China Buys Volvo—Yuan Will Be #1 Currency In Future

ΩΩTracing the arc of historical forces is fascinating.  As we see clearly how the lay of the land works, we can project forwards in time to see what will happen next.  Seeing what will happen next=power and even wealth.  Ruthlessly pursuing one’s ends is easier if one has a good idea about 50 Year Plans cooked up by the Chinese, based on understanding the arc of imperial histories.  The US is very definitely on a steep decline in power.  For example, poor Obama had to have a sudden, secret meeting in Afghanistan due to the US puppet there inviting in the Chinese and Iranians to do business.  HAHAHA.  Good grief.  We invade so others may expand their imperial powers?  End of our empire, for sure.

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ΩΩThe US media flagged poor Obama’s visit as a troop morale venture, not a frightened hurry to try to stop Karzai from expanding his many alliances with entities we are supposed to be weakening, not strengthening.  But the more we strengthen Karzai by killing his tribal opponents, the more he will gain power by forming business and political alliances with our direst rivals.  He is, in other words, triangulating.  And worse, we continue to pour in immense sums, to the tune of over $50 billion a year, making Karzai stronger!  And incidentally, this money loss is also making the US weaker vis a vis Iran and above all, China.

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ΩΩRecently there was a flurry of hysteria in Asian markets and online over the sinking of a South Korean ship that was roaming about right on top of North Korean territory.  I figured this was a ‘sinking of the Maine’ moment and was, like the Maine, either self-inflicted or carelessness, not North Korean aggression.  China was silent about it so I assumed they knew this was correct.  The fury of the sinking is no longer aimed at North Korea but rather, bereaved families are angry with South Korean naval officers.  Also, this is yet another indication that Koreans desire a German solution to their difficulties: reunification.  The only entity that can grant this is China.

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ΩΩAnd China is working on this and is increasing power in South Korea as China endorses this concept of reunification.  The US clings to division because this is a great excuse to keep our immense bases in South Korea where they can menace China easily.  The Chinese know this and they plan to deal with this in good time.  First, let’s examine common Western misconceptions about imperial influence.  There is tremendous delusional thinking on this topic.  In the ‘alternative press’, there is so much hatred of the concept of ’empire’ that the good side of empires—AND THERE ARE MANY—are devalued while the bad ones—THERE ARE MANY—are hyped while the imperialists in the media support empires but deny there are any empires!

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ΩΩIt is refreshing to see the Chinese being honest about imperial influences: they practically invented this about 4,500 years ago.  They export their culture and have alliances and relations but seldom occupy alien countries that are not ‘Han Chinese’ but rather, have, like the former British empire, trade zones that are Chinese merchants who use their CURRENCY and CONTRACTS backed by the empire as main tools for expanding economic powers.  Of course, many a Chinese empire has collapsed due to internal rot and invasions due to technological changes in warfare such as the invention of the stirrup and double recurve bows enabled swift Mongolian herders to overrun China periodically.

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ΩΩSee, these people had few trade prospects so instead of expanding Chinese influence, the Chinese spent tremendous effort in walling out these restless tribes.  And this always bankrupts the government and the tribes know this and deliberately egg on this sort of expenditure until it bankrupts the merchants and peasants paying heavy taxes!  The Afghanis know this and are using this historical force quite dramatically and viciously against the US empire.

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Why The Yuan Can’t Become The World’s Reserve Currency

But there are at least nine even stronger counterarguments.

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(1) The Chinese capital markets would need to have far more liquidity and transparency before investors would consider using the renminbi (China’s official currency, whose unit of denomination is the yuan) as a world reserve currency, and there’s no sign of that coming about.

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This is insane.  The US dollar will lose its reserve currency status exactly because it became too liquid!  It turned into a SEA of red ink!  As this gets worse, the prospects of the dollar remaining the keystone of all currencies will vanish very swiftly!  The US as destination of all manufacturing in the world will vanish, too.  This is a harsh lesson we must figure out before it is applied physically, in the future.  This future is assured: the dollar will very much cease to be the world’s fiat currency due precisely to it sinking in a sea of red ink, it produced to keep itself going!

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(2) The U.S. has never, in its 234 years, missed a payment on its debt. Right at the dawn of the republic, during the War for Independence, Congress concluded that nonpayment of debt would be national humiliation and must never happen. (Argentina’s congress took the opposite route when it approved the nonpayment of debts in 2002, to the applause of all the legislators present.)

