Political Economy & Finance
The latest skuttlebutt from China, is that China’s phenomenol growth story of the last 15years is coming to an end.
HSBC, reporting from the far continent suggested that a number of datapoints strongly indicate that the 10% plus growth of 15 years ago, and the 7.5% growth that has been normal throughout the last 5+ years while the west has been in the worst recession in over 70 years, is finally weakening.
Supply of houses in some of the larger cities, reached 15months supply, in tier 2 cities, and about 2 years in tier 3 and 4 cities.
However, house prices climbed in 44 of the 70 cities, but down from the 56 cities where prices had climbed in March, as monitored by the government’s statisticians.
Greenpoint, one of the largest Property Developers in Zheijang province reported that propery prices dropped 0.7% from the previous month, and housing in some of the northern cities is close to ten years’ supply.
Off the record remarks from one large company exec – Mao Da Qing, of Vanke Group, admitted that its stock of housing units was at over a 100 month’s supply.
Some developers in the Beijing area are attempting to stimulate demand by slashing prices. One even offered discounts, of upto 50%, and some with “Zero-down” loans such as were common in western economies in the lead up to the bubble of 2008, while others are attempting to add capital to their businesses to provide some security. All this is just more grist to the mill of the Boom becoming a Bust, and the over-development being similar to the bubbles that built up in western economies during the heat of the housing boom, but on a far grander scale.
In fact reporters from America have noted on several occasions of the huge number of vacant properties in some of the newer cities, as over development has meant visitors to these towns say they resemble “Ghost Cities”. But will this over-development mean a hangover, for the financial authorities as loans for development go unpaid, as properties go unsold?
China’s political leadership may not be too concerned, in regards to the cooling market, and they appear unwilling (at the moment) to reflate the economy via more Quantitative Easing, but going forward, if unemployment rises from the circa 15% reported by Will Hutton in his 2007 book, “The Writing on the Wall”, at around 170,000,000. (I suspect they may change their mind if the economy goes into freefall – as anything less than about 5% growth, would be seen as insufficient to keep the population quiescent)
Even if Bank of China has seen its market capitalisation shrink from RMB1 Trillion in 2010, to RMB740 Billion in recent months, will this mean less, or more, government intervention to keep the economy burbling along?
China’s Answer To Deflation?
If deflation does begin to take affect, with energy growth declining, and China’s Coal fired power stations looking for ways to reduce the pollution, that China seems to endemically suffer from, by cleaning exhaust fumes, without pushing up costs even while Mr Putin signed a deal to provide Gas to China, in an effort to clean up China’s air; what will the political elite do?
It is well known that China has been accumulating precious metals with increasing fervour in recent years. Is it the intention of the government and its economic wizzards to hedge their economy with large doses of Gold?
According to Byron King of King Capital, precious metals and natural resources commentator, and regular visitor to the middle-east’s hotspots, China is on track for being the world’s largest Gold holder sometime in the next 18months. Jim Willie who also comments on such matters has weighed in with a perhaps rash claim that they already have 10,000 tonnes, and Russia with 20,000 tonnes.
However, as imports through Hong Kong are reported via their financial authorities, China has also begun importing directly through Shanghai’s and Beijing’s financial heart and reports of buying through alternative channels, which are not reported, so this is a distinct possibility.
Reports of Chinese miners working in sub-Saharan Africa, sending back Gold to support families back home, and of Chinese officials buying at spot price from artisanal miners in Democratic Republic of Congo (DRC) bringing in upto 40 tonnes per month. It is therefore not outside the bounds of possibility.
And as a recent report of Dark Dealing in the Banking world suggests it is not just the “Morgue” (JP Morgan-Chase) and Goldman-Sachs who are involved in manipulating the Gold markets for their own (political?) ends.
Daniel Plunkett was a precious metals options trader for Barclays. On 28th June 2012, he was in hot water about to lose a considerable sum unless the Gold price fell that day. The Bank would have had to make a $3.9m payment to a client on an options contract. Plunkett had other ideas… He began selling Gold just before the 3 o’clock fix, and the contract was due to expire, and the price fell, netting him and the bank a $1.75m profit.
Of course the plan didn’t have a happy ending – at least not for the Bank, or the Trader. The client smelled a rat, and after an internal investigation, Barclays agreed to repay the $3.9million. The Financial Conduct Authority, fined Barclays £26m, and the trader £95,600 and a ban from ever working in the city again.
But is shows what happens where large sums are involved – desperate people do desparate things – and the Chinese? With the Fed’s policy of loosening of monetary stimulus, still at $45 Billion per month, and the Chinese holding $1.3 trillion in currency reserves, every 1% fall in their dollar reserves value is the equivalent of $13 Billion in lost purchasing power – enough to build 25 hospitals at half a billion each.
America’s Deflation Gathering Strength
If the figures released recently by the American statisticians indicate anything, it’s that the U.S. economy is also far from strong. Housing prices in the U.S. have risen recently partly because investment funds have been snapping up what were perceived to have been low prices in housing. But we also need to consider whether today’s youth of America are as wedded to the idea of home ownership as their more affluent forbears.
Many twenty somethings are now leaving college heavily indebted and without the jobs that would sustain long term mortgage payments as rapid changes in technology mean jobs are no longer secure for life, but until the next big thing comes along to disrupt the economy.
As I’ve said on many occasions before, the antidote to more financial manipulation by those in the centralised financial services industry is to decentralise.
Bitcoin, and the 80 or so other digital currencies may yet prove to be the undoing of so much influence, and skulduggery, as banks are stripped of their money creating powers over time, and governments are stripped of their tax raising powers, except on those with hard visible assets, such as property.
Perhaps that is one more reason, why the young are eschewing property. What you can’t see, you can’t tax. And at least for now, Bitcoin, Litecoin, Feathercoin, Maxcoin, Ultracoin and the others allow people to exchange values, without money changing hands.
And in recent weeks the big pull-back in Bitcoin that happened after the bankruptcy of Mount Gox, has partly been regained as the price of one coin, rose to $581 late this last week from its $400 lows.
For those keen to learn a little more about crypto-currencies, and hear a debate for and against: watch this – Peter Schiff, and Stefan Molyneux.
And for those looking to maybe dip a toe in the water and get some FREE crypto-currencies – go here —>>> Qoinpro.com
Those who think Peter Schiff has it right, maybe they will need to address that by buying what I believe is the most undervalued metal on the planet, and I’m not the only one who thinks so either… Ted Butler of the Butler Research Group thinks so too.
And if you are looking for a way to buy some silver. I can heartily recommend Liberty Silver
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Forgive my opening title to this piece – particularly if you are French…
No, it is not a reference to the delicacy of your country, nor an Englishman’s tirade against one of my favourite places on earth.
No, it is a reference to a story, I have never proved, but have heard recounted many times.
I am of course referring to the oft quoted story of what happens to a frog if you put it into hot water…
According to legend: If you put a Frog into hot water, it will immediately jump out. BUT, if you put that same frog into a pan of cold water, and gently heat it, it will sit there until it boils itself to death.
So my opening question is one of self examination.
Given the changes in the West in the decades since the 1970’s, for the rights and privileges that we fought so hard for over the previous eight hundred years, are we like the above frog, merely watching now, as some of these hard won rights are eroded?
The right to free speech and movement;
The right to freedom from persecution;
The right to vote;
The right to not be spied upon without due cause;
The right to religious freedom;
The right of “Habeas Corpus” and trial by a jury of our peers;
and more recently,
The right to be treated fairly, in the eyes of the law, irrespective of our religious principles, abilities, age, sex, sexual proclivities, marital status, colour of our skin, or the amount of money we have.
Many of these conditions that we have fought so hard to have put into law, have taken years of lobbying for, and yet the same class distinctions abide, and the same ruling elite still watches and rules over us.
