The gold market had looked bearish for the past couple of weeks and gold seemed to be breaking through support, but Bloomberg reports that the more recent spurt of price increase is due to Chinese buying. In other words, the Chinese central bank aims to hold gold. It currently has almost $2 trillion in foreign currency reserves. If it follows Russia and builds a 10% reserve holding, gold will be the winner and the dollar will be the loser.
There could be longer term repercussions as to the Chinese acquisition of gold. Why stop at 10%? There is no reason to trust the Fed or the dollar, and the American republic is running out of steam. This is due to self indulgence and corruption among American elites. Wall Street will not permit slow monetary growth, and foreign dollar holders will lose. If the Chinese are smart, they will convert all of their dollar holdings into gold.
Americans should think in terms of pressuring their Congressmen to repeal the legal tender laws that were passed during the Civil War. There is no reason why Federal Reserve monopoly money should be mandatory or "legal tender". There should be a free market in money. The Fed does not represent the public. Why should the public be forced to accept their garbage notes?
Showing posts with label chinese. Show all posts
Showing posts with label chinese. Show all posts
Sunday, April 26, 2009
Friday, April 3, 2009
The Chinese Were Suckered
The Chinese have embarrassed themselves. They believed that export-led growth was possible for a nation with a billion citizens. Export-led growth is fine for Japan or Korea, but China is so big that exports can account for only a small portion of the working population. Moreover, technological and scientific improvement limits the importance of labor-intensive industry. Export-led growth is fine to a point, but ultimately the comparative advantage of low labor costs needs to be surpassed by growth in human capital and technology, leading to competitive industry. With the largest potential market in the world, why would not China think in terms of developing the capacity to market internally? This would imply distributed growth, possibly based on the extent of export led growth that it has already experienced.
This would be accomplished through free market capitalist development whereby credit is widely distributed and entrepreneurship rewarded, free of taxation. The Chinese could accomplish this with a gold standard.
Instead, the Chinese allowed themselves to be suckered by Wall Street investment bankers and the US. The philosophical reason is likely this: the Chinese are still Marxists, and they believe that capitalism depends on exploitation. It seemed to them that in order to grow, their workers needed to be exploited. So they focused on low, exploitative labor costs. Then, they allowed Wall Street and its employees in the Fed and in Congress to convince them to invest in dollars, further reducing the cost of their exports. Thus, the Chinese have voluntarily cheated their workforce out of wages in order to subsidize American consumers and Wall Street.
Unfortunately for the United States, though, its public has been bamboozled into the same Wall Street scam: the advocacy of paper money expansion, high taxes and allocation of credit to foolish big business uses such as the Latin American debt crisis of the 1980s, Long Term Capital Management of the 1990s and the sub-prime bailout fiasco of the 2000's. This has led to a steady reduction in Americans' standard of living, a declining real hourly wage, as politically connected Wall Street opportunists make off with the cream of fresh Federal Reserve Bank reserves. The waste balloons larger as the "conservative"/"liberal" debate, better called the "Progressive"/"progressive" debate, grows ever more insipid, ever less relevant. American political debate has declined to the point where the news is communicated by bungling, drooling cretins who do not understand any of the issues.
Americans lack the intellectual curiosity or the motivation to question the Keynesian, pro-banker model. American politicians have squandered America's wealth on incompetently conceived and executed programs whose main purpose is to waste money. Americans do not raise an eyebrow that 50% of their earnings go to subsidize foolish government programs that produce value equal to 5% of their earnings. Americans are too busy watching "Entertainment Tonight" to care.
The Chinese have the potential to become the leading global power. They can achieve this by following common sense. Their call for a new currency was common sense. But they continue to be suckered by Keynesian double talk and lies. The new currency should be gold. It should be objective. It should not be subject to political manipulation as would a new paper currency. It should not be subject to the opinions of greedy bankers who do not know how to produce value.
I urge the Chinese to adopt the gold standard and the capitalist economic system. Capitalism does not mean exploitation. It means increasing wealth. When freed of the disruptions of paper money, it functions better than any other system.
This would be accomplished through free market capitalist development whereby credit is widely distributed and entrepreneurship rewarded, free of taxation. The Chinese could accomplish this with a gold standard.
Instead, the Chinese allowed themselves to be suckered by Wall Street investment bankers and the US. The philosophical reason is likely this: the Chinese are still Marxists, and they believe that capitalism depends on exploitation. It seemed to them that in order to grow, their workers needed to be exploited. So they focused on low, exploitative labor costs. Then, they allowed Wall Street and its employees in the Fed and in Congress to convince them to invest in dollars, further reducing the cost of their exports. Thus, the Chinese have voluntarily cheated their workforce out of wages in order to subsidize American consumers and Wall Street.
Unfortunately for the United States, though, its public has been bamboozled into the same Wall Street scam: the advocacy of paper money expansion, high taxes and allocation of credit to foolish big business uses such as the Latin American debt crisis of the 1980s, Long Term Capital Management of the 1990s and the sub-prime bailout fiasco of the 2000's. This has led to a steady reduction in Americans' standard of living, a declining real hourly wage, as politically connected Wall Street opportunists make off with the cream of fresh Federal Reserve Bank reserves. The waste balloons larger as the "conservative"/"liberal" debate, better called the "Progressive"/"progressive" debate, grows ever more insipid, ever less relevant. American political debate has declined to the point where the news is communicated by bungling, drooling cretins who do not understand any of the issues.
