Sabbath 23/6/38/120

Dear Friends

As we have all noticed the global markets are in turbulent chaos and they are left concerned and dismayed at the recent collapses and especially in China which seems to be leading the race to the bottom.

As usual the wealthy are trying to profit from the chaos and are selling and then trying to profit from the short term stability in the various markets.

The conventional wisdom has been that the US has the most debt and is the most vulnerable due to its over 19 trillion national debt, much of it funded from its own super funds.

The reality is that China is far more exposed than the US with its debt structure resting at $US28 trillion much of it in local government and regional funds.  Its infrastructure is overspent and they are at some 282% of GDP in debt. The second largest economy in the world is in a more parlous state than Greece on a pro-rata basis and could collapse the world economies and its central banks.

The Communists do not really comprehend what they have done as they see the economy as a political tool rather than the engine room of its free market enterprises.

The Globalists using the US economy see the problem as a temporary phase in their march to the New World Order and the economy as the ten regional economies under the Beast power. They are aimed at making the New World Order a system of One World Government and the central system as one based and controlled by the IMF and the World Bank.

This last week a political commentary was issued by the Australian Ian Verrender under the heading: “No China’s Economic Crisis has not been averted.”

Verrender’s view is that the New Normal does not bode well for Australia and the real problem is that our politicians do not get it.  Nor in our opinion does it bode well for Europe or the US.  The real issues revolve around economic growth and China’s broader health.

Verrender’s view was that: “After a week of chaotic trading on global share markets, with days of dramatic plunges followed by huge gains that clawed back a large proportion of the stunning falls, global investors have been left substantially poorer and horribly confused. Normal looks to have taken on an entirely new meaning.”

He thinks, as do many others, that: “The gyrations are symptomatic of a sudden rise in volatility that's been driven, not so much by the spectacular crash of the Shanghai and Shenzen stock exchanges, but by gnawing doubts about the broader health of China's economy.

Economists are thinking: “Even more worrying, almost eight years on from the beginning of the worst financial crisis in modern times, concerns are emerging about the ability of monetary policy to generate growth in the real economy. Could this be the beginning of the end of the reign of central bankers?”

It is a fact that after having taken interest rates to the extreme and then well beyond, we are now faced with the fact that the most visible effects have been a series of asset price bubbles from property to shares and bonds, but precious little real investment in productive activity. 

The quantitative easing was not infused into the economy but stored in the banking system and some used to provide loans for the creation of these price bubbles. The International bankers are aiming to absorb the world’s assets at bargain prices by collapsing the Middle Class and their investments.

After creating the greatest state led infrastructure development, late last year under the new rule of , China's Xi Jinping and Li Keqiang  the Chinse party system unveiled "The New Normal"; a strategy to shift growth in the world's second biggest economy from massive state-led and debt-funded infrastructure programs to a more “market oriented, consumer led model for growth.”

The Western economists thought: “It was a great plan on paper and the slogan was infinitely more hip than the Cultural Revolution's brutal campaign of ‘Thinking in New Ways’”.  However we are coming to grips with the fact that the implementation appears to be going off the rails.

Central to the plan was to develop the stock market, not just to encourage new entrepreneurs but to enable state owned or controlled enterprises to raise private capital in an effort to wean them off state funding.

Verrender notes as do others that borrowing restrictions were lifted, an historic link forged with the Hong Kong exchange as both The People's Daily and the official Xinhua news agency published articles linking a rising market to a buoyant economy.

We all watched as ordinary citizens heeded the call as the number of regular retail investors soared to 90 million, many of them borrowing heavily to get a slice of the government endorsed action as margin loans grew to $360 billion. The Chinese are inherent gamblers and they do not have a background to the capitalist markets and the dangers therein after their decades of communist rule.

By June this year, China's markets had soared 150 per cent as company valuations soared to “eye-watering levels”.

That's why panicked Chinese authorities reacted with such strident force to the first slump in July. Not only did the collapse undermine Beijing's authority, it threatened to derail a central plank in “The New Normal” and the planned shift towards a free market economy.

Verrender noted: “Stockbroking firms were forced to assemble a fighting fund, most companies were suspended from trading, selling was banned and a witch hunt for evil foreigners and others engaged in short selling. More recently, authorities amassed a $US400 billion fund to support stocks.

The market eventually "stabilised". But as the restrictions gradually were relaxed, the selling returned with a vengeance. Last week, as the avalanche gathered momentum, the authorities gave up trying to stand in the way.”  The problem is that the Globalist system is behind much of it and the Western Media are trying to pretend it is not happening.  They are also ignoring the UN and Religious moves of the New World Order in its “Agenda Towards 2030.”  The English speaking media is hopelessly compromised and they are pretending it is not happening, otherwise the US and UK and AU people might turn on them and destroy their plans and their security. They are dumb dogs and only in the other language press, largely among the globalist socialist press, is it mentioned.

The bizarre disconnect was that as Western markets rallied late last week, a chorus of bullish brokers dismissed the Chinese market rout as "unconnected with China's real economy". Verrender acknowledged that there was an element of truth to that. He held however, that it fails to explain why Beijing threw so much political and financial capital at trying to stop the crash.