The wealth accumulated by the few gives them privileges that we mere mortals can only dream of.
Take the senior banking elite for example. In recent years the Bankers have been involved in a series of actions that would make us mere mortals go to prison, and yet no senior banking figure has to my knowledge, even spent an hour in a Police station, let alone an interview room or a police cell. And if the allegations against these organisations are proved? They merely pay a fine, which ultimately gets paid by either their shareholders, their customers, or both.
One man Neil Mitchell, knows only too well the actions these Bankers have been involved in, as he was on the receiving end of their largesses and their dubious practices, as they foreclosed on his business just at the moment he was about to become successful. But, I digress.
So can a mere mortal join this elusive elite?
It means you, nay, WE need to accumulate wealth.
And, I’m not talking about a few million. That would be nice, but it wouldn’t put you in the realms of the elite. To reach those heady heights, you need circa £50million, and even that might be on the low side. According to the book “The Coming Battle”, over 100 years ago, the entry to this elusive club was already ten million dollars, and the value of those dollars has fallen 97% in the intervening period, so you can do the mathematics.
It has been said that a man (though it equally applies to a woman) can be judged by the company he (or she) keeps. Which boils down to the people you count in your social circle. In order to join this elusive band of brothers, you need to be useful to them, and that means you need to be an entrepreneur.
The word “entrepreneur” derives from the french word for “middleman” though its literal translation is “between taker”.
But being an entrepreneur is not necessarily just about being a middleman, it is about being a risk-taker. And we will have to think – as Napolean Hill once wrote, to grow rich, but it will be the route out of a future that many do not yet see coming, as the west’s social systems unravel, and future expectations go unmet.
Since the second world war, we baby-boomers constructed a political system where we required our politicians to give us care from cradle to grave. We required that politicians bribe us with our own money to educate us, keep us healthy, regulate traffic, regulate our work and our activites in the guise of “Health and Safety”. We even employed vast beauraucracies in government departments to tell us what to do, and how to do it, police and military systems to control it all, and funded it all on the back of growth we thought would rise almost forever.
But going forward, the transformation that is currently going on in the economic background means that many organisations that we currently see and use every day, will have to undergo major changes, to adapt to this revolution.
It is a truism that we humans have an in-built normalcy bias that makes us believe that the future will be an extension of today; and in the most part it will, as these things change slowly, but occasionally, there come times in economic and social history where change speeds up, and revolutions occur.
The first of those revolutions was the start of the agrarian society, when men began planting crops, and thus the normal way of surviving using the nomadic lifestyle gave way to living in one spot.
Once men began planting crops, they needed to defend them, and those people who threatened to take that away, were likely to get short shrift from the end of a spear, or sword.
As these people further developed, land ownership began, those with the most strength stood to gain the most, and a landed aristocracy grew up, with Kingdoms, and Fiefdoms spreading across the land, and battles for the ownership of these rich fields and water.
The next major revolution was in the 1600’s with the foundations of the enlightenment, and the discovery in the 1660s of chemical elements giving birth to chemistry. The previous elements of Air, Water, Fire and Earth, gave way to Hydrogen, Oxygen, Zinc, Nickel, Phosphorous, and the other chemical elements.
By the early 1700s we knew about 50 of these elements, and we were about to undergo the industrial revolution as these new elements gave us ideas to turn them into Iron, Steel, Steam-Engines, Iron-clad Boats, Steamships and Trains using wood and coal for fuel.
A second phase occurred in the late 1800s, as oil became more widely discovered, and then in 1901 as the oil in Spindletop, Texas oil well doubled the national output, ushering in the era of the motor-car its success encouraging further drillng, and gave the world and the U.S., cheap oil.
Another phase began a few years later when those early engines gave Wilbur and Orville Wright the idea to strap one to some wings, and the era of flight began. With the mass production techniques as used first by Henry Ford, producing vehicles in growing numbers, the world took its next steps of the Industrial Revolution.
The era of the semi-conductor began the next phase of this industrial revolution, as micro-electronics gave us first the huge power hungry mainframes used in government defence departments for decrypting our opponent’s messages, and later gave businesses the tools to automate many of their administrative functions, with the Lyons Electronic Office, mini-computers, and International Business Machines (IBM) becoming a household name.
The third generation of these machines began when Intel produced its 4004 Integrated Central Processing Unit (CPU) used in those early calculators, and desktop computing would emerge just three years later, by then the number of ICs (Integrated Circuits)in a chip, had risen several fold, and Gordon Moore’s Law was proven as his prediction that we would double in computer processing power every 18 months or so became accepted, and Microsoft would begin its journey to industrial behemoth as the Altair computer was developed giving the young Bill Gates, and Paul Allen their first challenge – to produce a computer programming code (Beginners All-purpose Symbolic Instruction Code) BASIC for this machine which still suffered from having no keyboard. By 1980, the home computer gave us in Britain, dozens of start-ups, and Acorn and the BBC computers. The Acorn, Amiga, Amstrad, Apple, BBC, Commodore, Sinclair, Tandy, Digital Research, Sperry and dozens of others pushed the boundaries of these desktop machines bringing computing into the mainstream.
A spin off of the Acorn/BBC partnership, was the small chip design division into a separate company, that designed the Reduced Instruction Set Chips (RISC) processors, that allowed a limited instruction set to be used, and these computer chips were smaller and lower in power consumption than their Intel designed CISC (Complex Instruction Set Chip) competitors.
These Acorn RISC Machines (ARM) processors went into mobile telephony systems, calculators, PDA’s and some of the early computer systems that have long since been consigned to the history books, but like the Guinea Pig, or Hamster was to prove to the Dinosaurs, when the opportunity arose, they took over. By the turn of the millennium, the mobile phone had got more and more functionality, and the Apple Smartphone which now contained these ARM chips turned the humble cell-phone into the ubiquitous smartphone that 5.2 billion handsets later have transformed our lives, giving us TWITTER, FACEBOOK, YAHOO, BAIDU, YANDEX, ALI-BABA, AMAZON, GOOGLE and E-BAY, and dozens of huge software based American Corporations – Oracle, HP, IBM and others are moving their services into the cloud, so that their revenue streams don’t disappear in a puff of smoke.
BUT, the downside is, that now we’re watching the world evolve at its fastest pace since the start of this wonderfully complex industrial revolution and those not part of this new wave will have to shrink and adapt.
The hardware in mobile telephony has allowed Africa to finally catch up with its western counterparts, as people can now communicate over relatively long distances and create havoc for governments of all political persuasions, with handsets that give them access to Social Media, Finance and information, and allow them to make contracts, discuss ideas, and to build systems that enrich their lives, educate their children and provide health care.
But as this increases their wealth, they will be competing for the scarce resources that we all rely on, and this increased wealth will lead to a population explosion at first, before increased costs, better healthcare, and wider involvement of women in the economy brings the birth rate into line with the West…
But these changes will cause pain for the west too, as we now have a billion more consumers with access to mobile computing power, that 50 years ago, only governments could afford.
And the latest development to come out of this rapid technological change are Crypto-Currencies, allowing Africans to trade where no banks exist.
Of course the first of these was Bitcoin, which according to Bloomberg this a.m., MIT undergraduates are to be given $100 in Bitcoins to see where these Technological University students take this new development.
If you haven’t used Bitcoin, or one of the 80 or so others, then the time to get in is NOW, and one of the easiest ways to do that is through Qoinpro, who not only set up an account merely with an e-mail address, but make an initial deposit, followed by daily deposits into your account. And this means that you can buy increasing amounts of the necessary things in life that you need. And as more and more people use these digital currencies, the digits on your bank account move from central computers in a Bank somewhere out there to the digits on your smartphone. And once that happens worldwide, the Banks become almost superfluous to the needs of most humans.
