China: Heart of the dragon

This article is from Roubini.com:

China’s economic growth model was a contributing factor in the current Global Financial Crisis ("GFC").

Under Deng Xiaoping, leader of the Communist Party from 1978, China undertook Gaige Kaifang (Reforms and Openness) - reform of domestic, social, political and economic policy. Economic stagnation and serious social and institutional woes that could be traced to Mao’s Cultural Revolution forced the change.

The centrepiece was economic reforms that combined socialism with elements of the market economy. It entailed engagement with the global economy reversing the traditional policy of economic self-reliance and a lack of interest in trade. As Robert Hart, 19th Century British trade commissioner for China, wrote: "[The] Chinese have the best food in the world, rice; the best drink, tea; and the best clothing, cotton, silk, fur. Possessing these staples and their innumerable native adjuncts, they do not need to buy a penny’s worth elsewhere."

In embracing markets, Deng famously observed that: "It doesn’t matter if a cat is black or white, so long as it catches mice." Deng also embraced a change in philosophy: "Poverty is not socialism. To be rich is glorious."

China’s economic reforms coincided with the ‘Great Moderation’ – a period of strong growth in the global economy based on low interest rates, low oil prices and deregulation of key industries such as banking and telecommunications. The boom was also based on increases in global trade and investment driven, in part, by the fall of the Berlin Wall, the collapse of the Soviet Union and integration of socialist economies into the world economy.

China’s growth model, inspired by the post-War recovery of Japan, used trade to accelerate the growth and modernisation of its economy. The economic engine was export driven growth. Special Economic Zones ("SEZ"), for example in Shenzen located strategically close to Hong Kong, were established to encourage investment and industry.

The model took advantage of China’s large, cheap labour force. The strategy benefited from rising costs in neighbouring Asian countries such as Japan, South Korea, Taiwan, Hong Kong and Singapore. China was able to attract significant foreign investment, technology and management and trading skills from countries keen to outsource manufacturing to lower cost locations to improve declining competitiveness.

China converted itself, at least parts of the country, into the world’s factory of choice. It imported resources and parts that were then assembled or processed and then shipped out again. The Great Moderation ensured a growing market for exports.

Innate conservatism, the desire to maintain Communist Party control of the domestic economy and avoid social disruption favoured partial market liberalisation. China’s need to provide employment for its underemployed population and improve its technology also favoured this strategy. China currently needs to grow at around 7-8% pa. to absorb workers entering the formal workforce each year.

The strategy was decidedly ‘trickle down economics’ as Deng himself acknowledged: "Let some people get rich first." Later, Deng would grouse: "Young leading cadres have risen up by helicopter. They should really rise step by step."

As economic momentum increased, foreign businesses invested in China to take advantage of the growth and rising living standards. Opportunities encouraged Chinese nationals living, studying and working overseas to return. As Deng astutely noted: "When our thousands of Chinese students abroad return home, you will see how China will transform itself."

Over time, a novel liquidity system also accelerated growth to staggering levels.

Liquidity Vortex

Export success created large foreign reserves that now total over $2 trillion. These reserves became the centre of a gigantic lending scheme where China would finance and thereby boost global trade flows.

Dollars received from exports and foreign investment have to be exchanged into Renminbi.

In order to maintain the competitiveness of its exporters, China invests the foreign currency overseas to mitigate upward pressure on the Renmimbi.

As reserves grew paralleling its growing trade surplus, China invested heavily in dollars helping to finance America’s large trade and budget deficits. It is estimated that China has invested around 60-70% of its $2 trillion reserves in dollar denominated investments, primarily U.S. Treasury bonds and other high quality securities.

Chinese funds helped keep American interest rates low encouraging increasing levels of borrowing, especially among consumers. The increased debt fuelled further consumption and housing and stock market bubbles that enabled consumers to decrease savings as the ‘paper’ value of investments rose sharply. The consumption fed increased imports from China creating further outflows of dollars via the growing trade deficit. The overvalued dollar and an undervalued Renminbi exacerbated excess U.S. demand for imported goods.