The reality is that when it comes to China's real economy, the big question is around economic growth. Slated to be 7 per cent this year, there are concerns it may be about half that, if it grows at all.

There has always been a suspicion that China's statistics are a work of fiction based on communist political propaganda. However, no one cared when it was clear growth was heading into orbit.

Verrender and other economists are now concerned that Beijing quietly has embarked upon a massive stimulus package that has taken the world by surprise and convinced many that the downturn is much greater than acknowledged. However, the sudden deceleration combined with the lack of transparency and the reluctance of Chinese authorities to reassure skittish financial markets has dented confidence.

The bulls argue that even if growth is below 7 per cent, it is a massive economy growing at a phenomenal rate. That is not the issue. As stated, Beijing has quietly embarked upon a massive stimulus package that has convinced many that the downturn is much greater than acknowledged.

There was the historic devaluation of the renminbi three weeks ago. Interest rates have been cut for the fifth time in nine months. Capital requirements for banks have been loosened. Several major banks have been given capital injections. A policy to rein in heavily indebted local governments has been reversed as cash once again is being extended.  It is actually through these heavily indebted local systems that the danger lies.

Western economists consider that on the trade front, China's position has deteriorated sharply. Exports slumped more than 8 per cent in July from a year ago. And with a slowdown in domestic activity, Chinese steel mills have been exporting vast quantities of raw steel, sending global prices plummeting. This is a destabilising dumping program tied into the devaluation.

Verrender wrote that “Steelmakers globally are up in arms, with European, US and South African producers demanding trade sanctions. Australia's Bluescope last week indicated that unless it received some kind of assistance, the future of the Port Kembla blast furnace was in doubt.”

China's debt rarely gets a mention, primarily because of its huge foreign currency reserves and its trade surplus. But as we said above at $US28 trillion, it stood at 282 per cent of GDP a year ago, according to the McKinsey Global Institute.

The economists think that taken as a complete picture, this doesn't bode well for emerging markets, the developed world and particularly Australia, the country most tightly bound to China's fortunes.

It is likely that the AU economy may well plunge on the effects of the China problems.

The AU Government is not aware of how serious the problem is and the Treasurer Joe Hockey, is having none of it.

"I'm absolutely confident, absolutely confident, that the fundamentals of the Australian economy and the global economy are still good, are still good," he said last week, adding that a senior Chinese government figure "reassured us, from his lips to our ears, that China would use whatever tools it has available to make sure that it grows relatively strongly this year".

Given the fear being generated elsewhere, it is a Treasurer's job to add some soothing words, even if they are totally at odds with his campaign of terror in the lead up to the last election, when the deficit was smaller and growth more robust as Verrender points out.

The government needs to deal with these serious issues rather than fabricate irrelevancies and failing to reorganise genuine economic reform.  So too does the US and EU need to deal with the problems and also the serious conflicts in the Middle East which will require the EU and the US and NATO to occupy the Middle East in the near future and deport all its refugees into a stable political environment in North Africa and the Middle East under NATO control.

Verrender’s and other views are that China's sudden decline has occurred at the worst possible juncture, just as Australian capital expenditure and business investment has dropped off a cliff.

As for global markets, September and October historically are the most unstable. Every major collapse for almost a century has occurred at this time.

It is geared to occur this September and October due to Globalist banking manipulation and the UN moves to establish the NWO.  See the paper World War III: Part I The Empire of the Beast (No. 299A).

A further development in propaganda manipulation in China emerged last week when a Chinese journalist has reportedly confessed to causing "panic and disorder" on the Chinese stock market after he was detained for spreading fabricated information. Wang Xiaolu, who works for Caijing magazine, was arrested shortly after markets crashed over the past fortnight.

He then reportedly "confessed" to spreading "false information" that "caused panics and disorder at (the) stock market, seriously undermined the market confidence, and inflicted huge losses on the country and investors", according to state media agency Xinhua.

Wang wrote last month about the China Securities Regulatory Commission (CSRC) stating that the body was working on devising a way to remove government money from the market. That claim formed the basis of the charges. The regulator rejected the claim and decried the story as "irresponsible".

Meanwhile, the CSRC is having its own problems, with four of its senior executives detained for "market violations", as well as taking bribes and forging official accreditation.  That was a far more serious matter but they had to hang someone.

The latter two charges were levelled against Liu Shufan, an official with the regulator, who "confessed" to forging an official seal in order to fake divorce taxation certificates for his mistress.

Xinhua also reported that 197 people have been punished for spreading rumours online about the crash, as well as other recent events to have rocked China, including the warehouse explosions in Tianjin.
The problem was that most of China knew of the impending crash and they all thought they could get out with a tidy profit in spite of the collapse.

cf also

The coming collapse will be far worse than the GFC ever was.  It is engineered by the Globalists and we will all suffer and lead into the formation of the NWO and the 42 months of the Beast power.

Wade Cox
Coordinator General