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All debts are ultimately owed by the taxpayers.  When the promises to pay in the future outstrip tax collections to the point that this can never catch up, the empire dies in a thunderclap.  Empires rot slowly but die rapidly: IN WARS.  When England’s external and internal rot got too great, it nearly died in WWII. What saved it was the US empire which was rich, well endowed with resources and people, huge, consolidated mostly in one place, not scattered all over the planet, and had virtually no debts!!!  It was creditor to the world.

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(3) Because China is still a communist dictatorship, its fiscal and monetary policies won’t respond to market forces the way a democracy’s sic: democracies do, and that creates a strong element of uncertainty.

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I am not a rich man like Mr. Forbes. I have no staff and no editors so I make mistakes.  But for this writer to make such an obvious mistake?  HAHAHAHA.   As for stability: democracies are NOT the best form for keeping empires afloat.  The greater mass of populace always wants to evade paying taxes.  So they always vote for tax cutters who don’t cut services or war spending.

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(4) China is facing its own demographic time bomb as a result of laws introduced in the 1980s that limit the number of births.

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ALL industrial countries see a collapse in births.  This is because the only mothers who are paid to have children are the lumpen proletariat and they raise mostly the criminal class.  Meanwhile, mothers can still insist on having babies but trust me, they are EXPENSIVE AS HELL.  In both time and money.  I had two children and love them and am very, very happy I had them and know they will be wonderful in the future but the struggle to afford them and the things I gave up were many, many things and so this is why the birthrate falls for women who struggle to have children.

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Unlike in farm communities where children can be treated as virtual or even actual slaves, as are wives.

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(5) China’s economic growth is based on the export of low-added-value products and a controlled rate of exchange, which give it an unbalanced economy with a low level of consumerism.

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Good lord, how stupid is this writer!  DUH.  All industrial powers start this way!  Britain began by exporting cheap cotton cloth which competed with expensive wools and silks!  And China is rapidly climbing the ‘value-added export’ ladder.

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(6) China is effectively two countries, one urban and developed the other rural and undeveloped, and the divide between them could lead to social instability that could threaten the country’s economy and currency.

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Want to see a politically unstable country?  Hello!  The collapse in US economic power is leading to a collapse in political stability.  The arrest of the recent born again Christian terrorist cell coincides with the rise of Palin, the right wing lunatic in the GOP who took over the dissatisfied Tea Party whites who are seeing their power vanish.  Hispanics are getting riled and if blacks resume agitation in the inner cities as old Civil War era tensions tear the nation apart, our chances of being even a nation is in jeopardy.

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(7) The Chinese economy depends too heavily on exports to one nation, the U.S., and

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This is now false.  Chinese/Asian trade is rising rapidly and even Japan is no longer seeing the US as its main export destination!  Note how this writer ignores Japan, a common failing with most ‘experts’ trying to riddle out what is going on in Asia.

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(8) has structural weaknesses because of a lack of supply of raw materials.

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NO commodity nation EVER beats a manufacturing nation!  The US exports commodities to China in exchange for manufactured goods.  This is why we have a constant deficit with Germany, Japan and China!

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(9) The U.S. economy relies on innovation and competition to generate productivity; without those free-market forces China’s medium-term competitiveness is more uncertain.

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Anything we ‘innovate’ moves to Asia as fast as possible.  So this does no good at all.

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The pound didn’t stop being the world reserve currency overnight. The process started around 1870 and was completed in 1945. For the yuan to take over from the dollar, the Chinese would have to do a great many things extremely well, and the Americans would have to do a great many things very badly.

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ΩΩThe pound was extremely strong until…1914.  WWI killed the pound but it remained the main currency until WWII annihilated it.  The US dollar is being internally destroyed by our insane military spending while taxes diminish.  Even as the military/industrial complex grows in size and is now a huge hunk of our industrial base, it eats up our national wealth faster than it ‘grows’ our economy.  A classic error many empires make is to allow mercenary forces to eat up national credit.  And our military is pure mercenary, it is not ‘national’ at all and even our soldiers are now, like with the British or Roman empires, hired from foreign lands.

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U.S. Stocks Drop as Sovereign Debt Concerns Overshadows Data – Bloomberg.com

U.S. stocks retreated as concern that deteriorating government finances will derail the global economic recovery overshadowed better-than-estimated data on consumer confidence and home prices.

