Much More Than Trillion Dollars Flowed Into Chinese Corporations In ONE DAY

November 6, 2007

Elaine Meinel Supkis

China's amazing stock sales yesterday clearly shows world finances are now flowing to China, not the US. This is a historic moment. The seeming collapse of our entire banking system in August was due to the sudden shift in world money flows back in July finally pinching the biggest banks in the West. This force is not gone, it is growing ever stronger. Just as a river bursts its banks and floods the plains, sweeping away everything, so it is here: the tsunami of money created by the central banks of the world coupled with the direction of trade PROFITS and the rise in asset value of commodities from food to energy means the US will collapse while China and Russia will rise in economic power.

From Xinhua:

PetroChina, China's largest oil and gas producer, replaced Exxon Mobil as the world's largest listed company by market value on Monday as its share price surged 163 percent to close at 43.96 yuan on its first day of trading on the Shanghai Stock Exchange.

The company's share price opened at 48.6 yuan on Monday, almost tripling its IPO price of 16.7 yuan, and ended the morning session at 43.65 yuan.

By offering shares on the mainland, the company is trying to increase its crude oil production to match its refining capacity, said Zheng Yi, an analyst with Guangfa Securities.

The company's market value on the Shanghai bourse swelled to above the one-trillion-dollar mark, surging past Exxon Mobil, valued at 487.7 billion U.S. dollars. It is the first time a company has been valued at one trillion dollars.

The share offering would reduce the weight of bank and financial institution stocks to 30 percent from 39 percent and help increase that of industrial sectors such as power, coal and refining, said Wang Jing, an analyst with Orient Securities Co. Ltd.

PetroChina is the first of the country's three petrochemical giants, including Sinopec

The US has run nearly all its systems in the red for much of my life. All my working life, I have yelled about this. I am a basic fiscal conservative. But not a right winger at all. Namely, right wingers want a Soviet-style military empire and fiscal conservativism. This is impossible and so whenever they take over, they ring up vast debts, far more than the socialist-minded left. They refuse to pay taxes yet go to war hoping the loot will balance the budget which it never does. So public debts climb with either party in power. If the Democrats cut the war machine, they get either impeached or drummed out of office by people talking about making America stronger by spending on the military.

All countries must spend on the military but the difference between that and empire are obvious: the empire spends much more on protecting foreign shores than at home and so it not only goes bankrupt if it doesn't tax the distant provinces, it is always attacked at the center! So Britain spent more than all of Europe on occupying the entire planet in 1914 but had virtually nothing at home so Germany lunged for the throat in London rather than fighting in Afghanistan or India!

I was reading 'The Peloponnesian Wars' by the world's first real historian/analyst in the modern mode: Thucydides. He wrote this great book nearly 2,500 years ago. Much of it is a record of the speeches made by the Spartans and Athenians. Athens was building a great empire. Sparta didn't feel comfortable over this so they spared over various distant quarters, a clash here, a clash there. Sparta then decided the way to deal with all this was to lunge at Athen's throat so the war took a very grim turn. Athens then had to tax its provinces rather than protect them in order to fight at home and Attica was reduced to ashes.

The greatest humanistic civilization collapsed into chaos and hysteria and cruelty. Desperate, Athens punished any allies who wavered by attacking and enslaving or murdering them. So all the allies left and went to PERSIA for help! Persia's empire grew and with the utter collapse of Hellenistic civilization, Persia thought they could rule the world but Alexander the Great rose out of the barbarian north to conquer all of them.

Economics are only the domestic face of Empire and War. No empire can have imperial power unless it has economic power. If that power is based on trade, the worst thing that can happen is for it to lose control of the Seven Seas and this never is done via wars in distant lands. It always happens when an empire it too finnacially careless, gets overstretched and spends too much on the wrong things and becomes a tempting target at home.

Britain ruled the Seven Seas and was the Workhouse of the World. During the 19th century, England reduced the global economic power of India and China so utterly, both were unable to fight off European invaders and England took over vast swaths of very productive lands. Yet, once Germany's industrial base and economic power was great enough, England's desire to be a great empire clashed with economic reality. The only way England survived this business with Germany was 100% due to the US becoming part of the British Empire again.

This long prologue is my usual way of trying to tie world news into the tapestry of history. Thucydides was the first human to try to do this so he refers to not only economic conditions and treaties leading up to and during the disaster that destroyed his civilization, he also explained past wars and speculated as to why they happened and how they were were misinterpeted by his contemporaries.

Outside of Levy's History of Rome, a much less reflective work, no one did this again until 1770 when Gibbon's famous 'Decline and Fall of Rome' was written in England at the dawn of it turning into the world's mightiest empire. Like myself, Gibbon was concerned about the weaknesses and follies of empires and wished to warn everyone about these hazards. Indeed, the revolutionaries in the US were so concerned about all this, they read his book, seeking clues to how to construct this new empire, the USA. For all they had as models was England's Paliamentary rules and kings or ancient Rome and even more so, ancient Greece.

Since then, fine writers like Professor Kennedy's seminal work on the economic realities of empire, 'The Rise And Fall Of Great Powers.' have shed a brilliant light on the pressing issue of the economic and financial health of empires and how their declines occur if rivals become stronger. I have debated, advised and worked with and then against the communist Chinese since 1969. This debate/struggle/learning experience is now bearing fruits we cannot ignore any longer.

In the past, online, many Western Chinese or Taiwanese web sites made fun of me concerning all this, they thought my use of official Chinese news was silly and the truth was, China is not getting stronger but is stupid or corrupt or polluted. Even as I explain that the West is even more these things in the past and in the present, is now deep in debt on top of doing what the Chinese are doing today, they tell me to shut up and go away.

Over the last 3 years, I have found that reading Xinhua news is very enlightening if one wishes to know what will happen next. When yesterday's astonishing news about Petrochina came out, I was filled with a feeling of confirmation of my own analysis: this is proof, the world money flow is now set against the USA and towards China. And I wanted to see what the Chinese said about this, themselves, before analyzing it all.

