China Is Toast

Even Mickey is Toast! The general assumption is that China is doing fine, thank you very much. I have a friend that is spending more and more time in China. I was totally unable to convince him that China has issues. As an attorney, my guess is that he will do well no matter what.

But for the average resident, how bad is China?

Latest research figures carried out by the Bank of America Corp. are set to rock the economies around the world once again. Has China been hiding the real state of its economic data? It would seem that the PRC hasn’t been quite as honest as it might have us all believe! According to the Bank of America Corp., the Chinese trade surplus that was meant to stand at some $61 billion turns out to be a meager mere tenth of that so far this year.

Another problem is that Chinese investors have this odd idea that empty apartments are a good investment.

A recent CBS 60 Minutes report in the US exposed dozens of new cities in China sitting empty—with the apartments snapped up as investments by the nation's wealthy middle class, then sitting empty as the owners fail to find tenants who can meet the rent.

Financial experts fear the ghost town explosion will lead to a housing bubble burst, following China's real estate boom which came after the government changed its policy 15 years ago and allowed people to buy their homes.

The middle class saw real estate as a solid investment, more stable than the share market and offering better returns than the banks.

This is just plain crazy. I know from first-hand experience that empty real estate is a depreciating asset. This will not end well.

I have been talking about various kinds of toast. Japan is toast. Europe is toast. Now China has joined that august breakfast of champions, they are toast as well. Is the US toast? That I will address very soon.

Isn't It Ironic?

I remember this song. I also remember the critiques of this song that insisted most of the examples in the lyrics are not ironic. 

But isn't it ironic that the current speculation about the Federal Reserve stopping or reducing Quantitative Easing (or as we hard money types call it, money printing) is causing distress, rejoicing, fear, and loathing in Washington. I guess my own perspective is a combination of rejoicing and fear. 

One wag even suggested that the Federal Reserve will have bought up all the marketable bonds by 2016. (I assume that this is all bonds not owned by various governments...the Japanese and the Chinese mainly...or government agencies.) This is exactly what I expect to happen. I also expect that all these bonds will be repudiated. The power of having a reserve currency is immense. 

Isn't it ironic, don't ya think, that the US may actually get away with this? 

Fraud Is Mathematically Guaranteed

It's Alive, the Mortgage is Alive. I am about to lose some libertarian "creds." It seems to me that the government power of definition could be used to help our financial mess. I do not know that I would call this regulation, but self honesty compels me to admit it is. If there is a known definition of mortgage for example, then one who issues or resells a "mortgage" that does not meet that definition is guilty of fraud.

To a large extent, due to rather utopian ideas of the market by regulators, "loans" that in years past would never have been issued were issued. These were the infamous "ninja" loans—no income no job. They were issued due to the way executive compensation works in our modern financial Babylon.

I suggest you listen to the 2012 Bill Black interview I embed below as it explains exactly how this works.

Or if you do not have time to listen, consider these words:

“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it."

- Frederic Bastiat

This is our modern Babylon that calls evil good and good evil. No non-psychopath ever wants to think of themselves as evil, so a little redefinition is needed.

Control of definitions, or as I call it here the template, predetermines the outcome. We need better definitions, and a better template to look at the world.

Europe Is Toast

On Monday I posted a video that showed rather convincingly that Japan is toast. But of course all of us with French surnames are confident that Europe is quite safe. Maybe I should change my name to Ivan DeJarnetoff for as this video shows, Europe is also toast. (As long as oil and gas prices remain high, Russia will do fine.)

Many European workers do not understand that their employer cannot pay them more in salary than they produce.  There will be a "payday" someday.



While this video is pro-gold, I think that gold and silver is the best option for speculative investment. But only after you have done your pre-investments.

We live in a world where investment is nearly impossible, as the risks of even "safe" investments outweigh the returns. As this video points out at the beginning, a very wealthy man who invests 10 million in 2 year US treasuries would have received an income of over $400,000 ten years ago. Today that same investment yields just over $20,000. This is nuts.

Get ready for a continuation of the Great Recession. It will not be pretty.

Japan is Toast

As Herb Stein famously said, "What can't continue, won't continue." So in that spirit I am embedding a video by OtterWood Capital. I know nothing about them, but I thought that the charts in the video explain the issues with regard to Japan. 

Japan is Toast. 

Perversely enough this may be positive to the US economy as money flees the Yen and looks for a "safe" home. The US will be the last castle standing, but even it will fall. One wild card is the over one trillion of US government debt owned by the Bank of Japan. Will they be forced to sell that debt rapidly? 

I think all the economic pundits are missing the power of the system. It will weather a number of storms. It will continue on for some time, and then since it can't continue, it won't continue. 

And the change will occur with great rapidity. Get ready as best you can.