These giants of the industrial age, which began as storage houses for the wealth of the rich who held their wealth in Gold and Silver and evolved into the masters of the universe, will lose some of their power.
Banks will still need their vaulting businesses. Yes, the gold and silver will still need storage, but the bankers will lose control of the currency that has been abused by Bankers for political ends since the dawn of the industrial revolution, and the privileges they have gained as the Banking Wizards were pulling the strings behind the curtain will be a distant memory.
But that will free us all to make choices for our selves that will REALLY make the Frog analogy I opened with a distant memory.
But we have some tough choices to make.
Look at the previous FIVE GREAT AGES of human progress:
The STONE AGE – lasted 3.4 million years.
The BRONZE AGE – 2,500 years
The IRON AGE – 1,500 years
The INDUSTRIAL REVOLUTION – 180 years
The DIGITAL REVOLUTION – 40 years
You’ll see the length of each age shortens as technology advances.
And the INFORMATION REVOLUTION is about to hit us, as handheld super-computers, and Big Data provides us with all the world’s information at our finger tips.
Google can barely keep up with the number of new Web-sites, and page changes; Twitter feeds, Facebook status updates, and the output from Universities and major Laboratory reports.
We’re about to be overwhelmed by an avalanche of new technologies that are taking shape in labs around the world. If your job isn’t in one of these new industries, you will probably lose it, and if it is, you may still need to adapt as your business’ competitors produce new products, that make your industry shrink or fail.
Being financially independent, having multiple sources of income, minimizing your taxes, and saving enough to live for 50 years in retirement, and the time when you can no longer work, will be the most critical decisions you need to make.
Technologies to cure cancer, stop you EVER getting it, cure arthritis, Heart Disease, regenerate new body parts – livers, hearts, kidneys. 3D printers to produce anything you want within hours of having the idea, and automated vehicles are about to change the world as we know it.
No matter what industry you currently work in, you will be affected, your town, or city, and those around you as these changes take place.
Being financially free will be the only way to cope…
Karl Marx encouraged the workers of the world to unite and to take ownership of the businesses – to free themselves from being wage slaves. Becoming a shareholder in these emerging industries will make you an owner, that will empower you, and we’ll do our bit to inform you of those that we think will be the Microsofts, Googles and Apples of tomorrow.
You will need to learn what being an owner really means.
But you will also need a money system, that can’t be corrupted by governments and bankers…
And you can see the discussion here…
As events in Ukraine spiral out of control, it is possible that in the absence of a thawing of relations between Russia and the U.S., over the Ukraine, a new cold war could be about to emerge.
Particularly as the Ukraine, gets its gas from Russia, and currently owes the Russian Gas Giant – Gazprom over $2.2 BILLION in unpaid bills.
However, all this turbulence in eastern Ukraine, with Russian defenders of their cultural identity, that have stormed Local and Regional government offices, will possibly force Putin’s hand to defend these ethnic Russians which could draw in western forces to defend its supported government in the west of Ukraine.
For Ukraine whose currency has depreciated in value by 27%, since the troubles began, this could spell disaster for the country and its people. The gas bought from Russia was purchased at the highly advantageous gas prices that Gazprom gave to former CIS/Soviet states.
As Gazprom increased its prices to above market rates to Ukraine, to reflect the risk of failure to pay, and to recoup lost income, it is obvious that naturally Ukraine would be upset. Wouldn’t anyone if their energy bill went up 300%? And this has implications for Ukrainian industry, already not as well developed or efficient as their western counterparts.
Aleksey Miller – CEO of Gazprom, Russia’s biggest energy supplier, which in different circumstances would be a huge investment opportunity, suggested that Russia should abandon the Dollar and use the Euro for the international sale of GAS.
Even Christine Lagarde, Managing Director of the IMF, weighed in on the subject of Ukraine, by admitting in an interview on 2nd April, that the problems in Ukraine could affect the global economy.
Of course the Soviet state, went through its own internal challenges in the late 80s, as the commodities prices fell. Russian tanks and soldiers were embroiled in Afghanistan, and the Soviets spent more than they earned, the end result was the end of the Soviet Empire.
Are there parallels today for the U.S. empire? I suspect so – only their printing press has saved them. But will Chinese Gold cause the U.S. empire to collapse? We shall see…
As American and other nation’s troops are stationed in the Far East to – as Hilary Clinton put it – pivot Washington to the Far East, which drew the statement from a senior Chinese military figure, that “Chinese containment” was not possible.
As the raw materials of life have become more important, both Russia and China have used different strategies to achieve similar results.
Russia and the Global Metals Supply Chain
Both Russia and China have large land-masses, and the potential for commodities production. Russia is an important commodities giant. and Russian output is critical to the global supply chain for many items.
Russia is a major producer and exporter of oil, natural gas, ores, refined metals and industrial minerals. According to a recent analysis by the British firm Roskill, the extractive, energy and chemical sectors are vital to the Russian economy and accounted for an estimated 80% of Russian export revenues in 2013.
It’s important to recognise though, that Russia’s commodities are important on several levels. Russia is more than a major producer and exporter of energy and materials; Russia is an important player within Western supply and product chains. So, targeting Russian companies has the potential to provide blow back on Western businesses and economies.
For example: Nickel is much more than a 5 cent piece in people’s pockets. Nickel is critical to manufacturing stainless steel and a lot more. Nickel prices have pulled back in recent years as supplies have had to adapt to lower global demand, but picked up in recent weeks as commodites prices turned around, and Indonesia, imposed restrictions on exporting raw ore.
One of Russia’s big players, Norilsk Nickel, extracts ore in Russia but refines its product in Finland. Overall, Russia is the world’s second-largest producer of nickel, after China. But since China consumes most of its nickel domestically, this leaves Russia as the world’s key “swing” supplier. In 2013, Russia accounted for 26% of global nickel cathode exports, or around 13% of total world consumption of nickel. Without Russian nickel, the world’s steel industry would be quickly disrupted and prices on international markets would rise, possibly steeply.
Cobalt: Although Cobalt is found in many African countries, Russia is an important supplier. Cobalt, is used in steel and alloys increasingly with military applications as it is used to harden steel based alloys for armour piercing shells, and military vehicles as armour re-inforcement.
Russia accounts for about 6% of global mine output of ore and 3% of global refined output. Most Russian cobalt production is related to Norilsk operations in Finland, where cobalt comes out of nickel production. At 6% and 3%, as noted, Russian cobalt numbers are relatively low overall, but the point is that if Western sanctions somehow choke off Norilsk operations in Finland, we’ll see the impact on global availability of refined cobalt which would only add to military hardware costs.
Vanadium: Russia is the world’s third-largest producer of vanadium – providing about 10% of the world’s supply. Vanadium is critical to hardening steel and other alloys and is a key element for the future of utility-scale storage batteries. If vanadium supply takes a hit, all manner of metal and energy projects could be disrupted. Though a small miner – American Vanadium – is about to commence mining operations in the U.S..
Tungsten: Russia is the world’s second-largest producer of tungsten (behind China) and accounted for about 6% of global supply in 2013. Don’t be fooled by that low raw number, though, because about 70% of global tungsten is a Chinese play. So that Russian 6% “global” statistic is really about 20% of what’s available to the world outside of China. Tungsten is critical to building machine tools as well as manufacturing drill bits. In essence, tungsten is used for requirements that call for hard, dense metals with high melting points. Europe is a major tungsten importer from Russia, and much European industry will have to scramble to make up for any loss due to sanctions.
Titanium: Russia is a large supplier of aerospace-grade titanium to both the U.S. and Europe, accounting for about 12% of imports. Two important buyers are Boeing and Airbus, whose operations could be slowed by lack of titanium supply, certainly in the short term. I’m guessing you can see a trend here?
