CLICK HERE LARGE PRINT EDITION: FREE TRADE IS VERY EXPENSIVE TO MAINTAIN « Culture of Life News 2
International trade was collapsed into the same hole dug by the Japanese ZIRP system. As I predicted several years ago, all the top G12 nations would all emulate the Japanese depression since they all rewarded Japan for this ZIRPiness. Namely, Japan’s export powers grew swiftly and Japanese export corporations ruled the roost. Anyone who didn’t protect themselves from the flood of Japanese exports saw their own industrial base decline or even be nearly eliminated. And the Chinese were the very first to successfully imitate the Japanese system. Except, to keep peace with the US and EU, they let the yuan get stronger which was a mistake.
It was a mistake because the US and EU both were using the Japanese carry trade to get around their own banking and finance laws! So they gave Japan free rein to run riot in world lending markets while screaming nonstop at China to not copy Japan. To appease everyone, China made the yuan stronger. And was simply punished even more. The greatest punishment being, the run up to the Olympics when the G7 nations ran a huge anti-China propaganda campaign coupled with an open attempt at supporting rioters in Tibet.
As I predicted two years ago, after the Olympics, China is now shutting down. And world trade is collapsing. We have to look at not only the propaganda but at the news to see how the New World Order people are operating. These are the same people who run interlocking charities to evade taxes and shift charity money back and forth between players who are more interested in padding their nests.
Let’s look at their nastiest enforcement arm, the IMF. This organization is heartless and cruel when it comes to small nations struggling with economic problems. But when it comes to the G7 who run the IMF, this organization encourages exactly what it condemns when the shoe is on the G7 caterpillar’s many feet:
Dominique Strauss-Kahn said he feared measures announced by the Group of 20 nations last month would not be enough.
The IMF has already cut its forecast for global growth next year, and he said the next projection, due in January, would be even worse.
Mr Strauss-Kahn spoke of “2009 as really being a bad year”….
He said it would take a spending stimulus equivalent to about 2% of global Gross Domestic Product, or about $1.2 trillion (£800bn), to make a real difference.
The level of debt in the UK was “disturbing”, he said, but he added that given the choice between increasing the deficit and not fighting the recession, he favoured the “less bad solution”.
Which nations have the highest levels of debt? Easy! The US is champ. Then comes Japan and then Britain. Per capita, Britain and Japan beats the US, hands down. Later, I will link to these other stories. Right now, the main thing is, the IMF wants the US to flood the world with borrowed spending that is based not on selling debt but making up money totally factiously. Instead of lending it to people against the value of either future earnings or against business’s future profits, the government is simply ‘printing money’. We fear, to the tune of over $8 trillion which is much more than the IMF is talking about here.
Greece has been in turmoil for 11 days. The mood seems to have turned “pre-insurrectionary” in parts of Athens – to borrow from the Marxist handbook….
Dominique Strauss-Kahn, the head of the International Monetary Fund, is worried enough to ditch a half-century of IMF orthodoxy, calling for a fiscal boost worth 2pc of world GDP to “prevent global depression”….
Russia has begun to shut down trade as it adjusts to the shock of Urals oil below $40 a barrel. It has imposed import tariffs of 30pc on cars, 15pc on farm kit, and 95pc on poultry (above quota levels). “It is possible during the financial crisis to support domestic producers by raising customs duties,” said Premier Vladimir Putin.
Russia is not alone. India and Vietnam have imposed steel tariffs. Indonesia is resorting to special “licences” to choke off imports….
Shortly after President Hu Jintao said China is “losing competitive edge in the world market”, we saw a move towards export subsidies for the steel industry and a dip in the yuan peg – even though China already has the world’s biggest reserves ($2 trillion) and the biggest trade surplus ($40bn a month).
So is the Communist Party mulling a 1930s “beggar-thy-neighbour” strategy of devaluation to export its way out of trouble? Such raw mercantilism can only draw a sharp retort from Washington and Brussels in this climate.
“During a global slowdown, you can’t have countries trying to take advantage of others by manipulating their currencies,” said Frank Vargo from the US National Association of Manufacturers.
During all global trade/currency collapses there is one simple rule: every man for himself. Anyone who doesn’t protect themselves will be trampled to death or drown. Rescuing drowning people is very dangerous. If they are still actively struggling to stay above water, they will yank down anyone who comes near.
Besides, we already are deep into a huge trade war. Japan weakened the yen for years while running their ZIRP program. They didn’t allow any lending in Japan for consumer purchases and thus, kept imports out via all sorts of means and systems. The end story was, one of the world’s biggest economies was a dead end. A black hole. No reciprocal trade. This was very unbalanced. In some petty kingdom, it might make no difference. But for a top industrial nation, this sowed the seeds for a total meltdown of global trade.
