China's Emergence As A Global Superpower

[ElectricFetus]

Oh yes I can't comprehend what your saying at all, call me what you will, I just want you to clarify in irrefutable parameters what your saying, is that to much to ask?

Ok then when will this begin to happen then? What is a clear indicator of it happening, clear raise in inflation, what?

I'm not saying events starting in 2014(?) to impractical food costs by 2016 is a one day transition, but are you suggesting at least that by 2016 we will know it has happened (what ever that is exactly) and clearly be able to detect it in the food price inflation that is causing starvation in the middle class? And specify what china has to do with this exactly?

 

[Billy T]

... I just want you to clarify in irrefutable parameters what your saying, is that to much to ask?

No, but I have told you already:

... I have defined "collapse" before but forget now, so will make new try: Say the purchasing power {of dollar} is falling by more than a percent per month and more than 15% annually - that I would call a collapse. I.e. in about 4 or 5 years your dollar savings will only buy half of what they could when the collapse began. Then by end the second year your less than 85 cent worth dollar will drop faster - say be worth 50 cent in the purchasing power of the pre-collapse dollar. With so many lacking jobs, it will be very hard to get salary increases to significantly compensate for the rapid loss of purchasing power. ...

Here is a list of some hall marks to watch for:
(1) Interest rates on 10 year treasury bond increasing by more than 50% per year. (Already from the 23 April12 low they are up 32% in slightly less than half a year!)
(2) Food prices rising faster than CPI with more of the lower middle class joining the poor on the growing list of food stamp receivers.
(3) Fraction of the adults with full time job declining, as it is now and has been for several years.
(4) Purchasing power of median or typical salary declining by more than 1% per year (and it has been for about five years now).*
(5) Fed being the largest buyer of Treasury bonds (as it has been for two or three years now.)
(6) Gold and farm land climbing back to new high prices.
(7) Rapid growth in early collection of Social Security and disability insurance, especially due to "back injury," which is hard to proof false. (If they don´t get photographed playing 18 holes of golf, etc.)

Now don´t misunderstand. I am not saying all these things will happen and certainly not all at the same time on "collapse day." When the collapse of the dollar began will, like when recessions begin, be a lively discussion (except in an unlikely event like US losing its investment grade rating due to dead-locked Congress, etc.) many months after all agree the dollar is collapsing in value. These are just some indicators that the collapse is soon coming or has already started.

... Ok then when will this begin to happen then? What is a clear indicator of it happening, clear raise in inflation, what? ... are you suggesting at least that by 2016 we will know it has happened (what ever that is exactly) and clearly be able to detect it in the food price inflation that is causing starvation in the middle class? And specify what china has to do with this exactly?

Yes you will know by 2016, but there will be very little if any "starvation" even for the poor, certainly not the middle class but it will continue to grow smaller as a fraction of the population as the poor fraction on food stamps etc. increases and wealth will continue to become more concentrated in the hands of the top 1% with increasing need / use of the National Guard to control riots and prevent radical political change. Armed groups of activist may, for example, try to prevent the loading of Mississippi barges with mid west produced grains for shipment to China. Cargill may not be allowed to sell to the highest bidder, (China) etc. - Real political / economic system change is possible.

Again all I have predicted is a run on the dollar on or before Halloween 2014, not when it begins. - That is not predictable, or even likely to be agreed among economist as to when it stated before 2017. (There is still some disagreement as to when GWB´s second recession began. Some Republicans want to push the start to when Obama took office.)

*Note it is the dollar´s purchasing power, not the purchasing power of typical salaries that will drop by 1% per month when the collapse is well under way - clearly defined to be happening. If we should get into "run-away" inflation, the dollar´s value will drop by at least 10% per month.

 

[ElectricFetus]

So this "run on the dollar" means the value of the dollar will begin falling (it will begin inflating) dramatically at =/>15% annually?

But the more you explain this the less it sounds like a "collapse", let me put this in different terms: remember the great depression, how will this relate to it, would by 2016 the affects of this "run on the dollar" be roughly more or less then the great depression?

And again how does china fit into all this?

