Bank of Japan, Bank of China and American Speculators

September 27, 2007

Elaine Meinel Supkis

China continues to evolve as an industrial power and a financial banking center. A terse message is issued by the Bank of Japan and the Bank of China. I try peering into the dark behind this message. The financial condition of the huge MITI entities in Japan, that is, Japan, Inc.---continue to grow ever more profitable and powerful while wages languish and purchasing collapses in Japan itself. Gold and commodities rise like crazy as the dollar continues its collapse against the euro and pound. The economic black hole of Japan is gradually pulling the US into a depression in several signficant ways.

First, a message from our present bankers and future rulers:

Dr. ZHOU Xiaochuan, Governor of the People's Bank of China (PBC), and Mr. Toshihiko FUKUI, Governor of the Bank of Japan, signed the renewed Currency Swap Agreement in Tokyo on September 20, 2007. This Agreement, which was signed on March 28, 2002 between both central banks under the framework of the Chiang Mai Initiative, has greatly contributed to strengthening the financial cooperation in the East-Asia region, maintaining the stability of the regional financial market and promoting the economic development in East-Asia. The renewal of this Agreement is a reflection of strengthened mutual confidence between the two sides and enhanced regional cooperation on capacity building for financial risk prevention. Besides, Governor Zhou and Governor Fukui also exchanged views on recent economic and financial developments in the two countries as well as on global financial situation and other issues of mutual interests.

Oh, and what 'recent economic and financial developments' did they discuss? I will note here that the yen has been allowed to closely track the declining dollar again. This greatly pleases Japan. I will also note that Japan has stopped echoing US demands that the yuan rise rapidly against the dollar. I sense these two Asian powers have a gentleman's agreement under the table. This must be the 'mutal interests' part of their joint statement. Also, the Chinese featured this at Xinhua news which means they are pleased with the diplomatic and other arrangements made. The Japanese are silent about this. I believe this is because they figure, if the gaijin don't read about it, they won't notice it.

The renewal of this agreement was, until recently, up in the air. China was very visibly angry with Japan getting away with outrageous currency manipulation using their FOREX reserves and the purchase of US bonds, to keep the dollar valuable against the yen. All China did was the same thing and they got hammered nonstop over this while the G8 nations excused Japan. I believe all this is going to change due to this new agreement that has hidden protocols buried far from the public eye or my ability to see in the news.

From Financial Sense:

This fall, providence is bringing yet another dish of trouble to an already over laden table—China may actually prove good on its threat to dump $1.33 trillion of US Treasuries and start the long awaited flight from the US dollar.

China’s threat to sell its US Treasuries—if actually carried out—will be triggered by the US Congress. This fall, the US Congress will vote on a bill that would impose a 20 % across-the-board tariff on all Chinese goods imported into the US. The supporters of the bill describe its passage as “veto-proof”—that they now possess enough votes to override a presidential veto.

This possibility calls again into question the very efficacy of democracy, to wit the belief that the collective will of the people is preferable to the capricious stupidity of a king or queen or any other selected or self-appointed tyrant, or indeed, virtually any government official.

China is watching us very closely. If Congress imposes barriers to Chinese imports, they will and must retaliate. And we are well within their grip. Japan doesn't want this to happen now because I believe Dr. Zhou made it pretty clear to Mr. Fukui that if the US goes after China alone, Japan will be financially sunk by China. So the Japanese are probably applying quiet diplomacy to this delicate matter. The US, of course, should have never ever, EVER fallen for the 'free trade' wench who knew she was simply transfering industry in order to make greater profits for the top holders of US wealth who wanted to 'grow' faster than the rate of inflation, kill the unions and evade environmental and OSHA regulations while exploiting labor and nature to make themselves filthy rich.

Way back when they hatched this 'free trade' garbage, they assured us all, prices would be cheap and thus, our paychecks would go further and our jobs here would improve because only the most dirty and tedious jobs would be outsourced. Ross Perot ran for President by running against free trade. He coined the 'Giant sucking sound' as jobs vanish phrase and he was spot-on. Yes, the giant sucking sound has vacuumed up and taken out the vast majority of our industrial base. I warned the government back in the late 1980's and I supported Perot's run because of this, thinking that we can outsource to everywhere is very foolish since we can't dominate all the places taking up our industries.