Once again, I see in the above article, mention of China’s huge FOREX reserves but NO mention of Japan’s huge reserves. Per capita, Japan’s reserves dwarf China’s reserves. China’s is slightly more than a dollar per person. Japan’s is less than 130 million people holding a trillion dollar reserve. Their FOREX reserve is one quarter the size of their entire GDP. This is amazing. Their public debt is 170% of their GDP. 92% of this debt is held by the Japanese people or the monster-sized Bank of Japan that pretty much rules Japan with the LDP.
Japan’s money stock is only four times greater than their FOREX reserves which is mostly dollars and euros. Over 55% of Japan’s trade is with its nearest Asian industrial partners and the US. And the trade with the US is much more one way than the trade with the other Asian nations. Let’s look at today’s news from Asia:
China must take more powerful and effective policies to support industrial development, the country’s vice premier Zhang Dejiang said at a work meeting concerning national industry and information technology on Friday.
“A stable and rapid industrial development is essential to the country’s overall economic advance,” Zhang said.
China plans to initiate a policy package in the coming new year to revive nine industries heavily hurt by the unfolding global financial crisis, the Ministry of Industry and Information Technology (MIIT) vowed at the meeting.
The nine industries to receive national support include light industry, textile, steel, non-ferrous metal, automobile, petrochemical, ship-making, electronics and telecommunications.
The US gave up making ships. Here is an old story I published in June, 2005, about how the US has utterly surrendered our ship building skills and how we no longer have a merchant marines: Culture of Life Financial News: ALL GREAT EMPIRES Built Great Ships
It is a good read, as always. The US put itself in a position whereby we enable foreign ships to invade our native ports so we not only have a huge trade deficit with Asian shipping nations, we don’t even make one thin dime on the transportation of not only their goods but our own goods! This has weakened our own economic tremendously. Note how China is protecting its most important industries: automobile, ship building, communications!
While Obama talks wildly about spending a fortune of money we don’t have, building roads, trade rivals in Asia are spending money on more ships! We killed our sold to aliens, our entire steel industry. China is working to protect their steel industry. So, who is smart and who is stupid here?
Japan’s government expenditure will increase to a record next year as Prime Minister Taro Aso tries to spend his way out of a recession and lift his slumping popularity ahead of an election.
Spending will rise 6.6 percent to 88.5 trillion yen ($988 billion) in the year starting April 1, a third year of expansion, according to a budget proposal released by the Finance Ministry in Tokyo today. The government will sell 33.3 trillion yen of new debt, the most in four years, to help fund a revenue shortfall.
In his first budget since taking the helm in September, Aso is expanding a debt burden that’s already the largest in the industrialized world as the economic slump cuts revenue and forces him to spend more to spur growth. His approval rating fell by half this month as voters and lawmakers in his own party shunned his handling of the world’s second-largest economy.
Throughout the last 8 years, the G7 never questioned why the world’s #2 economy was floundering. There were many theories but not mine: Japan WANTED this depression for it fixed its EXPORT CORPORATE PROBLEMS. They grew massively and colonized huge swaths of the industrial landscape during this ‘depression’. Their profit margins soared. They were quite content with this.
Only when the international struggle between the G7 and China heated up to a broiling disaster beginning in July, 2007 and all the way until after the Olympics, has the Japanese depression model faltered and collapsed. Japan is running like a scared rabbit, trying to get China to cooperate with restarting things. But China can’t do this.
The US is totally wounded and can’t function anymore as a trading power. Not only have we no merchant marine, we have little true reciprocal trade. This week, China’s communist rulers ordered their airlines to stop buying US planes and to cancel Boeing and EU plane contracts. For years and years, our Presidents would fly to Asia and OPEC countries to make deals on behalf of Boeing. This way, they could claim, we were exporting high-value goods, not commodities.
I said, these deals were political, not economical. And when China figured, there was no positive upside to these deals, all the contracts will be ripped up and thrown aside. The same goes for OPEC. They can and will cancel contracts. We can weep and wail, but when they take draconian measures to protect themselves from ours and Japan’s collapse, we cannot blame them.
The Fed’s reduction brought the U.S. key rate lower than Japan’s benchmark for the first time since 1993 and caused the yen to surge to a 13-year high, hurting Japanese exporters already reeling from a collapse in overseas demand.
Honda Motor Co. cited the yen’s gains and slumping sales as reasons for slashing its full-year profit forecast by 62 percent this week. President Takeo Fukui described the currency’s level of around 89 yen to the dollar as “abnormal” and called on the government and central bank to take “swift action.”