 

[Billy T]

So this "run on the dollar" means the value of the dollar will begin falling (it will begin inflating) dramatically at =/>15% annually?

But the more you explain this the less it sounds like a "collapse", let me put this in different terms: remember the great depression, how will this relate to it, would by 2016 the affects of this "run on the dollar" be roughly more or less then the great depression?

In addition to the >15% first year post run drop, I mentioned that the dollar value drop would accelerate in the second year. - I´ll give an estimate now: 20% drop in year two following the run.

Thus the < 85 cent at end of year one dollar falls to < 67 cents value by end of year two, post start of the run.
I think most losing 1/3 of their dollar´s buying power in two years (or less) would consider that a collapse of the dollar.

This is very, very, different from what happen in the great depression. - Then the dollars were in short supply,* many locked up in failed / frozen bank saving accounts so the dollar greatly INCREASED in buying power. My MD father had an office in the 8 story tall "Medical Arts" building in Charleston W. Va. Like many other MDs still there, I don´t think he was paying the rent. - Half the offices were vacant and owner could not pay the electric bills and taxes so that impressive office building, in a prime down town location, was sold for only $500! but with the taxes still unpaid.

I don´t know and too lazy to search, but bet the dollar APPRECIATED IN VALUE 1000% or more during the great depression. The the Fed followed the opposite approach - Tight sound money was the "cure" not dollar printing presses running at top speed 24/7 as now. If you have a twisted sense humor, as I do, then one of the funniest things I have ever heard was Ben Bernanke saying: " I´m not going to repeat the mistakes of the great depression. - I´ll make my own mistakes." - He sure has. - He is destroying the dollar!

And again how does china fit into all this?

Again, post 1232:

... China will be buying mid west produced grains while American go hungry and possibly stage food riots.** US will probably have a positive Balance of payments with China by 2017 at the latest.

As far as China "instigating dollar crash" that will not be necessary - interest rates needed to sell Treasury bonds are already rising and that will soon accelerate - just continued more than trillion dollar annual issue of thin air money is what crashes the dollar. Fact that China could crash the dollar now, with much greater pain in US than in China, is what I called years ago "China loading it economic gun" as deterrent to US doing anything with its stronger military against China. For example, US will not limit China´s exploration of the natural resources of the S. China Sea.

* Not a trillion new ones each year, hot off the presses!

** There is a slight risk that the growing masses of hungry and jobless will revolt and fundamentally change the US´s capitalistic system for one more like China has that provides double digit improvements in the living standard of the masses annually, but good propaganda and the National Guard make that unlikely.

 

[ElectricFetus]

Ok then so when should we start seeing this >15% inflation rate?

 

[Billy T]

Ok then so when should we start seeing this >15% inflation rate?

Same answer as for the last five years: "by or before Halloween 2014."

 

[Carcano]

I don´t know and too lazy to search, but bet the dollar APPRECIATED IN VALUE 1000% or more during the great depression.

The dollar rose in value by about 25% from 1931-1933...erasing a big drop since the creation of the Federal Reserve. Its been in freefall ever since...cheered on by both parties!

http://www.minneapolisfed.org/community_education/teacher/calc/hist1800.cfm?

 

[ElectricFetus]

Look at it like this and it does not look so bad:

 

[Billy T]

Thanks to both Carcano & Electric for interesting graphs. Electric´s shows finer time dynamics but crude "eye ball" smoothing of it from 1960 latest point indicates to me about a 4% annual inflation rate. 72/4 = 18; or prices double in about 18 years. From Carcawno´s graph, with right angle paper corner projection, CPI = 200 at 1976 + (1/10)(2000 -1976) = 1976 + 2.4 or 1978.4
And CPI =400 (doubled) at 1976 + (6/10)(2000-1976) = 1976 + 6x(2.4) = 1976 + 14.4 = 1990.4
1990.4 - 1978.4 = 12, not 18 years to double.

Doubling in 12 years is 72/12 = 6% inflation rate. More than my "eye ball" average of 4% for period 1960 thru 2010.

