Truth and Lies Series – Part 3

Rossa presents the last of the series:

Is China going to save the world? I think not.

Truth: China Is Preparing To Dump The Dollar

Most economists should have seen the Chinese problem back in 2005, when their central bank started issuing Yuan denominated treasury securities called “Panda Bonds”:

Maybe the cute name threw mainstream pundits for a loop, or maybe they just couldn’t see the true purpose behind such a move.

China is the largest holder of U.S. debt and dollars. It is also the largest holder of forex reserves in the world. China’s coffers are bloated with savings. So then, why would the Chinese government introduce a plan to sell their own debt securities? They don’t need constant inflows of foreign cash to stay afloat like we do here. Their currency was pegged to the dollar so issuing a Yuan denominated security would have been pointless, at least in the eyes of the common investor. What did the Chinese central bank know that we didn’t?

It took some connecting of dots, but in 2008, when the ASEAN trading bloc took shape and they began to allow Yuan bonds for cross border trades, the reason was clear; China was planning to de-peg from the dollar. China was going to allow their currency to valuate. China was going to move towards a consumer based economy. China was going to drop the dollar as its reserve currency for international trade. And, eventually, China was going to dump their U.S. Treasury holdings altogether.

Why would China start preparations for this all the way back in 2005? It seems like a serious gamble, unless they KNEW what was coming in 2008. Unless they knew that the credit crisis would strike hard, that U.S. consumption would falter for years, not months, damaging Chinese exports. Unless they knew that the Federal Reserve would recklessly pour fiat into the system. Looking back at China’s actions, one can only conclude that their central bank was made aware of coming events by others, or, they are all Jedi, and deserve some kind of award for their incredible powers of foresight.

So far, the Chinese have de-pegged from the dollar, Yuan bonds are now being issued by the World Bank, and China has dropped the dollar in bilateral trades with Russia. We are only a step or two away from a global shunning of the dollar and a treasury dump by our biggest creditor.

Truth: China Is Suffering From Inflation

Concise data on Chinese inflation is even more impossible to obtain than it is here in the U.S. The “official” inflation rate in China increased by 5.1% last year, however, some estimates double that figure:

Chinese property prices rose for the 19th month in a row last December, while Chinese demand for housing remained low. Government subsidization of residential construction has created modern day “ghost towns”; entire complexes of apartments and retail spaces devoid of inhabitants:

China has introduced its own stimulus measures in the face of the global credit crunch. While our fiat dollars have all been stuffed into the pockets of corporate banks and foreign entities, their fiat Yuan is going directly into their real economy. This is why China’s inflation is so immediate, while ours is still partly subdued.

Does this mean China is in the midst of its own bubble, ready to pop and rain down financial havoc? Not necessarily…

Lie: China Can Counter Inflation Without Boosting The Yuan

China has one option; extreme Yuan appreciation boosting the buying power of their populace in order to counter rising prices. China denies this possibility in public forums, but their central bank’s actions tell a different story.

Reserve requirements (the amount of money Chinese banks must hold as a safety net) have been upped several times, mushrooming to 19%. This is meant to remove excess liquidity from the economy, but so far the move has failed miserably. China has also raised interest rates to curb lending several times to no avail. As noted above, inflation continues.

I believe Chinese as well as Western central bankers are well aware that the Yuan will have to spike considerably if inflation is going to be halted, but currency valuation is not something that can be enacted without consequence. Generally, for one currency to rise quickly, another currency tends to fall. In this case, that currency will be the dollar.

Forget about all the empty rhetoric you hear in the MSM or are liable to hear during Chinese President Hu Jintao’s visit this week in Washington. Already, Hu has called for greater cooperation between the U.S. and China while at the same time stating that the dollar based system is a “product of the past”:

The U.S. government has called for greater cooperation with China while the Senate has issued a statement demanding Congress institute a bill that would label China as a “currency manipulator” on the eve of Hu’s visit:

The meeting between Hu and Obama will generate nothing, because neither Hu nor Obama actually have any say in the financial decisions they will discuss. Those decisions are made by the central bankers of our respective nations, and the central banks want an end to the dollar. When it comes down to it, the banking elites of China and the U.S. are both working towards this goal, while the masses are led to believe that they stand opposed.

Most revealing has been China’s support of the EU. Why are the Chinese suddenly so interested in propping up European economies that are destined to default? It’s definitely not out of the kindness of their hearts. First, China gains greater proliferation of the Yuan by tying itself closer to Europe, Africa, and the rest of Asia. Greater Chinese investment in the EU makes a switch to the Yuan (or a basket of currencies) and a move away from the dollar more acceptable to the citizenry of Europe. (Notice that all the American taxpayer dollars that were sent to tide over the EU were made secret, while all that Chinese money sent to the EU is loudly paraded for all to see. China: good guy. America: bad guy). Second, the greater the proliferation of Yuan bonds, the faster the Chinese can begin to dump their U.S. Treasuries. This is the key!

China must shrink its forex and T-bill reserves in order to drive an appreciation of the Yuan able to cut off inflation concerns. Timothy Geithner claims this will be good for the U.S. Hu claims it would be bad for China. They are both liars. Ultimately, inflation will be used by China as the excuse to drop the dollar completely, which is what they have been planning to do since at least 2005. The private Federal Reserve and our government will announce victory and a “managed” devaluation of the dollar, only to have the treasury bubble snap and bury us in hyperinflation, which is what they wanted all along, for many reasons, but most importantly to allow for the birth of the IMF’s SDR as the new global currency (amply supported by the new improved Yuan).

ConclusionThe Saga Of Disinformation Continues

I thought the economic situation was confusing two years ago. I never dreamed the pretzel could become so twisted so fast. The reason it is vital to stay on top of the fog and misdirection should be evident; deception in the economy can be used to steer the public and our country towards terrible ends. While many of us might become exhausted with the constant reminders of the dark road ahead, we cannot take for granted that the battle for the truth is far from over. We have made great headway over the years, far more than I dared imagine possible, but this is a beginning, one that must be cradled carefully, like the embers of the first fire.

The nature of propaganda is to strut, to pound its chest and wail the closer we get to reality. The more Americans stumble upon the facts behind the false statistics and false smiles of establishment pundits, the more we will be subjected to globalist think-tank fancies and elaborate insanities. In this, we find our most reliable gauge of impending jeopardy, and salvation. Bigger grifts signal precarious times, but also desperation amongst the perpetrators and con men. There does come a time when people become weary of being fooled, and they turn their blunderings from a hindrance into an education. Ironically, lies very often destroy themselves, by frustrating their intended victims into action.

By Giordano Bruno

Neithercorp Press – 1/18/2011

5 comments for “Truth and Lies Series – Part 3

  1. Patrick Harris
    January 22, 2011 at 16:59

    150,000 hectares (whatever they are) of English forests to be sold off, China will be the new owners – any bets?

  2. Patrick Harris
    January 22, 2011 at 22:33
  3. January 22, 2011 at 23:02

    Patrick Harris wrote:

    150,000 hectares (whatever they are) of English forests to be sold off, China will be the new owners – any bets?

    I do so hope so.

  4. David
    January 23, 2011 at 01:33

    What is in this that isn’t in Martin Wolf’s articles in the FT?

Comments are closed.