Guest Post by Paul Craig Roberts
In The Matrix in which Americans live, nothing is ever their fault. For example, the current decline in the US stock market is not because years of excessive liquidity supplied by the Federal Reserve have created a bubble so overblown that a mere six stocks, some of which have no earnings commiserate with their price, accounted for more than all of the gain in market capitalization in the S&P 500 prior to the current disruption.
In our Matrix existence, the stock market decline is not due to corporations using their profits, and even taking out loans, to repurchase their shares, thus creating an artificial demand for their equity shares.
The decline is not due to the latest monthly reporting of durable goods orders falling on a year-to-year basis for the sixth consecutive month.
The stock market decline is not due to a weak economy in which after a decade of alleged economic recovery, new and existing home sales are still down by 63% and 23% from the peak in July 2005.
The stock market decline is not due to the collapse in real median family income and, thereby, consumer demand, resulting from two decades of offshoring middle class jobs and partially replacing them with minimum wage part-time Walmart jobs without benefits that do not provide sufficient income to form a household.
No, none of these facts can be blamed. The decline in the US stock market is the fault of China.
What did China do? China is accused of devaluing by a small amount its currency.
Why would a slight adjustment in the yuan’s exchange value to the dollar cause the US and European stock markets to decline?
It wouldn’t. But facts don’t matter to the presstitute media. They lie for a living.
Moreover, it was not a devaluation.
When China began the transition from communism to capitalism, China pegged its currency to the US dollar in order to demonstrate that its currency was as good as the world’s reserve currency. Over time China has allowed its currency to appreciate relative to the dollar. For example, in 2006 one US dollar was worth 8.1 Chinese yuan. Recently, prior to the alleged “devaluation” one US dollar was worth 6.1 or 6.2 yuan. After China’s adjustment to its floating peg, one US dollar is worth 6.4 yuan. Clearly, a change in the value of the yuan from 6.1 or 6.2 to the dollar to 6.4 to the dollar did not collapse the US and European stock markets.
Furthermore, the change in the range of the floating peg to the US dollar did not devalue China’s currency with regard to its non-US trading partners. What had happened, and what China corrected, is that as a result of the QE money printing policies currently underway by the Japanese and European central banks, the dollar appreciated against other currencies. As China’s yuan is pegged to the dollar, China’s currency appreciated with regard to its Asian and European trading partners. The appreciation of China’s currency (due to its peg to the US dollar) is not a good thing for Chinese exports during a time of struggling economies. China merely altered its peg to the dollar in order to eliminate the appreciation of its currency against its other trading partners.
Why did not the financial press tell us this? Is the Western financial press so incompetent that they do not know this? Yes.
Or is it simply that America itself cannot possibly be responsible for anything that goes wrong. That’s it. Who, us?! We are innocent! It was those damn Chinese!
Look, for example, at the hordes of refugees from America’s invasions and bombings of seven countries who are currently overrunning Europe. The huge inflows of peoples from America’s massive slaughter of populations in seven countries, enabled by the Europeans themselves, is causing political consternation in Europe and the revival of far-right political parties. Today, for example, neo-nazis shouted down German Chancellor Merkel, who tried to make a speech asking for compassion for refugees.
But, of course, Merkel herself is responsible for the refugee problem that is destabilizing Europe. Without Germany as Washington’s two-bit punk puppet state, a non-entity devoid of sovereignty, a non-country, a mere vassal, an outpost of the Empire, ruled from Washington, America could not be conducting the illegal wars that are producing the hordes of refugees that are over-taxing Europe’s ability to accept refugees and encouraging neo-nazi parties.
The corrupt European and American press present the refugee problem as if it has nothing whatsoever to do with America’s war crimes against seven countries. I mean, really, why should peoples flee countries when America is bringing them “freedom and democracy?”
Nowhere in the Western media other than a few alternative media websites is there an ounce of integrity. The Western media is a Ministry of Truth that operates full-time in support of the artificial existence that Westerners live inside The Matrix where Westerners exist without thought. Considering their inaptitude and inaction, Western peoples might as well not exist.
More is going to collapse on the brainwashed Western fools than mere stock values.
After September 11, and given the great speculative bubble that was created during the previous decade, it seemed that the American economy was about to collapse. Then Greenspan took action by cutting down the interest rates several times. The goal was simple: to encourage American consumers to borrow and spend. The consumers’ desires would become the engine that would stabilize the system. It was a huge risk, because cutting the interest rates to almost zero, Greenspan released a flood of cheap money into the economy, which in the past led always to inflation and dangerous instability. But this time it didn’t happen. A huge consuming boom began, bigger than any other in history, without inflation. Everything seemed to remain stable and the system seemed that it could manage itself without any direct political control.
But ultimately, the reason for this unusual booming was the exact opposite. It happened due to the massive exercise of political power, from an elite thousand miles away. The Chinese government kept the exchange rate of the country at a low level. Therefore, the Chinese products became cheap and flooded America. And to pay for them, the US dollars flooded China. But rather than spend this money for the population, the Chinese leaders loaned them immediately back to America by buying government bonds. It was a perfect system of cheap goods and cheap money inflow in the US, all controlled by the Chinese political power. And that’s what created stability. From this, came an orgy of lending from banks to even most unreliable borrowers in the US. Although this time, the deregulated market had been stabilized thanks to the political intervention of China, the bankers wanted to make more money.
http://bit.ly/1U8lFER
Greetings,
I suspect that as things unravel, there will be no shortage of finger pointing and blame. The problem, as I see it, is that the American people are no longer capable of forming any rational thought. That we could come to a consensus to deal with these problems is beyond the scope of our gadget addicted dullards.
Events are now in the driver’s seat.
NickelthroweR, I think you are right. Maybe an article about if we have seen the black swan event and
the economic collapse is really upon us.Is in order? Admin?
Well Paul,
We’re not all fools. Simple truth is there is damn little we can do about it. Would be nice if you would recognize it. Instead you come off as a mouth piece for Russian and Chinese interests. Even when you do speak the truth.
Francis
More interesting is the Hang Seng data from last night (US time):
Open 21,758.62
Close 21,838.54
Reported delta: +758.15 (3.60%)
If you have a calculator handy, you can see that it’s actually +79.92
Shanghai was similar, but with a smaller “error.”
Fiat trading data?