If you focus on Carcano´s graph for only the period 1978.4 till 1990.4 this "conflict" is resolved. That period includes the 14% inflation peak of 1980, so 6% inflation rate is more valid for that shorter period than 4%.

What this all means, is that inflation rate has been dropping for the two decades starting in 1990, as is obvious from Electric´s graph too.

If my long standing prediction of run on dollar by Halloween 2014 is to come true, one should see and an acceleration from the current low inflation rate (<3%) to ~6% by end of 2013 so I am predicting that too. That is a bet I can lose by first couple of months* of 2014. Let´s see if I do.

To be consistent with my definition of "collapse" (given in post 1234, and several times repeated) I am also expecting that the average of October 2014 & November 2014 monthly inflation rate is at least 1% per month and, if government does not play too many games with CPI calculation** (as they are planning to do to reduce the cost of Social Security´s inflation step ups), that the CPI of 1 Nov 2015 will be at least 15% higher than the CPI of 1 Nov. 2014.

At least one one can say I am being vague and leaving myself a lot of "wiggle room."
----------------
* To get end of year 2013 rate, we will need a few months of data at start of 2014 also. Say average of December 2013 & January 2014´s inflation rates I am predicting will be ~6%. (I´ll also bet both of you say: "No way it will more than double in 2013 alone.")

** Government has drastically reduced the CPI calculation before - Why the "shadow CPI," which still uses the original calculation, is about twice as high as the government current CPI calculation.

PS to be a little more on thread, I should say something about China, but don´t like predicting about it as the inflation (and every thing else) is all "managed" and reported with distortions. But what the hell, I go out on weak limb and say: "China´s inflation rate will be less than the US´s at start of 2015." (Currently it is more than twice the US´s rate so this would be a big change.)

 

[rodereve]

Yes - not because of China's rise, but of US' fall.

 

[Billy T]

... The latest statistics from China Association of Automobile Manufacturers show that the country delivered a total of 1,056,100 units abroad in 2012, a 29.7 percent rise on 2011.

I think, but have not found (help if you can) US car exports in 2012 were only about half as large as China´s. I.e. China sells more cars than any other country to its domestic market AND also is world export leader too. (They certainly lead the US in exports to Brazil and have for ~last three years.)

 

[Billy T]

China is following the plan*:

In 2012, rural incomes rose faster than urban incomes—for the third consecutive year. Rural income from benefits payments rose 21.9%, twice the rate in urban areas, as the government increased its spending on health care subsidies by 36%. And, because poor families tend to consume a higher portion of their income than the wealthy, the growth in rural incomes should help with the goal of re–balancing the Chinese economy toward consumption.

*To reduce income inequality and become more of a domestic lead economy.

 

[kwhilborn]

How to compete against Billions of Communists?

We need to shop in our own backyard. Corporations getting rich off the Cheap Chinese workforce need to be tamed, and large Tariffs enforced.

There will soon be no "Made in China" stickers on everything, and prices will jump 20% (guessing) at retail levels.

 

[Billy T]

The Plan in 6 parts:

The tottering global economy and slowing growth rate at home make it important to transform economic development model. The decision of the 2013 Central Economic Working Conference is to raise the quality of economic growth and make it more result-oriented by focusing on "six musts".

The first is expediting economic restructuring. The second is transforming the pattern of economic development to ensure that it is based on expanding domestic demand. The third is continuing to work effectively on agriculture, rural areas and farmers, as well as advancing urban-rural integration. The fourth is continuous implementation of the strategy to invigorate China, and boost its economic and social development. The fifth is prioritizing people's interest above everything else and working tirelessly for people's well-being so that development benefits reach the whole nation in a fairer manner. And the last is deepening reform in an all-round way, clearing obstacles in the system that hinder development, proactively implementing the opening-up strategy and creating a competitive edge.

The key to fulfilling the "six musts" lies in handling the relations between steady economic growth in the short term, economic restructuring in the intermediate term and systematic transformation in the long run.

 

[Billy T]

China surpassed the U.S. to become the world’s biggest trading nation last year as measured by the sum of exports and imports, ending the U.S. supremacy in global commerce that emerged after the end of World War II in 1945.

