NOTES ON THE CHINESE CRISIS

[TTPer Mike Ryan wrote a thoughtful commentary on the Forum regarding China Is Now the Epicenter of Global Risk by Ambrose Evans-Pritchard.  Several TTPers suggested we publish it as a full article.  We are happy to comply.  Thanks, Mike.]

This is in response to a question asked on the Forum, “Can anyone explain the repercussions of the global risk of China to our economy?”  Here are my thoughts.

It is risky to predict the reactions of complex systems that are actively influenced by government, especially when the primary goal of government is power for insiders and the fleecing of outsiders.

Example: The Clinton Global Initiative and its DOJ support.  Governments spend more on power and control every time there is a financial crisis.

Some thoughts:

A Chinese crisis will reduce state demand for US and Japanese debt, forcing natural interest rates up.  However, it will increase market demand for US debt as a safe(r) haven.  Results? Unknown.

Money will slush around the world like a whale in a bathtub and the financial industry will focus on arbitrage if the Fed interest rate does not follow the changing market rate. If the Fed raises official rates, then many projects and enterprises will no longer be profitable, slowing the world economy even more.

Reduced growth in China will lower commodity prices leading to social unrest in the developing countries of Africa and Latin America and more human migrations.  Saudi Arabia and Russia will be impacted significantly by the drop in petroleum prices and might consider either covert or overt military action to damage competitive oil producing regions.

Example: foreign agents might ignite massive forest fires in Fort McMurray, Canada to knock out oil sand production.  (oops-they already did that).

Or they might blow up an oil rig or two in order to cause major oil pollution, igniting an environmentalist outcry. (oops, they already did that too).

Maybe they will sabotage a pipeline (oops, that was last week in Alabama).

The House of Saud might be overthrown.  Islamic jihad might expand to include massive extermination of minorities in a Hitler, Stalin, Kims, Mao, Pol Pot sort of way. Why? Because they can and their culture feeds on brutality.

The Chinese government might try to control domestic sentiment and stimulate growth by hyper accelerating military spending.  Defense industries and universities are the biggest crony capitalists, populated with party partisans.  China will need to destroy military assets while building them at the same time in order to keep a lid on the velocity of money.  This suggests conventional hot wars with neighbors as a means of rapidly altering the Yuan in circulation.

Increased inflation in the USA will reduce business confidence and therefore capital investment.  It will reduce the purchasing power of the foodstampers, creating a fertile ground for Elizabeth Warren style Cultural Marxism.  The media will flame social unrest if Trump is elected in order to expand Cultural Marxism within the DOJ and DHS.

Empire builders within these agencies won’t let the crisis go to waste.  The war on cops will accelerate, propelling the long-term objective of the DOJ for direct federal control of all police forces in the USA.  It is interesting how the war on cops and urban riots coincide with the government authorization of domestic psyops to impact national behavior.

Just who really is behind the war on cops when the outcome is likely to be a vast increase in Executive Branch power and centralization of policing?  It sure looks like the team specializing in destabilizing banana republics is at the table. Don’t know.  Just saying.

The conflicts between the “old money” Anglophiles in the Republican party and the “new money” merit and entrepreneurial class in the party will widen and deepen.  With each financial crisis in America, since the founding, the Anglophiles are disproportionately impacted.

New money replaces old money.  Those that benefit from their listings on the social register, eastern educations, bloodlines traced to Jolly Old England, church and secret society affiliations, membership in the right clubs, patronage, and their general disdain for middle Americans tend to be replaced by less pedigreed men and women of action due to innovation.

The old money places regulatory burdens on entrepreneurs and engages in anti-capitalism activities as they try to use government to preserve their estates. The old money is already worried as evidenced by Mitt Romney’s shameful elevation of social class membership above the party and national interest in this election.

In practical terms, we might see a drift towards nationalism and competitiveness favoring new money and away from the old money’s globalism and replacement of nation states with transnational bureaucracies.  Example: Brexit.

Old money will continue to regulate the devil out of everything, as the cost of compliance is less for the biggest players (economies of scale are significant).  A Hillary win might cut loose the dogs of a regulatory war.

I believe that we are in a new age of discovery and a new industrial age based on computer code.  There will be many battles between centralizers and decentralizers over the next century.  In the end, decentralization will outperform centralization of power.

A Chinese financial crisis will be the third major battle between centralized and decentralized power since 2001, and the centralizers are throwing vastly more resources into the maintenance of the old political and theocratic systems than are the decentralizers, but with decreased effectiveness.  Example: Trump vs. Clinton advertising expenses, US Intelligence expenditures vs. the drug cartels.

The road will grow rougher for a long time.  This is the third battle in a long war as governments fight to maintain control.  Computer code is changing everything.