Red Ponzi Ticking—-China And The Dark Side Of The Global Bubble, Part 1

Friday, August 26, 2016
By Paul Martin

by David Stockman
DavidStockmansContraCorner.com
August 25, 2016

NOTE TO READERS

I am in the throes of finishing a book on the upheaval represented by the Trump candidacy and movement. It is an exploration of how 30 years of Bubble Finance policies at the Fed, feckless interventions abroad and mushrooming Big government and debt at home have brought America to its current ruinous condition.

It also delves into the good and bad of the Trump campaign and platform and outlines a more consistent way forward based on free markets, fiscal rectitude, sound money, constitutional liberty, non-intervention abroad, minimalist government at home and decentralized political rule.

In order to complete the manuscript on a timely basis, I will not be doing daily posts for the next week or two. Instead, I will post excerpts from the book that crystalize its key themes and which also relate to the on-going gong show in the presidential campaigns and in the financial and economic arenas. Another of these is included below.

I am also working with my partners at Agora Financial on a new version of Contra Corner. More information on that will be coming later this month.

…..Donald Trump is absolutely correct that China is a great economic menace. But that’s not owing to incompetence at the State and Commerce Departments or USTR in cutting bad trade deals.

Nor is it even primarily due to the fact that China egregiously manipulates it currency, massively subsidizes its exports, wantonly steals technology, chronically infringes patents and hacks propriety business information like there is no tomorrow.

If that were the extent of China’s sins, a new sheriff in the White House wielding a big stick and possessing a steely backbone—-attributes loudly claimed by The Donald—-might be able to reset the game. After hard-nosed negotiations, he might even obtain a more level and transparent playing field, thereby eventually reducing our current debilitating $500 billion import trade with China and retrieving at least some of the millions of jobs which have been off-shored to the far side of the planet.

But as we demonstrated in Chapter 5, the world fundamentally changed in the early 1990s when Mr. Deng and Chairman Greenspan jointly initiated the present era of Bubble Finance. The latter elected to inflate rather than deflate the domestic US economy and to thereby export dollar liabilities in their trillions to the rest of the world.

At the same time, having depreciated the yuan by 60%, Mr. Deng discovered that to keep China’s nascent export machine booming he needed to run the printing presses in the basement of the People Bank of China (PBOC) red hot, thereby sopping up the massive inflow of Greenspan’s dollars and keeping China’s exchange rate pegged to the US dollar.

The Rest…HERE

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