Rare Earth metals may also be included in this list of essential resources that modern economies cannot do without and that are sourced, at least in part in the former Soviet Empire.
Will Russia Look More to the East?
I could go on with other energy and materials that come out of Russia, but you get the point. Western politicians may feel like they have to “do something” about Russia annexing Crimea. but they have to be careful to not bite the hand that feeds them.
For our purposes, on the investment front, one potential result of Western sanctions will be to give Russian leadership even more incentive to look east, toward Chinese markets. China is a major consumer of many raw materials and refined products and would likely be able to buy and use Russian materials that no longer move west.
Different commodities will move in different ways, of course; some more than others…
Is China’s growth story about to unravel?
David Stockman writer for the Daily Reckoning, says: China is in the greatest construction boom and credit bubble in recorded history. An entire nation of 1.4 billion has gone mad building, borrowing, speculating, scheming, cheating, lying and stealing.
The source of this demented outbreak is not a flaw in Chinese culture or character – nor even the kind of raw greed and gluttony that afflicts all peoples in the late stages of a financial bubble.
Instead, the cause is a kind of monetary madness with an oriental face. Chairman Mao was not entirely mistaken when he proclaimed that political power flows from the end of a gun barrel – he did subjugate a nation of one billion people based on that principle. But it was Deng Xiao Ping’s discovery that saved Mao’s tyrannical communist party regime from the calamity of his foolish post-revolution economic experiments.
Just in the nick of time, as China reeled from the Great Leap Forward, the famine death of 40-60 million people – depending on whose figures you use, and the mass psychosis of the Cultural Revolution, Mr. Deng learned that power could be maintained and extended from the end of a printing press – just as Western Bankers did 200+ years ago. And that’s the heart of the so-called Chinese economic miracle. Its not about capitalism with a red accent, as the Wall Street and London gamblers have been braying for nearly two decades; its a monumental case of monetary and credit inflation that has no parallel.
Will Hutton who wrote “The Writing on the Wall.” (an ironic play on the Great Wall of China) suggested back in 2007, that the mixture of capitalism and political direction, would eventually lead to a collapse in China’s economy, when investments, and prices were centrally controlled, because the market mechanism of the free flow of information in markets – the price signal – and “Contract Law” is a requirement for all modern capitalist economies to function properly.
Perhaps our own politicians and Bankers would do well to remember that too, as they force Bullion Banks into manipulating currency prices by manipulation of interest rates, and precious metals prices, but I digress.
At the turn of the millennium, credit market debt outstanding in the US was about $27 trillion, and they’ve hardly been slouches in attempting to borrow their way to prosperity. Total credit market debt is now $59 trillion; so America has been burying itself in debt at nearly a 7% annual rate.
But America has been out-banked – to coin a phrase. In 2000, China had about $1 trillion of credit market debt outstanding, but after a blistering pace of “borrow and build” for 14 years it now carries nearly $25 trillion. BUT, this stupendous 25X growth of debt occurred in the context of an economic system designed and run by elderly party apparatchiks who learned their economics, when Chairman Mao was still alive. That said, the country sent highly educated senior communist figures around the world to study other cultures, and political and economic systems, so it is possible they have learned something since then.
However, it is probable, that there is no legitimate banking system in China – just giant state banking bureaucracies which are run by party operatives and a modus operandi of parcelling out quotas for national credit growth from the top, and then water-falling them down a vast chain of command to the counties, townships and villages.
There have never been any legitimate financial prices in China – all interest rates and Foreign Exchange rates have been pegged and regulated to the decimal point; nor has there ever been any honest accounting either – loans have been perpetual options to extend and pretend. Even the Yuan was pegged to the dollar at 8 to the dollar, until an agreement to enter the World Trade Agreement meant they had to freely float their currency by 2015, and China has allowed the Yuan to strengthen to circa RMB6.5:$1 – and is also behind their drive to collect as much gold as they can.
However, in two short decades, China has erected a monumental Ponzi economy that is economically rotten to the core. And, needless to say, there is no system of financial discipline based on contract law. China’s GDP has grown by $10 trillion dollars during this century alone — that is, there has been a boom across the land that makes the California gold rush appear pastoral by comparison. Yet in all that frenzied prospecting there have been almost no mistakes, busted camps, empty pans or even personal bankruptcies. When something has occasionally gone wrong with an “investment” the prospectors have gathered in noisy crowds on the streets and pounded their pans for relief – a courtesy that the regime has invariably granted.
Since 2000 China has 1.5 billion tons of steel capacity, but “sell-through” demand of less than half that amount and, on-going demand for sheet steel to go into cars and appliances and rebar into replacement construction meaning the other half is produced merely to go into surplus storage – once the current pyramid building binge finally expires.
The same is true for its cement industry, ship-building, solar and aluminum industries – to say nothing of 70 million empty luxury apartments and vast stretches of over-built highways, fast rail, airports, shopping malls and new cities.
Will this ultimately lead to a price and economic collapse? Probably, but WHEN?
In short, the flip-side of the China’s giant credit bubble is the most massive malinvestment of real economic resources – labor, raw materials and capital goods – ever known.
Effectively, the country-side pig sties have been piled high with copper inventories and the urban neighborhoods with glass, cement and steel erections that can’t possibly earn an economic return, but all of which has become “collateral” for even more “loans” under the Chinese Pyramid scheme.
China has been on a wild tear heading straight for the economic edge of the planet – that is, monetary “Terrain Unknown” – based on the circular principle of borrowing, building and borrowing. In essence, it is a giant re-hypothecation scheme where every man’s “debt” become the next man’s “asset”.
Thus, local government’s have meager incomes, but vastly bloated debts based on stupendously over-valued inventories of land. Coal mine entrepreneurs face collapsing prices and revenues, but soaring double digit interest rates on shadow banking loans collateralized by over-valued coal reserves. Shipyards have empty order books, but vast debts collateralized by soon to be idle construction bays. Speculators have collateralized massive stockpiles of copper and iron ore at prices that are already becoming ancient history.
Is this factored into China’s Plans for Empire, so that if – IF – a third world war begins, most of the materials will already have been purchased and produced, and once their currency is re-flated due to their large Gold holdings, they can buy what they need with the world’s strongest currency?
So China is on the cusp of the greatest margin call in history? Or the precipice of the biggest long term plan for global domination the world has ever seen?
Only the Chinese political class know the answer to that one.
But a Chinese market collapse would seriously affect all the world’s economies, and the Chinese have the biggest savings on the planet.
Cracks began showing in this edifice when a bank run began at Jiangsu Sheyang Rural Commerce Bank last month, as worried citizens clamoured for their money when a withdrawal for RMB200,000 (about $32,000) was refused at the Sheyang branch.
This was on the heels of the failure of several shadow banking institutions whereby several rural co-operatives and Farmer’s Credit Unions failed in recent months.
However, once asset values starting falling, these pyramids of debt will stand exposed to withering performance failures and melt-downs. Undoubtedly the regime will struggle to keep its printing press prosperity alive for another month or quarter, but the fractures are now gathering everywhere because the credit rampage has been too extreme and hideous. Maybe Zhejiang Xingrun Real Estate which went belly up last week was the final catalyst, but if not, there are thousands more to come. Like Mao’s gun barrel, the printing press has a “sell by” date, too.
Worryingly, a Chinese man was arrested for spreading rumours/information about these financial problems.
Of the more than US$562 million (RMB3.5 billion) that it owed to debtors, US$112 million was borrowed from 98 private parties with annual interest rates of up to 36%, according to recent revelations from Chinese media. Under that kind of pressure, the only surprise is that the default didn’t happen sooner. The company struggled to find capital for years; the chairman is suspected of borrowing up to US$38.6 million with “fake mortgages.”
