A Chinese Mirror

26 Aug

Laugh, Clown, Laugh

Image via Wikipedia

During the Cold War, the Soviet Union built a new embassy on the highest hill in Washington D.C.  There was much concern that the embassy’s elevation would allow the Soviets to more easily intercept microwave transmissions going in or out of our capitol.  Our government didn’t seem to care.

At the same time, the U.S. built a new embassy in Moscow that:  1) was in a low spot in local terrain that would inhibit our own electronic spying; and 2) was built by Russians with Russian-made bricks and metal beams.  There was much concern that the U.S. embassy would be riddled with Soviet listening devices implanted in the bricks, blocks and beams.  The U.S. government didn’t seem to care.

I realized then that our government doesn’t care what our alleged foreign enemies know about our “secrets”.  Our government cares primarily about what the American people know.  The principle object of “national security” is not to prevent our government’s secrets from falling into the hands of foreign enemies.  The principle object is to prevent governmental secrets from falling into the hands of average Americans who might revolt if they realized what kind of racket our “government” is really running.

The strategy of using “national security” as a pretext to keep the people uninformed is not uniquely American.  The Soviets were just as determined to use “national security” as an excuse to keep the Soviet people ignorant and obedient.  Virtually every government uses the same excuse to keep their people ignorant and docile.

In the end, every government understands that its relationship with its people is adversarial.  Governments claim “We’re here to help you,” but when it comes to government, it’s always an us-against-them relationship.  Government is here to exploit us.  The government knows it; the people usually don’t.  The government doesn’t want the people to find out because, if they do, they’ll stop cooperating with those in power who wish to exploit them.  For government, public ignorance (“national security”) is bliss (“government security”).

Insofar as mainstream media cooperates with gov-co to keep the public fat, dumb and docile, it’s often hard to find honest, in-depth reporting about the U.S. government in mainstream media.  Conversely, it’s often easy to find “honest, in-depth reporting” about foreign governments since mainstream media has little interest in concealing the “secrets” of foreign governments.

So, if you’re astute (or perhaps merely imaginative), it’s sometimes surprising to see how much you can deduce about your own government by reading about some other country’s government.

•  For example, The New York Times published an article on August 24th entitled “China Faces Obstacles in Bid to Rebalance Its Economy”.  That article is all about China, but it also implies a great deal about the U.S.:

“China has vowed repeatedly . . .  to overhaul its state-directed growth model and empower its consumers to spend more on their own, something that would make its economy more sustainable and help the sluggish world economy as well.”

40% of the U.S. economy depends on checks from our government.  While the U.S. economy may not be as “state-directed” as China’s, the U.S. economy is still “state-directed” and thus very similar to China’s.

“But leaders in Beijing . . . are finding it difficult to steer China away from growth that relies largely on infrastructure projects, construction and export manufacturing . . . . its economic policies contribute to wasted resources, vast social inequality and a soaring inflation, which leaders fear will fuel social instability.”

Difficulty in steering the economy?  Social inequality (the rich get richer, while the poor and middle class are left behind)?  Social instability?  Does that sound like the U.S.?  It does to me.

“Yao Yang, an economist at Peking University, said Chinese leaders knew that the domestic economy put too much money in the hands of corporations and the government. They agree that they have to increase social welfare to encourage domestic consumption and dampen mass discontent.”

Sure, an economist can see that an alliance between corporations and government is enriching those entities and impoverishing the people.  Likewise, an economist can see that they must take money from rich Chinese corporations and government to enrich consumers and “dampen mass discontent”.

But will any Chinese politician both see the dangers of economic inequality and act to minimize those dangers by redistributing more wealth from corporations and government to the people?

Similarly, do major U.S. corporations and government take a disproportionate share of wealth of the U.S. economy?  Does this result in inequality and increasing “discontent”?  Will any U.S. politician act to resolve this inequality?  Or are both U.S. and Chinese governments serving themselves and corporations rather than the people?

“But there are obstacles that limit the ability of leaders to shift direction. For one thing, China continues to empower its large state-owned enterprises at the expense of private entrepreneurs. . . . Those large enterprises have enormous influence on policy makers.”

Are China’s “large state-owned enterprises” equivalent to the U.S. corporations that are deemed “too big to fail”?  Yes.

Is the “enormous influence” in China just a code for corporate bribes?  Are American “political campaign contributions” just another code for bribes?  Yes and Yes.

China is no more governed by communism than the U.S. is governed by the philosophies of capitalism or democracy.  Both nations are governed by fascism—a symbiotic alliance between government and corporations that seeks to empower both by controlling and exploiting (rather than serving) the people.

“State banks also tend to favor government-backed projects . . . . one reason officials support capital-intensive projects arises from the way such officials are measured by the central government in annual reports. The rate of local G.D.P. growth is a top criterion by which the officials are judged. Their careers depend on it, and capital-intensive projects give short-term lifts to growth numbers.  Another reason officials promote such projects is corruption: it is relatively easy to take bribes or skim money from large state investment projects.”