The 'value' of this Chinese entity is double its nearest rival? We must remember, this money is NOT DEBTS being loaded onto Petrochina. This is INVESTORS putting their OWN money on it! This is money at is not from a bank, it is from that unicorn so many people talk about but abuse in America, the INVESTORS. And classically, these investors should be using either profits or savings to do this, not borrowing money. Some might borrow money to gamble in stocks but NEVER should the top officials and employees running these corporations do this!

In the West, we saw a huge balloon in 'wealth' due entirely to the top officiers and financiers taking a huge cut out of the creation of DEBTS which they then unloaded onto corporations at a mad rate. This was that flood of buy-ups and buy-outs run in the West for the last 10 years using that well-spring of free loans, the Bank of Japan. This meant the global money supply kept shooting upwards as Japan cheerfully lent money at ridiculous rates much lower than the entire planet. And this system is now collapsing rapidly since it has run out of entities to buy up or buy out and locations where debts can be loaded up higher and higher by the trillions!

China's experiment with capitalism is based on building up capital. Being new to capitalism, they are taking seriously all the ancient rules and regulations which were tossed out by Japan and the USA in the last 20 years. They have learned from Kennedy's great book, what really matters. The Chinese leadership has tightened the screws on their economy yet it is attracting world wealth because IT IS PRODUCING WORLD WEALTH. In the form of value-added goods which it trades for world resources like oil. This trillion dollar deal means Petrochina will OUTBID the USA and Europe when it comes to oil deals in all the oil pumping nations including Russia!

The US, so accustomed to the fiat dollar for oil purchases, are way behind rapidly moving events and more and more nations use the euro to buy and sell oil which is why the dollar is plunging in value. We imagine that our oil barons are getting filthy rich but THEY know they are LOSING GROUND TO THE CHINESE due to the yuan getting stronger while the dollar dies! So their profits seem to be soaring here in the US but internationally, it is much weaker, much, much less. I wonder how long our oil companies will tolerate a weak dollar? Personally, I would suggest that China has just out gunned them in this area. I expect the Chinese to take over international oil trade.

From my earlier blog, in 2005.

Japan can't buy up anymore because they chose to weaken the yen and increase foreign trade power rather than buy things. But China is now buying up whatever they can and unlike Japan, aren't using this to buy Rockefeller Center or golf courses. They are buying businesses. Especially in the energy field.

Several years ago, I wrote about the Unocal deal.

The battle for Unocal heats up. More than one person has noticed that this is an economic shot across our corporate/military/industrial prows. All the rhetoric about free trade is now being put to a test. Congress, which passed all those free trade laws and which is passing CAFTA now is blanching as they reconsider the wisdom of their ways.

This older article from June, 2005, is filled with predictions all of which came true so far. The US Congress rebuffed China's purchase so the communist party regrouped and reconsidered and began courting Putin greatly while the US pushed Putin aside more and more contemptuously. Hu was just beginning to understand the awesome powers of his magnificent diplomatic ship and its dedicated crew.

We didnt' sell Unocal, we sold our souls to war and looting. And so the fruits of the energy markets will fall into China's lap because they are not stealing ANYTHING AT ALL. They are not invading anyone. Talking about bombing Iran. They are winning this war. The US is acting like Athens as they destroyed their democracy fighting imperial wars with all their neighbors and destroying their allies in their desire to have their own way no matter what.

I wrote back then:

Chevron, instead of offering a higher bid, pulls political muscle instead. This has repercussions, of course. Our government is owned by more than one person. The Chinese weighed in today. From Xinhua News:

Stay out of it.

That's what corporate America is doing, and that's what some outspoken executives are advising the US Government to do about Chinese oil firm CNOOC's US$18.5 billion bid for California-based Unocal Corp.

Executives say the government should let the market decide whether CNOOC Ltd's offer or a rival bid from Chevron Corp comes out on top for the ninth-largest US oil and gas producer.

I warned that the Chinese fury over that deal smash-up would have serious consequences. The US is no longer in charge of world finances. I warned the US about sovereign wealth and capitalism. We have been playing 'crony capitalism' which is not true capitalism complete with the concept of Darwinian economics of rivals competing with each other. The entire business of the G7 dwarves is 100% about maintaining the economic powers of the older, failed European empires, not expanding capitalism. Since all empires run on red ink, all this has done was drive the West into bankruptcy. We can now clearly see this as our banking system collapses due to the dead hand of too much debt which is directly due to bankers and financiers focused only on collecting infinite loans from the Bank of Japan and then spending it on each other via putting these Japanese-inspired debts onto each other's economic bases.

Now we discover as usual, there is no infinity in economics. There is always a breaking point. The money flowing to Petrochina is all about everyone seeking a return from a company that has a future. Everyone is betting that China, flush with a lot of sovereign wealth, will be the future power in the oil world. The US imagines if we invade all the Middle East and murder a couple million more people, we will control the source of this oil and thus, reap the profits from China buying this oil from the US which will occupy Muslim lands and rule them like Athens tried to milk its provinces while waging wars. I see the downside to all this.

For Thucydides made it quite clear, holding onto these provinces meant insurrections and riots and murder and many refugees filled with desire for revenge against the Hellenes. And they didn't protect Athens and that great civilization rotted away and did NOT recover at all. Plato, being the waning light of reason there. Eventually, they were enslaved by the Romans.

From Bloomberg:

Alibaba.com Ltd. more than doubled on its first day of trading in Hong Kong, pushing its market value past South Korea's NHN Corp. to become Asia's second-biggest Internet company after Yahoo Japan Corp.

The Web trading company that counts Cisco Systems Inc. and Yahoo! Inc. as shareholders rose to HK$30.80 as of 10:05 a.m., compared with the initial public offering price of HK$13.50. That values the company at about $20 billion.