Indeed, specifically with China, I said, 'China is an empire, a potential world power, they have nuclear bombs and missiles and a huge army. Any factories we ship there will be under the total control of the Chinese government and we won't be able to intimidate them or force them to do our bidding. This is a ONE WAY STREET.' Of course, no one listened to me. When Clinton signed yet more 'free trade' pacts, I threw up my hands in despair. The unions that trusted him were stabbed in the back and unions continued their long march into the night of servitude.

When I write about the Chinese dragon running the banking system of the world more and more, I keep hearing a variation of this song, 'What Lola Wants, Lola Gets' from the musical, 'Damn Yankees.' And I hear, 'What China Wants, China Gets.' The words of the song are quite fitting in this case. And Gwen's dancing here is a hoot, too.

From Bloomberg, more Dragon news:

China Investment Corp., the nation's $200 billion sovereign wealth fund, starts operations today as the government seeks to boost returns on the world's biggest foreign-exchange reserves.

The investment agency will come under the direct supervision of the nation's cabinet, the State Council. Lou Jiwei, former vice finance minister, will act as director and Gao Xiqing, former deputy chairman at the National Council for Social Security Fund, will be general manager, according to information disclosed at an opening ceremony in Beijing.

The biggest of our financial houses each control about $1 trillion in investments. But $200 billion isn't something to sniff at. Just as the wealth pouring into the banks in Dubai or Russia, this money isn't just going to sit there and support the dollar anymore. They are all obviously switching gears and indeed, the gear switch was triggered by China who ceased to try to support the dollar no matter what. They now are using the money we send them, proactively. And all others will heed them in this and follow in their footsteps because this will make them richer.

The other day, I spent many tedious hours combing through the Bank of Saudi Arabia looking at developments there. I noted that China's share of business, both buying and selling, has been growing in leaps and bounds and now China is one of the top 4 entities doing business, nearly equal with Japan, the US and Europe. By next year, they will surpass Japan and the US. Indeed, due to the yen falling with the dollar, the Saudis are doing more and more business with China and I bet China is paying in euros that are going up in value which pleases the Saudis so between China and Saudi Arabia, the euro is probably increasingly ipso-facto, the reserve currency for buying oil. To keep pace with the dying dollar, the Saudis keep the oil rising in price...in dollars. They don't want us to cheat them.

When they issue statements that they will pump more oil to make things cheaper for us, this is ALL LIES for US consumption. The real rate of pumping has dropped in the last 2 years. They don't worry about their investments in the US anymore, the clearly see China buying up the more profitable parst and they are holding secret meetings with Dr. Zhou, I bet.

From Xinhua:

The policy makers of China's central bank said at their third quarterly meeting that the country should carry out "moderately tightening" monetary policies to further rein in credit growth.

They said the central bank should coordinate the adjustments of interest rates and exchange rates and step up controls over the liquidity within the nation's banking system to maintain "rational" growth of lending.
*snip*
Statistics show new loans totaling 3.08 trillion yuan (409.6 billion U.S. dollars) were approved in the first eight months this year, and the figure is close to the total loans of 3.18 trillion yuan (422.9 billion U.S. dollars) for 2006.

China's tightening up on credit will affect us here. They make it clear, too much easy credit=inflation. I hope Dr. Zhou calls Dr. Bernanke and tells him all about this. The US depends on nearly only, consumerism. 70% of our economy is selling stuff, most of which we don't make anymore. Congress wants to cut our deficit with China but NOT fix this mess in a serious way since they will continue with the free trade ideology with the rest of the world. And the entire world has a trade surplus with us!

The US could clip the ability to take on more debts if they are serious but this would destroy what is left of our economy and we will go into a depression. We can see from Japan, what a depression looks like, at least from the side of the populace that works.

From Asahi:

Large Japanese companies sharply increased dividends to shareholders, but slightly raised salaries to employees in fiscal 2006, according to a Finance Ministry survey.

