THE SUCKER’S TRAIN WRECKS OF CHINA AND AMERICA

That the US markets are experiencing a Sucker’s Rally is obvious to many experienced investors.  That China’s markets are experiencing the same may not be so obvious.  Both economies are chugging down parallel tracks towards the same fate, a derailed train wreck, and for much the same reasons.

The benchmark Shanghai Composite Index has shot up over 50% since its low of November 4, and gained almost 6% in the last week alone.  There has been a world-wide deluge of news stories about how China is recovering from recession with miraculous rapidity, and is back on track towards 8% GDP growth this year.

Who knew how many folks believe in Chinese Easter Bunnies?  Evidently, even more than those who claim to see Easter Bunnies frolicking on the White House lawn portending an end to our recession and 3.5% growth by year’s end.

There were six – six – sucker’s rallies in the US stock market averaging 47% each between 1929 and 1932.  Sucker investors never tire of grasping at straws, and here we are again.  Every microgram of data that’s "not as bad as expected" is hailed as proof that "the worst is over" and we’ll soon be on a rocketship rebound to the moon.

The same sort of media cheerleading is going on regarding China – when the common reality is that the massive "stimulus" of government spending is having the same result in the US and China.  The stimulus money is not going into production and increased real wealth, but into speculation, waste, and corruption.

Neither of the recent runups in US and Chinese markets are based on increases in corporate profits, employment, or consumption.  All three fundamentals necessary for a rational bull market are running in reverse in both economies.

There is simply no way Beijing can get its economy to turn on a dime, one moment utterly dependent on massive exports selling cheaply with a devalued currency, and in an instant pivot off a continuing collapse of those exports – down 22.6% in April, deeper than 17.1% in March from those months last year – switching to a sudden salvatory increase in domestic demand.

Just as the P&L for most Chinese companies is a lie – they keep three sets of books, one for the government, one for the shareholders, and one for management – so Beijing’s rosy scenario claims for its economy is a lie.

The truth is that the Chinese economy is a house of cards built on sand. 

China has 1.3 billion people.  Most, about a billion, are at the subsistence level living on a few dollars per day.  They have no capacity to stimulate domestic consumption.  The remaining 300 or so million comprising China’s new wealthy and middle class are doing the same thing folks in the US are doing:  hunkering down, saving and not consuming.

Businesses in both countries are hunkering down for the same reasons.  When government pours money into an economy, very little of it goes to productive uses.  It gets stolen, flows down useless ratholes, ends up in the pockets of those with political pull, or is blown on investing in speculative bubbles.

Further, businesses in China have little freedom from government and bureaucratic interference, and such freedom is diminishing for US businesses by the day.

There are differences.  Beijing’s paramount goal is maintaining political power.  Zero’s Washington is focused on expanding political power – to get, in other words, the monopoly on political power that Beijing has already.

Beijing sees the way to keep its power is to steadily increase prosperity among an ever-increasing share of the population.  This is very hard to do, combining communist power with capitalist markets, but Beijing was able to via conning the US into accepting its mercantilism (they can sell their stuff to us, we can’t sell our stuff to them).

That game is over, and they can’t figure out an alternative strategy fast enough to prevent a train wreck.  However – they are at least trying to figure out a way to increase prosperity.  It is the exact opposite with Zero and the Dems.

Even the hi-tech wizards and political idiots of Silicon Valley who backed Zero to the hilt now understand that he is conducting a War on Business.  A non-stop deluge of more taxes, more rules, more regulations, more controls, more stifling of entrepreneurial incentives, a never-ending grasp for more fascist power.

There is no possible way for the American economy to rebound, for it to avoid a train wreck, when the President of the United States is determined to destroy it.

With Zero, the liberal-socialist mentality is naked and visible for all to see.  This mentality is totally unconcerned with wealth creation, of how wealth and prosperity is created.  It looks upon man-made wealth as an unowned natural resource there for the taking.  It is the mentality of a bandit who makes a "living" robbing caravans crossing the desert, stealing the property and wealth of those who produced it.

(This, incidentally, is the way the Koran depicts Mohammed making a living, as a bandit chieftain robbing caravans.)

All the Zerocrats can think of is how to steal, not to produce.  The Worship of Zero by the media is giving them carte blanche, to run amok destroying America’s capacity to produce, the greatest capacity in world history.

And they will continue to run amok, until businessmen stop being sniveling begging cowards and stand up like men – like French businessman Thomas Le Gendre (1638-1706).

It was during the reign of Louis XIV (1638-1715).  Louis’ Finance Minister Jean-Baptiste Colbert was strangling the French economy with a stifling profusion of edicts and restrictions.  In 1680, Le Gendre and a group of prominent Parisian merchants went to see him.  Colbert patronizingly asked them, "How may the French state be of best service to you?"

To which M. Le Gendre responded, "Laissez nous faire."  Leave us alone.  Get the hell out of the way.

Get out of America‘s way: that’s the message American businessmen should be sending to Washington.  At least they have the freedom to do so.  They sure don’t in China.

Yet China’s train wreck is likely to be less severe and take less time to repair than America’s.  The one word reason:  hyper-inflation.

It’s a total toss-up as to which is more mind-boggling:  that the Feds have created trillions and trillions of dollars out of thin air, or that the taxpaying public isn’t murderously enraged by their doing so, demanding that all government officials responsible be tarred, feathered, and lynched.

Maybe it’s because a trillion is incomprehensible to most people.  Try this.  Suppose you got an enormous inheritance that allowed you to spend a dollar a second.  You could thus spend $3,600 an hour, $86,400 a day, day in-day out.  In about 11½ days, you would have spent one million dollars.

If you keep that up, spending $1 million every 11½ days, it will take you over 31 years to spend a billion dollars.  At that rate, how long will it take you spend one trillion dollars?

31,000 years.

That folks at the Fed have no comprehension of this was made obvious when Congressman Alan Grayson – a Democrat (!) from Florida – wiped the floor with Federal Reserve Inspector General Elizabeth Coleman in a Congressional Hearing last week (5/06).

Ms. Coleman is the person responsible for determining where all the trillions and trillions of Fed funny money has gone.  You won’t believe how cluelessly incompetent she is as you watch the YouTube video of her testimony:

Pile on top of this Zero proposing and the Dems voting for a federal budget with a $1.8 trillion deficit – which will be vastly larger because it’s based on a pathologically optimistic GDP of 3.5%.  US GDP will be minus 3.5% by year’s end, at least.

There’s almost no way to describe the magnitude of the train wreck Engineer Zero is heading us towards.   China’s is going to be nightmarish.  Ours is going to be cataclysmic.

There is no way to stop or prevent this.  All you can do – what you must do – is get out of its way.  TTP is here to help you do so.  Participate in the Plan B discussions in the Forum, and in the new TTP Social Network (click on the icon in the left side bar).  Get out of dollars and into gold (or foreign currencies, almost any of which will be better than dollars).  Buy junk silver, ammo, and food. 

We’ve got to save ourselves.  We can’t save America.  Not until after the train wreck.  The good news?  The train wreck is going to wipe out Liberal America.  Then out of the rubble we can build a Constitutional America, an America that will be free and prosperous once again.