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Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. paced declines in banks as Standard & Poor’s cut Iceland’s credit rating and an auction of 12-year Greek bonds garnered demand for less than half the debt offered. Exxon Mobil Corp. and Chevron Corp. retreated as oil declined after yesterday’s 2.7 percent rally.

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“Greek bonds are getting killed,” said David Lutz, managing director of equity trading at Stifel Nicolaus & Co. in Baltimore. “There’s a lot of concern on sovereign debt. People are worried that the situation is not resolved.”

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ΩΩActually, stocks didn’t respond to anything in particular.  There was no ‘breaking news’ that could be used as a peg to hang a decline or rise in stocks.  Things in general are still mostly heading south in the West.  The turmoil of the recent collapse in US/UK /EU/Japan finances has been papered over by tons of government debt and this is what is causing future problems, as is obvious.

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Ford Sells Volvo to Geely in China’s Biggest Overseas Auto Deal – Bloomberg.com

The price includes a $200 million note and the remainder to be paid in cash, Ford Chief Financial Officer Lewis Booth said yesterday in Gothenburg, Sweden. The companies expect to finish the deal in the third quarter after getting regulators’ approval, Geely Chairman Li Shufu said.

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Divesting Volvo completes Chief Executive Officer Alan Mulally’s strategy of exiting European luxury lines to focus on Ford’s namesake brand after the 2007 sale of Aston Martin, and of Jaguar and Land Rover to Tata Motors Ltd. for $2.4 billion the following year. Booming sales made China the world’s largest car market in 2009, generating profit that’s allowing automakers to reach out to Western markets and technologies.

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ΩΩIn 1999, Volvo sold its car division Volvo Cars to Ford for $6.45 billion and this week, Ford sold it for $1.8 billion which is a $4.65 billion loss. Ford and GM fixed their losses the same way all the US investment banks and financiers fixed their own losses: tapping the Federal till. Which is capitalized by a huge mountain of US government debt, not foreign capital pouring in thanks to a trade surplus.

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ΩΩThe Fed graph below illustrates how the M1 money has shot upwards at a tremendous speed during the rescue operations. China is using capital to buy Volvo from Ford while Ford uses government finances to avoid bankruptcy by moving losses to the public. Note how the Fed M1 numbers shot from $740 billion added to $880 billion in just one year! This is nearly $200 billion more and is a 20%+ hike in a matter of months, not years!

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ALFRED: ALFRED Graph

ALFRED: ALFRED Graph

ALFRED: ALFRED Graph

ΩΩThe collapse of commercial bank credit is also very astonishing.  I took the last three years of data and superimposed it on previous recessions.  Note the differentials: each recession saw very, very little diminishment of commercial bank credit but this one is seeing epic declines.  We lost three years of credit value in three years and it is still dropping.  It will continue to drop as businesses go bankrupt and default on their loans.  By the way, this is a classic ‘hockey stick’ graph and note how the rate of increase in volume shot upwards at a higher and higher rate before declining.

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ΩΩThe fall this graph represents is equal and attendant to the decline and fall of the entire US as an empire.  It is a symptom.  At no time since the Great Depression, has this happened.  The inflation years of the 1970’s which was caused mainly by the end of the Vietnam War spending coupled with the OPEC embargoes barely affected the overall rate of commercial banking.  The 2000 Dot Com Bubble popping caused growth to slightly ebb for a year but then, thanks to wild government spending coupled with very easy Japanese carry trade-origin lending, the creation of commercial credit…which was mainly hedge funds and international investors dumping tons of debt onto US businesses…shot upwards like a rocket.

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ΩΩNow, there is nothing to dump debt onto and the ones that got plastered with tons of debt are defaulting and thus, the great decline which is hard to overcome.  We can’t create more credit if it is vanishing due to defaults on all those useless and stupid loans.  Loans that were piled on a country that was SHRINKING its own industrial base!

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Currency Crisis And Debasement – Forbes.com

In 29 years we have taken the U.S. national debt from less than $1 trillion to over $12 trillion (a 12-fold increase). What is really troubling is that the ratio of debt to GDP has exploded over the last 29 years from 34% to over 85%. During this 12-fold expansion of debt we have only expanded GDP 5.3 times. We are growing debt at twice the rate of growth of the U.S. economy. This is obviously a troubling situation….

