November 22, 2013
by Paul Craig Roberts
Since 2006, the US dollar has experienced a one-quarter to one-third drop in value against the Chinese yuan.
Now, China…is considering undermining the petrodollar by pricing oil futures on the Shanghai Futures Exchange in yuan.
The People’s Bank of China has said that the country no longer benefits from increasing its foreign currency holdings (primarily US bonds).
“It is no longer in China’s favor to accumulate foreign exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University.
The Chinese monetary authority will “end normal intervention in the currency market, and broaden the yuan’s daily trading range,” Governor Zhou Xiaochuan wrote in a recent guidebook explaining the reforms.
The dollar’s role as the world’s reserve currency is coming to an end, which means the end of the US as a financial imperialist.
The US economy is already in shambles. Bonds and stock markets are being propped up by massive and unprecedented money printing by the Federal Reserve.
This new blow to the dollar, in addition to jobs being offshored, and the gambling casino that was created by financial deregulation, means that the US economy as we know it is also coming to an end.
November 29, 2013
China’s new air defense zone, stretching far into East Asia’s international skies, is an historic challenge to the United States, which has dominated the region for decades.
Beijing is now confronting strategic assumptions that have governed the region since World War Two.
China’s recent maritime muscle-flexing in disputes over the Paracel islands and Scarborough Shoal in the South China Sea, and over Japanese-administered islands in the East China Sea, has stirred concern in Washington.
China’s unilateral creation of the air defense zone – accompanied by warnings that it would take “defensive emergency measures” against aircraft that didn’t identify themselves – has raised the stakes in a territorial dispute with Japan over tiny, uninhabited islands in the area.
A Chinese analyst with ties to the military warned Tokyo and Washington…that U.S. surveillance flights near China’s coast – such as one that sparked a fatal collision over Hainan Island in 2001 – “will never be allowed to happen again.”
The fact China’s air defense zone overlaps Japan’s – including contested islands that the U.S. is obliged to defend under its treaty with Japan –represents a dangerous strategic shift, U.S. officials say.
And China’s declaration that it could take action against unidentified aircraft that ignore its warnings has sparked fears of an increased risk of accidents and miscalculations.
In China, there is a palpable sense of historic mission.
“China’s actions are a way of facing up to the U.S. escalation of military power in the region,” said Ni Lexiong, a defense analyst at the Shanghai University of Political Science and Law. “This is an issue of face and respect.”
“It’s also about national interests. You have to look at this in the context of history – there have been many agrarian countries that have developed their economies and then transformed into naval powers. It’s a consequence of a country doing business globally. It’s normal,” he noted.
November 25, 2013
At a brand new housing development in Irvine, Calif., some of America’s largest home builders are back at work after a crippling housing crash.
“They see the market here still has room for appreciation,” said Irvine-area real estate agent Kinney Yong, of RE/MAX. “What’s driving them over here is that they have this cash, and they want to park it somewhere or invest somewhere.”
Yong’s phone has been ringing off the hook, with more than 5,000 new homes slated for the nearby Great Park Neighborhood. Most of the calls are from overseas, but prospective buyers are not looking solely for financial returns on the real estate.
While American secondary schools and universities are a big draw for Chinese buyers…many are also concerned about China’s political instability, and inflation. They are paying cash for real estate in California, using it as a safe haven for their wealth.
The homes range from the mid-$700,000s to well over $1 million. Cash is king, and there is a seemingly limitless amount. “The price doesn’t matter. If they like it, they will purchase it,” said Helen Zhang of Tarbell Realtors.
Many of the buyers don’t want any questions asked about where the cash is coming from.
November 25, 2013
Most people – certainly most governments and economists – define inflation as a general rise in prices. But this is wrong.
Inflation is an increase in the money supply, of which a rising general price level is just one possible result, and not the most common one.
Excessive money creation more often shows up as asset bubbles whereby new money, instead of flowing equally to all products, flows disproportionately into the ‘hottest’ asset classes.
People who were paying attention in the 1990s might recall that the consumer price index was well behaved, while huge amounts of money flowed into financial assets, thereby producing the dot-com bubble.
The same thing happened in the 2000s, when excess currency flowed into housing and equities.
In each case, mainstream economists and government officials pointed to modest consumer price inflation as a sign that things were fine.
And in each case they were simply looking in the wrong place, and were completely missing (we would say “deliberately missing” – EDITOR) the destabilizing effects of an inflating money supply.
Now they’re at it again.
Economists, legislators, and central bankers are using low consumer price inflation as a rationale for even easier money, while ignoring the epic bubbles that are occurring in sovereign bonds, equities, high-end real estate, and collectibles all around the world.
These bubbles are the true evidence of inflation. And since they’re growing progressively larger, it is accurate to say that inflation is high and accelerating.
Because so much of society’s wealth is flowing to the top 1% – who after all can only drive one car at a time and tend to eat no more than the rest of us – inflation isn’t showing up in food, suburban houses, or mass-market products.