U.S. exports and imports last year totaled $3.82 trillion, the U.S. Commerce Department said yesterday. China’s customs administration reported last month that the country’s total trade in 2012 amounted to $3.87 trillion.
China had a $231.1 billion annual trade surplus while the U.S. had a trade deficit of $727.9 billion.

China’s emergence as the biggest global trading nation gives it increasing influence, threatening to disrupt regional trading blocs as it becomes the most important commercial partner for countries including Germany, which will export twice as much to China by the end of the decade as it does to neighboring France,

And most is NOT in dollars as US & EU are a DECREASING fraction of China´s trade.

 

[Billy T]

I have long suggested China, when ready to see dollar collapse, will issue gold backed bonds for only central banks & IMF to hold (Not investors who might actually ask for the gold. Central banks may test the delivery but as now mostly prefer interest paying bonds. - keep typically <10% of reserves in gold).
Here is more support for that POV in quote below from link given at end:

" China is the world's largest gold producer, producing more than 350 tons of gold a year, almost 20% more than the world's second largest producer. And yet, China isn't exporting a single ounce of gold. Instead they've been importing huge amounts of gold. In 2012 China imported roughly 500 tons of gold.

Song Xin, chief executive of China Gold International, one of the country's biggest gold producers {bars and jewelry for the public sold in mass outlets like the one in the photo} recently revealed: "The shortage in supply has been deepening very fast; from 48 tonnes in 2007 to 400 tonnes in 2011.” {Billy T noted a few years ago, that instead of being illegal for public to buy gold as it was just a few years ago, now you can open a “gold account” in banks. You pay in Yuan and get credited X grams of gold, but can´t take it out – only its current value inYuan. Thus China can always use “your” gold or like the US did, force you to sell it cheaply. (at $35/oz when US did this under FDR.) China also makes for greater profit, beautiful engraved small bars to sell to public - typically used as gifts. See some at end.}

China is also buying gold mines across the globe. Let me give you some examples:

• In August of 2010, China Gold International put in a $742 million bid to buy Skyland mining ...
• In November of 2011, Zijin Mining Group put in a $227 million bid to buy Gold Eagle mining ...
• In August 2011, Stone Resources put in a bid to take control of Crescent Gold, an Australian gold miner.
• In November 2011, Baiyin Group bid on the South African miner, Gold One International.
• And in April 2012, Sovereign Gold partnered with Jiangsu Geology & Engineering to buy two gold mines in Australia.

This is just a sampling …of over $5.8 billion worth of takeover bids in just a few years. But this is just the first step in China's quest for global domination. …

Here's the second thing they are doing ... China is buying energy and mineral resources all over the globe, with paid up front 20 to 30 year delivery contracts… (text then gives examples. One they did not give was $10 billion loan to PetroBras to be repaid by 20 years of oil delivery at rate of 200,000 Barrels per day!) *

And third, China is gaining powerful allies across the globe, handing out billions through its China Export-Import Bank. …(text then gives examples, one of which is the 75 billion invested in Latin America in last 7 years, which is more than the World Bank, Inter-American Development Bank and the United States Export-Import Bank combined for schools, hospitals, railroads, mines, power plants, tele-communications, ports, etc. – mainly local infrastructure equipped with Chinese made products.) *

*For more details read: http://finance.uncommonwisdomdaily.com/reports/GRH/GO/?ccode=UWD1272&em=
(Note if this link does not work add your Email address at the end with no space.) But first 1/3 is self promotion and last 1/5 tries to sell you their service, but you can quickly quit and get text and graphs if you don´t want to lissen to it all in back-ground while doing other work.

different patterns on the bars have different meanings. Gold bars with pattern of "Onward & Upward" and "Grand Prospect" make good gifts for business partners, and "Good luck and Happiness" and "Smooth Journey" for close friends, and some with "Blossoming Flowers" are designed specifically for females (but not wives, I assume. ) The silver bars are air-tight sealed - can be burried if you like / fear robbers (or the government) and gold, of course needs no protection in the ground.