But before Xingrun gets branded as China’s worst small, private homebuilder, it’s important to understand how it ended up in the mess in the first place, and what specific factors brought the operation down, or at least to the brink of collapse (local government officials insist it hasn’t officially defaulted yet).
Xingrun’s business in Fenghua, a county-level city that is part of Ningbo in a manufacturing belt on China’s east coast, ran into trouble through a renovation project starting in 2007, Chinese media pointed out. The company attempted, after securing government support and taking over for another distressed local property company, to build high-rise apartment blocks in a village called Changting. The project required the company to build homes for the original residents before the existing village could be torn down and the new buildings built. Construction was slated to start in the first half of 2012. Xingrun projected that it could pay off its debts within three years.
The project never got to the construction phase. In fact, the small village homes are still standing. Xingrun built the replacement homes for the villagers but there’s no sign of its main housing product, high-rises. Nothing has happened because the residents of the village have tangled the project and the company in a lawsuit that has stretched for years.
High risk is something no one seems willing to stomach these days – in stark contrast to just a year ago. That explains why Xingrun was unable to pay back its loans. But why has it come so close to keeling over now? Its troubles with the Changting project persisted for years but the company simply rolled over loans and borrowed at high rates from private lenders.
One problem for capital-strapped developers in the Ningbo area is that private lenders no longer want to lend to highly risky companies. In fact, they are calling in their loans. This is just one of the problems afflicting Xingrun. The value of property in some areas of Fenghua is decreasing and that trend has lowered confidence in developers’ ability to pay dizzyingly high interest rates.
Banks aren’t hot on lending to this kind of developer either. In the past, a developer such as Xingrun could ask the local branch of a commercial bank for more credit. The local branch would take that risk because loan officers there knew that, somewhere much higher up the chain, officials promoted the lending.
That support exists no longer. Now, when small developers beg local banks for credit, they will likely be turned away. Local bank managers are reportedly being told that they may lend to risky borrowers if they wish, but they will be held accountable.
High risk is something no one seems willing to stomach these days – in stark contrast to just a year ago.
Fenghua is a small town, and Xingrun’s reach beyond that area is limited. Analysts have come out strong in saying that such a default has little systemic risk. The bigger picture in the region, however, can’t be ignored.
Xingrun’s woes are still the woes of the local authorities. The default will add US$305 million (RMB1.9 billion) to Fenghua province’s non-performing loan portfolio, pushing up the rate of toxic assets to 5.27% and making it Zhejiang province’s most indebted government, according to calculations by The Economic Observer newspaper.
Add Fenghua’s problems to those of the The greater Ningbo Liberty Silver region. The area reportedly has at least six years of housing stock either sitting empty or under construction. The massive buildout will put small developers under great pressure to pay back loans, especially if private debtors are calling in high-interest loans. A slowdown in property prices won’t help either. Without a rescue from provincial-level banks, Fenghua won’t be the last local government stuck in a jam.
So what is The Coming Battle?
It will be between depositors (the people) and the Bankers when the next economic collapse occurs – far sooner than most people think. Crypto-Currencies, do not rely on Banks to transfer value between individuals, or between people and businesses, and will increasingly mean the Banks wield less power over the economy, and the state, but this means that many governments will want to outlaw them. However, if you feel you want to find out a little more on the subject at Review Outlaw.
And, you can get some free currency – HERE.
Of course if you have spare capital, putting some of it into precious metals with no counter party risk – that is – hold in your hands metal… would be considered sound advice, and if you want to know where you can buy these wonderful metals – try HERE.
Addendum: 12 April 2014
Since this piece was researched and written, the PBoC (People’s Bank of China) has agreed to provide RMB1,000,000,000,000 (1 Trillion – Renminbi/Yuan) about $153 Billion to provide increased infrastructure in rural communities, improving roads, agriculture and local amenities. So the end speculated on, won’t be happening soon; but someday the spending has to stop. (or not rise quite as much) to rein in inflation, which will probably now happen circa 2018-20.
The west too will probably make one last attempt to stave off the inevitable collapse, resulting in the final outburst of inflation. Bankers will be held to account by the people, and the result will not be pretty.
And the final analysis, will compare Precious Metals with the number of Dollars, Yen, Yuan, Pounds, and Euros in circulation.
Silver which is my favourite precious metal, is so oversold as to be the best buying opportunity for anyone with money to invest, and time to wait.
The above chart tells its own story. The MACD (Moving Average Convergence Divergence) shows when we can expect a turn in prices. When it’s high, the price turns down, and when it is low, the price turns up… You have been shown the future.
The below film, tells of The Coming Battle.
And here’s more evidence of what’s likely to follow.
“There are none so blind,
as those who will not see.”
What do YOU see?
That depends on who you ask.
If we look at the major market indicators:
House Prices at all time highs in London. (Being chased up by Chinese buyers apparently)
Stock & Commodities Markets
– Dow Jones Industrial Average – 16,572,
– FTSE 100 – 6,673,
– Gold down slightly over recent days to – 1292.72
– Silver ($/oz) – 19.97
– Brent Crude ($/bbl) – 106.57
– NYMEX Crude ($/bbl) – 101.02
– Copper ($/tonne) – 304.75
Looking at the above prices which were a snapshot on 4/4/14 – Friday lunch -time, you’d certainly think so.
Janet Yellen Fed Chair, has begun tapering – now we’re only getting $75billion QE this month, probably down another few billion next month, and lowering towards the Autumn, to zero. With employment numbers up on both sides of the Atlantic, in U.S., Euroland, and Britain.
David Cameron and George Osborne, as the two senior figures in the UK coalition are now walking around with a swagger as the next election looms just over 12months away, and the economy seems to be improving.
UK unemployment is lowering with figures heading to the 2 million mark again, and growth whilst subdued in the last month against the same month last year, probably owes more to the fact that this year, Easter is a month later, so the mini-boom that occurs as people begin sprucing up their homes which feeds through into the manufacturing sector with new kitchens and bathrooms: new electrical equipment, new plumbing, shower cubicles, flooring, furniture, kitchen cabinets, and taps getting installed.
And American Jobs seems to be improving too – albeit at variable rates. Today’s numbers though were below expectations.
But the structural mess the west has got itself into over the last twenty plus years, has not really been resolved, just as a new threat appears on the horizon.
For a few years recently, I worked in recruitment and employment services, and visited dozens of small and not so small employers selling our services, and the thing that stood out for me visiting the shop floors of engineering companies, and talking to warehouse managers, large and small, was the age range of the technical staff that worked there. They were all baby-boomers.
That’s right. These millers, maintenance fitters, service engineers, vertical borers, turners, technically skilled and semi-skilled staff were almost all without exception over 50.
They have accumulated decades of experience and wisdom, and time spent honing their skills. They have survived the countless recessions and financial booms over the time since the 1970s. They learned the basics in school in metalwork or woodwork classes. They went to Technical Colleges to do a HND, or OND in some engineering discipline or other, and learned technical drawing. They got their hands dirty messing about with things – tinkering if you will.
Many of today’s youngsters want to be TOWIE members, walk around in designer clothes, appear on X-Factor, Britain’s Got Talent, work in the Media, and Music, and be overnight successes as the 24/7 media channels focus on vox-pop issues, and makes “Celebs” of people who really shouldn’t be.
Their only real talent being for self publicity, and a willingness to make fools of themselves – on camera, and their personal lives become a mess as their rise to prominence and their fade to obscurity, wreak havoc with their self-esteem, and their relationships with those around them. But there’s only so much of that the viewing public can take.
In Britain, we are at last starting to offer apprenticeships to the young to learn skills that can’t be learned in the classroom – like turning up on time every time, as Woody Allen once observed which is 90% of success.
And keeping your nose clean (metaphorically speaking) at least until you know what you’re talking about – and even then, speaking out of turn can damage your chances of success.