In effect, China was lending the funds used to purchase its goods. China never got paid, at least until the loan to America was paid off.

The Asian crisis of 1997-98 encouraged China to build even larger surpluses. Reserves were seen as protection against the destabilising volatility of short-term foreign capital flows that had almost destroyed many Asian countries during the crisis.

The substantial build-up of foreign reserves in China and the central banks of other emerging countries was a liquidity creation scheme. The arrangements boosted growth and prosperity in China, other emerging markets and the developed world. Commodity exporters, such as Australia, benefited significantly from the increased demand for commodity and the higher prices for resources.

In 2007, unsustainable levels of debt in many economies triggered a near collapse of the global banking system that, in turn, triggered a major slowdown in growth.

The unprecedented external demand shock, with sharp decreases in consumption and investment from synchronous deep recessions in the developed world, affected the Chinese economy. The sudden and precipitous fall in exports led to a significant slow down in China’s stellar growth rates in 2008 triggering sharp declines in stock and property markets.

Job losses in export-intensive Guangdong province were in excess of 20 million migrant workers. Workers and students entering the workforce were unable to find work. Fearful of social instability, the Beijing government moved quickly to restore rapid growth.

Panicked government spending and loose monetary policies increasing available credit is currently driving China’s recovery, contributing around 75% of China’s growth of around 8-9% in 2009. In the June quarter, Chinese exports (around 35-40% of the economy) decreased by around 20% implying that the non-export part of the economy grew strongly.

In the first half of 2009, new loans totalled over $1 trillion. This compares to total loans for the full 2008 year of around $600 billion. Current lending is running at around three times 2008 levels and at a staggering 25% of China’s GDP.

The availability of credit is fuelling rampant speculation in stocks, property and commodities. Estimates suggest that around 20-30% of new bank lending is finding it way into the stock market, driving up values. The market for initial public offerings for new companies has recommenced after being closed for six months.

China’s recovery, in turn, underpinned the recovery in commodity prices and economies dependent on natural resources. In recent parliamentary testimony, Reserve Bank of Australia Assistant Governor Philip Lowe highlighted the extent to which Australia, a major trading partner of China, was reliant on Chinese demand. Lowe noted that 23% of Australia’s total exports went to China in the most recent quarter, up from 4% 10 years ago. China now also takes 80% of Australia’s iron ore exports and 20% of coal exports.

While a significant part of the importation of commodities is restocking depleted inventory, abundant and low cost bank finance combined with a deep seated fear of the long term prospects of U.S. Treasury bonds and the dollar has encouraged speculative stockpiling artificially boosting demand.

Lock & Load

Government spending and bank loans has resulted in sharp increases in fixed asset investments (over 30% up on 2008). A major component is infrastructure spending which accounts for over 70% of the Chinese government’s stimulus package. In the first half of 2009, investment accounted of over 80% of growth, approximately double the 43% average contribution over the last 10 years.

Infrastructure investment is adding to production capacity in a world with sluggish demand and major over-capacity in many industries. In the absence of sufficient domestic demand, the production may be directed into exports increasing the global supply glut and creating deflationary pressures.

Progress on shifting the emphasis to domestic consumption has been disappointing. Government incentives, in the form of rebates for purchases of high value durables such as cars and white goods, has increased consumption in the short run (up 15% on 2008). But, over the last 25 years, Chinese consumption has declined from around 50% to its current levels of 37%.

The current expansion in lending also risks creating China’s own home grown banking crisis with a rise in non-performing bank loans. The problems of bad debts from loose lending are not new. In the 1990s, similar credit expansion led to an increase in bad debts. The big state-owned Chinese banks had to be substantially recapitalised and restructured at significant cost to the State in a series of steps that ended as recently as 2004. Recently regulators have brought pressure on banks to increase capital ratios to cover the rapid growth in their loan books.

Chinese bank regulators are concerned that new lending is being used to finance real estate and stock market speculation rather than productive purposes. They have moved to try to reduce speculative lending but it is likely that the central bank will resolutely maintain its moderately loose monetary policy because of uncertainties in the external and domestic environment.