 

[Billy T]

If you have any illusions, put them aside now. It's the Yuan's world - the West is just living in it, or borrowing from it as the case may be. Demand for the Yuan is growing at such a staggering rate that your financial future will be built upon it.

The dollar has lost more than 80% of its value since being taken off the gold standard in 1971. Our nation is $222 trillion in the hole {public and private debt greater than assets} according to Yale Professor Lawrence Kotlikoff's analysis of CBO numbers. Our national debt has skyrocketed to more than $16.652 trillion and is increasing at something like $50,000 a second. Things are so bad that Helicopter Ben is buying $85 billion in paper a month.

The euro is singing only a slightly different tune: According to the Maastricht Treaty, national public debt is not to exceed 60% for any member state. Yet, at the end of 2011, Greece, Italy, Ireland, Portugal, Belgium, France, UK, Germany, Austria, Cyprus, Spain and Netherlands, all had government debt as a proportion of GDP of 165.63%, 120.1, 108.1%, 107.8%, 98%, 85.8%, 85.7%, 81.2%, 72.2%, 71.6%, 68.5% and 65.2%, respectively.
And finally, Japan's in deep, too. With total combined private, corporate and government debt near 500% of GDP, the Yen is living on borrowed time.

This is a "debt bug" in search of a windshield.

But the Yuan has risen 24.66% against the U.S. dollar since June 2005, backed in part by 1.3 billion consumers and real assets.

China can destroy the dollar whenever it wants to take a one-time loss on dollars in reserves for the EVERY YEAR reduction in the cost of its imports due to US & EU being in depression and too broke to buy much in competition with China. More of the same from another source:

The International Business Times revealed a shocking announcement ... one that the mainstream media has refused to acknowledge ...

It stated that in a secret alliance with Russia, China {And a couple dozen of others, including Japan, India, S.Korea, etc. who now agree to NOT use dollars in their mutal trade} launched the ultimate attack on U.S supremacy. By attacking the United States’ last great export machine ... and its ultimate source of global domination for the last 40 years ... the petrodollar.

I firmly believe this is the shot across the bow for an economic war between the U.S. and China ... one that will bring about the end of the 30-year bull market in U.S. bonds. America has gone to great lengths to prevent this very crisis from occurring.

It's the reason we took down Saddam Hussein, Muammar Gaddafi and why we're now imposing sanctions on Iran. But with our weakened military and our bloated national debt, China has the perfect opportunity to take us down ... Now China holds the economic future of America squarely in its hands.

And while you may be thinking that these currency wars won't affect you or your family, mark my words: the fall of the petrodollar will devastate everyone who lives, works and invests in America. By attacking the United States’ last great export machine ... and its ultimate source of global domination for the last 40 years ... the petrodollar. It's the reason we took down Saddam Hussein, Muammar Gaddafi and why we're now imposing sanctions on Iran. But with our weakened military and our bloated national debt, China has the perfect opportunity to take us down ...

And unfortunately for us, their $3.5 trillion in U.S. foreign currency helped them launch their first wave of assaults ... I can assure you, right now China holds the economic future of America squarely in its hands. And while you may be thinking that these currency wars won't affect you or your family, mark my words: the fall of the petrodollar will devastate everyone who lives, works and invests in America.

 

[ElectricFetus]

China can destroy the dollar whenever it wants to take a one-time loss on dollars in reserves for the EVERY YEAR reduction in the cost of its imports due to US & EU being in depression and too broke to buy much in competition with China.

Oh so when will China do this then?

 

[Billy T]

Oh so when will China do this then?

China may not need to destroy the dollar, if I´m correct that the growing debt (trillion more each year) and the US running dollar printing presses 24/7 (currently 85 billion per month - more than a trillion each year) does cause a run on the dollar by (or before) Halloween 2014. We are destroying US economically all by ourselves.

I did not say China will destroy the dollar - I said they could, just by dumping half their Treasury bonds on the market.