But social commentary is not our beef. Political and Economic commentary is.
As the events in Ukraine of recent weeks seem to recede into the media background. And even the missing Malaysian Airlines flight MH370 seems to have gone quiet, as Australian Ships now search using SONAR technology, we need to look deeper at events worldwide, that will have an economic impact.
This morning we learn that Israel is sabre-rattling again, as Palestinians fire small rockets into that country, and the Palestinian leader discusses openly pursuing a “two-State” solution, outside the normal negotiation channels, as both the West-Bank developments, and the wall surrounding the Israeli state makes it almost impossible for ordinary Palestinians to make a living.
Of course if so few Palestinians have money to support their families, you have to ask: “Where are they getting the money for arms and munitions?”
And well you might.
Last week unmarked cargo planes, arrived in a sand lashed airfield just a short 45minute drive away from Amman. One of many such touchdowns in Sunni controlled Jordan.
The plane, one of approximately 150+ such flights in both Turkey and Jordan since the Syrian crisis began in early 2013. was filled with military equipment, approximately 3,500 tonnes in total. And this was directly authorised by the American President.
This military hardware is supposed to go to anti-Assad moderate groups who are fighting to overthrow Basher Al-Assad, President of Syria after years of dominance by the Assad regime.
Of course, not all the groups fighting for their freedom, are what they claim to be. Some contain Al-Qaeda operatives, who use their time there to get much needed experience of military hardware, and divert some of that to fights in other parts of the region.
Of course the US. media channels are prone to hide these disturbing facts from most Americans, who like the British are distracted by the media equivalent of MUSAK – that inane music that used to be so common in lifts and public spaces where they didn’t want to play anything that would distract you from shopping and spending money.
Of course Israel has its own reasons for being paranoid – almost 70 years have elapsed since 1947, when they were granted the state of Israel under a UN charter, and they have had to defend their territory from their Islamic neighbours ever since, having fought several wars, particularly during the 60s and 70s when their newly enriched neighbours decided to launch attacks on Israel for their own political agendas.
In 1967 the six days war was fought as Jordan, Syria and Egypt prepared a sneak attack on Israel, who took the opportunity to get their revenge in first, and after six short days captured the high ground in the Golan Heights, pushed the Jordanians back to the Jordan River, and the Egyptians back across the Syniai peninsula. The Arabs were humiliated, and a fresh war in 1973 – the Ramadan War was their attempt to take their revenge. The two wars helped push up oil prices already rising from increased demand, and it was this that was the major driver of the price rises that raged that winter of 73 and into 1974 pushing inflation to 26.9% in late 74 in the UK. Then the Iranian revolution in 1979, when the Shah of Iran was ousted and chased overseas allowing Ayatollah Khomeini to return from exile in Paris, and the scene was set for 21% inflation the next year, as oil prices once more reacted and the west would again be mired in recession.
As the war in Iraq and Afghanistan comes to an end, and troops begin returning home to bases closer to home, those troops were keeping a lid on sectarian violence that goes back 1300 years.
These wars are similar in effect to the Vietnamese war where Americans lost 56,000 personnel, and spent countless billions of dollars on arms and equipment for their forces stationed there.
These American involved wars were both funded by a government able to buy goods and services essentially for FREE as the Central Bank – The FED, creates money out of thin air, and this allows America to throw its weight around in places it shouldn’t really be, and where it lacks the knowledge of the culture to make improvements in the country without first destroying much that was there already.
In the middle east, this lack of knowledge has cost it dear with rises in Terrorism. The Islamic world also suffers a schism, divided just as Christianity is into two major factions, but this divide began one day in 629 A.D. as the prophet Mohammed sat down to a lamb or goat dinner that would begin the split that has affected middle-eastern politics ever since.
The meal was poisoned, and while Mohammed tasted the poison and spat it out, he had already bitten off more than he should chew, and on his demise which was sudden, no one could agree on who should replace him. The two views of Islam, one backward looking, one more progressive, became like Catholicism, and the Church of England who split apart when King Henry VIII decided he wanted a divorce in 1533, so he could father a child with yet another new bride who he married when it became obvious his bride-to-be was pregnant. (Divorce was a taboo of Catholicism)
The Islamic split though is the reason we may yet be plunged into another economic malaise.
The Shia population consists of about 70million Iranians, 22million Iraqis, 2million Lebanese, 4million Syrians, 10million Yemenis, and in the Arabian Peninsula populations of 700,000 Kuwaitis, half a million Bahrainis, 300k in Oman, 400k in UAE and another few hundred thousand dotted about the middle-east, with upto 11million in Turkey, 7million in Azerbaijan, and upto 30million in the hills of Afghanistan and Pakistan – between 145-160 million in total.
Many of those Shia side with their Palestinian brethren in the eastern Mediterranean, and the split I mentioned harks back to a time that Iran was called Persia, which many will remember ruled the Persian empire in the centuries around the time of the Holy Roman Empire and beyond.
Iran, according to Byron King a Harvard geologist, a former US Navy pilot, and Military intelligence officer with high military clearance, believes the real reason Iran wants a nuclear device is because its near neighbour the Kingdom of Saudi-Arabia dominates the region thanks to oil and American military support, and with Iran’s growing population of upwards of 88million, and one of the largest oil reserves in the world, Iran nurtures a yearning to return to its former glory days of the Persian Empire.
And, lest we forget, the Persians invented Chess, Algebra, traded with China and built the hanging gardens of Babylon, invented bricks and before the Islamic rules against alcohol – invented wine.
And as Iran recently launched its second naval vessel into the Caspian Sea as oil resources there become important, this is just repeating what they did 1500 years ago when they held off Roman armies.
Iran if you know your geography well, sits on one side of the Persian Gulf, where 40% of the world’s oil gets to market, and where 90% of the oil exported from the middle east passes through the narrowest point, at just 21 miles wide – the Straits of Hormuz.
But, what most people don’t know is that middle-eastern oil was first found in Iran in 1908, and Western oil majors swooped in to fuel Western growth and the war machine that would be so important in the war that was to come in Europe, so there is bitter resentment still.
On the other side of the Gulf is Saudi-Arabia, Oman, UAE, Qatar and both North and South Yemen who are mostly Sunni muslims. Yemen covers the whole of the Southern Arabian peninsular to the Red Sea, across from which, sits the Horn of Africa, and the narrowest point known as Bab El-Mandeb – or “The Gates of Tears”.
These shia controlled nations have over the last 50 years surrounded Iran’s mortal enemy – the Kingdom of Saudi-Arabia, who helped fund Saddam Hussein for 8 years, during the Iran/Iraq War in the 1980s, in which Saddam launched Scud missiles into Iran, and gassed thousands of his Shia citizens.
To the west of the Saudi peninsula sits the Red Sea, facing Egypt, Sudan, South-Sudan, Ethiopia, Eritrea, and other hotbeds of unrest.
On the south of the Saudi peninsula -Yemen, has a particular section of the Shia population who are the Huthis. In a recent incident in the Indian Ocean, off the coast of Yemen, a US naval vessel stopped an arab Dhow – a small sailing ship with a broad trangular sail, and the sailors found not fish as might be expected from such a small vessel, but military hardware destined for Huthis, Al-Qaeda operatives now headquartered in Yemen.
This hardware wasn’t just a few rifles, and handguns, but military binoculars, sophisticated explosives, detonators, and both ground to ground rockets, and heat-seeking portable anti-aircraft missiles – Not the kind of stuff you find in a military hardware supplies’ shop. And the source of this booty? You guessed it – probably Iran.
So, why is Iran selling armes to rebel groups or giving them away?
Who is funding Al-Qaeda?
It is just possible, that to maintain its grip on the society, Iran needs a high oil price and fomenting unrest in the region, to heighten the perceived risks in the area, is one way to achieve that, or is it really just part of a master plan to unseat KSA from its dominance in the region.
