Here is the Bernanke's financial war on China and developing countries. The insidious purpose of QE2 can be deduced from the following observations. (1) The national debt is impossible to pay off, not only debt to foreign sovereign countries, but also the larger, internal debt to US citizens through social programs such as Medicare and Social Security. The interest rate must be low, and preferrably zero; otherwise, the US government will default "immediately." QE2 helps the US government to avoid immediate bankruptcy. (2) Too-big-to-fail banks are still struggling. With low domestic interest rates and people refinanced their mortgages to lower interest rates, banks earn less. Higher interest rates can cause more home owners to default. Hence, the second bank stress test at 11% unemployment rate and the QE2. (3) US wants to lower its debt to foreign countries by devaluing the dollar and causing inflation. (4) The Fed tries to force China to de-peg by flooding the Chinese economy with paper money. At the same time, the Treasury urges China to strengthen the Yuan. US banks cannot make much in the low interest environment in the USA, but they can use foreign currency exchange to earn higher interest returns in China, earn profit through the currency appreciation of the Yuan, and buy real tangible assets in China with Bernanke's paper money created out of thin air. This way, Bernanke is subsidizing his pack of wolves to raid and loot the Chinese savings and hard assets, and he hopes that these banks in the West can earn and steal their way out of insolvency. (4) The USA has effectively declared China an enemy. Bernanke's pack of wolves are buying assets in China (and other developing) countries, but China cannot buy the same in the US. E.g., recent 3leafs deal was withdrawn. (5) Japan, as an export driven country, was essentially destroyed by the US 2 decades earlier. Japan, through the diligence of its people, had high saving rate decades earlier, but they had to buy the Treasury bonds to support its exports because the dollar's reserve status. Then the US asked Japan to float its currency higher, and soon, much of the debt to Japan was inflated away. US "prevented" Japan from getting its deposits in the US, and instead, loaned money to Japan. Now, Japan is a debtor nation with high debt to GDP ratio and with 2 decades of no growth. Nice work for the bankers and slavers. Caution to any developing country: China, India, etc. By the way, can anyone comment on what China and other developing countries are doing about their capital inflow besides raising rates and bank reserves and currency swaps? I am an American. I will be happy if my Uncle Sam can loot and steal for me. But no, I am angry. This loot does not benefit me. It supports the growth of this fukking military industrial complex, this welfare state where I pay highest taxes and see welfare recepients doing nothing but bitching about current affairs; it supports the perpetual conflicts around the world. I don't know what the best solution is, but I believe no single country's currency should serve as global reserve currency. Is this it? Is the best the whole fukking human race on the planet earth can come up with is industry and banking? Industrial products benefit humanity: iPhone, Internet, supercomputers. The only product of banks is debt and enslavement, wrapped in various colorful packages. Is this all we've got? You've got to be fukking kidding me! The fact that dinosaurs, which ruled for millions of years on this same planet we inhabit, were wiped out in no time, tells us that the probability of survival of our species in each year is less than one. Let this probability be P, P<1; it does not matter how close P is to 1, consecutive survial of humanity year after year trends to 0. If we don't figure out something better sooner, we will meet the Great Filter hell of sooner. No wonder we don't see other alien civilizations.
1. Chinese assets. I am no expert, but I haven't seen the Chinese let us take ownership of anything which can't be nationalized, voided, confiscated, or held as collateral. Other countries have not been so quick to watch their exit strategies. (Can't find any supporting evidence quickly, so I may be full of it.) 2. China as the enemy. Its about time that we start to think about what globalization is doing in detail, and not just what it should be doing to our corporate balance sheets. 3. Japan was loaned rather than returned deposits. Didn't know that. I had heard that the Japanese had bought all of the US hard assets of interest in the 1980. The Rockefeller Center, for example, was held until 1996. Interesting. 4. Industry and Banking. Your argument is too simple. One can look at the current situation as trying to invent new customer needs to fill, or as the gateway to a whole new reality. It is beyond me to know which. 5. Human survival. Your judgment of this poorly behaved youngster called the US does not lead directly to a statement about humanity. Aside from mentioning the tomes of science fiction on the topic, I want to mention that the armament, and especially relative armament may prove particularly problematic. Some versions of history explain the colonial era in terms of firearms, and particularly automatic firearms. Not a page in human history inwhich one want to revel. It will be rather the pity if it must be repeated using microwave gunships, chemical weapons, ... 6. Aliens. There are two reasons why I think that aliens have not made themselves known. My wife tells me that there is a saying in German along the lines of "The Freedom of Craziness". When someone is acting wild but tolerably, everyone, including the police, are inclined to not get involved. There just isn't likely to be a positive outcome. The other reason is human dependence. Say all you like about testosterone men who won't stop to ask for directions, and I will point out ten times as many who are trying to keep their disability payments coming. Just as a humanitarian aid organization cannot enter without the situation immediately becoming more pathetic. So too, a real, factual, dependable presence of someone to beseech would pull efforts immediately away from any real, practical solution to our problems. Not a very positive response, but you made several interesting points.
