A new China meme emerges; They are not free enough to displace the dollar.

Jim H
By Jim H on Wed, Oct 1, 2014 - 1:33pm

Here at PeakProsperity.com, we are schooled in the art of triangulation.... or as Chris calls it, "connecting the dots".  Stated differently, when we take in lots of information and view it with an open and inquiring mind, it can lead us in new directions.. give us new insights into the world as it is.  I would also suggest that this ability to triangulate clues (and cues), both subtle and not so subtle, are the basis of what we call Intuition.  But I digress....

I believe I see a new meme being foisted upon us by our Western elites as a means to counter China's methodical drive to position the Yuan to compete with the dollar on the world stage, and I would describe it as follows;  

Sure, China has grown, and they have bought a lot of Gold, and they could buy a lot more Gold.. but they will not be able to continue on this path of economic growth because they don't have free markets and free thinkers like we do!

Here are three dots I want to connect today as we consider whether we are seeing an emergent Western propaganda theme or not;

1)      http://www.zerohedge.com/news/2014-10-01/us-secretly-egging-hong-kong-pr...

 

The mass demonstrations in Hong Kong are dramatic, indeed. And given that Hong Kong has long enjoyed a more liberal existence under British rule, protests against a more authoritarian Chinese government (at least it used to be more authoritarian) are not entirely surprising.

But Chinese officials accuse the U.S. of egging on the protests.  As the Wall Street Journal’s China Real Time blog reports:

On Thursday, Wen Wei Po published an “expose” into what it described as the U.S. connections of Joshua Wong, the 17 year-old leader of student group Scholarism.

The story asserts that “U.S. forces” identified Mr. Wong’s potential three years ago, and have worked since then to cultivate him as a “political superstar.”

Evidence for Mr. Wong’s close ties to the U.S. that the paper cited included what the report described as frequent meetings with U.S. consulate personnel in Hong Kong and covert donations from Americans to Mr. Wong. As evidence, the paper cited photographs leaked by “netizens.” The story also said Mr. Wong’s family visited Macau in 2011 at the invitation of the American Chamber of Commerce, where they stayed at the “U.S.-owned” Venetian Macao, which is owned by Las Vegas Sands Corp.

Hmmm.  That's interesting.

2)  http://www.zerohedge.com/news/2014-09-29/europe-china-start-direct-tradi...

The news march has been relentless over the last year... more and more agreements between China and other sovereigns to trade in their own currencies and ice out the dollar.  While our US monetary leaders will never let on that they are worried about this - that they cannot do so in a confidence-based system is clear - we can read into their actions.  I think they care a whole lot.. so much so that they will do anything they can to arrest the trend.  Have there been any other actions, beyond speculation above that we may be unduly influencing pro-democracy flare-ups in Hong Kong, that suggest efforts to smear China?  Here then is the last point;

3)     http://www.zerohedge.com/news/2014-09-30/why-china-hoarding-gold-alan-gr...

Gold loving, anti-paper bugs like me can get pretty excited about some of the statements regarding Gold made by Alan Greenspan in this recent Op-Ed.  But I am not pointing to that aspect of the editorial at all... rather I think the theme of this piece was clearly aimed at those who think that the current trend of China strength, growth, and monetary displacement can and will continue.  My speculation here is that this piece was no accident, but rather part of a larger, coordinated effort by our monetary/banker elite to discredit China.  Greenspan builds credibility by stating the obvious;  China has grown a lot and has bought a lot of Gold.. and Gold is still pretty good money;

    Yet gold has special properties that no other currency, with the possible exception of silver, can claim. For more than two millennia, gold has had virtually unquestioned acceptance as payment. It has never required the credit guarantee of a third party. No questions are raised when gold or direct claims to gold are offered in payment of an obligation; it was the only form of payment, for example, that exporters to Germany would accept as World War II was drawing to a close. Today, the acceptance of fiat money -- currency not backed by an asset of intrinsic value -- rests on the credit guarantee of sovereign nations endowed with effective taxing power, a guarantee that in crisis conditions has not always matched the universal acceptability of gold.

 

Beijing, meanwhile, clearly has no ideological aversion to keeping gold. From 1980 to the end of 2002, Chinese authorities held on to nearly 13 million ounces. They boosted their holdings to 19 million ounces in December 2002, and to 34 million ounces in April 2009. At the end of 2013, China was the world’s fifth-largest sovereign holder of gold, behind only the United States (261 million ounces), Germany (109 million ounces), Italy (79 million ounces), and France (78 million ounces). The IMF had 90 million ounces.

BUT... but, but, but, says Greenspan... this does not mean the trend can or will continue. 

However much gold China accumulates, though, a larger issue remains unresolved: whether free, unregulated capital markets can coexist with an authoritarian state. China has progressed a long way from the early initiatives of Chinese leader Deng Xiaoping. It is approaching the unthinkable goal of matching the United States in total GDP, even if only in terms of purchasing-power parity. But going forward, the large gains of recent years are going to become ever more difficult to sustain.