This story which has nearly no coverage in the West, is another clear sign that the trillions of dollars produced via the Bank of Japan loaning the West whatever they wanted, is now flowing to China. The Japanese desperately want to raise the value of the yuan so they can shift the carry trade to China and it is shifted to China. But the Chinese are buying up things the Japanese need to control via the USA. Namely, oil. The battle over the value of the yen and the yuan vis a vis the dollar continues, of course. Both know the dollar is doomed. Both know they and they alone are propping up the value of the dollar and the tensions this is causing is making FX traders very rich and it is quite predictable but also destructive. The dollar can't be weak if the Chinese are buying up world oil resources.

From Xinhua:

Russian President Vladimir Putin met with visiting Chinese Premier Wen Jiabao here Monday.

Wen arrived here earlier in the day for a two-day official visit to Russia after concluding a visit to Belarus.

Wen will also hold talks with his Russian counterpart Viktor Zubkov to discuss bilateral relations, regional and international issues and other issues of common concern, a Chinese diplomat traveling with Wen told Xinhua.

Wen will deliver a speech at a China-Russia high-level economic forum and attend the closing ceremony of the year-long program "the Year of China" in Russia.

The well-oiled [HAHAHA] Chinese diplomatic machinery rolls onwards. I have kept track of the news concerning their Year Of Russian Oil. It is going quite well for the Chinese who can now go to Putin with a trillion dollars in stock funds for Petrochina and OUTBID EUROPE. Indeed, the G7 dwarves should wake up from their dreams of barking at Russia and forcing Russia to obey them and figure out, the Bear is stronger, not weaker than they. And their cute little American missiles will only insure their doom if they dare to cross this ill-tempered ursine country.

Putin doesn't have to sell them anything if they get too grumpy. Will Germany and France figure this out before it is too late? Not with their rightwing leaders who support Israel and hate Muslims.

From the Scotsman:

RUSSIAN President Vladimir Putin yesterday claimed that Russia is under threat from others who wish to split the country and take its vast natural resources.

And in a veiled reference to the United States, he claimed there were others who would like to "rule over all mankind".

This is a strong warning. He has boldly warned us off from the idea that we can invade all Muslim lands and rule them despotically via dictators like we are doing in Pakistan right now. Both England and the US said vague and silly things about the raw military coup there but both are giving Musharraf more money, not cutting his purse strings to our empire. We are even urging him to kill more of his own citizens so we can rule the Middle East easier. All this is going to collapse.

From Associated Press:

Pakistan's deposed chief justice called on lawyers nationwide Tuesday to defy baton-wielding police and protest President Gen. Pervez Musharraf's imposition of emergency rule.
"Go to every corner of Pakistan and give the message that this is the time to sacrifice," Iftikhar Muhammad Chaudhry, who is under virtual house arrest in Islamabad, told lawyers by mobile phone. "Don't be afraid. God will help us and the day will come when you'll see the constitution supreme and no dictatorship for a long time."

Later, in the central city of Multan, hundreds of police blocked about 1,000 attorneys from leaving a district court complex to stage a street rally in defiance of a ban. Both sides pelted each other with stones and officers swung batons to disperse the crowd.

An Associated Press reporter saw at least three lawyers were wounded, two bleeding from the head, and three police also were hurt by bricks flung by lawyers.

Rock throwing lawyers. The mind reels.

As I see it, China has a vested interest in keeping a dictator there in power because they fear Muslim uprisings just as Russia fears this and both Russia and China would cooperate with the US in these matters except the US and England are ENCOURAGING Muslim uprisings against Russia and China! So both are playing a strange game in the Muslim world which is unfolding in ways that are making us more and more vulnerable to collapse.

From Taipei Times:

The US dollar dived to a fresh record low against the euro on Friday as foreign exchange speculators appeared to shrug off an upbeat economic report that revealed a surprisingly strong surge in US job creation.

The already ailing US dollar tumbled to a fresh low point against the euro in Friday afternoon trading as traders continued to fret about US economic prospects amid a housing slump and credit woes.

The euro was switching hands at US$1.4504 in afternoon trading, up from US$1.4422 late on Thursday. The euro, however, had surged to a record US$1.4528 in earlier trading on Friday.

The US dollar gained some ground against the yen, rising to ?114.65 in afternoon deals, compared with ?114.54 a day earlier
*snip*
.The Canadian dollar meanwhile spiked nearly two percent to a record high of US$1.0723.

AMAZING! There were NO headlines on the top of the Washington Post or NYT or CNN screaming, 'The Loonie is flying and the dollar is crashing!' Not a peep. Canada has all its energy contracts written in dollars, not loonies. So instead of getting richer as the loonie rises in value, this is killing the Canadian energy exporters! So even as the price of oil rises, the fall in the value of the dollar makes a ruin of all long-term contracts. This is why a weak dollar will, in the end, bite us in the rear, hard. All our provinces are being bilked by this system of devaluing the dollars used to pay for energy.

This means, when China approaches with real money, they will OUTBID US for FUTURE contracts! We will have to bid with weaker and weaker dollars and if the yuan goes up and up, this means people will have FAITH IN THE CHINESE CURRENCY and look at the dollar with a jaundiced eye. The utter failure this will bring us is historic and utterly stupid. And the US will fix this with Canada and Mexico the same we way we are fixing it in the Middle East: violent military occupation.

From Bloomberg:

Toyota Motor Corp., the world's second-largest automaker, may report net income rose for a ninth straight quarter as higher sales in China and Russia countered lower demand in the U.S.

Net income probably rose 9.4 percent to 444 billion yen ($3.9 billion) for the three months ended Sept. 30 from 406 billion yen a year earlier, according to the average estimate of six analysts compiled by Bloomberg. Sales increased 4.6 percent to 6.1 trillion yen, they said.