Insofar as Chinese leaders more interested in their careers and corruption than in providing honest service to the people, they sound just like congressmen, don’t they?

 “Based on official figures, total local government debt across China is $2.4 trillion to $3.1 trillion. The upper estimate is equal to half of China’s G.D.P. in 2010Right now, the banks are encouraged to ‘restructure’ all of this debt such that little of it will become nonperforming loans.”

Typically, a loan generates a promissory note that’s used as collateral by a bank to issue more consumer credit.  Under fractional reserve banking, every $1 million in promissory notes might justify the issuance of $10 million more in additional consumer loans.  That kind of leverage can make an economy soar.

But, conversely, that kind of leverage can also make an economy crash.

I.e., if the $1 million in loans become non-performing, the promissory notes become worthless as collateral and are placed on a “watch list”.  In theory, this could require the $10 million in additional consumer loans to be “called in”.  If the number of non-performing loans is modest, business can continue more or less as usual.  If the number of non-performing loans at a particular bank is high, the bank could be shut down.  This “negative” leverage could not only destroy the bank but even the economy.  Thus, “restructuring” non-performing loans (rather than bankruptcy) is desirable to maintain the illusion that the loan is still “performing” and therefore suitable for use as collateral.

So long as the loans appear to be performing, they inspire people’s confidence.  So long as people have confidence in the banks, the currency and the economy, the economy will continue to function.  If people lose confidence and succumb to fear, the economy can implode.  An unusually high number of non-performing loans can sap public confidence and threaten the economy.

During the financial crisis that begin in A.D. 2007, our government managed to conceal the existence of over $500 billion in non-performing loans by declaring them to be “toxic assets” and buying them from the banks.  One type of “toxic asset” was the sub-prime mortgages that could not be repaid. The banks sold their “toxic assets” (actually, worthless, non-performing loans) for 85% of their face value to the government and used the resulting payments as sufficient collateral to avoid calling in all the additional loans based on the “non-performing loans”.

“Toxic assets” were merely a pretext to implement widespread “restructuring” of non-performing U.S. loans.

Today, in order to protect its banking system, China (like Greece or the U.S.) also needs to “restructure” its non-performing loans, rather than force the borrower (major Chinese corporations) to declare bankruptcy and, worse, admit that their promissory notes are worthless.  Thus, the purpose for debt restructuring is less to help the borrower, than to protect the banks.

Again, we see evidence that the world’s governments are more interested in protecting corporations than their people.  In doing so, we see evidence of a global tendency towards fascism.

“On the issue of exports, Mr. Biden and other American officials have been pressing China to let its currency, the renminbi, appreciate so that Chinese goods do not have an unfair advantage in the global marketplace . . . raising the value of the renminbi makes imported goods less expensive in China, and that helps tamp down inflation.”

If our government were truly concerned about China’s currency producing an “unfair advantage” in the global markets, why fuss at China to “appreciate” (deflate) its currency?  Why not mitigate China’s “unfair advantage” by simply restoring high U.S. tariffs and bringing industries and jobs back to the US, lowering domestic unemployment, and raising the American people’s standard of living?

In fact, China’s “unfair” advantage was largely created by the U.S. gov-co’s willingness to embrace global free trade, lower U.S. tariffs, and thereby export industries and jobs to China and other countries.  If our government were really concerned with China’s “unfair advantage” (and resulting disadvantage for most Americans) all they’d have to do to compensate is raise U.S. tariffs.

Insofar as the gov-co refuses to raise tariffs, is the gov-co really concerned about China’s “unfair advantage”?  Is the gov-co truly concerned about the resulting disadvantage to Americans?  Or is our government’s “concern” feigned in order to deceive the American people into blaming China for at least some of our economic problems that are actually caused by Congress?


“The debate over rebalancing China’s economy comes at a particularly tense time in the nation’s political life, so there is little political will to push ahead with economic reforms, analysts say.”

No political will among Chinese leaders to “do the right thing”?  Sounds just like America’s recent debt ceiling “crisis” where American politicians demonstrated a lack of political will to do the right thing—or anything at all.

“Moreover, powerful and wealthy interest groups like state-owned enterprises will work to prevent redistribution of capital and assets.”

China’s “powerful and wealthy interest groups” are primarily corporations.  It is the nature of all corporations to maximize their profits by minimizing the income of all other entities—particularly the people.

In the U.S., the gap between the minority of super-rich (usually associated with corporations that are “too big to fail”) and the rest of the country is growing—fueled in large measure by political campaign contributions, lobbying and exemptions to insider trading laws for congressmen that allow the big corporations to buy congressmen, senators and even presidents like indentured servants in the 1700s.

Powerful, corporate interests are exerting disparate influence or even control over the both the Chinese and U.S. governments.  Again, this suggests that the real political philosophy behind China, the U.S. and the New World Order is not communism, or democracy, but fascism.