If I am wrong and US enters 2015 with slowly recovering economy, then developments in China determine when it is to China´s economic advantage to exercise their "destroy US economically" option - i.e. send both US and EU into deep, long-lasting depression so China pays much less every year for its imports with US and EU too broke to buy in competition.

China must first, and rapidly is expanding its domestic demand. This has been going slower than they hoped as the long established practice of the Chinese population is to save at least half of their disposable income. The government is trying to re-eduate them to spend them selves into debt as Americans do, but old habits die hard.

The other main requirement before China choses to send US and EU into depression, if it has not already happened, is to grow its trade with neighbors larger than its trade with the US & EU. It is doing a good and rapid job of that too. Trade with the SEATO group is increasing by more than 50% annually and with others like Brazil (China is Brazil´s main trading partner for two years now and trade mutal trade is growing ~20% per year - Brazil imports more Chery cars than all types of US cars now.) and Australia (I don´t have data on how fast its china trade is expanding but am sure it is at least by 15% year.) The trade agrement signed more than year ago with India is to bring their mutual trade (with no use of dollars) to 100 billion annually and be essentailly balanced (A good good deal for India that always has had a trade deficit with China.) When this happens is hard to predict, but it is the main objective of the new Government of China.

Does it make much difference to you if it is 2016 or 2018 when China says to US:

Go to Hell. We no longer lend to you. We don´t need you to buy our exports now.

 

[ElectricFetus]

China may not need to destroy the dollar, if I´m correct that the growing debt (trillion more each year) and the US running dollar printing presses 24/7 (currently 85 billion per month - more than a trillion each year) does cause a run on the dollar by (or before) Halloween 2014. We are destroying US economically all by ourselves.

Strangely, I agree, Still would like to put bets on Halloween 2014 though, since I guess dollars will be useless, want to bet in gold?

I did not say China will destroy the dollar - I said they could, just by dumping half their Treasury bonds on the market. If I am wrong and US enters 2015 with slowly recovering economy, then developments in China determine when it is to China´s economic advantage to exercise their "destroy US economically" option - i.e. send both US and EU into deep, long-lasting depression so China pays much less every year for its imports with US and EU too broke to buy in competition.

Sure they could, heck the Soviets could have nukes us all into oblivion, the question is do they want to? Now you claim they would benefit with reduce import prices, what imports?: if the EU or US was to collapse economically all trade would cease up, China better perfectly self-sufficient before they try to implement "fuck over US and EU" plan for *I don't know* reason, because their millions of factory works that at paid to make products for the international market will have nothing to do and no income once America and the EU collapses.

China must first, and rapidly is expanding its domestic demand. This has been going slower than they hoped as the long established practice of the Chinese population is to save at least half of their disposable income. The governement is trying to re-eduate them to spend them selves into debt as Americans do, but old habits die hard.

So then you agree china is not yet self-sufficient enough economically?

The other main requirement before China choses to send US and EU into depression, if it has not already happened, is to grow its trade with neighbors larger than its trade with the US & EU. It is doing a good and rapid job of that too. Trade with the SEATO group is increasing by more than 50% annually and with others like Brazil (China is Brazil´s main trading partner for two years now and trade mutal trade is growing ~20% per year - Brazil imports more Chery cars than all types of US cars now.) and Australia (I don´t have data on how fast its china trade is expanding but am sure it is at least by 15% year.) The trade agrement signed more than year ago with India is to bring their mutual trade (with no use of dollars) to 100 billion annually and be essentailly balanced (A good good deal for India that always has had a trade deficit with China.) When this happens is hard to predict, but it is the main objective of the new Government of China.

If I had 1.1 billion people to find jobs for I would make trade with the penguins of Antarctica if they had money! If china GDP was even half of that per person as the USA china would be twice as large as the USA economically, it would be the worlds larges economy by 100%, to provide even that standard of living for that many people china can't afford not to make everyone a growing trading partner! Fuck even Japan their hated scapegoat enemies they trade about $300 billion worth and growing. Their people are pissed enough as is about the pollution, income inequality and the corruption, if they don't keep the economy growing the people will revolt, why would they sanely risk their necks to for some crazy vendetta strategy on the west?