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This is another Forbes story written by someone who reads the writing on the wall, all right! He notes that growing debts at double the rate of economic growth is very dangerous. The previous Forbes writer thought this was no big deal!

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–“Roman coinage began to be debased under the rule of Nero (AD 54-68) with the content of money being reduced from 100% silver to 90% silver. The trend continued in AD 193-210 when the silver content was reduced to 50%. So in a period of 150 years a 50% debasement was put into effect.”…

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Um, we debased the silver content from 100% in 1963 to nil today. Even the half dollar saw its silver content reduced by 60%! The dime and quarter are no longer elements of the silver dollar: they are now fake, cheap replacements of silver value. Even pennies are no longer copper. Starting in 1967, the government began to suck in silver coins and not recirculate them. This is when I rapidly began hoarding silver coins and I wasn’t the only one to do this. But we could not use this as ‘superior money’, we had to melt this down to get value and the government made this illegal.

. …Recommendations for investors looking to invest successfully in a period of higher inflation and currency weakness: Emphasize countries with financial strength. Move a significant portion of your funds to countries with strong finances, and hence, strong currencies. Countries like China, Brazil and maybe even India are in stronger financial condition today than many of the developed economies.

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ΩΩJust like when Forbes told readers to retire to France or Canada or other good health insurance coverage countries while at the same time, Forbes fought off US attempts at starting similar insurance coverage here, so it is with this writer telling us to invest in CHINA, not the US!  HAHAHA.  This is 100% a sure sign that China is the future and the yuan will definitely replace the dollar.  No ifs, ands or buts.  Now for a return look at some recent news from this winter:

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China, ASEAN mark FTA with grand ceremony_English_Xinhua

NANNING, Jan. 7 (Xinhua) — China and the Association of Southeast Asian Nations (ASEAN) on Thursday held a ceremony marking the establishment of world’s largest free trade area of developing countries. “Let’s take the FTA as an opportunity to lift China-ASEAN relations to a new high,” Huang Mengfu, vice chairman of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC), said at the ceremony.

ΩΩThis is one huge sphere of influence.  US influence here is 100% due to us allowing trade to flow mostly from these areas to the US.  This passive form of imperialism is bankrupting the US.  Sure, everyone wants to be our buddies!  This is so they can destroy us with trade that eats up our entire labor base!

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Locations of China and Southeast Asian Nations (ASEAN)_English_Xinhua

BANGKOK, Dec. 28 (Xinhua) — To realize the Renminbi (RMB)-dominated transaction and trade settlement has become an ever-stronger request in Thailand and the ASEAN area as the ASEAN-China Free Trade Area will fully come into force on January 1, 2010, said Wichai Kiatrengsuk, vice president of the Bangkok Bank and manager of the bank’s Chinese Relations Department.

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“As the robust development of Sino-Thai trade and investment, there has been an increasing stronger request among our clients that the trade be directly settled between the Chinese currency and Thai baht, without the involvement of U.S. dollars. Many clients from other Southeast Asian countries have made the similar appeal — the RMB’s direct settlement with their local currencies,” said Wichai after a ceremony by the Bangkok Bank to mark the launch of Thailand’s first credit card that adopts the standard of China Union Pay (CUP), the largest credit card provider in China.

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ΩΩAnd I highlighted the most important sentence in this article: aggressively, the Chinese are cutting out the use of dollars as international trade settlements.  Right now, for various reasons, OPEC still uses the dollar in this way but they are now openly talking about changing their own policies.  And change will come, no matter how deluded we are. Already, currency players and international investors are running from the sinking US dollar and rowing like mad to get aboard the euro and yuan ships.  The near sinking of the euro scared everyone to death since Europe has no powerful central government but is rather, a very loose confederation.  Which is very, very, very unstable.

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ΩΩStability matters! And China is very stable.  Far from falling apart, the Han Chinese are on a roll.  The countryside is undergoing vast changes…but for the better, not worse.  True, they have many, many problems.  But their problems are being solved, not papered over by debt owed to foreign trade rivals!  A big difference.

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ΩΩIn California, the governor is selling their Ronald Reagan office building to keep the government there afloat.  This is classic: we are selling our government buildings to pay for today’s temporary bills due to US workers unable or refusing to pay sufficient taxes to maintain our systems.  And who is going to trust us?  NO ONE.

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