Don't Understand Why We Are In A Global Depression? Read This Thread., page 3

reply to post by Hallberg Rassy

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I agree with you to a point. But as I said, economic warfare is new and I don't expect you or anyone else to really understand it.

It is important to understand WHY China is taking these steps and WHY they decided to become such a big buyer of US sovereign debt. This is no accident and it didn't happen over night.

I didn't blame China. Obviously you didn't understand the premise of what I wrote. I said China KNOWS how our system works, and they've known for quite some time that a day like this was coming. So like any good soldiers, they prepared.

I recommend you get a better understanding of the US/China relationship, history, and trade laws that have lead to where we are today. The only country holding us afloat right now is China.

reply to post by cognoscente

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Exactly how is demand being taken care of? U.S. ports are filling up with vehicles, because no one is buying. Neighborhoods are empty because no one is buying the houses. Companies are laying off people because they can't move product. The wholeproblem is lack of demand, lack of people with money to buy goods and services. Heck, even Vegas is pulling in enough people.

It is not about the money supply? Banking is all about the money supply. The money supply is created through banking with the fractional reserve banking system.

Low trade = low productivity = low employment = low growth. It's just a chain.

Um yeah, and what creates the low trade problem? I already told you, lack of money to buy goods and services, in other words, demand. When you arrive at the point where people are paying out everything they earn just to stay alive, then they have no money to buy new things, heck, we are so overloaded with stuff, we don't need more stuff.

their banks didn't condone extending credit to subprime borrowers or even reduce mortgage requirements

Um, yeah, yes they did. China extended vast amounts of credit to the U.S. because it drove their economy. Japan has done the same thing, and they both did it using the same technique, fixing their currency exchange rate to the U.S. currency to maintain a trade imbalance.

reply to post by projectvxn

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I id a little looking into it, and yes, China is the largest holder of U.S. debt outside of the U.S..

Here is a link to an article on the situation, that I thought had some intelligent things to say.

www.goldworld.com...


[img]//images.angelpub.com...[/img]

I don't know if the image will display, but China still only holds a small percentage of U.S. Debt.

The break down of U.S. debt holders is,

The U.S. Federal Reserve and U.S. Intra-governmental - 43.06%
Other Investors (see the article) - 33.04%
Mutual Funds - 6.89%
China - 6.63%
Japan - 5.69%
State and Local Governments - 4.69%

So, with 6.63% of U.S. debt is China going to be able to take over the U.S. economy, not even close, only in the cartoons. China is more dependent on the U.S. than the U.S. is dependent upon them. Not only that, but China would also greatly hurt their other closest trading partner, Japan, and very, very seriously piss off the rest of the world. It would be very bad business sense for China to try and destroy the U.S. economy. On top of that, they have no Navy to come over and collect.

Here is another link to the break down of U.S. debt holders.

www.geldpress.com...

reply to post by poet1b

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You don't need to hold a lot of debt to hold a lot of dollars. Which they are using to buy the commodities they need to strengthen the yuan against the dollar in the coming months. This will make the Yuan more attractive to countries seeking to switch from the dollar through currency swaps.

This is already starting in Argentina.

Here is a listing of top countries GDP output. In other words, the countries that produce the most Goods and Services. I believe these are 2009 figures.

www.mapsofworld.com...

* U.S.A * 13,807,550
* Japan * 4,381,576
* Germany * 3,320,913
* China * 3,280,224
* U.K * 2,804,437
* France * 2,104,666
* Italy * 1,439,983
* Spain * 1,436,086
* Canada * 1,313,590
* Brazil * 379,000

This pretty much paints the picture as to who has what capabilities.

What does this mean? The world has tried to use the U.S. consumer to pull the third world up out of poverty. This doesn't work, it has only lead to massive debt in the U.S. and a collapse of the worlds economy. The solution is to raise wages in third world countries, and to cut working hours around the globe. Increase demand, lower supply, and the markets should start functioning properly again.

reply to post by poet1b

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This is very generalized information and DOES NOT give an accurate representation of economic activities. It only describes output as a general number tallied over time. It does not calculate how capable any on nation could be in dealing with financial matters..

I fail to see where you're going with this.

reply to post by projectvxn

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Ah, but is this good news or bad news for U.S. workers? I think it is good news for U.S. workers and bad news for U.S. bankers. The U.S. currency as the global exchange currency is bad for U.S. workers in that it raises the cost of U.S. workers, while it gives an advantage to U.S. based IC's, aiding them in exporting U.S. jobs.

reply to post by projectvxn

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Financial matters are nothing but numbers in a book or a computer these days. They are only as good as what those who claim them to be are capable of making them good on. The old saying comes down to, "figures don't lie, but liars do figure".