Instead, trillions of dollars are pouring into tangible assets, which are then being hoarded in mansions and high-end storage facilities.
When you think about it, this is a truly startling asset grab.
*** FEATURED ARTICLE ***
November 20, 2013
by John Rubino
Late in the life of every financial bubble, when things have gotten so out of hand that the old ways of judging value or ethics can no longer be honestly applied, a new idea emerges that, if true, would let the bubble keep inflating forever.
During the tech bubble of the late 1990s, it was the “infinite Internet.”
Soon, we were told, China and India’s billions of people would enter cyberspace. And after they were happily on-line, the Internet would morph into versions 2.0 and 3.0 and so on, growing and evolving without end.
So don’t worry about tech stock earnings! Earnings would come later, when the dot-com visionaries cashed out and handed the reins to boring professional managers.
During the housing bubble the rationalization for the soaring value of inert lumps of wood and Formica was a model of circular logic. Home prices would keep going up because “home prices always go up.”
Now the current bubble – call it the Money Bubble or the sovereign debt bubble – has finally reached the point where no one operating within a historical or common sense framework can accept its validity. So for it to continue, a new lens is needed.
And right on schedule, here it comes: Governments with printing presses can create as much currency as they want and use it to hold down interest rates for as long as they want. Financial crises are now voluntary!
Financial crises only happen if a country decides to stop depressing interest rates – and why would they ever do that?
The bubble rationale is that central banks are all-powerful. Interest rates will stay low and stock prices will stay high. Governments will keep on piling up debt with impunity, because they control the financial markets and they get to decide which things trade at what price.
Breathtaking! Why didn’t humanity discover this financial perpetual motion machine earlier? It would have saved thousands of years of turmoil!
This illusion is no crazier than the infinite Internet, or home prices always going up, but it is crazy.
Governments couldn’t stop tech stocks from imploding or home prices from crashing, and when the time comes, the Bank of England, the US Fed, and the Bank of Japan won’t be able to stop the markets from dumping their currencies.
Nor will they be able to stop the price of energy, food, and most of life’s other necessities from soaring when the global markets lose faith in their promises.
There are actually three kinds of people: those who know, those who don’t know, and those who don’t care to know. Members of the last group are the “sheeple.”
Sheeple exist on both sides of America’s false political paradigm, and they exist in all social classes.
In fact, the professional class and the hierarchy of academia are rampant breeding grounds for sheeple. Doctors, lawyers, scientists, and politicians are all just as prone to the sheeple plague as anyone else.
The only difference is that the professional class has a bureaucratic apparatus behind them that gives them a false sense of importance. All they have to do is tow the establishment line, and promote the establishment view.
Mainstream media outlets go out of their way to reinforce this mindset by establishing the illusion that sheeple are the majority, and that majority perception is the only correct perception.
Many liberty movement activists have noted recently that there has been a surge in media propaganda aimed at painting the survival, preparedness and liberty cultures as reactionary, extremist, conspiracy-minded, etc..
National Geographic’s television show “Doomsday Preppers” appears to have been designed specifically to seek out the worst possible representatives of the movement and parade their failings like a carnival sideshow.
Rarely does “Doomsday Preppers” give focus to logical arguments regarding why their subjects become preppers, nor do they normally choose subjects who can explain as much in a coherent manner.
This is a very similar tactic to that used by the establishment media at large-scale protests. They generally attempt to interview the least-eloquent and easiest-to-ridicule person present.
The goal is to give sheeple comfort that they are normal, and that anyone who steps outside the bounds of the mainstream is abnormal and is a target for the collective.
Rows of dilapidated five-story dormitories in the city of Nantong, previously housing China Rongsheng Heavy Industries Group’s 38,000 employees, were abandoned after the shipbuilder cut almost 80 percent of its workers over the past two years. Most shops serving them have also closed.
A $6.6 trillion credit binge during the past five years, encouraged by Beijing policy makers as stimulus to combat a global economic slowdown, now threatens to stoke a debt crisis.
At stake are trillions of yuan in bank loans that companies producing everything from ships to steel to solar power are struggling to repay as the world’s second-largest economy heads for the weakest annual expansion since 1999.
Rongsheng is seeking a government bailout after accumulating 25 billion yuan ($4.1 billion) in unpaid loans as of June and is a casualty of over-investment gone bust.
In Nantong, the only remaining market is selling past-its-shelf-life bread, and other dusty items at a discount as shopkeeper Qiu Aibing prepares to wind down before winter. There’s no sign of a single customer.
“After I’m done selling all this stuff, I’ll be gone,” said Qiu, casting a careless look at the half-empty shelves. “The workers didn’t have money to spend anyway because there’s no work to be done, and many of them haven’t been paid for months.”
China’s biggest banks are already affected, tripling the amount of bad loans they wrote off in the first half of this year ahead of what may be a fresh wave of defaults.
Industrial & Commercial Bank of China Ltd. and its four largest competitors expunged 22.1 billion yuan of debt that couldn’t be collected through June, up from 7.65 billion yuan a year earlier.
