China housing gone wild

This has “big bubble” written all over it:

http://finance.yahoo.com/news/Soaring-China-home-prices-apf-3176952120.html?x=0&sec=topStories&pos=2&asset=&ccode=

These are the types of economic imbalances that happen when you have fiat currency and fractional reserve lending which leads to way too much money running around in the economy,generally in the hands of too few, which chases the prices of speculative assets up.  After all, when you have provided food, clothing, shelter, transportation, health care and entertainment to your family, what is left to do with all that excess money but to speculate?

I wish I could say this was just China being stupid but if you look at the facts, they got locked into this by US inflation.  You see, we doubled our monetary base last year in order to come up with new money that would kick the can on great depression 2.0 down the road.  What this should have done was tank the dollar relative to the Chinese Yuan but the Chinese leaders knew that a stronger Yuan would put the smack down on the Chinese export economy so they greatly increased the Yuan in circulation so that they could maintain their ridiculously low currency peg.  In other words, the US exported its inflation.  Again.  How many more times this scam will work is unknown but now you can see how $hit rolls down the side of the pyramid and the US is at the top of it.  No wonder the enlightened ones worship the pyramid.  They understand that, just like in ancient Egypt’s massive use of slaves, the pyramid is the key to stealing a person’s labor.

A depression by any other name

“…for the first time since the Great Depression, Americans took more aid from the government than they paid in taxes.”

http://www.washingtontimes.com/news/2010/mar/01/americans-reliance-on-government-at-all-time-high/

That’s pretty sobering IMO.  As you can see, our taxes are far too low to support the spending our government is doing.  Government knows that if taxes were increased to where they need to be in order to support these levels of ridiculous spending that people would not have money to pay the rent and to shop at wal-mart.  Major corporations would take a major plunge as sales fell off a cliff.  A better way (they think) is to borrow money and then spend it so that banks and corporations can show profits for a bit longer.

So what we basically did was take on trillion dollar deficits in order to keep the economic Ponzi from collapsing.  We kicked the can down the road a bit further but the end of this is fairly predictable.  We will take on as much debt as suckers will lend us and then we will, either by massive inflation or by direct means, default on the debt.  Others will default before us but default is the only way that the long running, debt based, something for nothing Keynesian con game can end.  It will not be anything new and in fact we already defaulted once when Nixon closed the gold window in ‘71.  But that was sort of a stealth default because people still had green dollars in their hands which they had been brainwashed into thinking were as good as gold.  When the next default occurs it will be a lot more obvious and it will result in shortages of a lot more things than just gasoline like it did back then.  The only thing that is not known is the timing.

FDIC now trying to push failed bank "assets" into retirement funds

“March 8 (Bloomberg) -- The Federal Deposit Insurance Corp. is trying to encourage public retirement funds that control more than $2 trillion to buy all or part of failed lenders, taking a more direct role in propping up the banking system, said people briefed on the matter.”

Time to face facts: The FDIC is broke and they are looking for a place to dump the crappy assets that they know will be coming in the door as they take over hundreds if not thousands of failed banks over the next 2 years.  So what better place to dump them than in pension funds which are managed by minions of the financial system?  That’s right, take the cash out of the pension funds and replace it with bad debt.  If this debt were any good and if it were being offered at fire sale prices then there would be a bidding war for it but there isn’t so its not.  People who have these pensions will wake up some day in the future only to find that the scammers have bled them dry.  The Wimpy Economy is showing its true face.  Anyone promised something in the future has less and less chance of receiving it every day.  Wimpy never intended to repay all those fronted hamburgers either.  If there is a way to cash out of any of these programs, the sooner the better IMO.

http://www.businessweek.com/news/2010-03-08/failed-banks-may-get-pension-fund-backing-as-fdic-seeks-cash.html

More evidence that China is a Wimpy Economy bubble just like the rest of the world

Summary:

“Many of the stimulus projects undertaken this past year have been financed, not by the central government directly, but by local governments, including cities, counties, and provinces….local governments have already accumulated RMB 11 trillion (US$ 1.7 trillion) in outstanding debt, with RMB $13 trillion (US$ 1.9 trillion) in available credit lines, belying China’s low reported levels of public debt. …these debts are supposedly guaranteed by the local governments [so] banks and other lenders tend to treat the loans as essentially risk-free.”  Top regulators in Beijing now report that “China plans to nullify all guarantees local governments have provided…”  “…their credit was worthless without the guarantee”

http://seekingalpha.com/article/192391-bloomberg-report-china-to-nullify-financing-guarantees-by-local-governments?source=email

Bottom line: China is simply playing the same game of “let’s find the greatest fool” that western banks have been playing.  They just tell people whatever they want to hear no matter how fantastical it really is because people want to believe, need to believe.  Why do these con games continue to work even after Bear Sterns and Bernie Madoff?  2 main reasons IMO: First, there is so much funny money running around that it needs to go somewhere.  Unlike real money like gold and silver, funny money is no use locked in a vault.  It needs to be out there being invested (gambled with) because unlike real money it loses value each year in aggregate and there is always the risk of a sudden and catastrophic drop in value such as happened to Iceland last year (50% devaluation literally overnight).  Their equivalent 401ks turned into 201ks with the snap of a finger and there was nothing they could do about it because their money was locked up out of their reach in a government controlled retirement system.  Sound familiar?  Money managers know that holding fiat money is like holding a hot potato.  If you hang on too long you might get burned.  