On 24 August 2009, Chinese Premier Wen Jiabao was reported as saying: "China will maintain its stimulative policy stance because the economy, far from being on solid footing, is facing fresh difficulties, … Beijing would ensure a sustainable flow of credit and a ‘reasonably sufficient’ provision of liquidity to support growth… ‘We must clearly see that the foundations of the recovery are not stable, not solidified and not balanced. We cannot be blindly optimistic…Therefore, we must maintain continuity and consistency in macro economic policies, and maintaining stable and quite fast economic growth remains our top priority. This means we cannot afford the slightest relaxation or wavering.’"

The centralised control structure of the Chinese economy has allowed rapid action to be taken to avert the slowdown in growth. In July 2009, Su Ning, Vice Governor of the Chinese Central Bank People’s Bank of China observed: "… ‘the mind and action’ of all financial institutions should ‘be as one’ with the government’s goal, and financial institutions should properly handle the relationship between supporting the economy’s development and preventing financial risks." Even if execution is not in question, the appropriateness of the policy measures and the sustainability of the recovery are unclear.

There are also concerns that Chinese statistics are unreliable and frequently manipulated by officials to meet political and personal objectives. One unexplained and nagging discrepancy is the difference between reported growth figures and electricity consumption. It is difficult to reconcile falls in electricity consumption with continued robust economic growth.

Even China’s state-controlled media has become increasingly sceptical about the accuracy of statistics. In recent polls, a high percentage of the population doubted official data.

International commentators have become concerned about the quality of the economic data. Commenting on the time taken by China’s National Bureau of Statistics ("NBS") to compile growth data, Derek Scissors, from the Washington-based Heritage Foundation, wryly observed: "Despite starkly limited resources and a dynamic, complex economy, the state statistical bureau again needed only 15 days to survey the economic progress of 1.3 billion people."

The NBS recently launched a campaign - "Statistical Feelings: We have walked together – Celebrating the 60th anniversary of the founding of New China" - to increase confidence in its work. The campaign has already produced memorable slogans and poems. "I’m proud to be a brick in the statistical building of the republic." "I can rearrange the stars in the sky because I have statistics."

The problems extend to financial information as generally accepted accounting principles are not generally accepted in China. Writing in the 17 August 2009 New York Times, Mark Dixon, a mergers and acquisition advisor in China, expressed surprise that revenue and cost gymnastics were not included as an official event at the Beijing Olympics.

Bounding Mines

China’s $2 trillion foreign currency reserves, a large proportion denominated in dollars, may have limited value. They cannot be liquidated or mobilised without massive losses because of their sheer size. Increasingly strident Chinese rhetoric reflects rising concern about the security of these dollar investments as the U.S. issues massive amounts of debt reducing the value of Treasury bonds and the currency.

China’s Premier Wen Jiabao has expressed concern: "If anything goes wrong in the U.S. financial sector, we are anxious about the safety and security of Chinese capital…" In December 2008, Wang Qishan, a Chinese vice-premier, noted: "We hope the US side will take the necessary measures to stabilise the economy and financial markets as well as guarantee the safety of China’s assets and investments in the US."

Yu Yindong, a former adviser to the Chinese central bank castigated the U.S. over its "reckless policies". He asked Timothy Geithner, the U.S. Treasury Secretary to "show us some arithmetic." At the University of Beijing, Mr. Geithner obliged indicating that the U.S. intended to reduce its budget deficit to 3% of GDP from its current level of 12% eliciting sceptical laughter from students.

China’s position is similar to that of a bank or investor with poor quality assets. China is trying to switch its reserves into real assets – commodities or resource producers where foreign countries will allow.

In the meantime, China continues to purchase more dollars and U.S. Treasury bonds to preserve the value of existing holdings in a surreal logic. On the other side, the U.S. continues to seek to preserve the status of the dollar as the sole reserve currency in order to enable the Treasury to finance America’s budget and trade deficit.

Every lender knows Keynes’ famous observation: "If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours." Almost 40 years ago, John Connally, then the U.S. Treasury Secretary, accurately identified China’s problem: "it may be our currency, but it’s your problem."