It thus seems unlikely that, in the years immediately ahead, China is going to be successful in vaulting over the United States technologically, more for political than economic reasons. A culture that is politically highly conformist leaves little room for unorthodox thinking. By definition, innovation requires stepping outside the bounds of conventional wisdom, which is always difficult in a society that inhibits freedom of speech and action.

So, leaving aside the obvious hypocrisy of the US telling other nations they should have free markets like us... Or that they should treat their protestors nicely while we literally jack-booted and pepper sprayed our own Occupy protestors out of existence, I sense a broader, coordinated propaganda play here.  Like any propaganda, there are elements of truth in it.. and I am, for now, exercising my right to free speech in a way that mainland Chinese can not, at least not easily or openly. 

But still, is our future really as bright and technologically shiny as Greenspan implies it will be?  Is China really down for the count looking forward?  Are the coincident timing of the Hong Kong protests and Greenspan's Op-Ed just an accident?  Although the Greenspan piece is ostensibly about Gold.. I don't think that is the point.  The point is to cast doubt on China's ability to continue forward on the path of developing their currency into one that rivals the dollar.  The Hong Kong protests, while clearly tapping a seam of tremendous agitation on the part of the younger generation there, also serve to highlight instability.  If this movement makes it's way to China proper...it would surely get ugly fast.  China is scary... better stick to the dollar.

P.S.  Please don't read this as a "pro-China" piece.  I am simply pointing out that the best defense of the dollar our elites are able to put up is that old chestnut, "look how bad the other guy is", rather than actually fixing our own problems, enforcing the law, and constraining our bankers. Sad.    

H/T due to the X-22 report, where I first heard about the idea that the Hong Kong protests may have US support as part of the broader currency war going on.     

      

        

 

       

  

2 Comments

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2387
Bill Holter blog from today sounding similar theme

I am not the only one connecting dots on this topic today;

http://blog.milesfranklin.com/its-all-about-the-dollar

It’s All About the Dollar!

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Sometimes seemingly unrelated news is actually joined at the hip and directly related.  For example, what does Bill Gross leaving PIMCO, China announcing “yuan for euro” direct trade and unrest in Ukraine, ISIS overrunning part of Syria and Iraq, and the recent protests in Hong Kong …have in common?  I’ll talk briefly about each and give you some clues along the way to an obvious ending.

First, Bill Gross left PIMCO last week to join Janus funds.  He started the funds over 30 years ago and had grown assets under management to the staggering number of over $2 trillion!  The vast majority of assets held are bonds or some sort of bond/interest rate derivative.  The bull market in bonds which began in 1982 and started with a 15.375% coupon, 20 year Treasury yield has run its course to almost nonexistent yields.  A simple question might be something like “what will happen to bonds when interest rates begin to rise?”  Or another, “what will happen to bond’s collateral if these low rates have created asset bubbles?” (They have, everywhere)............

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2387
Another spokesmodel mouthes the China meme

Remember, this could be either different folks thinking they see the same thing, or a more coordinated meme that is being pushed by our Western elites.  I only ask that you consider that it might be propaganda;

http://marketsanity.com/search-jim-rickards/

Jim Rickards explains what the Hong Kong protests are really about (not democracy)

Deirdre Bolton, Fox Business, Released on 10/2/14

“This has a democracy catalyst, but growth in China is slowing down, there’s enormous flight capital, the wealthy are getting their money out, it looks like a rigged system – it is a rigged system – the income inequality is getting worse. Sure, there’s a specific democratic catalyst here, but what it really represents is a lot of economic frustration, economic inequality. That’s what’s behind all of this and why it won’t go away quickly.”

“They’re going to suppress it at all costs. I’m not sure the students or the protesters understand how dangerous this is from the Communist party’s perspective.”

If you have not been exposed to the idea that the Gov't uses people like Rickard's, who have the ear of people like us, to mouth their meme's... well, I am not the first to suggest this;

http://sgtreport.com/2014/08/i-have-good-company-with-my-view-that-ricka...

All this says to me that people who are perceived as being credible keep circulating these absolutely preposterous myths. But if people want to believe the fairly tale that the United States still has all its gold safely vaulted in places like New York and Fort Knox, they are telling you that this is how all this synthetic gold has in fact been created.

That quote and the one below is from Hong Kong-based fund manager, William Kaye on King World News (LINK).

The U.S. government is essentially communicating to people through its agents that we still have all that gold in our vaults and to prove it, here is the serial number. So, if necessary, just show up with this piece of paper and we will deliver the gold.

Just like Greenspan, Rickard's suggests that China is rigged, and that they are toast.  Are they toast, or is this the next (verbal) volley in a currency war that the US have been losing badly of late? 

 

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