“With U.S. rates now lower than Japan’s, there’s the risk that the yen will keep strengthening,” said Nobuto Yamazaki, executive fund manager at Diam Asset Management in Tokyo. “Now that the U.S. has a zero-rate policy, there’s no point for the Bank of Japan to hold its key rate at 0.3 percent.”
Note how the Japanese are grinding their teeth! What is so damn ‘abnormal’ about a strong yen? Eh?
Of course! There is nothing wrong with it! The entire philosophy of the floating currency which the stupid geniuses in our economics think tanks talk about all the time, is how trade that is unbalanced will balance via currency values! Of course, every time we tried that in the past, the only way was for the US to have negotiations with Germany and Japan and DEMAND they devalue the dollar and strengthen their currencies!
We called these desperation meetings, ‘Bretton Woods II’ and ‘Plaza Accords’, etc. Since the triumph of the free traders and the monetarists, we have had no more negotiations. We just went with the flow. And the flow was totally one way: our deficits with Germany and Japan as well as China and OPEC shot through the roof. They all imported with utter impunity. And we sucked down immense deficits that led to a huge growth in US debts.
See how the Japanese bankers are howling with rage as they note that our own ZIRP is now lower than theirs! Rats! So Japan will take swift action so they can continue to destroy our industrial base. Isn’t that sweet? They are our GOOD allies, after all!
The central bank may offer to increase its monthly government bond purchases from lenders, one of its main tools for adding funds to the banking system. The purchases have been kept at 1.2 trillion yen ($13.7 billion) since October 2002.
The bank may also begin to buy commercial paper from lenders outright. Currently it accepts such short-term corporate debt only as collateral, with repurchase agreements. Prime Minister Aso announced last week that the government will start buying the securities.
All the major central banks are propping up collapsing financial houses. The frenzy of buy-outs, hostile take-overs, etc. are now being protected by the central banks. These manic deals were made mostly with Japanese carry trade funds created by the Bank of Japan or by US lending from the Federal Reserve.
These things are toxic as hell. They are mountains of debt businesses can’t service in a down turn. This is why I raged about these deals when they were hot, hot, hot. This drove up the stock market but was not healthy. The Dot Com Bubble was healthier than this business. Now, on to the Nikkei:
TOKYO (Nikkei)–The Ministry of Finance announced Saturday that it will start selling three-year fixed-rate government bonds for individual investors as early as the second half of fiscal 2009.
Japan Carmakers Plagued By Bloated U.S. Inventories
TOKYO (Nikkei)–Toyota Motor Corp. (7203), Honda Motor Co.(7267) and Nissan Motor Co. (7201) have seen their inventories in the U.S. skyrocket to double the levels deemed appropriate as demand continues to weaken in the world’s largest automobile market.
Fed Rate Cut, Soaring Yen Raised Stakes For BOJ Meeting
TOKYO (Nikkei)–The Bank of Japan’s decision to lower interest rates to near zero signals a new sense of urgency brought on by the U.S. Federal Reserve Board’s unprecedented rate cut and the yen’s subsequent surge against the dollar.
Honda May Cut Full-Time Jobs If Yen Stays Strong: President
TOKYO (Nikkei)–Honda Motor Co. (7267) may have to abandon one of its key principles of protecting the jobs of its full-time workers in the year ending March 31, 2010, if the Japanese currency remains at current levels of around 90 yen to the dollar, President Takeo Fukui said Friday in an interview with The Nikkei.
The Japanese workers are being hammered even harder. Both the US and Japanese workers have seen grave declines in take home pay and benefits for the last 25 years. This is the real depression. Workers who can’t buy, don’t buy. Commerce declines. In Japan, to the vanishing point. In the US, the Japanese carry trade enabled us to overspend for 15 years. This increased worker’s debts to the upper limit. Now, seeing only more pay cuts and layoffs, everyone is going down in a depression.
The Japanese cannot sell to American workers who are unable to buy. So we have the sight of the world’s #1 and #2 economies going down the same depression rabbit hole. A depression that has ravaged both nations’ work forces for over a decade. The depression today has deep roots! And this is why it is not easy to fix. We can’t have the top two economies playing this sort of destructive economics. Against their own work force.
Japan has reduced much of its workforce, about one third, to ‘part time’ status! And the few protected workers are now being shoved into that pool of peasant labor. Japanese workers are very highly educated and urban. But emotionally drained and nearly utterly helpless when it comes to politics, organizing themselves or fighting their rulers.
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