“The authors of the Eurasia Group report wrote that although Beijing would meet some of its goals, ‘ultimately, the country’s leaders lack the political stomach and sense of the moment to implement a comprehensive and ambitious rebalancing agenda.’”


Ah heard dat!

How many American leaders have the “political stomach and sense of the moment” to implement a “comprehensive and ambitious rebalancing agenda” needed to restore our economy and prevent the coming crash?


We can point to Ron Paul, Michelle Bachman and handful of other radicals who sincerely intend some sort of “comprehensive and ambitious rebalancing agenda”.

But, assuming any of these radicals won the presidency, how far could their agenda proceed without the active support of most other politicians?

The majority of American politicians are more interested in their careers than in advancing some “rebalancing agenda”.  They know that money is the “mother’s milk” of politics, and major corporations can be a huge source of political campaign contributions.  The politicians are not about to bite the corporate teat that feeds them.

Politicians also know that 40% of the American people (both rich and poor) receive a paycheck, entitlement or some sort of subsidy from the government.  They know that the only real “rebalancing agenda” that makes sense will involve removing many, perhaps most of that 40% from the rolls of government dependents and forcing those people to get real jobs.

But politicians also know that if they try to cut government hand-outs, the dependents’ resulting wail will tend to shatter our ears—and political careers.  Given that our politicians care more about their reelection than about the country’s general welfare, they will not support any serious “rebalancing agenda” in America until after the economy crashes and that crash can be blamed on someone besides Congress.

•  It’s like riding on the Titanic.  The ship’s designer allegedly boasted, “Not even God could sink the Titanic.”   What a fool.  As you sit there on the Titanic and watch the ship begin to slide under the waves, you know the ship is going down.  Everyone knows.  You’re scared.  You’re praying to God to be saved.

But every once in a while, you gotta laugh.   Man’s arrogance, opportunism and self-serving nature virtually guarantee that disasters like the Titanic will take place.  The Fukushima nuclear power plant meltdowns are another example of man’s hubris.  The coming collapse of the U.S. economy is a third.

Barack Obama, Timothy Geithner, and Ben Bernanke have repeatedly assured us that the U.S. has never defaulted on its debts, and never would.  These same officials have declared the recession is over and the recovery is in progress.  I rate their blarney right up there with “Not even God could sink the Titanic.”

I’m riding on the same ship of state as the rest of you.  I know what’s going to happen.  You know what’s going to happen. I’m anxious.  But sometimes, I just gotta laugh.

We’re headed for an economic crash not simply because the math and economic principles make that crash inevitable.  We’re headed for the crash because generations of our politicians, China’s politicians, virtually all politicians, are so dedicated to their own careers that they “lack the political stomach” to make the necessary (but politically-painful) corrections to prevent the crash.

Just like China, U.S. politicians are bought and paid for by wealthy special (corporate) interests.  Corporate interests can’t see beyond the next quarterly report.  As in China, these corporate interests are compelled to seek their own profits rather than the general welfare and prosperity of the people.  In the mad pursuit of private, corporate profits, the national economy is being driven towards collapse.  It doesn’t have to be that way, but the nature of corporations (and perhaps human nature) make the coming crash inevitable.

I don’t know if the people of China are starting to laugh. I know I am.


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One response to “A Chinese Mirror

  1. David

    August 27, 2011 at 4:38 AM

    It’s all madness. I have thought that any loan made should be accounted for by dollar for dollar postings. If a $10,000.00 loan is made, no leverage. Meaning that as that loan is paid back, the lender can only have available to lend what has been paid back in, not the asset known as that particular $10,000.00 loan. So the first payment on the loan of – say – $489.12 means that the lender now has an additional $489.12 available to lend.

    With the second payment of $489.12, the lender now has $978.24 available to lend – presuming the lender has not already lent out the first repaid amount of $489.12 to some other entity.

    This is what faces a man selling his house. If he self-finances a second mortgage – or even a first mortgage – to a buyer, the seller/lender can only spend or loan out such monies as has been paid back in on that particular loan schedule.

    If a private treaty lender is so restricted, why should a bank or credit union be exempt from this same brake on credit expansion?

    It certainly slows down the velocity of money, but over time the overall asset base should be much more robust, solid and secure.

    Further, this increases the value/worth of money in circulation, as CIF – cash in fist – commands respect.

    As the value/worth of paper money is held, eventually some ratio can be established between a certain defined amount of paper money and a certain defined amount of gold.

    If people want more money than what is available in the lending markets, they will have to go out and create – not money – but wealth. Wealth that can be turned into money…traded for money.

    Ultimately, wealth is created, i.e. through manufacturing and other endeavors. Wealth is NOT created through paper money games.

    Paper money games do not create wealth but merely the opportunity to transfer ownership of an item of value from a borrower to a lender.

    While the worker seeks to create/increase his wealth, the lender seeks to create/increase his control over wealth. The lender seeks the wealth that has been created. The lender is in a service business. A service economy creates no wealth. It is static.

    The economy needs the busy bees out there creating and making the honey that makes most everything so sweet.


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