Toyota increased sales in China, the world's fastest-growing car market, by 57 percent to about 136,000 vehicles in the quarter helping offset a 5 percent decline in the U.S., the company said. Toyota President Katsuaki Watanabe may raise the carmaker's annual earnings forecast after affiliate Denso Corp. and Honda Motor Co. both said overseas growth will boost profit more than expected.

Toyotas sold in China are made in China. Toyotas sold here are mostly made in Japan, China and India and shipped here. About 45% are made here except fo the key, critical parts the Japanese want to keep secret. They do this to China and India but already, the Chinese communists are demanding they make the secret technological parts in China using Chinese engineers and designers. Or they will cut off Toyota from future growth in China. The Chinese, using their new wealth, are forcing their trade partners to play this capitalism game their way, not the way the Japanese or Americans want to play.

From the Street:

First Solar (FSLR - Cramer's Take - Stockpickr) was among those gaining ground, after the solar power company inked about $1 billion worth of module supply agreements with subsidiaries of Australia asset manager Babcock & Brown and Netherlands-based sustainable energy company Ecoconcern. The precise value is subject to currency exchange rates throughout the contract period, which runs from 2008 through 2012.

The agreements add 557 megawatts to the Phoenix-based company's contracted module volume, so First Solar will begin construction on a fourth manufacturing plant in Malaysia in the latter half 2009. Shares were up $9.47, or 6.4%, to $157.57.

I love solar energy and used it as my sole source of power for a number of years. I intend to upgrade my systems and use it entirely. People ask me what they can do to protect themselves. I will say this again and again: build passive and positive solar energy systems and get out of debt and make certain you have good survival skills. This requires hard work and self-training. Back to the news: hooray for more solar systems but note where the factories will be: IN ASIA. Labor is wealth. China is interested in solar power, they have been since my dad went there in 1974. They intend to be in control of that market in the end, too. Right now, they are concentrating on the cheaper systems but note that they plan to build many more nuclear power plants and they intend most domestic use to be solar panels, not coal, etc.

This long-range plan was worked out many years ago, I was in on the process of hammering this out. This was in the Reagan years when the US shut me down and refused to have me on TV or talk in public about alternative energy. This was when I warned the US about 'the window of energy opportunity will begin to close on our fingers in 2000.'

From Bloomberg:

U.S. credit markets are enduring their worst bubble ever and it may take six years for them to return to normal, investor Jim Rogers said.

``Never in American history have people been able to buy a house with no money down,'' Rogers said in an interview in New York. ``We have the worst credit bubble, and it's going to take a long time to work its way out. You don't cure a bubble in five or six months. It takes five or six years.''

Back to our evolving financial mess: all this money was lent to everyone and anyone because the US dropped rates to 1% and Japan was literally at 0% back then. We threw all this money into the toilet. Now it is clogged and the s**t is all over the floor and the house is ruined.

From Dow Jones Newswire:

Merrill Lynch & Co. could be required to buy out Larry Fink's $400 million ownership stake in BlackRock Inc. , the money manager where he serves as chief executive, if it wants him to replace Stan O'Neal, according to a published report Monday. The move would be necessary to avoid conflicts of interest, the Financial Times reported on its Web site. Fink's name has been floated as a possible successor to O'Neal, who recently retired after Merrill Lynch was hit by billions of dollars of losses in subprime mortgages and other assets. Merrill Lynch owns about half of BlackRock, which manages more than $1 trillion in client assets. (Corrects buyout amount in headline.)

Petrochina has a trillion dollars in free and clear money raised via stock sales in classic fashion. Merrill Lynch owns half of BlackRock which 'manages' a trillion dollars. What is this trillion dollars, anyway? Is this mostly DEBTS? As we see our banking system collapse like the WTC on 9/11, this question is very important. The value of these loans is what is declining and as they collapse, the actual value of the corporations, assets and properties decline just as swiftly! So a trilion in 'assets' can vanish like dew on the grass after the sun rises. The value of stocks of Petrochina can collapse, too. But the MONEY the organization GAINED via the sales of these stocks will remain. How they use this is how much wealth they can create in the future.

The US decided to cease producing all that much and make money shifting money from place to place. This is how England tried to keep power after WWII once India, Pakistan and China removed themselves from the empire. Increasingly, the banking system and the bourses themselves are being bought out by the oil pumping nations and Asians. So this scheme is failing badly. This deal to save the sinking Merrill Lynch Titanic means shifting millions of dollars all over the place and rearranging the fiscal chairs and tables as the listing deck makes them slide oceanwards. Will this rich Pirate, Mr. Yo-Ho-Ho Fink save the ship?

Where will he sail? Will the Saudis allow this Jewish financier a free hand? When my dad went to see Faisal in the seventies, he had to first remove all pictures of me and one of my brothers from his albums he took showing the family because we both married into Jewish families and nothing Jewish was allowed into that nightmare kingdom. Indeed, the king had purchased a new Lear jet and my mom and dad flew in on it only the Saudi prince they were with noticed the wallpaper had lions with a crown that had Hebrew letters because it was the private jet of the King of Ethiopia who sold it to the Saudis that week.

So the jet roared into Egypt and my parents had to sit there for an entire day and watch a crew of Egyptians come in with magic markers and carefully strike out all the offending Hebrew letters! Another time, a Saudi jet had to land in Damascus to remove the napkins when a stewardess noticed they were made in Israel! Things are quite different now which is why bin Laden is waging his war against the rulers of Saudi Arabia and which is why the WTC was attacked, etc. Fink will serve his true masters well. He will try to make the Saudi kings richer. It will be his total desire.

And this is where history comes in, yet again. As the Saudis get richer, we get poorer here in America. But our trusting trade partners in Canada are made weaker as we seek to weaken the Saudis by paying them with weak dollars for oil and the Saudis are madly buying up our financial systems using their sovereiegn wealth so they can control us and they are using Jewish financiers to do this and this is a huge, historic mess with explosive effects. Avoiding talking about all this won't stop the effects from happening, b the way, which is why I struggle to do this! It doesn't earn me a big readership and I really do fear real anti-semitism for obvious reasons: historically, Jews are blamed for economic messes.