The ability to produce goods and services it the most important capability. Who owes whom what is just a debate.

reply to post by thumbpick

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It has been hijacked by liars who figure.

sorry for the one liner.

Originally posted by poet1b
reply to post by cognoscente

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Exactly how is demand being taken care of? U.S. ports are filling up with vehicles, because no one is buying. Neighborhoods are empty because no one is buying the houses. Companies are laying off people because they can't move product. The wholeproblem is lack of demand, lack of people with money to buy goods and services. Heck, even Vegas is pulling in enough people.

Hindsight is a gem, isn't it? Demand will replace itself as soon as credit begins to flow and these toxic assets are dealt with. Both trade and productivity were excellent before the financials went out of whack.

Originally posted by poet1b
It is not about the money supply? Banking is all about the money supply. The money supply is created through banking with the fractional reserve banking system.

It has everything to do with the money supply, but not the way you're thinking about it.

Originally posted by poet1b
Um yeah, and what creates the low trade problem? I already told you, lack of money to buy goods and services, in other words, demand. When you arrive at the point where people are paying out everything they earn just to stay alive, then they have no money to buy new things, heck, we are so overloaded with stuff, we don't need more stuff.

Lack of money because the banks aren't giving it out, because they are afraid it will be destroyed along with all the other overleveraged loans they gave out over the past few years.

Originally posted by poet1b
Um, yeah, yes they did. China extended vast amounts of credit to the U.S. because it drove their economy. Japan has done the same thing, and they both did it using the same technique, fixing their currency exchange rate to the U.S. currency to maintain a trade imbalance.

I was talking about Canada you dolt.

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On a final note, what's with this propensity for rebellion against the system? So what if money is fiat? The problem is the existence of a central, private authority able to print money with little or no oversight. They try their best to match GDP growth rates so that your money isn't destroyed. On the other hand, it is central planning in that they crudely target desirable foreign exchange rates so as to keep their currency competitive overseas. This sometimes has undesirable domestic consequences. A better way to go about this is to issue a single global currency, with decentralized printing obligations given to each participating country so as to avoid corruption and promote transparency. The currency would be traded on a perfectly free market, and we wouldn't have to deal with all these accumulated balance of trade deficits that are causing so much trouble on the international political scene.

Originally posted by poet1b
What does this mean? The world has tried to use the U.S. consumer to pull the third world up out of poverty. This doesn't work, it has only lead to massive debt in the U.S. and a collapse of the worlds economy. The solution is to raise wages in third world countries, and to cut working hours around the globe. Increase demand, lower supply, and the markets should start functioning properly again.

No one has tried to pull the third world out of poverty. It's just a natural consequence of capitalism. The world depends on a U.S. consumer market because, simply put, they have all the money. In the process the U.S. has relegated a huge proportion of its manufacturing industry to the newly industrializing, so-called periphery countries, such as China, India and Brazil. If the U.S. really wanted to, they could just restart their manufacturing industries and it wouldn't be a problem. It would definitely put a lot of Americans back to work. However, it just happens to be cheaper to run their operations overseas. The workers are used to lower wages, and consumer markets overseas are virtually non-existent in comparison so they have yet to acquire a complex taste for first world goods and services. Those countries also have significantly lower output, so their currency is weaker and in turn we have painted this picture where it only makes sense to specialize as a consumer society. There is no point not to until the rest of the world actually starts to compete, and no matter how much people like to portray China, India and Brazil as big, new, autonomous industrial players the reality is they have a very long way to go and they pose significantly little threat to what will continue to be dominating U.S. economy for decades to come.

What you are pointing out is a very amateur observation... Of course the world would be better off if there were more competition, if wages were higher in third world countries... But you can't just raise wages. They will rise when those countries start developing their own internal demand, and that will only happen when they become a little more autonomous, and start producing goods and services that are on-par with U.S. production standards.

You're not going to solve the world's problems by artificially increasing third world wages. You would see massive spending in the short-run, and then however long that takes to run through the system, the value of their wages would inflate dramatically and there would be a crash, because the wage increases were never matched with an increase in real productivity. The fact is the third world produces little of value.

The third world needs to get its priorities straight. For example, Thailand is in a period of continual revolt, Zimbabwe is not fairing any better in terms of democracy, Congo is in the same decrepit state as it was when King Leopold of Belgium left ever so long ago, and the rest of them are in a state of seemingly interminable warfare. An investment in education, science and technology should take precedence over politics. The governments of the third world are being funded by multinational corporations, which are posing significant market barriers to fledgling capitalist classes in those countries, who can not compete with these highly subsidized, politically motivated first world corporations. Those are the real problems.

