, that is it... india is bigger danger

      Delete
  5. What to do about ISIS?

    None other than Bill O'Reilly has proposed a "mercenary army" to deal with them. I don't understand the logic of that.

    Someone has to however, and fast.

    Personally here's what I would do....

    I'd have a week-long phony negotiation in Geneva with our Secretary of State and his Iranian counterpart. Then I'd announce that the Iranians have agreed to a whole mess of new inspections and agencies and observations, etc...to solve the problem of the "nuclear theat." I would announce to the world that the Iranian nuclear program is now safe.

    Then I'd covertly do whatever was necessary to bribe or threaten the leaders of Hezbollah to do my bidding. I'd open them up Swiss bank accounts, bring them girls from Sweden for them to fuck..anything they want.

    Then I'd tell them to get the hell out of Syria. They'll have to kiss Assad goodbye because he's going to lose anyway...if I can't beat him on the battlefield then I'll kill his ass with a satellite guided bomb disguised as a car bomb or whatever. It doesn't matter what I do so long as it's not attributable to me, but Assad is a dead man so don't back him because you're backing a loser...so get the hell out of Syria.

    Now that you're out of Syria we're going to re-deploy your ass to Iraq where you'll have the noble task of gallantly killing ISIS everywhere we deliver you.

    In a matter of weeks you will have killed of these ISIS weirdos and shown the world that your Shiite brand and that of your Iranian sponsors who we now love are the victors in this all this shit.

    Just a thought.

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    Replies
    1. This Shiite/Iranian vs. Sunni/Salifist thing will never be over until one side wins and one side loses....

      I'd say let's back the Iranians, make friends with them like they've been trying to do for twenty years, and let's bring stability and peace to that region...now.

      Delete
    2. The key to making this all work is to do it covertly.

      It's much better to have the victors over ISIS be someone there...someone not linked to the US. Anything the US does over their attributable to us is poison.

      Let's get our fingerprints off of everything over there, forget all this "multilateral" shit, and force these assholes over there to do our bidding...as well as form an alliance with the strongest power that will always be there....IRAN.

      Delete
    3. Instead of going after individual jihadists and their cells and groups...an absolutely insane mission....

      We should be putting our feet on the necks of the leaders of groups like Hezbollah, and the stupid governments in Egypt and Saudi Arabia...

      Let's let these assholes know we can topple them if we like...these little shit countries are small enough for us to fuck around with...

      But Iran is too big...way to big...to fuck around with anymore.

      They are not the towelheads of 1953. They are 80 million and growing and clever as shit. We should be pushing around the Saudis, those idiots in Jordan, and certainly wipe our ass with Assad in Syria.

      But the Iranians are too big and too intelligent to fuck with. They must be our covert friends.

      Delete
    4. Iran is like Checkoslovakia in continental europe, if CS falls, whole europe is going down, iran is just CS on euroasian contiental scale... could be that solution is to give to Kurdistan exit on sea near Aleppo, for Iran to look west, all blow give to Israel

      Delete
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