The real cause of these messes is, of course, people wanting Santa Claus, the Tooth Fairy and eternal wealth with no labor added. Childish dreams of lollipops and sugar plum fairies are the cause of our woes and of course, the desire to run a violent empire that steals stuff is part of this. Responsible, sober people don't need financial trickery or selling out one's birthright to live well and long. The Muslim revolutionaries, far from feeling defeat, are energized by the news and this is another piece of the puzzle that they will use in their ideological battle witih the Defenders of the Faith in Saudi Arabia, namely, the house of Saud.

From the Telegraph:

Beleaguered investment bank Bear Stearns has moved to liquidate one of the feeder hedge funds that invested in its collapsed High-Grade Enhanced Leverage (Hegel) fund in an attempt to fend off a potential investor revolt.
*sinp*
BSAM's letter to investors in the feeder fund informs investors it has appointed KPMG, which is also in the process of winding up Hegel, to liquidate the feeder fund.

Investors in the feeder fund are understood to be shocked by BSAM's attempt to block them from taking control, and are apparently now asking questions about the timing of the decision to wind up the fund.

Hegel's pendulum is swinging in the wrong direction, isn't it? I had to read Hegel in German when I was in school in Gemany. His view of how things must swing from one extreme to the other is something we all must understand. This is the roots of wave theory, generational theory and evolutionary theories. Nothing ever goes up and up and up. Note also how the investors are angry and amazed as the manipulators who pretended they were partners are using their pirate coves to control access to information about these funds and who are now acting unilaterally to do whatever they can even as they work hard to sail off with as much loot as possible, leaving the investors holding an empty bag and the hole where the loot was buried is quite empty.

The Queen's tax havens also have courts that rule in favor of pirates and the investors who thought they would get rich in a tax haven are now discovering it is a pirate cove and they are now walking the plank. I would hope this teaches them a lesson about civilization and the need to support one's government but people are quite stubborn when it comes to basic lessons.

From the Age, Australia:

THE man responsible for investing $41 billion of the State's money has warned mum-and-dad investors to prepare for a massive sharemarket crash.

He says a dramatic downturn is inevitable as the rapid rate of investment is unsustainable, and the repercussions of the $300 billion subprime lending crisis in the US are yet to be felt fully.

State Treasury has revealed that Victoria looks set to lose just $1.9 million directly from the subprime fiasco.

The pension funds will be hammered world-wide by this financial collapse. Their money was real money that was forced by artificially low interest rates to go into riskier and riskier schemes in order to 'grow' thanks to the Bank of Japan lending at 0% interest for over a decade. Now they will see their profits vanish and several billion retirees will pay the piper for this. Governments will have to raise taxes yet again.

The Real Reason for the the Stock Market Falls - Cheap Money from the Bank of Japan

The yen carry trade sounds like an investor's dream come true, but there's just one problem: Unexpected currency moves.

In the example above, you were borrowing in yen and investing in dollars. As long as the exchange rate between those two currencies stays the same, you're fine. And if the dollar rises against the yen, you're even better off because you're making money from the currency move in addition to the difference in interest rates.

But if the yen starts — gasp — rising against the dollar, things can get ugly fast. Remember, you're going to have to pay back your yen-denominated loans by selling assets that are priced in dollars. Since it'll now take more dollars to repay your yen loans, you're losing out. If you opted for massive leverage, you're totally screwed!

This is not all hypothetical. It's happened before, most notably during hedge fund Long Term Capital Management's (LTCM) meltdown in 1998. The yen surged 9% in a matter of weeks that summer, then skyrocketed another 12% in just 72 hours!

This article from last March is a very good read. I heartily agree with the authors. This article should be read at the next G7 meeting and then the people destroying the West's economic base can begin a serious discussion about Japan with the Japanese. Who will squirm and smile and dodge and delay like crazy. The yen is clinging to the dollar at between 113-116 yen to the dollar as the dollar collapses. This is totally wrong and the G7 should look into this but then, when they tried, both Japan and the US vetoed this. The fact that they did this shows that Goldman Sachs wants this to continue. And since they run our economy at this moment, we will see this get worse, not be corrected. To the bitter end.

From Bloomberg:

Treasury Secretary Henry Paulson says the U.S. is examining the subprime mortgage crisis to ensure that ``yesterday's excesses'' aren't repeated. He could be talking about himself and his former firm, Goldman Sachs Group Inc.

Paulson, 61, doesn't mention that Goldman still has on the market some $13 billion of almost $37 billion in bonds backed by subprime loans or second mortgages that it created while he was chief executive officer. Those bonds have an average delinquency rate of almost 22 percent, higher than the average of other subprime bonds from the period, according to data compiled by Bloomberg.

HAHAHA. Arrest Paulson! CONFLICT OF INTEREST! Arrest all the Goldman Sachs executives across the planet who run the world's financial systems. One just took over Canada's central bank and within a MONTH, the loonie shoots up in value against the dollar. Will the Canandians allow this to continue? Will the go to the central bank and demand the new president resign? Time is running out, Canada.

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Comments

[Crimson Ghost]

“The things that will destroy us are: politics without principle; pleasure without conscience; wealth without work; knowledge without character; business without morality; science without humanity; and worship without sacrifice.” Mahatma Gandhi

These prophetic words were written a century ago.

Never in history has a nation indulged in these things that will "destroy us" as much modern day America.

[DeVaul]

Hilarious cartoon, Elaine. I have never seen Putin smiling that much. A rare photo.

Too bad we happen to be one of the dwarves.

[Elaine Supkis]

Both Wen AND Putin are grinning ear to ear.

[Mike Fox]

Speaking of money and power, I was wondering what your thoughts were on the growing, or more appropriately, mushrooming 'Sovereign Wealth Funds' of China and Russia?