At about 5,600 companies capitalized at 1 billion yen or more, dividends rose 39.4 percent from a year earlier while salaries inched up 1.6 percent.

The annual salary was about 5.9 million yen per employee, almost unchanged for 10 years. Directors received about three times more in salary than employees, compared with two times in fiscal 1996.

The survey also showed that both sales and pretax profits hit record highs on an all-industry basis.

10 years, and no wage hikes. Prices in stores are flat but this is due to outsourcing jobs to China and India and refusing to allow the finances to buy imports from the US and other high-cost places. Plus the yen is always weaker than the dollar so we get no advantage from currency differentials and Japan's trade surplus with us grows relentlessly. On top of this, to placate us, they locate factories here that assemble the higher-end cost cars that sell for a premium here. In every economic report I see from that strange country, always, profits and other capitalist things are up and up and up while things impacting the working class deteriorates or stagnates.

Japan is like an economic black hole in the world's economy. As inflation rages around the planet, it vanishes when it reaches Japan. As profitability falls in other industrialized countries, it shoots up in Japan. As currencies all strengthen against the dollar, the yen weakens. Japan is the inverse of the US and the US plan to weaken the dollar to win trade wars is utterly defeated by Japan's methods. What is particularly notable is that the US refuses to talk about this or deal with this.

From Bloomberg:

High-yield bonds posted the best returns in four years this month as a U.S. rate cut eased concern about a credit crunch and encouraged buyers of the riskiest debt.

Speculative-grade bonds returned 2.46 percent, the most since September 2003, according to Merrill Lynch & Co. index data. Most of the gains came after the Federal Reserve cut interest rates on Sept. 18, helping junk bonds recover from a decline of 3.14 percent in July, the worst month in five years.

Right on the eve of a trade war with China and a possible real war with Iran (fighting cats and dragons at the same time is pure insanity) the US played Santa with SPECULATORS!!!! This is pure insanity. This made our economic state worse. In just one week, the more speculative, the most destructive bonds jumbed in value? We all warned the Fed that the weeping and wailing of the army of OFF SHORE, NON-TAX PAYING speculators was crocodile tears. Cramer, the head Baghdad Bob of these pirates, was throwing himself about the TV studio screaming, 'There is BLOOD in the streets! People are losing their JOBS!' And this scared the rulers of America who make money betting against our nation, making money speculating, using Asian loans.

So...Japan's INDUSTRIALISTS are seeing a 34% hike in profits while America's SPECULATORS got the Fed to kill the dollar even more so they can make a one-week 2.46% hike in profits so they could boast to their investors, they can make money doing nothing except playing money games in the FOREX markets or the CDO markets. They won't talk about the ABX markets which are so negative, they are as big a black hole as Japan's consumer statistics.

From Bloomberg:

Commodities had the biggest monthly gain in 32 years, led by wheat, crude oil and gold, as the dollar's slump enhanced the appeal of energy, grains and precious metals as a hedge against inflation.

The 19-commodity Reuters/Jefferies CRB Index was up 8.1 percent this month, the most since July 1975. Wheat climbed to a record in September amid a global grain shortfall, boosting corn and soybeans. Oil also hit a record, and gold reached a 27-year high. The Federal Reserve cut borrowing costs to bolster the U.S. economy, sending the dollar tumbling.

``The Fed has signaled pretty clearly that they will answer the problem of a slowing economy with greater liquidity,'' said Chip Hanlon, who manages $1 billion at Delta Global Advisors Inc. in Huntington Beach, California. ``We're in a bullish phase for commodities.''

In other words, inflation. Yes, inflation and all inflation that really bites are two fold: one is the government issuing easy money by offering rates below the real rate of inflation and of course, commodities rising in price due to all this. For much of my life, I read economists all yelling that inflation is caused by wage hikes. And certainly, outsourcing our industry to China has caused the price of many things to drop. But WAGES DROPPED so the benefits, as far as people on the street are concerned, vanished.

