Wednesday, February 10, 2010

Economic Warfare

We are now witnessing the opening salvos of an economic warfare between the US and China. Whether politically-motivated or just trying to err on the side of caution, China is declaring that it will start selling off the riskier US-denominated debts - those not guaranteed by the US govt/treasury. 

So the US still thinks that it can dictate what China should do. In reality, they should be very afraid of China, and listen to what the Chinese has to say, and pay attention to what the Chinese can do. The Chinese can easily screw the US by mass-selling their US-debt holdings, and stop buying US debts. It is already happening. China's US debt holdings have begun to drop last year. And now the Chinese government is getting its people to sell off more US-debts.

What this means for US: More and more dollars flooding the market (as if Helicopter Ben is not enough), and a real chance of hyperinflation. Well, even without this Chinese action, Helicopter Ben will make sure that hyperinflation happens.

Today, I read in the papers a comment by an economic Nobel Laureate Joseph Stiglitz that people are over-reacting to US debts, that the US can easily avoid debt-default just simply by printing money. Is he nuts? This is exactly the kind of Keynesian garbage that 99% of the earth's population has been brain-washed into believing. This guy is missing a point here. Sure, the US can print and print, but by doing this, they are still going to default: through inflation. Their currency will be so worthless by then.

The US will default at current trajectory. It has defaulted before. The most obvious in recent history being the default in 1971, when the US told the world that the USD is no longer redeemable for gold. The world has trusted the USD to be as good as gold, which is why they allowed the Bretton Woods system to exist in the first place. But alas, things are not to be.

The recent focus on Greece is just a distraction. Soon, people will start noticing that the US is in an even bigger hole.

China, for one, has already noticed this long ago. And they know they have the economic trump card to make US bleed massively. After such a long time, they finally declared the obvious: sell US debts.

And so it begins..

Thursday, February 4, 2010

I'm a farmer!

Just started work in an aeroponics farm today! It's a great chance to study agriculture.
Next 10 years = years for precious metals and agriculture commodities! The bull run should last even longer for agriculture.

I am also in the process of setting up a company dealing with silver bullion, with a friend. Our website - in addition to silver bullion products - will contain educational information on what money really is, how money comes about, and what the banks and the governments around the world are doing to our money in the modern world. More details will be posted later!

On another note, I've recently watched Obama's State of the Union address too. It's the same old stuff. No fundamental changes to the way the economy functions. Only on-the-surface changes which he thinks are real changes. And then he outlined some contradictory plans too: Ever-increasing spending, tax cuts for the majority of the nation, more borrowings, and at the same time talking about getting the budget deficit under control.

The US can only fund its $3.8 trillion in spending plans for this year with $2.4 trillion in tax revenues. Where will the other $1.4 trillion come from? From foreign lenders, and from the printing press. But with China already scaling back in their lendings (and starting to sell US denominated debts), and other nations following suit, the printing press will become a much more viable option.

Note that I use the word 'spending', because the US are not investing their money.

This is the madness of Keynesian Economics. Spend your way out of trouble! Too bad they will soon realise that a national budget is no different from a household budget.

It would be interesting to watch his State of the Union address again one year from now and see what he has to say.

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