The Chinese used to refer to dollars affectionately as mei jin, literally "American gold". Chinese investments may not be the real thing – merely iron pyrite, fool’s gold.

China’s position is like that of an unfortunate who has stepped on a type of anti-personnel mine, known as a ‘bounding mine’. The mine does not explode when you step on it. Instead, it trips when you step off it as a small charge propels the body of the mine into the air where the explosive charge bursts and sprays fragmentation at a height of around 3 to 4 feet (1 to 1.3 metres). China, in building and investing its massive foreign exchange reserves in dollars and U.S. Treasury Bonds, has stepped onto the mine and it cannot step off without serious damage!

John Paulson's Hedge Fund Position (Nov 15)

Top hedge fund manager, John Paulson, position updates

Bot more shares in Citigroup (C). Now holds 300m shares @ $4.84

Sold some shares in BAC, GS, JPM in Nov

Current Holdings: CBY

The Global Oil Scam

Article from Seeking Alpha:



$2.5 Trillion - That’s the size of the global oil scam.

Goldman Sachs (GS), Morgan Stanley (MS), BP (BP), Total (TOT), Shell (RDS.A), Deutsche Bank (DB) and Societe Generale (SCGLY.PK) founded the Intercontinental Exchange (ICE) in 2000. ICE is an online commodities and futures marketplace. It is outside the US and operates free from the constraints of US laws. The exchange was set up to facilitate "dark pool" trading in the commodities markets. Billions of dollars are being placed on oil futures contracts at the ICE and the beauty of this scam is that they NEVER take delivery, per se. They just ratchet up the price with leveraged speculation using your TARP money. This year alone they ratcheted up the global cost of oil from $40 to $80 per barrel.

A Congressional investigation into energy trading in 2003 discovered that ICE was being used to facilitate "round-trip" trades. " Round-trip” trades occur when one firm sells energy to another and then the second firm simultaneously sells the same amount of energy back to the first company at exactly the same price. No commodity ever changes hands. But when done on an exchange, these transactions send a price signal to the market and they artificially boost revenue for the company. This is nothing more than a massive fraud, pure and simple.

"Traders of the the ICE core membership (GS, MS, BP, DB, RDS.A, GLE & TOT) wouldn’t really have to put much money at risk by their standards in order to move or support the global market price via the BFOE market. Indeed the evolution of the Brent market has been a response to declining production and the fact that traders could not resist manipulating the market by buying up contracts and “squeezing” those who had sold oil they did not have. The fewer cargoes produced, the easier the underlying market is to manipulate." - Chris Cook, Former Director of the International Petroleum Exchange, which was bought by ICE.

How widespread are “round-trip’‘ trades? The Congressional Research Service looked at trading patterns in the energy sector and this is what they reported: This pattern of trading suggests a market environment in which a significant volume of fictitious trading could have taken place. Yet since most of the trading is unregulated by the Government, we have only a slim idea of the illusion being perpetrated in the energy sector.

DMS Energy, when investigated by Congress, admitted that 80 percent of its trades in 2001 were “round-trip” trades. That means 80 percent of all of their trades that year were bogus trades where no commodity changed hands, and yet the balance sheets reflect added revenue. Remember, these trades are sham deals where nothing was exchanged. Duke Energy (DUK) disclosed that $1.1 billion worth of trades were “round-trip” since 1999. Roughly two-thirds of these were done on the InterContinental Exchange; that is, the online, nonregulated, nonaudited, nonoversight for manipulation and fraud entity run by banks in this country. That means thousands of subscribers would see false pricing. Under investigation, a lawyer for JPMorgan Chase (JPM) admitted the bank engineered a series of “round-trip” trades with Enron.

You can chart the damage done by Goldman Sachs and their gang of thieves by looking at commodity pricing pre and post ICE. Before ICE, commodities followed a more or less normal growth path that matched global GDP and was always limited in price appreciation by the fact that, ultimately, someone had to take delivery of a physical commodity at a set price.