Indeed, the lower the prices, the more industrialists could drive down wages as we see today as the last of the high-wage industries kill off union wage hikes even as inflation is biting ever harder at our wallets. So, infaltion is NOT the product of wages. All our financial crashes in the last 35 years has been because of sudden price hikes in energy and food. Over and over and over again, the price of energy goes up, mostly due to wars, then the price of food climbs due to high energy costs in growing, handling, transporting and selling food (unlike cars, food can't sit in a dealer's lot for a year!). And the trick of the Federal Reserve in not counting food and fuel as inflation has utterly warped statistics so we get raging inflation while they claim all is well and keep rates relentlessly below the rate of inflation which has now produced several dangerous bubbles in succession.

We are now seeing yet another SPECULATIVE bubble and like the previous four bubbles, the money this creates makes less and less economic sense. Now, they aren't even building houses in vacation spots, they are building....nothing! Nay, they are building up Asia even more. The money generated here goes right back to Asia. And this flow is important to both Japan and China which is why they are making secret convenants for dealing with this collapsing which it is going to do if we don't stop guzzling energy like there is no tomorrow and the Fed ceases lying about inflation it is causing.

From Forbes:

Gold exceeded earlier highs, surging to its highest point since 1980 as fund buying accelerated amid record low dollar values and another new peak for oil prices in London.

'Funds are throwing lot of money at gold,' said Kitco analyst Jon Nadler. He added, however, that gold's one way ascent over the past month is taking on some 'ominous and speculative features that may not see it correct in orderly fashion'.

And this is why the price of gold is shooting up: the SPECULATORS are now shifting their tactics to gold! The gold bug sites online have long believed that the big financial houses were conspiring to keep gold cheap. I would suggest, gold was kept cheap because they had much nicer ways of making free money for themselves. The 'gold' in CDOs was more secure than a commodity metal. Gold can lose value rapidly, easily, as easy as fiat cash loses value. But up until this year, they all thought that property values would be retained and even if they fall, home owners would still pay no matter what, even if the value drops by 25% or more.

But unlike previous recessions, this time around, too many people bought too recklessly. My next article is all about this. Our banking system is collapsing due to this and gold is now becoming a 'last resort' destination for lots of cash pouring into the accounts of various pirates in the Caribbean and off the shores of Enlgand. They must translate these dying dollars into something that will go up and since they are bidding up the price of gold, themselves, it rises. If the gold bugs online wish to make money, they should soon begin selling, like soon. Because this will end with a bang, too. The day the Bank of China pushes the red 'panic' button on us.

From the Daily Pfenning:

And don't look now... But the dollar index is just a tick above the all-time low of 78.19 this morning... I'm not a chartist, nor do I play one on TV, not that anyone would have recorded it if I had, but I believe a break below this all-time low is not a good thing...

The dollar index is at a 35 year low. Nixon time! People forget the desperate measures Nixon made, trying to deal with the inflation and the oil hikes that were rapidly destroying our economy. He used wage and price controls, for example. This made him very unpopular. Then he had a bright idea: go to China! This began our program to make China our outsource station and thus, kill inflation. My dad was very much a part of that operation. The scheme to teach them about capitalism and the joys of making money was passed off to myself and others after Madame Mao's arrest.

From Market Watch:

"Gold is returning to its historical attribute as a monetary instrument," said Peter Spina, an analyst at GoldSeek.com. "With the U.S. dollar falling to new lows, capital is looking for a preservation of wealth asset. As foreign currencies become more expensive and suspect themselves, gold is quickly becoming an asset choice."

"A lack of faith in the U.S. dollar's ability to preserve purchasing power will continue to flood the gold market with investment demand," Spina said in emailed comments.

Gold isn't a monetary instrument. It is a SPECULATIVE instrument. Quite a difference. One cannot buy with gold, one must CONVERT it into money, first. If one buys something with gold, it has to be a gold certificate and I have a bunch of gold certificates from 1848-1933. All were rendered worthless by the government when the banking system collapsed. A lot of gold buyers are buying certificates, not the actual gold. Be forewarned.