Second, too many people rely on returns from their investments in order to live.  They are either retired (think boomers) or are simply rich and count on the interest payments to provide perpetual income without the need for them or anyone in their family to work again, ever.  That may sound normal to a lot of people but it is the recipe for an unworkable economy IMO.  Nobody should be allowed to live a massive life without work – it is simply not what nature intended for us and it means that everyone else has to work harder in order to support the consumption of those who are not working.  It might be hard for most people to fathom this simple concept but in reality there is no free lunch so if someone appears to be getting free lunch then rest assured that someone else is paying for it with their work even if they don’t understand the fact.

Perhaps the most interesting aspect of this story is the fact that China appears to be telegraphing the pull out of their government guarantees at a time when most other governments are scrambling to provide additional guarantees.  IMO this probably means that China is overheating.  There is too much malinvestment happening in the country and it is creating too many bubbles.  Such bubbles raise prices on assets which makes them too expensive for the locals to purchase leading to the creation of empty mega cities and empty mega malls.  If the Chinese government does indeed nullify these guarantees it will result in a sudden stop of capital coming into that country and it might even trigger a mass exodus. 

90+% of Icelanders say "no way" to debt slavery...

It’s absolutely sickening that the bad debt of high rolling bankers/gamblers could somehow be placed at the feet of hard working people who had nothing to do with the scam and who would have won nothing had the banks won.  In other words, no chance to win, only the opportunity to lose.  This is the face of modern debt slavery:

“The deal would require each person to pay around $135 a month for eight years -- the equivalent of a quarter of an average four-member family's salary.”

http://finance.yahoo.com/news/Early-results-Iceland-voters-apf-4185401720.html?x=0&sec=topStories&pos=3&asset=&ccode=

So for the next 8 years this “deal” would consume 25% of all the wages in Iceland.  Such a deal!!  No wonder the Icelandic people are voting against this and are willing to brave the consequences.  IMO they are doing exactly the right thing.  They need to repudiate this debt and just buckle down and work hard to create products and services that people want.  In a couple years this will all be water under the bridge whereas if they agreed to pay this ridiculous debt off it would be nearly a decade in clearing up best case.  Remember, if Icelanders are stupid enough to pay this off then they will lose 25% of their buying power.  That means their economy will fall into a seriously big ditch.  Deflation will set in and salaries will plummet.  Thus, what should have been an 8 year payoff period will end up taking much longer.  Again, it amazes me that those who took the risk and invested in Landsbanki and Icebank and Kaupthing think they should be made whole for their bad investment choices.  It’s insane.

Unfortunately, Iceland is not alone here.  The Iceland story is just a miniature version of the same scam that was replayed all over the world to various degrees including the US.  If it were not for the fact that we have the world’s reserve currency which we can inflate while others are trying their best to divest themselves of it without collapsing the whole fiat currency Ponzi then I can assure you we would already be feeling major pain.  But our creditors have to treat us with more care than Iceland’s creditors are treating them because our debt is so big.  To paraphrase the old saying, if you owe the bank $100k and lose your job then you have a problem but if you owe the bank $100 million and you lose your income source then the bank has a problem.

What happens in Iceland could serve as a roadmap for many countries over the next several years.

Watch Iceland

Quick recap: Greedy “too big to fail” Icelandic banks (Landsbanki, Icebank, Kaupthing) leveraged up on risky investments and then went bust.  Faced with financial collapse of the country’s banking system, the Icelandic parliament stepped in and guaranteed foreigners repayment of the risky debt taken on by the banks.  The reason that such a ridiculous thing was credible at all was that Iceland is a debt based economy like the USA.  Nobody bought anything with cash.  Stores didn’t buy food to resell using cash, they used/use credit.  No banks=no credit=no food on the shelves even for those who have money in hand.  Such are the wages of the Wimpy Economy.

Of course, governments have no money of their own, they spend other people’s money.  Icelandic people figured out that government was going to make debt slaves of the entire population of 300,000 people in order to make their banker masters happy.  Someone else had the fun, and the common man was going to be in debt for a lifetime as a result.  The people called B.S. on this crap as they should.  As a result, the president of Iceland used his veto power on the parliamentary mandate and demanded a popular vote on the matter.  Apparently he was more afraid of the wrath of the people than of the wrath of the bankers.

As a result of the popular pushback, creditors have been offering better and better terms.  But the people didn’t rack this debt up so they don’t appear to be in any mood to pay anything no matter how good the terms are. So now the vote is imminent and Icelanders are bracing for the blowback they know will happen when they vote to default on the debt.

http://finance.yahoo.com/news/Iceland-braces-for-apf-4185401720.html?x=0&sec=topStories&pos=main&asset=&ccode=

My take on this is that the threat of not being able to get credit going forward is far worse than the reality will be.  Why?  Because as much as the creditors posture and pose, they are screwed unless they can convince people to go into debt – that’s how they make their living.  If all credit were cut off to Iceland the people would adapt and they would show the world that you really don’t need credit to live.  Worst case they would start paying for things with gold and silver coins.  The fiat currency crowd does not want this and even more to the point, cannot have working examples in the world of economies that are free from the burden of credit and fiat money.  After all, if Iceland shows that it can work then who next?  I predict that Icelandic people will vote against paying the debt back and before 2010 is finished their credit lines will be reinstated despite all the posturing and threats if they don’t agree to become lifelong debt slaves.

First documented case of plated tungsten posing as gold

It’s only a 400 gram bar but it does go to show that gold plated tungsten has been thought of by scammers.

http://www.zerohedge.com/article/german-prosieben-tv-channel-finds-500-gram-tungsten-bar-wcheraeus-gold-foundary-bank-origin