ICE threw that concept out the window and turned commodity trading into a speculative casino game where pricing was notional and contracts could be sold by people who never produced a thing, to people who didn’t need the things that were not produced. And in just 5 years after commencing operations, Goldman Sachs and their partners managed to TRIPLE the price of commodities.

Goldman Sachs Commodity Index funds accounted for $60Bn out of $100Bn of all formula-managed funds in 2007 and investors in the GSCI lost 15% in 2006 while Goldman had a record year. John Dizard, of the Financial Times, calls this process "date rape" by Goldman Sachs as the funds index rolls cost investors 150 basis points of return annually ($9Bn on the Goldman funds) but GS, under the prospectus, is able to "manage our corresponding position," which means that it has to deliver a price at the end of the roll period. If Goldman can cover that obligation at a better price, they will, and GS pockets the difference. This is why we see such wild moves in the days before rollover, there are Billions riding on GS hitting their target every month.

It is not surprising that a commodity scam would be the cornerstone of Goldman Sachs’s strategy. CEO Lloyd Blankfein rose to the top through Goldman’s commodity trading arm J Aron, starting his career at J Aron before Goldman Sachs bought them over 25 years ago. With his colleague Gary Cohn, Blankfein oversaw the key energy trading portfolio. According to Chris Cook: "It appears clear that BP and Goldman Sachs have been working collaboratively – at least at a strategic level - for maybe 15 years now. Their trading strategy has evolved over time as the global market has developed and become ever more financialised. Moreover, they have been well placed to steer the development of the key global energy market trading platform, and the legal and regulatory framework within which it operates." According to Cook:

It appears to me that what has been occurring in the oil market may have been that – through the intermediation of the likes of J Aron in the Brent complex – long term funds have been lending money to producers – effectively interest-free - and in return the producers have been lending oil to the funds. This works well for as long as funds flow into the market, or do not withdraw in quantity, but once funds withdraw money from the market, there is a sudden collapse in price.

A combination of market hype, the opacity of the Brent Complex and the relatively small scale of trading of the benchmark BFOE crude oil contract enabled the long run up in prices, and several observers believe that the dramatic spike to $147.00 per barrel was the specific outcome of the collapse of SemGroup, which that company’s management subsequently blamed mainly on Goldman Sachs.

Mike Riess issued a study of "Modern Market Manipulation" in which he describes how GS, MS, DB et al have systematically created an environment that rewards those who manipulate the system, robbing the poor to send the money up they company ladder in exchange for record bonus payouts, which (by design) are the majority of their traders’ salaries:

Before the ‘80’s, there were just us traders. "Rogue" traders arrived on the scene with the large institutional participants, both private and public. Today’s companies and government marketing boards are large enough for senior management to distance itself from controversy, including market manipulation.

In a competitive, amoral environment, middle managers in these mega-organizations have the authority to hijack an institution’s reputation and the financial clout to manipulate the market—and they do. As long as they succeed, they enjoy promotions and perks and, sometimes, the fruits of embezzlement. If the manipulation unravels, the company denies any knowledge and hangs the rogue out to dry. We’ve seen this over and over again, most recently with D’Avila and Codelco, Hamanaka and Sumitomo, Leeson and Barings and Tsuda and Daiwa Bank.

The CFTC’s definition of manipulation is:

* A planned operation that causes or maintains an artificial price
* Unusually large purchases or sales in a short period of time in order to distort prices
* Putting out false information in order to distort prices.

In mid-2008 it was estimated that some $260 billion was invested in the Brent energy markets on the ICE while the value of the oil actually coming out of the North Sea each month, at maybe $4 to $5 billion at most. NYMEX trading follows a similar path with 258,000, 1,000-barrel contracts open for December delivery (258M barrels), which were traded 327,000 times yesterday alone yet, at the end of the period, less than 40M barrels of oil will actually be delivered as that is the total capacity at Cushing, Okla. - where NYMEX contract deliveries are settled. Every single one of those traders know it is not even possible for 80% of the contracts they are trading to be fulfilled - it's a joke, but the joke is on YOU!