And if Iran and the Kingdom of Saudi-Arabia DO go to war, the battle would embroil all who depend on middle-eastern oil to make their economies run, as the price of oil would spike on International markets.
If a new battle between the Sunnis and Shia erupts, the Arab Spring 2.0 will seem like a cakewalk, and the oil price could hit $200+/barrel. Is this why Abu-Dhabi recently spent $17bn on anti-missile hardware? And UAE and Saudi-Arabia have also splurged on weapons and British Fighter Aircraft.
Is this the real reason America is pursuing shale oil and gas with such fervour?
Recent reports suggest that U.S. now holds the biggest energy reserves on the planet.
In the Bakken oil fields alone in north-western America, the US Geological Survey suggested there might be 500+ billion barrels of oil, and a more recent survey, suggests that there is even more oil buried beneath the already huge Bakken field.
This with the West Texas shale oil-field – the Eagle Ford basin, the Monterey shale in California, the Utica shale gas and liquids finds in Ohio, the Mississippi basin oil find and the shales in the North East – could add upto 2 Trillion barrels. Enough for 100 years, and the U.S. could already be the world’s biggest producer.
And as I’ve mentioned on a previous occasion, the U.S. intends liquifying some of these natural gas finds and exporting them at international prices.
Companies way ahead of the rest of the industry are – Cheniere Energy, (NYSE:LNG) who signed a 25 year deal with Centrica – owner of British Gas, to supply LNG and similar contracts with 4 others including Spain’s “Endesa Generacion S.A.” and Indonesia’s “PT Pertamina” from its Corpus Christie liquifaction plant, via its new export facility it is building in Sabine, Louisiana.
Together with Cameron LNG who obtained approval from the U.S. Department of Energy (DOE) to export up to 12 Mtpa, or approximately 1.7 Bcf per day, of domestically produced LNG to all current and future Free Trade Agreement countries and on February 11, 2014 received conditional authorization from the DOE to export LNG to non-Free Trade Agreement countries, including those in Europe and Asia. It should also be noted that the Panama Canal is being widened and due to open in 2015, to allow the huge LNG cargo ships that will be needed to carry all this oil and gas to China.
Cameron also has an application under review with the Federal Energy Regulatory Commission, the lead agency responsible permitting the new facilities. This new facility in Hackberry, Louisiana was an import terminal, but it is being specially adapted for export. This company therefore faces long-term growth as their facility sits alongside major pipelines from most of the major sources of Gas.
The completed liquefaction facility will comprise three liquefaction trains capable of exporting up to 12 million tonnes per annum (Mtpa), or approximately 1.7 billion cubic feet per day of liquefied natural gas. In addition, a new 21-mile natural gas pipeline, a compressor station and modifications to existing pipeline interconnections are proposed. Construction on the project is already underway, with the first LNG production in 2017, and full commercial operation in 2019.
The new and existing facilities will be wholly owned by Cameron LNG Holdings, LLC, a joint-venture with 50.2 per cent indirectly owned by Sempra Energy (NYSE: SRE) and the remaining owned by GDF SUEZ S.A. (GDF SUEZ), Japan LNG Investment, LLC (a joint venture entity that has been formed by subsidiaries of Nippon Yusen Kabushiki Kaisha (NYK) and Mitsubishi Corporation (Mitsubishi)) and Mitsui & Co., Ltd. (Mitsui) each owning a further 16.6 per cent.
Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2010 revenues of $9 billion. The Sempra Energy companies’ nearly 16,000 employees serve about 26 million consumers worldwide.
And if you’re wondering who is going to build this new facility – on March 17, 2014 Cameron LNG, LLC announced the joint venture between CB&I and Chiyoda International Corporation, a U.S. based wholly-owned subsidiary of Chiyoda, a Japanese Oil Services Major, had been awarded the contract valued at approximately $6 billion. – CB&I (NYSE: CBI) and Chiyoda Corporation (TSE: 6366; ISIN: JP3528600004) – I wonder what that contract will do to their bottom line?
Also, a recent off-shore find in an area called “Tubular Bells” basin in the Mississippi Canyon – Gulf of Mexico, has given Hess Corporation (NYSE:HES) an independent oil major a fillip.
The company estimates that the field will have a peak production of 40,000-45,000 boe/day. The field holds more than 120 million boe of reserves and possibly as much as 200 million barrels, according to Hess, but as these finds add to the US output, we may yet see oil prices level off (in the absence of Middle-Eastern turmoil), though it is likely that output will not begin for a year or so.
The prospects for these companies is all the more important if the disruption in the middle-east curtails output, or raises tensions there, as the value of the reserves and any output, will merely add to the bottom line of these American Corporations.
However, any prolonged rise in oil prices would raise the QE question again, and cause major problems for importing nations such as Japan, and Germany which does not have any major oil fields.
And if the price of oil rises, then it is inevitble that Gold and Silver will follow suit, whether China decides to announce its Gold reserve position this month or not. (See my last post)
If any more currency gets printed by the Fed, as a result of all this oil money sloshing around the world? Then you better get yourself some alternative currency, as thes crypto-currencies become more widely accepted, and for those who are interested in a new business that mines for currency, and makes an initial deposit, and daily top-ups into your account – with referral fees for any new members found, you can get details and membership for free by clicking —>> HERE.
If you liked this post then please like it, post it to family or friends, or copy and paste, but remember the discussion of the above companies is not a recommendation to purchase. But merely to offer a starting point for your own research. Share prices can go down as well as up, and any investment may be at risk.
However, I have also been critical of Governments who use legitimized counterfeiting (QE) to stem the natural economic downturns that occur in all mature markets as producers fight for market share, and prices are forced down as a result when the growth in incomes is stagnant, or falling, or savings rise in preparation for retirement, because this fixes one part of the economy at the expense of others, and that is never a good thing, as it merely transfers wealth to the few from the many.
The markets boom or bust as people switch their buying habits, change their tastes, or prepare for their retirements, and either begin borrowing, or saving at different times in their lives. And the demographics of the population (the birth rate, average age, sex and range) determines what is likely to happen and when.
For those with pension plans, their savings build up on Pension Company books increasing that company’s liabilities, and if the investments they’ve chosen fall significantly (such as during a stock market correction) then they risk not having the liquidity to pay out for those retirees when their bills come due, and in April 2012, that reached 10,000 people per day – in just the U.S. alone.
I am prepared to admit, that the Central Bankers, may, MAY, be raising the base money level for perceived socio-economic reasons, but the people who benefit most from such actions are always the Central Bankers, and those closest to them in the Banking Elite, as they receive the money first, enabling them to buy government securites, and draw huge salaries, while securing a steady income from future tax-collection.
Of course future taxes MAY or may not, cover the government’s debt obligations, as economies shrink or change shape, when the buying public changes its tastes and some industries prosper, as others decline, perhaps at just the point when welfare payments rise due to a faltering economy, but raising taxes on the apparently wealthier members of society is not always the way to go, as this discourages further investment, which of course is the best way to create meaningful jobs.
The problem for economists and politicians alike, is that the world is changing, and in ways we are only just beginning to perceive.
A CHANGING WORLD – NEW INDUSTRIES
Robots and other programmable production machines have capital costs – Eg: Robots, 3D-Printers, CNC & DNC machines etc, (you need to buy them) and they have operational costs, in the materials they use, or financial costs because you need to depreciate that capital cost over time, to ensure you have sufficient capital to replace it at some future point in time, whether to replace it on a like for like basis, or whether you want to, or need to improve its functionality.
But robots don’t have an income (except to the owner) and that income doesn’t always get spent in the location of the factory, typically like the human capital does – the worker’s wages. Which means the benefits don’t always flow equally in the factory location. The owner benefits – perhaps from a low taxation status in one country, and the factory produces little in economic benefit in the country in which it operates. A problem for governments the world over.