[edit on 9-4-2009 by cognoscente]

reply to post by cognoscente

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Great posts cognoscente!

America is a consumer economy and when we stop consuming the world suffers as a whole. With many Americans holding onto their money, rather than spending it now, everyone is suffering. Even the Americans.

Edit: I like the word, is.

[edit on 4/9/2009 by Tentickles]

reply to post by projectvxn

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Maybe you should go work for The Pentagon. They seem to be prepping for economic warfare.

Originally posted by poet1b
reply to post by projectvxn

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Ah, but is this good news or bad news for U.S. workers? I think it is good news for U.S. workers and bad news for U.S. bankers. The U.S. currency as the global exchange currency is bad for U.S. workers in that it raises the cost of U.S. workers, while it gives an advantage to U.S. based IC's, aiding them in exporting U.S. jobs.

I'm afraid you are underestimating China's financial know how.
And there's also a few things you're not considering:

For instance, as our auto industry collapses China's well, look for yourself:
China March Car Sales Rise 10% on Stimulus, Tax Cuts

April 9 (Bloomberg) -- China’s passenger car sales rose 10 percent in March from a year earlier after tax cuts and government subsidies boosted demand, narrowing the gap with the U.S. as the world’s largest car market.

Sales of cars, minivans and multi-purpose vehicles rose to a record 772,400 in the month, according to China Association of Automobile Manufacturers. Sales of cars and light trucks in the U.S. plunged 37 percent last month to 857,399 vehicles.

Demand for minivans surged 40 percent last month as the government began giving out 5 billion yuan ($731 million) in subsidies to help rural residents buy vans and light trucks. Sales growth in China for General Motors Corp., Daimler AG and other automakers contrasts with plummeting sales in the U.S., Japan and Europe.

“The sales surge was mainly caused by government policies and China may overtake the U.S. as the world’s biggest auto market this year,” said Yu Bing, an analyst at Ping An Securities Co. in Shanghai. “Still automakers’ profitability is not growing at the same pace as their sales since most growth coming from small vehicles.”

__________________________________________________

Secondly you're underestimating the importance of Monetary policy, and how the the Chinese use the Fractional Reserve system. The OP has a good explanation on what that is if you don't already know.

The Chinese purchases of US sovereign debt may seem like a small part, but it is no surprise that the Federal Reserve holds the vast majority of US debt, as they are the ones who supply the money at cost to the Treasury. But foreign government interjection in the US sovereign debt market is is the other way the US creates money. It's how we wound up creating money for a world reserve system after Bretton Woods in 1945.

US Government debt in the US is at just over $11 trillion.
The total US money supply as of April 2nd of this year is just over $8 trillion dollars(M2 growth rate of 9.2% since this time last year).

Interestingly enough, even I expect growth at the end of this year. I expect consumer spending to go up 2.3% at year end, but with hoarding going on and books being kept under a tight lock and key in the US it is impossible to REALLY know how much money is in the supply. If consumer spending goes up even 1% by years end then it translates into a 20 percent drop in USD value. How? Because(if we could look at M3) we would know that the total US money supply over the last year has been largely financed by China and the Federal Reserve monetizing the Treasury(Which is historically the last thing central banks do before going out of business). The Chinese and Fed financed dollars are being hoarded by Banks, people, and other institutions. The ONLY entity in the US really spending money right now is the US government as they try to reflate a burst bubble.

The idea here is to get out as the consumer spending level increases. This is why we have seen returns in t-bill, but long term bonds have been taking a hit. Recently the Fed stepped in to reflate the the 30y bond bubble by monetizing our debt to the tune of $300 billion, and again this week to the tune of $1.15 trillion.

What does this mean?

It means the dollar is crashing soon and China knows it. So they're buying short term debt instruments and using the dollars to buy gold.(Ever wonder why we had a huge spike in gold prices?) Those gold prices are coming down now, but that's because it is winding down. And to illustrate my point:
(PDF commodities report as of Mar 27 2009)

Why would they bother with gold? Because the Yuan is a silver backed currency and they are looking to diversify it's value in the metals market. I expect Chinese monetary policy to change soon after consumer spending in the US goes up. By which time they will have long announced their "inability to continue to purchase US Debt".

Dollar crashes, yuan, having been printed just slightly over the amount of silver and gold reserves declared by China so as to hold down their currency to the right moment. As I said they will take over the World Reserve system by currency swaps. They are already moving in that direction:

China, Argentina Agree to Currency Swap(Wall St. Journal March 31 2009)

BUENOS AIRES -- Argentine officials are hopeful that a new currency swap deal with China will bolster confidence in the peso while giving the monetary authority greater power to defend the currency.

"This should boost confidence," said an Argentine Central Bank official who asked for anonymity. "Even if none of this money is ever used, its mere existence should serve to boost confidence in the currency."