[DeVaul]

Elaine has documented these funds quite extensively in her past articles. Read them in the archives to find out more about them and about when they started.

They will be used as a new form of state sponsored banking is my guess. They are pretty much the same as ancient "treasuries", but they will not be used just to build palaces and private armies.

[John]

Elaine,

While I agree with you, in large part, about Israel and the Jewish aims (they play the guilt card to their own benefit just like noted race-hustlers Jackson and Sharpton), I do feel compelled to point out that if you look at conflict around the world, you find Muslims at the heart of almost every one!

Muslims are fighting Christians.
Muslims are fighting Jews.
Muslims are figting Hindus.
Muslims are fighting BHUDDISTS - who really don't f*ck with anyone!

I'm sure that if a sizable Muslim population ever comes into close and lasting proximity with a Taoist population, the Muslims will be fighting Taoists, too. The whole nature of Islamic thought is centered on the idea of being better than everyone else, and being commanded by God (aka Allah) to rule the whole world, by force if needed.

Much like Democrats and Republicans in America, there isn't a "right one" and a "wrong one" when it comes to Muslims and Jews. They're pretty much both full of crap, and their basic aims are outright dangerous to the idea of universal freedom for the masses of mankind.

I'm merely pointing this out because of late your writings seem to imply that there's a good guy and a bad guy in that fight. More and more, I'm coming to understand that the choices facing us today aren't those of good vs. bad, but rather, of bad vs. bad.

Sad, but true.

[Katya]

Elaine you wrote:

"The utter failure this will bring us is historic and utterly stupid. And the US will fix this with Canada and Mexico the same we way we are fixing it in the Middle East: violent military occupation."

Do you really think this is more likely than the North American Union (a more peaceful takeover), and if so, why?

K

[Blunt Force Trauma]

"Arrest all the Goldman Sachs executives across the planet who run the world's financial systems. One just took over Canada's central bank and within a MONTH, the loonie shoots up in value against the dollar. Will the Canandians allow this to continue? Will the go to the central bank and demand the new president resign? Time is running out, Canada."

I agree. We have, what, a 760 billion dollar deficit in Canada and I'd estimate that 3/4 of that is tied up in mortgages that many cannot afford? We are headed the same path down to subprime hell.

We could have Members of Parliament try to fight on our behalf as our 'Federal Reserve' is actually owned and run by the government, unlike the U.S. Federal Reserve, which is not; but our Prime Minstrel has his head too far up 'The Decider Guy's' arse to listen.

But you are right as always, Elaine. 42 year old Mark Carney is governor of the Bank of Canada . Fitting last name, eh? 'Guess Your Weight', er, deficit.

http://www.gata.org/node/5599

[Canuck]

Elaine, I will have the temerity to remind you that less than a year ago I had to argue that the Loonie was in fact rising against the USD when you stated that Canada was in fact holding the Loonie down for unfair trade advantage against American producers.

So lets see if I get this straight.

A year ago it was the Canadian Federal Gov’t, Bank of Canada and Bay Street that was holding the Loonie down to increase exports to the US.

Now it’s the citizenry who should rise against the same principles in order we don’t get screwed in the ear being paid in USD for commodities. In effect serving the same cause of a lower Loonie that the financial mandarins were vilified over.

I’m afraid the international monetary speculators are having a heavy hand in this flight of the Loonie, just as they sold us out for shit when we weren’t so tarted up with oil and commodity prospects. The Canadian citzenery is going to have as little effect now that these greedy bastards see us as safe haven as the USD trips and lands face first in the mud.

[Neuro Artist]

As far as I can see Petro China isn't worth 1 trillion dollars. It put about 2% of its total shares on the market, so it actually 'only' took 20 billion dollars out of the purse of investors. Apparently it earns about 20 billion dollars this year, thus the price/earnings ratio is about 50, which is about 4 times as much as the comparable western oil companies.

This is a bubble in China. And it will burst. When that happens all other bubbles will burst too, due to the chinese withdrawing their funds from the rest of the world. Good bye financial system of the world.

[John]

All this PetroChina talk ignores the fact that the COMPANY only got the IPO PRICE!

All those gains above the IPO price? Those went into the pockets of the people who, through inside connections to the brokerage handling the IPO (yes, even in China, I'll bet that's how it happens), got to buy shares directly from the company.

Multiply the number of shares sold by the IPO price and you know how much PetroChina put into their company's pockets.

If they're smart--and not overly greedy--they'll wait to see if this shareprice holds or even climbs; if it does, they'd be well advised to quickly put out about 25% additional shares in a secondary offering. It would be enough to almost double their initial capital raised, while not being dilutive enough to piss off existing shareholders. (This is assuming that Neuro's figure of 2% of shares having been IPOed is accurate; it would take the issued shares up to 2.5%, which is still miniscule, all things considered.)

I'm not saying I encourage this--I've no love for the ChiComs--but it would be the savvy move, financially.

[blues]

(Off topic, sorry. I Have thoroughly searched through the (liberal?) Truthout internet news service's huge front page, and have not found the slightest trace of a story about the Kucinich resolution to impeach Cheney that was sent to the House floor today. Democrats voted to table (kill) it; Republicans forced the proposal to be referred to the House Judiciary Committee. Buzzflash has full-screen headline at the top of its front page. See for yourself! What is it with Truthout??? I guess the truth is out to lunch with them.)

[Rouser]

Neuro Artist is quite correct. The PetroChina valuation is quite a joke. Bubbles eventually disrupt ALL economies. This one will be quite momentous when it pops!

[Carlos]

The irony of these times is that we have lived to see the world turned upside down. Everything is now a mirror and opposite of accepted reality. The Communist states have become peace loving capitalists, while the world's Democratic standard bearer has turned warmonger and quasi-totalitarian. Pain and misery is a good teacher.