What happened here was, fiat currency was turned, via fiat IMF directives, into a SPECULATIVE script that one can use to play stock-market-type games. The international gambling casino was opened by Nixon with the Bretton Woods II Accords. The US was faring badly after this so there was the Plaza Accords where they re-launched the world currency casino. Then the Japanese discovered how to BEAT THE BANK. Then the Chinese figured this out and we were swiftly doomed.

Fixing this will be fun, no? First, we have to forego consuming more than we sell. And we must save oil. And we must cease using currency as a speculative source of free money. The money pouring into the world's economic system via currency speculation is massive. It is 10X the value of trade profits. This multiplier effect is causing global balloons of all sorts like the swift rise in commodity prices, for example. This is unsustainable. It will crash when the US declares bankruptcy or a trade war with China breaks out.

Money is cheaper, generally, but as McAdie put it:

"Cheap money is now history. There are not going to be any more of the big leveraged buy-out deals for a long time because the CLO [collateralized loan obligations] market that financed them is effectively closed."

McAdie is wrong. The trade in 'cheap money' is going to continue for the time being. But it hangs by just two threads: the Bank of Japan and the Bank of China letting us do this in order to keep up their very uneven trade with us that benefits them and hurts our own economic health. The Fed doesn't control this, they can only enable this. So this is why I concentrate so very hard on Japan's and China's business and banking news: this is life and death for us to understand and change. Buying gold bonds won't change this nor will it insulate people from a collapse of our currency! The safe harbor concept is wishful thinking. Any student of history can see this.

Just for one harsh example, England decided, if they won the gold and diamond mines of South Africa, they could continue their empire with abandon and do as they please. So they launched the Boer Wars and finally won. With tremendous difficulty. And this showed the weakness of the empire and Germany suddenly lunged at France and England nearly immediately at the end of the Boer War. And all that gold in South Africa went to...Fort Knox. To pay for WWI. And WWII.

Culture of Life News Main Page

Comments

[blues]

I just took the quick and dirty option of going to Wikipedia to get some very basic numbers. Here they are:

The North American Free Trade Agreement:

- Formation: 1 January 1994

World Trade Organization:

- Formation: 1 January 1995

William Jefferson Clinton:

- 42nd President of the United States: January 20, 1993 – January 20, 2001

I seriously considered doing a theory on "economics", but decided against launching it because I was sure if I discovered the real theory, it would be ignored, since it would be of no utility to the powers that be.

I have, however, (following an endless, often vicious(!), argument spanning a dozen websites, beginning with my initiation to the blog world on the now defunct 'repentantnadervoter.org') done an extensive stint in voting theory, which is closely related to "economics theory" (such as it is).

I even have my "own" page on the Electorama Wiki (but it's a Wiki):

http://wiki.electorama.com/wiki/Main_Page

((----- Copy & Paste -----))

http://wiki.electorama.com/wiki

/Consecutive_Runoff_Approval_Voting

You'll notice there is nothing in the "discussion" tab, and my page stands utterly apart from all the other game theory oriented pages on that wiki. I am just "there", all by myself. All the pages are at:

http://wiki.electorama.com/wiki/Special:Allpages

I have a more up-to-date version (which is more "Wiki-ish, which I should perhaps (maybe) substitute on the Wiki) on my own political blog:

((----- Copy & Paste -----))

http://dailytrough.wordpress.com/2007

/09/23/real-democracy-is-the-only-answer/

However, I have in fact virtually begun launching a theory on economics with my seemingly (though not really) nihilistic post:

((----- Copy & Paste -----))

http://dailytrough.wordpress.com

/2007/09/27/it-is-all-an-esoteric-game/

What I am really doing there is scything down the weeds in contemplation of planting a new crop of theory. That's just my way; I eschew messing around with highly developed fields like, say, physics, and prefer to build new stuff in poorly developed fields.

I think I will start from the perspective of "A Theory of Betrayal". It sounds so cynical and all, but if cynicism is what it takes to build the thing, I won't let that inconvenience get in the way of the theory. I think I will start with the premise that life is about betrayal, and levels of betrayal. Maybe you could break out of the cycle of betrayal by becoming a Buddhist, or something. But as long as the great anthem of the Song of the Self plays in your head, like a neverending self-eulogy, the Great Betrayal must be your very own shadow. Even your own betrayal, in the end.

