The Chinese government steered prodigious amounts of debt towards real estate, and now China is paying the price. Perhaps a planned economy isn’t such a great idea after all. From Wolf Richter atwolfstreet.com:
The debt-fueled property & construction bubble that drove its growth turned into a huge explosive mess with an enormous amount of debt.
It’s mind-boggling just how important the residential property sector is to the Chinese economy, to what extent government-dictated economic growth was achieved by building more apartment towers, and it’s even more mind-boggling how much debt residential property developers have racked up, and how much household wealth is tied up in the property sector at multiple levels. Then there are the demographic headwinds the property sector has been facing for years, that are coming to the forefront. So now there is a property crisis in China that is making the US mortgage crisis of 2008 look like child’s play in terms of magnitude. The central government has been trying to deal with rampant real estate speculation and prevent it from going even more haywire and take down the financial system and the economy.Continue reading→
ANSWER: Since money drives them, it is possible that they might tax it. When the Colosseum was struck by lightning in 217 AD, repairs were expensive, and money was in short supply. Therefore in 230 AD, Emperor Alexander Severus placed a tax on pimps and both male and female prostitutes, with the stipulation that the income raised go not into the public treasury but towards the cost of restoring the Colosseum. (Imperial Lives, Severus Alexander 24.3).
It is one thing to say you will eliminate prostitution and the drug trade, but then how do you pay the girl next door even to babysit? Prostitution is legal in Amsterdam, and their red light district is a major tourist attraction. The girls have to have health certificates to work, so it is possible that they will just legalize some aspects and collect taxes.
Otherwise, this will end up like Japan, where each emperor devalued the coinage in circulation to 10% of its former value, and his new coins were then full value. After doing this a few times, the people just stopped using Japanese coins and turned to bags of rice and Chinese coins. Japan lost the ability to issue coinage for 600 years.
That is the serious risk that the West would face. My advice to China would be to keep the paper currency; the yuan could then replace the dollar and the euro and provide the basis for a black market. The Western government could outlaw cryptocurrencies or even gold, once again, as a free market. But they could not devalue the currency of a foreign nation.
The Pandora Papers leak of nearly 12 million documents
has shed further light on the secretive, mysterious world of offshore companies and trusts.
These structures — set up in
so-called “tax havens” or “secrecy jurisdictions” — are used by many of the world’s wealthiest and most powerful people and corporations to shift and store money internationally.
The toxic effects of the Fed’s relentless interest rate repression are many, but among the worst has been the absolute savaging of bank depositors.
Interest rates on 12-month CDs (under $100,000) dropped below the inflation rate in October 2009 and have been pinned there ever since.
There is no other word for this than “expropriation” — an unconstitutional taking of property from tens of millions of households that needed to keep their funds liquid and didn’t wish to roll the dice in the junk bond market or stocks.
Worse still, the resulting vast transfer of income from depositors to banks has resulted in an egregious, artificial ballooning of bank profits and stock prices.
For instance, the combined market cap of the top six US banking institution — JP Morgan, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs — has risen from $200 billion at the bottom of the financial crisis during the winter of 2008-2009, where it reflected their true value absent government bailouts, to $1.5 trillion recently.
That 7.5X gain, which was 100% orchestrated by the Fed, is an unspeakable gift to the wealthy who own most of the stocks and especially to top bank executives who have cashed-in on vastly appreciated options.
Needless to say, this massive bubble in banks and other financial stocks is unsustainable. When the Fed is finally forced to shut down its printing presses, the bank stocks will be among the first to dive into the abyss.
While this might represent condign justice from a policy and equitable point of view, the extent of the harm to everyday Americans cannot be gainsaid.
That’s because Wall Street is going for one more bite at the apple, claiming that the currently accelerating rate of inflation is good for bank stocks.
Consensus stock price forecasts for JPMorgan are up 20% by 2023 and for Goldman Sachs by 70%.
Needless to say, this is just another 11th hour lure from big money speculators looking to unload vastly overvalued stocks on unwary retail investors.
Accelerating inflation supposedly portends higher growth and loan demand, but that’s a complete humbug becausewhat we actually see in the market is stagflation.And that will cap loan demand even as it squeezes net interest margins, causing bank earnings to fall big time.
…With all the conspiracy theories that somehow the bankers are the real culprits in creating excess money supply, there has been an evolution in central banks that has finally crossed the line since 2019. The Federal Reserve was, once upon a time, responsible. The Fed was originally designed as an authority to create money, which was an elastic money supply. That made perfect sense when the Fed was designed in 1913.
Yes, the bankers owned the shares BECAUSE the Fed was actually designed to do what JP Morgan did in herding the bankers together to save the day during the Panic of 1907. Morgan convinced the bankers that if they did not chip in money to bail out the troubled banks, panic would unfold, and ALL the banks would be hit as a contagion. They listened and joined his effort to stem the Panic of 1907. The design of the Fed was to recreate what JP Morgan put together. The shareholders were the bankers because it was a bail-out fund for the bankers, and TAXPAYER money should not be used to bail out the bankers.
Democrat President Woodrow Wilson signed the 1913 Act, creating the Federal Reserve as well as the income tax.
And yet, the primary objective ofanygovernment is to increase its size and poweras rapidly as the populace will tolerate it. The only reason that they rarely do this quickly, is that they can’t get away with it. Like boiling a frog, it takes time to lull the populace into submission, bit by bit.
And, in order to make sure that the public do not figure out what’s been done to them, the news reporting becomes Orwellian in its endless repetition of a false narrative.
It is, however, true that, “You can’t fool all of the people all of the time.” Eventually, the Band-Aid peels back to reveal an infection that’s far beyond what had been generally perceived. It then falls away in layers, as increasing numbers of people become aware that they’ve been scammed – that the media is entirely corrupt and that the media’s owners – big business – have, with the enthusiastic compliance of the government, robbed them on a wholesale basis.
Well, that sounds reasonable… even beneficial. But, unfortunately, that’s not really the whole story.
When QE was implemented, the purchasing power was weak and both government and personal debt had become so great that further borrowing would not solve the problem; it would only postpone it and, in the end, exacerbate it. Effectively, QE is not a solution to an economic problem, it’s a bonus of epic proportions, given to banks by governments, at the expense of the taxpayer.
But, of course, we shouldn’t be surprised that governments have passed off a massive redistribution of wealth from the taxpayer to their pals in the banking sector with such clever terms. Governments of today have become extremely adept at creating euphemisms for their misdeeds in order to pull the wool over the eyes of the populace.
At this point, we cannot turn on the daily news without being fed a full meal of carefully- worded mumbo jumbo, designed to further overwhelm whatever small voices of truth may be out there.
Let’s put this in perspective for a moment.
For millennia, political leaders have been in the practice of altering, confusing and even obliterating the truth, when possible. And it’s probably safe to say that, for as long as there have been media, there have been political leaders doing their best to control them.