History proves that the Western Empire has always has been this way, except for its use of smoke and mirrors which has worked until just recently. It worked well while the Communists were willing to play the role of Evil Empire, but they have learned that prosperity is a more pleasurable game and that wars cause bankruptcy. Hardship is a good taskmaster, it causes people to change. For those who want the status quo, it will be difficult. We tend to look at things in the short term, like politicians who legislate laws that bring benefit during their term in office.

I suspect the Eastern Empire will be ultimately more prosperous, peaceful and equitable for the rest of the world.

[Elaine Supkis]

Canuck, LAST YEAR, the loonie was kept below the dollar. But then GOLDMAN SACHS just took over last month. Since that day which was 30 days ago, the loonie has shot up 10%.

I am right, as always. For I said Goldman Sachs would monkey with things and we need to pay for our oil with cheap dollars and this means forcing Canada to accept our lousy dollars which ergo, raises the value of their own currency in world makets If Canada wants this to stop, they need to hold US dollars!

The yen is not getting stronger and look! Today they announced their damn FOREX reserves are no $965 billion and this means it went up nearly 10% this year! China's is soaring.

Everyone: China is definitely having a classic bubble! But the US needs the bubble just to SURVIVE. The bubble money ISN'T coming here anymore! It is in China!

Today's market went up due to Exxon and other oil companies. But NONE of them went up by $1 trillion! Just the Chinese company! So I read this as a very important sign. The flow of money in this world had changed and so has diplomacy, etc.

The West talks about this banking crisis while PRETENDING it is global. It is NOT. It is confined to the West G7. Even Japan isn't having a banking crisis right now. We are. China isn't.

I have more to say about that in the news, it is growing painfully obvious.

[Elaine Supkis]

Dear John,

Buddhists have about 5% of world oil under their feet. Russian Orthodox have about 10%. Christians of all types have about 35%. All the rest is under Muslim feet. Since they have a huge part of world oil resources, everyone is trying to grab it and control it.

So they are at war with EVERYONE and EACH OTHER. This is due to the oil, not their religion.

In Sri Lanka, by the way, the Buddhists are fighting the Hindi. And in Asia, the Chinese are in opposition to the Japanese and there are no Muslims involved. The war between Japan and China has killed MILLIONS in the last 70 years! How about that?

Then there is the bloody history of Christians in Europe; many, many, many millions of everyone killed! Many millions! Possibly the bloodiest of the lot, these Christians.

[Al]

John,
you are skewing the facts to make a point. Muslims are fighting Christians in Iraq/Afghanistan because the Christians invaded Muslim lands.
Muslims are fighting Jews because Jews (with Christian help)invaded/ethnically cleaned Palestine.
Muslims are fighting Hindus in large part because Christians exercised divide and rule.

Don't know whether you knowingly try to mislead people or are honestly ignorant but in either case you should try to be a bit more open-minded.

[Neuro Artist]

Well, it is still fascinating that 20 billion dollars gets invested in one day in the Petro China bubble (that is still a lot of money considering that a normal chinese worker may earn about 20 dollars in a week). I bet that many chinese are convinced they will find oil on the moon. They are a bit spaced out, the chinese, I guess, for the time being.

Al, good analysis of cause and effect.

I wonder if Canada will be the first country to hang a Goldman-Sachs banker, it won't be the last.

[Not Student]

You know how I read the sign of PetroChina?

I think the Chinese are running out of patience to wait for the market to unwind and have decided to take things into their own hands.

This PetroChina bubble is so huge that it can potentially trap all the speculators' money in it and NOW the speculators' collective balls (balloon? HAHAHA) are in the chinese hand.

Will China sacrifice its own financial prosperity to collapse the world financial system? Not if they are not forced to. But now they have that option.

When push comes to shove, don't forget that China STILL has an incredible industrial base and with the past 20 years of development, a credible scientific team as well.

PetroChina will be the tip of the Archimedes Leverage that will move the world. NOT a good sign.

[Canuck]

Here’s the historical BOC rate for the last year

11/2006 4.50
12/2006 4.50
01/2007 4.50
02/2007 4.50
03/2007 4.50
04/2007 4.50
05/2007 4.50
06/2007 4.50
07/2007 4.75
08/2007 4.75
09/2007 4.75
10/2007 4.75

Here’s the last 10 weeks

5/09/2007 4.75
12/09/2007 4.75
19/09/2007 4.75
26/09/2007 4.75
03/10/2007 4.75
10/10/2007 4.75
17/10/2007 4.75
24/10/2007 4.75
31/10/2007 4.75

Carney doesn’t take over until January. There’s been no change in the overnight rate, or with pronounced direction of the BOC.

http://www.ft.com/cms/s/0/9acb8948-72cc-
11dc-b7ff-0000779fd2ac.html?nclick_check=1

What ever he does has to be vetted by the board of directors.

http://www.bankofcanada.ca/en/about/
board.html

A well dispersed group geographically. Presuming they’re all compliant saps to the Governor of the BOC is a stretch, but it’s possible. Just not at this juncture. I won’t argue that a GS alumni isn’t bad news but;

1. Carney doesn’t have the reigns yet
2. Dodge’s stable polices are still in place and resulted in increased Loonie valuation
3. The general population felt the Loonie was undervalued for our economic stature.
4. Usual Canadian Export/Business protest over the strong Loonie has not developed.
5. No parallel media stories on consumer benefits of strong Loonie, quite the opposite (i.e. Bay street’s not on the goldman bus yet).

So to counter your contention that GS is behind the latest Loonie jump I’d say that they’re involved yes but not yet from behind the desk of the BOC. They’re fully in line with the currency spectulators that build demand by buying into the Loonie as safe harbor and speculation of increased valuation. It’s possible that the speculators are projecting favorable polices from a GS BOC Governor, without policy change its still speculation which is no stronger than other factors.