I find you so interesting, Elaine, because I have observed your own vast war against all forms of betrayal. I'm a bit like that too. Once you start to create a theory based on betrayal, the ones who set themselves against the stupendous forces of betrayal become your best informants. I would be much pleased should you find my project to be at all interesting.

I am not much concerned with the "prisoner's dilemma" style questions, since I see no choice between cooperation and betrayal. The cooperation part is the pie crust, the betrayal the filling. In fact cooperation and betrayal exist only in conjunction, like quarks. Well, I'll see how far this will go. It's all in "beta", though, and I make it up as I go along.

Back at the ranch, I have just now completed a four year-long review of my gigantic linguistic project (which I call "itemics"), and plan to begin rolling it out in my now-overripe old site:

http://www.anti-grammar.com/phpBB2/index.php

So I guess that's the news about blues.

[Elaine Meinel Supkis]

Yes, Blues, thanks.

As for the prisoner games: what I see is a series of horns of dilemmas that traps people into forcing them into actions they don't want to take but must and the outcome is always worse than going in: the decline of empires. Building things is a different complex: mistakes are made and these mistakes are GOOD in that they open up possibilities!

Ergo: life is paradoxical in the extreme and thus, very interesting.

[aitrader]

Curious what you think of China's move to consolidate a sixth of their Forex reserves in a single fund?

http://www.marketwatch.com/news/story/china-launches-200-bln-forex/story.aspx?guid=%7B6C8824E6-11EF-4ED1-A5E4-63A79BF3DCF1%7D

My wild guess is that this is done partly to centralize enough cash so it can be used as leverage for more favorable terms with trading partners.

[Molecool]

Again, prices can't be cheap - they can only be low. Products can be cheap...

[blues]

Molecool, quick, call the Wikipedia police! (No wait, this is a blog.)

[blues]

Okay, time for a basic linguistic analysis of the noun phrase cheap prices. I a rather formal sense, the phrase is malformed, as is the the phrase hot temperature

However, it is clear that the typically well-formed phrase low prices has become what they call in the grammar racket "semantically bleached". That is, it has been more or less worn out from overuse. All our lives, we have heard low prices reiterated in media ads, and this overexploitation has by now saturated it with so many connotations that it doesn't register properly with readers.

[Elaine Meinel Supkis]

Yeah! Blues! Thank you. You are a wonder.

And yes, there is no such thing as 'proper English' ...it is FAKE! Made up by lots of teachers over the generations, you should read Shakespeare. Or the older Bibles. Hell, try reading Beowulf! Haha! I have!

I studied the medieval languages. Should write about them, they were quite charming when they all tried writing in their native tongues. Everyone tried to write PHONETICALLY with some Latin text thrown in.

THEN the clerics learned GREEK. This fouled up the spelling for um, about...400 years! And to this day, I get confused on 'surprize' or 'surprise' or 'grey' rather than 'gray' etc because I read a lot of Brit writing! Many words are spelled differently!

As in 'My Fair Lady,' Professor Higgens says, 'Why can't the English learn to speak their language? And then there are the Americans, they haven't spoken Enlish in many years!'

I love that musical. A must-see.

[blues]

Of course I read Beowulf.

But for the real Old Englach, one must read Chaucer:

((----- Copy & Paste -----))

http://www.luminarium.org

/medlit/larsonchaucer.htm

~ Whan that April with his showres soote
The droughte of March hath perced to the roote,
And bathed every veine in swich licour,
Of which vertu engendred is the flowr; ~

[Elaine Meinel Supkis]

yes, the sweet nectar of spring's flowers...time to get drunk!

[John]

"For much of my life, I read economists all yelling that inflation is caused by wage hikes."

So, in other words, they're all lying sacks of weasel shit.

Because inflation is a specific phenomenon. It occurs when the size of the money supply grows at a faster rate than that of the underlying economy which that money supply represents. Period.

[Elaine Meinel Supkis]

In a nutshell! Thanks, John!