Wow, I was really thrown a curve ball on this one. I've got a list of names in my head that I automatically go through once I see a crazy irrelevant topic like this, that doesn't have anything to do with trading at all. The dreaded bearice and T Geithner are by far the worst. Amazingly none of them are to be seen. I'd like to contribute, but I'm trying to cope with the emotional impact I've been left with.
While browsing here it hit me: What is happening is that the greedy banker-political class have REALLY overdone it this time. They took so much taxpayer money and gave it to their friends that the economy can't even recover... they probably sit around the gentlemen's club with a cigar and a snifter of Brandy saying "Is it just me or does the recovery seem a little slow?"
I like OP's name...MathAndLogic. Anyway china also benefited from its export/outsource with the US, so pot meet kettle. And chinese knew exactly what the US is doing. I know many business owners in china, and they joke with me all the time about how devilish americans are - they make the chinese slave over making cheap shit with the worst environmental impacts in their country while complaining about outsource/trade imbalance and point out china's pollution problems, then they just inflate the dollar a few points and bam! a couple million sneakers the chinese worked hard to make are now free gifts to the usa And increase interest rate in china will only encourage more hot money to flow in, so yeah the government is in a difficult place right now to deal with inflation.
1 advantage chinese have over us is that us actions are predictabe. Clearly they studied every action in history and learned. Patient, waiting for opponent to become impatient and make mistake. So far, they are ahead in this game in my opinion.
Yes...its mind blowing actually, and the shit hasn't even hit the fan yet. The next decade will certainly be an interesting one .
Let's follow this line of thought. If there is no Fed intervention, the market interest rate should be as high as 10 to 20% as in the 1970s. At this interest rate on current national debts and personal debts, our government will be bankrupt and home owners will default en mass. The financial institutions propped up by tax payers through TARP will fall again. Therefore, quantitative easing must and will continue, but likely it will not be called QE3 or QE4; it will likely be called the IMF World Hunger Relief Fund or something noble; afterall, IMF is a puppet of the Fed. Nonetheless, the only product of banks is sugar-coated debt and slavery. Now, Fed is the largest bond holders of our debt; China has fallen to the third and will continue to dump US treasuries as China's next Five Year Plan is to convert itself from export driven to internal consumption driven economy. The toilet paper dollars and the inflation we exported will be returning home. QEs will continue in various disguises ad nauseum. Do you see a way out? Can this vicious cycle be interrupted and reversed? China has gained significantly as its infrastructure improves. No pain no gain. QEs will cause China to suffer. But this suffering will slow as its economy becomes less dependent on exports. In the past decades, China has demonstrated remarkable foresight. Instead of taking IMF loans, it asked for direct foreign investment in the form of fixed assets and infrastructure that cannot be moved out of the country by speculators in times of financial panic; instead of buying gold, it bought mines; instead of impoverishing itself by too many mouths to feed, it has prescribed single child policy that can be adjusted when the time is right; instead of telling its citizens "God will save us," it is a nation of atheist focused on math and sciences; its students rank the top in the world on math and sciences; it has claimed the Gold prizes nearly year after year in International Math Olympiad. It is far too early to say Asians can't innovate. People in frontiers of knowledge will innovate and people behind will learn because it is economic suicidal waste to reinvent the wheel. Students will learn in class rooms; corporations in competition will not learn from each other in classrooms; they will either innovate by themselves or steal trade and technological secrets though industrial espionage. Now, much of the world manufacturing had gone to China. Here is a thought experiment. Is democracy necessary the best for a country? Let a country be a set of individuals who make decisions for their self interest and the interests of the country as a whole; and one of these decisions is the best for the whole regardless whether it is the best for the self; after much contention and bickering, what is the probability that the best solution for the whole will be adopted? What about a centrally planned economy? Let there be a subset of individuals who receive information from all in the set. This subset makes the best rational decision in that moment in time and prescribes to the rest. At least bickering is reduced. Is this better? I don't know. Monarchy and dictatorship is more political than economic. There has been economic rise and fall under monarchies. The problem with monarchy or dictatorship is that one person's brain is not enough to process all the complex information of the whole country. China has really made impressive progress. Our cry against China has been wimpy squeal "human rights." What is in a name, communism, capitalism, Montague, Capulet ? Fasten your seatbelt for the rough ride ahead.