These are the same jerks that would give the New Zealand Dollar a “better fundamental” than the Loonie back when we were at 0.67/USD even though our exports far exceed. These guys love Harper, they love captive markets which for all appearances the US will fall into with Canadian commodities. For years they would rally against our government debts and our awful socialist policies (read, health care). Now commodities are a smart bet, projecting the Loonie won’t withdraw anytime soon. There’s a lot of interest from all the currency speculators not just GS so they’re all in play trying to out hustle each other, further bumping up the Loonie valuation.

BTW the consumer windfall from the strong Loonie does not exist. Importers and distributors are keeping prices high claiming previous contract and payments in USD. Retailers are caught in the pinch. It appears the dry goods marketers are going to try to get in the same position as Cargil and Tyson foods squeezing both production and retail of margin.

All the vehicle manufacturers are cashing in on the Canadian market by not reducing prices, sending letters of demand to US auto retailers to prevent selling cross border, voiding cross border warranties, etc. Yesterday an associate checked the local price against the price in Phoenix of a Honda pilot (Honda Pilot is built in Lincoln, Alabama and Alliston, Ontario, Canada) $14K unadjusted price differential.

http://www.cbc.ca/news/yourview/2007/10/
your_report_price_drops_across.html

http://www.cbc.ca/news/yourview/2007/10/
businesses_pledge_price_drops.html

http://en.epochtimes.com/news/7-11-1/61467.html

[龍之傳子]

What's wrong with bubbles? The US had many bubbles in its histroy, no? PetroChina and its alike have gotten all that IPO money and they'll use it to best serve their companies and the Chinese government. If the bubble bursts, it's the investors that will lose money not PetroChina. PetroChina only sold small percentage of its total shares so it can weather the downturn if the bubble bursts. On the other hand, when the bubble do burst, it'll serve as a good lesson for the ordinary Chinese citizens. They need to learn how to value and hedge risks. Many western governments are doing everything they could to disrupt the Chinese economy. They want the Chinese economy to crash hoping that will stir up social unrests in China. Hahahahaha! They will be wrong again. China is investing massive money in surveillance companies that will help the Chinese government install surveillance equipment on every corn of streets in big Chinese cities. Any big crowd gathering will be recognized instantly by the surveillance hardware and software and will be put down by forces. China is ascending and there will be bumps along the way to the top. No one in the Chinese government ever expect everything will be run smoothly, but everyone in the government knows what to do when something bad happens. You can count on that. China has been through many civil wars but it has become out of its problems and on its way to the top, hasn't it?

[John]

I believe I specifically said that there are no 'good guys' in this religious mess. And yet I get two posts that seem to imply that I'm saying otherwise.

I have no patience with the rhetoric out of Christianity & Judaism about how persecuted they are.

But I'm not listening to it from the Muslims, either.

And c'mon, Elaine - the China/Japan conflict is not relevent to what I'm addressing, which is that the Muslim beliefs are no less aggressive than those of any other Western religion.

Heh. It's more like the Unholy Land, if you think about it. A good deal of the world's pain and suffering was born there.

Now as far as the bloody history of Christianity, I agree with you. But Jihads predaded Crusades, so far as I know. Please point me toward a source that proves otherwise, should one exist.

[Neuro Artist]

Yes the islamic jihad expansion occurred before the christian crusades, which to some extent was a reaction to the former, or more probably a way of christianity to get firmly united under the catholic church. I think we all need to see that it is not really about differing religious points of view, but the rulers using authoritarian religions to keep the population in check for their benefits. As of late, the last 200 years or so, I think though that "judeo-christian" leaders have been the most responsible for the mess. But of course it is not unlikely that it had been a mess if islamic leaders had the upper hand either. Humanity just needs to get off the hook of authoritarian book-religions, alltogether, if we are going to live long and prosper, we need to re-learn how to think and figure out things for ourselves. Unfortunately it probably means that all the gods-choosen-people, bible-thumpers and Quran-schoolers have to kill each other first, and a lot of others as well. As of late there is of course the high priests of economy also, but that part is in self-destruct mode, and will set off the judeo-christian-islamic destruction. When the smoke clears I hope what is remaining of humanity can pull itself together and use the brainpower we have been blessed with in a constructive, creative and sustainable way.

[DeVaul]

I'm hoping that Neuro is right, or at least things do get better once the dust settles.

I've been cornered by my Christian neighbors, a Muslim contractor working on my house, and of course, Jews, regarding what I should believe and what is right and so forth.

I'm really tired of it, but they never tire of it. I am amazed at the amount of energy they pour into trying to convert others to their particular belief.

Their religion is the most destructive religion I have ever seen or read about, but they cannot see this themselves.

They are more blind than I am deaf.

[Elaine Supkis]

According to the Bible, the very first thing humans did after being expelled from the Garden of Eden was for the two sons of Adam And Eve to get in a fight on one killed the other.

As for the Crusades: some history.....at the same time Mohammed rode Pegasus to Jerusalem, WILD BARBARIAN HORDES were destroying the Roman Empire. Starting with Attila the Hun. The Vandals, the Mgyars, the Vikings....they were very, very nasty and very bloody and ran over everyone. In contrast, the Islamic fighter were civilized.

By 888 AD when Charles the Fat, son of Charles the Bold died, Charlemagne's empire had totally collapsed. In 1073 AD, there were TWO popes and they used swords to fight out who would be the Prince of Peace. Call this, the Princes of Pieces. Heh.

Then, the winner, Gregory VIII turns around and excommunicates the Holy Roman Emperor, calling him a devil.

Once that gets sorted out, THEN the Crusades commenced in 1095. In 1099, the Crusaders take Jerusalem AND KILL EVERYONE. How civilized. HEH.

Now there are FOUR Popes! Fighting each other. Next week: I will talk about the sweet families that fought over the Eastern Roman Imperial throne in Byzantia. A story of terrible wretchedness.

[Elaine Supkis]

The emperors of Byzantia were quite fond of poking out the eyes of siblings and nephews, by the way. In between murders, poisonings, throwing out of windows, etc. Fun people. Now, who is civilized again?