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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Bill Buckler
January 28, 2010
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Inside China – And Japan
China Swells – Japan Implodes

Over the past two weeks, China has hit world number one status in three different but related areas. First, it was announced on January 16 that China’s foreign exchange reserves had swelled by a record 23 percent in 2009 to reach the equivalent of $US 2.4 TRILLION, by far the highest in the world. Several other equally mind-boggling numbers were announced in tandem. Over 2009, Chinese banks extended a total of 9.59 TRILLION Yuan (just over $US 1.4 TRILLION) in new loans. As a result of this lending orgy, China’s M2 money supply numbers are stratospheric. The annualised increase in December 2009 was 27.7 percent, following on from a record increase of 29.7 percent in November.

Second, China has overtaken the US as the world’s largest auto maker as 2009 auto sales jumped 46 percent to hit 13.6 million vehicles. By comparison, US auto sales slumped by 21 percent to 10.4 million, the worst result since 1982. The US has been the number one auto maker in the world for more than 100 years. Not any more. And China’s auto sales are still accelerating. The December 2009 figure was up 92 percent on December 2008.

Third, China has overtaken Germany and become the world’s largest exporter. Chinese December exports leaped 17.7 percent year-on-year, giving a total for 2009 of the equivalent of $US 1.20 TRILLION. Germany’s equivalent figures for 2009 were 816 Billion Euros or the equivalent of $US 1.17 TRILLION. The difference? China’s annual growth is still in double figures while the German economy officially contracted by 5.0 percent in 2009.

 Add all this up and what is the sum? China had a credit expansion of 30 percent in 2009. House prices in the largest cities (Beijing and Shanghai, for example) were up 60 percent plus in 2009. On January 20, Chinese banking authorities ordered banks to confine lending for 2010 to 7.5 TRILLION Yuan, down 21.8 percent from official 2009 levels. This order came after Chinese banks lent 600 Billion Yuan in theWEEK of January 11-15 (multiply THAT by 52). The attempted transition from an export to a consumer led economy has led to a blowout in debt and money supply reminiscent of Japan at the end of the 1980s and in excess of anything the US experienced at the height of their stock and real estate bubbles.

The World’s Biggest Debtor - Japan:

Go back and read the quote with which we began this issue of The Privateer. The biggest sovereign debt accident waiting to happen in the world is Japan. The reason is simple. The global “debt bust” is only about three years old and only became unavoidably visible with the onset of the GFC in mid/late 2007. Japan’s “debt bust” is about to enter its third decade following the stock market AND property market collapse which began in the first quarter of 1990. For two decades, Japanese monetary and fiscal policy has been an open book on how NOT to “fight” recession. The rest of the world’s monetary and financial powers that be have certainly read the book but have learned nothing from it. Instead, they are making all the same mistakes that led Japan to two decades (and counting) of economic malaise.
Japan’s debt to GDP ratio is by far the worst in the world, dwarfing such picayune debt traps as the 113 percent of GDP debt ratio that Greece has been pilloried for in recent weeks. Japan’s ratio is projected at 227 percent of GDP this year and compounding. Conservative projections at current rates put it at more than 250 percent of GDP by mid decade.

For twenty years, the GARGANTUAN savings pool inside Japan has allowed the government to borrow at what amounts to a zero rate of interest. The savings are used up. Japanese households are no longer buying Japanese government bonds. Foreign investors stopped buying them years ago. Japan has two choices - stop borrowing or continue to service the debt (for a while) by selling off foreign reserves.

Ó 2009 – The Privateer

(reproduced with permission)


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