The two nations agreed to a three-year currency swap totaling 70 billion yuan, ($10 billion).

These actions are important to note. You need to let go of the "US is the most needed nation" myth and start looking at real data.

To answer your original question. This is BAD for the US worker, as this will bankrupt the nation. You seem to think that China needs us, and what China REALLY wants is a level playing field with the yuan as the goalie. And they're succeeding because we have bumbling fools running around Washington thinking this is the 1930s all over again.

[edit on 9-4-2009 by projectvxn]

Also, Canadian banks don't have a federally mandated reserve ratio; the banks decide their position on their own, which allow them to use the reserve ratio as a form of fiscal policy without fear of bank runs. At the moment, the U.S. is stuck at a 10% reserve ratio, which the public is used to, and if it were to be changed there seems to be a risk that all the banks would run out of deposits instantaneously.

consumerist.com...

Now this is interesting!

Apparently, Congress prevented the FDIC (Federal Depository Insurance Corporation) from collecting a risk premium from 95% of the banks for the last ten years straight, thinking that the FDIC was making enough money as it was, what with the banking system's ostensibly superb operations over that decade. The result was an inability of the FDIC to recoup the losses of major investment banks, such as AIG and Citigroup, causing the destruction of trillions of dollars worth of wealth in the form of derivatives. If only we had played by the rules, perhaps a large proportion of the damage in the financial market might have been alleviated more quickly.

[edit on 9-4-2009 by cognoscente]

reply to post by cognoscente

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The government and banks got to big for their britches, taking away the regulation.

They are now trying to reinstate a lot of the bans to make things safer.

SEC reinstating Short-Selling Ban

I am happy they are doing so, but it's too late. The damage has been done.

reply to post by cognoscente

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Demand won't replace itself until people start making money above what they owe in order to spend. Credit doesn't replace income. The people making this claim are only trying to pull the wool over your eyes.

Um, you're the one who claimed it has nothing to do with the money supply, see your post before last.

The monetary system has nothing to do with this recession,

I don't think you have a clue how I am thinking about the money supply.

You do a fine job of trying to put the cart in front of the horse, but you still get nowhere. Without a source of income people have no money to spend, and loaning people money when they have no ability to pay it back is throwing money away. Without consumers, market economies do not move. People who have no source of income to spend can not be consumers, so there is no demand to keep the market running. Extending credit does not fix this, at best it only delays the problem, making the problem worse, which is what got us here where we currently are.

While you may have been talking about Canada, the rest of us were talking about China, try and keep up, dolt.

The ONLY solution is to raise third world wages by eliminating the artificial barriers that are keeping third world wages down, which are the oppressive governments financed by IC's and backed by the U.S. military. Are you really that lacking in knowledge about secret government activities?

The additional solution is to lower the standard work week to where it should be for current productivity rates, somewhere below 32 hours.

reply to post by projectvxn

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You make some good points, can't say I totally disagree with you. The Chinese are indeed very shrewd businessmen, and they are bound to win some battles, if not the entire war, in these trade wars that have been going on for centuries now. Personally, no matter which team they are playing for, I see these bankers as the problem, and rarely as the solution. Banking should never be anything more than a system for the reasonable exchange of goods and services. When people start seeing banking at the economic engine, instead of the transfer station that it really is, then we are in serious trouble, which is what has brought us to where we are today.

I would say this, our current banking system is broken, as a result of deregulation, and failure to regulate international banking. The recent G20 summit which set its goals on starting to regulation international banking clearly made a step in the right direction. If I remember correctly, the Chinese and the other third world economies were mainly interested in pumping up the IMF, and large loans to third world economies, while the Europeans were mainly interested in regulation and eliminating tax havens, which is the real solution. I thought it was very interesting as to who wanted what, and as to who was making what accusations.

All first world nations reached their status by allowing unions, and adopting labor standards, resulting in rising wages, creating a middle class, and a strong consumer base, enabling the market system to function.

China, nor any other nation, is ever going to succeed by playing some sort of banking voodoo. The only way for China to become a first world nation will be for it to raise wages to develop domestic demand, and to start respecting individual rights.

Maybe Canada might be a good example of how things should be done after all.

I would have to add, that I don't think that the U.S. dollar should continue on as the worlds reserve currency, it gives too much room for abuse by the elites, and too much capability for them to stick the U.S. public with the bill for their abuse.

reply to post by poet1b

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The rise in wages and such will come in time. Right now it is a positioning strategy they are following. I agree with you that the Banksters are the real problem, but China has STATE banksters so you know precisely what you're getting.

I think China merits a closer view. We all know where America is headed, but few know how China plays a role.

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