China’s economy probably will expand 7.6 percent in 2013, the weakest pace since 1999.
China’s credit quality started to deteriorate in late 2011 as borrowers took on more debt to serve their obligations amid a slowing economy and weaker income.
Interest owed by borrowers rose to an estimated 12.5 percent of China’s economy from 7 percent in 2008. By the end of 2017, it may climb to as much as 22 percent and ultimately overwhelm borrowers.
China’s total credit will be pushed to almost 250 percent of gross domestic product by late 2017, almost double the 130 percent of 2008.
The nation might face credit losses of as much as $3 Trillion as defaults ensue from the expansion of the past four years, Goldman Sachs Group estimated in August.
This results a global glut of the supply of goods, leading to falling US inflation expectations because the supply of goods far outweighs US domestic demand.
This in turn gives the Federal Reserve the excuse it needs to print even more vast quantities of money, and continue holding interest rates at close to zero.
November 21, 2013
There has been a lot of fanfare on the huge increase of oil production coming from the Bakken Field located in North Dakota. There are many stories of people moving to the state to take advantage of the new oil boom.
However, with all booms comes the inevitable bust.
While the American public and world have been made aware of the huge increase in oil production coming from the Bakken, few are privy to the dark side of the equation.
The Bakken’s daily decline rate from their existing oil wells has reached a staggering 63,000 barrels per day (bd). This means that every day the Bakken pumps oil, its existing wells are declining by 63,000 bd. (see chart).
As you can see from the chart, the rate started to decline in a big way after 2011. In 2011, the average daily decline was only 20,000 bd. In less than 3 years, this rate has increased by more than 3 times.
Astonishingly, 93% of North Dakota’s oil production comes from the Bakken region alone.
The public is only told about the huge increases in production, but for some strange reason the mainstream media tends to omit the negative side. The only way oil production is increasing in the Bakken is due to the massive amount of new wells that have been added.
In 2008, the Bakken in North Dakota only had 479 producing wells. At last count in September (2013) when then Bakken was producing 867,123 barrels of oil per day, it took 6,447 wells to do so.
Thus, energy companies drilling and producing oil in the Bakken have to keep increasing the number of wells each month in order to offset the huge 63,000 barrels per day decline.
As with all oil fields, there are only so many sweet spots and areas to drill. The Bakken decline rate has only has one way to go – and that’s higher.
If the present trend continues, then we are going to see a daily decline rate of 75-85,000 barrels a day by the end of 2014. At some point in time (sooner rather than later), the daily decline rate will reach a figure that the shale oil companies will be unable to offset.
Once the Bakken and Eagle Ford oil fields peak and decline, the United States has no other “energy rabbit” in its hat.
A new study of the effects of tiny quantities of radioactive fallout from Fukushima on the health of babies born in California shows a significant increase of hypo-thyroidism caused by the radioactive contamination traveling 5,000 miles across the Pacific (from Fukushima).
The article will be published next week in the peer-reviewed “Open Journal of Pediatrics.”
Congenital hypothyroidism is a rare but serious condition normally affecting about one child in 2,000, and it is one that demands clinical intervention. The growth of children suffering from the condition is affected if they are left untreated.
All babies born in California are monitored at birth for Thyroid Stimulating Hormone (TSH) levels in blood, since high levels indicate hypothyroidism.
Researchers examined congenital hypothyroidism (CH) rates in newborns using data obtained from the State of California over the period of the Fukushima explosions.
Their results are published in their paper “Changes in confirmed plus borderline cases of congenital hypothyroidism in California as a function of environmental fallout from the Fukushima nuclear meltdown.”
The researchers compared data for babies exposed to radioactive Iodine-131 and born between March 17th and Dec 31st 2011 with unexposed babies born in 2011 before the exposures, plus those who were born in 2012.
Confirmed cases of hypothyroidism, defined as those with TSH level greater than 29 units increased by 21% in the group of babies that were exposed to excess radioactive Iodine in the womb. The same group of children had a 27% increase in ‘borderline’ cases.
Exposure to radio-Iodine is associated with thyroid cancer in children. There was a big rise of thyroid cancer in Belarus, the Ukraine, and the Russian Republic after Chernobyl.
The situation at Fukushima seems set to echo this, despite the reassurances from the authorities that there will be no effects.
(There have been 53) confirmed thyroid cancer cases in 0-18 year-olds in Fukushima prefecture in the past six months. This represents an 80-fold excess based on national data prior to the Fukushima iodine releases.
These data present a severe challenge to Dr. Wolfgang Weiss of the UN and WHO, who stated last year that no thyroid cancers could result from the Fukushima disaster because the “doses were too low.”
How does Dr. Weiss explain the 80-fold increase in this normally rare condition?
Or rather, when will Weiss admit that the entire scientific model that underpins his views is fraudulent, and that nuclear radiation is…1,000 times more dangerous to human health than he is letting on?