Americans lack the intellectual curiosity or the motivation to question the Keynesian, pro-banker model. American politicians have squandered America's wealth on incompetently conceived and executed programs whose main purpose is to waste money. Americans do not raise an eyebrow that 50% of their earnings go to subsidize foolish government programs that produce value equal to 5% of their earnings. Americans are too busy watching "Entertainment Tonight" to care.
The Chinese have the potential to become the leading global power. They can achieve this by following common sense. Their call for a new currency was common sense. But they continue to be suckered by Keynesian double talk and lies. The new currency should be gold. It should be objective. It should not be subject to political manipulation as would a new paper currency. It should not be subject to the opinions of greedy bankers who do not know how to produce value.
I urge the Chinese to adopt the gold standard and the capitalist economic system. Capitalism does not mean exploitation. It means increasing wealth. When freed of the disruptions of paper money, it functions better than any other system.
Tuesday, May 13, 2008
Chinese Tragedy Ahead
The Chinese have decided to imitate American economic progress. But they have chosen to imitate the wrong thing. American economic success has come in spite of, not because of, government development schemes. In particular, the US government and the states granted large amounts of land and access rights to railroads in the nineteenth century. Although railroads contributed to economic development, they did so at much higher cost to the public than was necessary. The public donations of land were accompanied by considerable incompetence and corruption. More railroads were built than were needed. In today's world, the corruption associated with land grants has not disappeared. The Progressives of the early twentieth century believed that by rationalizing the corruption of the political bosses, government support for business could be rationalized and made honest. In the Progressive tradition, Robert Moses in New York and similar social democratic Progressives in other states involved state and federal governments in considerable grants to business. This tradition is not why America has succeeded. America has succeeded in spite of government support for business. Sadly, the Chinese have chosen to imitate the Jay Gould/Robert Moses tradition. They are attempting to modernize their country through government support for development coupled with inflation.
The way that America did succeed in developing its economy was entrepreneurship. Freedom of enterprise not only permitted entrepreneurial genius to innovate here, but also drew entrepreneurial geniuses from other countries. For instance, Nikola Tesla came to the United States because Europeans refused to invest in his concept of A/C electricity. Thomas Edison, Jonah Salk and an endless list of homegrown and immigrant innovators came here because of American freedom. But a long list of social democrats, media pundits, quack academic economists and socialists have done all they can to destroy America's freedom.
The development that occurred because of Jay Gould, Robert Moses and Bruce Ratner, the successor to the governmental welfare approach to business, is not the development that made America a great country. Rather, America became a great country in spite of Jay Gould, Robert Moses and Bruce Ratner. In the case of Robert Moses, the public housing on which he squandered billions of dollars and was supported by the New York Times caused massive increases in crime, destruction of neighborhoods and the near-bankruptcy of New York City in the mid 1970s. Jay Gould's and his contemporaries' railroads were incompetently run and cost the nation far more than they should have. Despite the massive tax on innovation that corrupt government support for business has posed, the US surged ahead because of the innovation of men like Edison and Tesla. The entrepreneur, free of government impediment and government welfare subsidy, thinks of ways to meet consumer needs and so makes himself wealthy and the world wealthier still.
Tragically, the Chinese perceived the spectacular image of large-scale development and have attempted to emulate Robert Moses's approach with large construction projects, continuing to limit the intellectual and economic freedom on which economic development depends. Equally sadly, Americans lost sight of the reason for their success, and passed laws and regulations, and imposed punitive taxes, that have inhibited entrepreneurship, slowing American economic progress, even as they have increasingly provided welfare payments to incompetent bankers, real estate developers, academics and Wall Street stock jobbers who do not produce wealth.
This country and China have squandered resources in stupid ways. The bubble will burst as all credit bubbles do. America may have enough resources to reassess its errors. The Chinese likely do not, and many there will be hurt.
The way that America did succeed in developing its economy was entrepreneurship. Freedom of enterprise not only permitted entrepreneurial genius to innovate here, but also drew entrepreneurial geniuses from other countries. For instance, Nikola Tesla came to the United States because Europeans refused to invest in his concept of A/C electricity. Thomas Edison, Jonah Salk and an endless list of homegrown and immigrant innovators came here because of American freedom. But a long list of social democrats, media pundits, quack academic economists and socialists have done all they can to destroy America's freedom.
The development that occurred because of Jay Gould, Robert Moses and Bruce Ratner, the successor to the governmental welfare approach to business, is not the development that made America a great country. Rather, America became a great country in spite of Jay Gould, Robert Moses and Bruce Ratner. In the case of Robert Moses, the public housing on which he squandered billions of dollars and was supported by the New York Times caused massive increases in crime, destruction of neighborhoods and the near-bankruptcy of New York City in the mid 1970s. Jay Gould's and his contemporaries' railroads were incompetently run and cost the nation far more than they should have. Despite the massive tax on innovation that corrupt government support for business has posed, the US surged ahead because of the innovation of men like Edison and Tesla. The entrepreneur, free of government impediment and government welfare subsidy, thinks of ways to meet consumer needs and so makes himself wealthy and the world wealthier still.
Tragically, the Chinese perceived the spectacular image of large-scale development and have attempted to emulate Robert Moses's approach with large construction projects, continuing to limit the intellectual and economic freedom on which economic development depends. Equally sadly, Americans lost sight of the reason for their success, and passed laws and regulations, and imposed punitive taxes, that have inhibited entrepreneurship, slowing American economic progress, even as they have increasingly provided welfare payments to incompetent bankers, real estate developers, academics and Wall Street stock jobbers who do not produce wealth.
This country and China have squandered resources in stupid ways. The bubble will burst as all credit bubbles do. America may have enough resources to reassess its errors. The Chinese likely do not, and many there will be hurt.
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