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ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

Posts Tagged ‘central banking tyranny

The Economic Death Spiral has been triggered

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by Gordon T. Long
Posted originally May 27, 2011 
This posting has been abbreviated slightly

For nearly 30 years we have had two Global Strategies working in a symbiotic fashion that has created a virtuous economic growth spiral. Unfortunately, the economic underpinnings were flawed and as a consequence, the virtuous cycle has ended.  It is now in the process of reversing and becoming a vicious downward economic spiral.

One of the strategies is the Asian Mercantile Strategy.  The other is the US Dollar Reserve Currency Strategy. These two strategies have worked in harmony because they fed off each other, each reinforcing the other. However, today the realities of debt saturation have brought the virtuous spiral to an end.

One of the two global strategies enabled the Asian Tigers to emerge and grow to the extent that they are now the manufacturing and potentially future economic engine of the world. The other allowed the US to live far beyond its means with massive fiscal deficits, chronic trade imbalances and more recently, current account imbalances. The US during this period has gone from being the richest country on the face of the globe to the biggest debtor nation in the world. First we need to explore each strategy, how they worked symbiotically, what has changed and then why the virtuous cycle is now accelerating into a vicious downward spiral.

ASIAN MERCANTILE STRATEGY

The Asian Mercantile Strategy started with the emergence of Japan in the early 1980s, expanded with the Asian Tigers in the 90s and then strategically dominated with China in the first decade of this century. Initially, Japan’s products were poor quality and limited to cheap consumer products. Japan as a nation had neither the raw materials, capital markets, nor domestic consumption market to compete with the giant size of the USA. To compensate for its disadvantages, Japan strategically targeted its manufacturing resources for the US market.  By doing this, the resource poor island nation took the first step in becoming an export economy – an economy centered on growth through exports versus an economy like the US, where an excessive 70% of GDP is dependent on domestic consumption.

The strategy began to work as Japan took full advantage of its labor differential that was critical in the low end consumer product segment, which it initially targeted. Gradually, as capital availability expanded, Japan broadened its manufacturing scope, moving into higher levels of consumption products requiring higher levels of quality and achieving brand recognition. Success soon became a problem as the Yen began to strengthen. To combat this the Japanese implemented the second critical component of what became the Asian Mercantile Strategy template. It began to manipulate its currency by aggressively intervening in the forex market to keep the yen weak.

Further success forced Japan to move to a more aggressive forex strategy to maintain a currency advantage. It was strategically decided that Japan’s large and growing foreign reserves were to be re-invested back into the US. By buying US Agency and US Treasury debt instruments it kept the dollar strong relative to the Yen. The more successful Japan became, the more critical this strategy became. In the 80s Japan dominated global expansion as it brought US automotive and consumer electronics’ manufacturing to its knees.

By the early 90s the Japanese labor advantage was quickly being lost to the Asian Tigers because the Yen versus the Asian Tiger currencies was too strong. The Asian Tigers were following the Japanese model. The Asian Crisis in 1997 re-enforced to all Asian players the importance of holding large US dollar denominated reserves. This further accelerated and reinforced the strategy of purchasing US Treasury and Agency debt. With China’s acceptance into the World Trade Organization (WTO),  China emerged on the scene in full force. Armed with the lessons of the last twenty years, China took the Asian Mercantile Strategy to another level in its ongoing evolution.

The results were one of the largest and fastest transfers of industrial power ever to occur in history.  In ten years, China assumed the role of the world’s undisputed industrial powerhouse in the world.

The virtuous cycle further accelerated as Asia became more dominant because its reserves, reinvested back in the US, began to have a larger and larger impact. The more Asia bought US Treasury and Agency debt, the lower US interest rates were forced, allowing Americans to finance more and more consumption. The more Asia bought US securities, the stronger the US dollar was against Asian currencies, and therefore the cheaper Asian products were relative to US manufactured products. It was a self reinforcing Virtuous Cycle. The result was a staggering 46,000 factories transferred from the US to Asia over the same ten year period. The transfer set the stage for chronic unemployment and public funding problems, but it was temporarily hidden by equally massive increases in debt spending.

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Secession: An Answer to the Sovereign Debt Crisis

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by Ron Holland
Posted originally May 12, 2011

GET READY AS SECESSION IS COMING SOON TO A FAILED UNION NEAR YOU. Over the weekend, the news has been full of reports about Scotland getting ready to vote on independence from the United Kingdom after the election victory by the Scottish National Party. The UK has stated it will abide by the coming referendum but we fear the Bank of England, their central bank will not be so agreeable.

Also we hear with the usual denials, that Greece is considering withdrawing from the Eurozone due to their sovereign debt problems. The Greek leadership believes dumping the Euro and creating their own currency will allow them to inflate their sovereign debts away as well as getting the country out of recession and forced austerity from Brussels. These same Greek politicians should have thought of this when earlier receiving their big payoffs and incentives to force the nation into the EU. They will claim the motive now is patriotism to save the nation as sometimes even politicians will become patriots when necessary but we expect they see another graft opportunity.

The European Central Bank (ECB) will not be pleased with Greece because its Greek bond portfolio will suffer. Also these free-market human political actions where individuals decide their future rather than distant central banking cartels and eurocrats threatens the entire European Union. We think this is great as the EU and ECB were just a sham and power grab from the beginning for power hungry European elites not content with just pillaging their own citizens.

Solving the Sovereign Debt Crisis

Secession is the right for an area to leave a government tax jurisdiction (national boundaries) based on the will of a majority of the voters in the geographic area wishing to peacefully withdraw by democratic means and create a government more in tune and controlled by the citizens in the region.  Often just the threat to withdraw from a larger union is enough to cause the central government politicians and central banking cartel to better follow the needs and dictates of the people. But when all other political remedies fail, secession is often the final solution to an elite political and central banking tyranny which steals from the people for the benefit of the controlling Anglo-American monetary elites in many Western nations.

The establishment media avoids like the plague the only real solution to the sovereign debt crisis around the world because they are totally controlled and exist only to protect the elites which created the sovereign debt crisis in the first place.  Today democratic secession is starting to happen in Scotland and Greece and this peaceful political tool is a real alternative to forced unions like the American and European Union as well as national politicians on the take that pillage their own individual nations.

Today, most forced, arbitrary unions of nation states are ended by negotiation, democratic voting by the regional citizens involved and then a friendly and cooperative relationship with the former state. Scotland which was annexed into the British Empire by terrible wars and force of arms over hundreds of years will likely soon depart peacefully as did the old nation of Czechoslovakia split into the Czech and Slovakia Republics back in 1993.

Creating a New Currency

I fear, here in the US, if we fail to take the necessary political actions to protect our wealth now at a time of our choosing, then foreign creditors and markets will decide when the American debt and the dollar are finished. Secession is one alternative and I hope others will come up with a better solution. But citizens of every overly indebted state need to ask themselves and their political representatives a few questions:

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