And, in a zero-sum economic world, there will always be winners and losers (Until we start trading with Martians, or Venusians if you prefer.) the trick is to not be on the losing side.
Money was invented to facilitate trade, and to ensure that value for value was transferred. Money is really – savings – and was initially just Gold and Silver as well as copper for small transactions – the origin of the British £,s,d (Pounds, Shillings, and Pence, which were gold, silver and copper respectively) because when I trade my wheat or sheep, or cows, maybe I want to buy something not now, but in 3 months or 3 years time perhaps: seed or fertilizer or a new Barn, for the new industry I want to create, and Gold and Silver retain their value over time, making saving possible and these metals perfect for money purposes.
The first currencies, were Gold and Silver certificates of deposit, as Mike Maloney of GoldSilver.com outlines – A currency is a receipt for money. Certificates of Deposit which were a claim on the gold and silver that was in the vault (the money was in the vault, the currency was in circulation) then began circulating in trade and the Bankers hit on a wonderful idea – they could make more of these certificates than there was Gold and Silver available to back them. Thus modern Banking was born, and bankers became richer than Midas. But if there’s no money there in the vault when people want it… Then what?
Now in recent years the world’s Central Banks have been inflating their Fiat currencies (Money dictated by government, and NOT backed by metal) which means that the value of currencies fall, as the amount or quantity of currency now rises – through QE., (Quantitative Easing) and the purchasing power falls. (the cause of Price-inflation)
ANTIDOTE TO QE – CRYPTO-CURRENCY
As an antidote to this debasement of the currency supply, Satoshi Nakamoto (If you want to read more on this person – Click HERE – Who is Satoshi Nakamoto) developed a series of pieces of software to create a digital currency, with a fixed supply of 21,000,000 units and a system for transferring that value to others by digital means. Currency is initially earned by “mining”, which is a way of linking the world’s networks together to transfer the currency between users, and earning credits along the way. Or you can buy them, and transfer them to your digital wallet.
Of course the value of these digital currencies will rise and fall, like any commodity or currency, and one of these currencies is, if you have not already deduced – BITCOIN.
As Bitcoin has grown, and others have realised its features, there have been many who have emulated it. Max Keiser, of RT fame, has already launched MaxCoin, and there are dozens of others – upto 80 as I recently read, However, it is also obvious that governments have now decided that it is time to legislate these digital currencies for political reasons – some valid, others less so. The perhaps valid reasons are that it has been used to purchase goods and services, that the government would rather you didn’t, such as: Drugs, Ammunitions, Firearms, and other items of dubious morality.
In use, no means of identification is necessary, though the block chain can be followed to trace ownership, however, this means that to all intents and purposes it is a private transaction, but increasingly governments want to track ALL transactions so that they can extract their pound of flesh (to pay off the debts to their banker paymasters amongst others.)
Mount Gox, a Japanese built business in Shiboya, acted as a coin exchange has been recently attacked several times, and money stolen by attackers, such that Mt Gox had to file for bankruptcy protection in Japan. Was this government sanctioned or controlled? Was it the Banker elite fighting back? Time will only tell. Though as in all financial systems, fraud is a possibility. However, much has been made that the Banks received Billions in subsidies to stave off bankruptcies, and little has been made of that wealth stolen from the citizens of various countries.
However, while researching this article, I found other web-sites that will perhaps replace Mt Gox, but one that is still in the early stages of development is QoinPro. The business strategy is unclear (and I asked them, but was unable to get a straight answer) however I suspect they will become a coin exchange, and trading house for which they will charge transaction fees as Mt Gox, They are registered in the Netherlands, and Hong Kong, so appear legitimate. To encourage memberships, they apparently mine for coins of several crypto-currencies, and for those participants they deposit sums directly into their accounts on a daily basis. So no mining fees, or set-ups for those who become members, and they have an affiliate system, whereby you receive between 7.5% and 16.5% on all currencies issued to those who you recommend, and who sign up under you. (dependent on the number of people at each level)
That means you get an initial deposit just for joining, but you also get daily top-ups, which though low at the moment, are designed to rise as they iron out any wrinkles over the coming months.
As a devout skeptic, I could not see the value of these crypto-currencies, but as I have given it some thought, it is just possible, that all existing fiat currencies will disappear, and be replaced by cryptographic-currencies. That will mean the banks will suffer as they will not have control of the money supply, and essentially the banking system becomes the network. However, we can expect them to fight back. Governments will not have control, as these are essentially stateless currencies, and the currency will be resistant to legislative processes, and these new currencies will circumvent legislation as it tries to keep up. Evolution happening faster than the bureaucrats can keep up. The Chinese recently made trading of BitCoin illegal, though it can still be used for purchases, but will the legislation stop other currencies from emerging? It has not so far. And will it stop peer to peer transactions?
Having thought extensively through the implications, it is clear, that crypto-currencies are here to stay. So what happens if crypto-currency exchanges begin, backing the digital currency with real money – Gold and Silver, and the crypto-currency digital wallet becomes in effect a bank account?
Then we have a parallel banking and finance system outside the control of any government, and true free-market principles will flourish. Having become a member of this web-site, I have to-date in a little over a week received over 100 coins split amongst 5 currencies, and two more currencies to be added shortly.
That end result, may be a few years away, so in the absence of monetary metal backing, it is safe to say, that you will still need to use some of your savings for Gold and/or Silver, and use the crypto-currency (or currencies) of your choice perhaps for everyday transactions – Of course, eventually it may be possible to buy these precious metals with them.
The following tables are not exhaustive and only serve to give an impression about coins available. Some of these coins can also be collected through QoinPro.
|NMC||Namecoin||SHA256||21,000,000||2,016||50 NMC / Block|
|PPC||Peercoin||SHA256||No Limit||1||103.10 PPC / Block|
|DVC||Devcoin||SHA256||No Limit||2,016||5000 DVC / Block|
|TRC||Terracoin||SHA256||42.000.000||540 Blocks||20 TRC / Block|
List of Scrypt based Alt-coins
There are many Scrypt based altcoins.
|LTC||Litecoin||Scrypt||82,000,000||2,016||50 LTC / Block|
|DOGE||Dogecoin||Scrypt||100,000,000,000||240||250,000 DOGE / Block|
|WDC||Worldcoin||Scrypt||265,420,800||120||50.79 WDC / Block|
|FTC||Feathercoin||Scrypt||336,000,000||504 Blocks||200 FTC / Block|
The last three were discovered on another coin exchange – McxNOW., which offers exchange of some of the above, but also offers interest on deposits, based on the value of the trades conducted on the exchange for each of the currencies – So if you hold BTC, your interest gets paid in BTC, and if you hold one of the others, in that too.
This video tells you a little more.
And if the currency or the alternatives listed above follow the path of Bitcoin, their value wil rise in line with it.
BUT it won’t be a straight line, and the unpredictability for some will be too much to handle.
However, in time, they may, just MAY replace currencies created by the Banks. And unlike those currencies, they are not simultaneously a debt to the Banker class.
In Africa, already many people now use these crypto-currencies exclusively for daily transactions, perhaps because of the distances involved, and the costs of installing fixed line telecommunications systems, is such that the newly emerging technologies in wireless telephone masts have been the engine of growth, and as banks were only available in cities, this has meant many Africans have leap-frogged the west as these technologies have become actively entrenched in the economy, allowing that continent to develop at a much faster pace than hitherto.
The West may have to run to catch up. YOU can begin your journey HERE –
And if you wish to learn why Bankers are a menace… Watch This.
Addendum. 23rd April.
And is it all about to come crashing down around their ears?
This video page of the End of the Bankers might just be the Clue…