Over the course of an average month at the NYMEX, 5 BILLION barrels of oil will be traded, with a fee being collected on every single transaction which is ultimately passed down to US consumers, yet less than 40M barrels will actually be delivered. That is just 8 tenths of 1 percent of actual demand for the product that is being traded - 99.2% of the oil transaction fees being paid by the American people do nothing more than create fees for the traders and record profits and bonuses for the trading firms!

Index Speculators have now stockpiled, via the futures market, the equivalent of 1.1 billion barrels of petroleum, effectively adding eight times as much oil to their own stockpile as the United States has added to the Strategic Petroleum Reserve over the last five years. Today, in many commodities futures markets, they are the single largest force. The huge growth in their demand has gone virtually undetected by classically trained economists who almost never analyze demand in futures markets. As money pours into the markets, two things happen concurrently: The markets expand and prices rise. One particularly troubling aspect of Index Speculator demand is that it actually increases the more prices increase. This explains the accelerating rate at which commodity futures prices (and actual commodity prices) are increasing.

Before ICE, the average American family spent 7% of their income on food and fuel. Last year, that number topped 20%. That’s 13% of the incomes of every man, woman and child in the United States of America, over $1Tn EVERY SINGLE YEAR, stolen through market manipulation. On a global scale, that number is over $4Tn per year - 80 Madoffs! Why is there no outrage, why are there no investigations? Well, the answer is the same - $4Tn per year buys you a lot of political clout, it pays to have politicians all over the world look the other way while GS and their merry men rob from the poor and give to the rich on such a vast scale that it’s hard to grasp the damage they have done and continue to do to the global economy.

CIBC Chief Economist Jeff Rubin issued a report last year that blames the current recession on high oil prices, saying defaulting mortgages are only a symptom. According to Rubin, these higher oil prices caused Japan and the Eurozone to enter into a recession even before the most recent financial problems hit. Higher oil prices started four of the last five world recessions; we shouldn’t be too surprised if they started this one also:

Oil shocks create global recessions by transferring billions of dollars of income from economies where consumers spend every cent they have, and then some, to economies that sport the highest savings rates in the world. While those petro-dollars may get recycled back to Wall Street by sovereign wealth fund investments, they don’t all get recycled back into world demand. The leakage, as income is transferred to countries with savings rates as high as 50%, is what makes this income transfer far from demand neutral.

There is NO shortage of oil. OPEC alone has 6-7 Million barrels a day of spare capacity, more than the total disruption of any single country and any two countries other than Saudi Arabia could offset. Additionaly, ICE partners Total and JPM are part of the cartel that is totally skewing the global demand picture by storing 125M barrels of oil in offshore tankers. That’s 15 days of US imports that have been "ordered" but never delivered so they show up as an extra 1Mbd of global demand, even though nobody actually wants them. Land-based storage is also bursting at the seams, with global supplies up to 61 days of total consumption (84Mbd) up from 52 days last year.

That’s 5 BILLION barrels of oil already out of the ground, in barrels and ready to go AND THEY KEEP MAKING 86M MORE EVERY DAY!!! Where is the shortage? Mainly, it is media hype pushed by "analysts" at the very firms that profit the most from high oil prices. Goldman Sachs issues bullish opinions on oil and builds large positions in oil, while it is the cartel’s job to hide oil in offshore tankers, and then sell forward all the oil, with futures contracts, locking in the high price. Of course they have their media hounds as well, most notably the Drudge Report. As noted by Goldmansachsrules:

Type in the word "OIL" inside the "Drudge Report" search engine. It returns 1,965 headlines with the word "OIL." Over the last couple years, The Drudge Report has ran 1,965 headlines with the word "OIL." Most of these articles were hosted by the worthless organizations of Yahoo, Breibart, APNews, and Reuters. The Drudge Report just creates the headline, and links it the article hosted by who ever is doing the "hyping."

Search on the word "credit crisis" and you only get 12 archived headlines. The word "bailout" yields only 268. The word "bank" returns only 568. So you have the Drudge Report hyping the oil market, because they bring it up almost 2,000 times. Unlike the "credit crisis" or "Wall Street Bailout" that actual did happen, the oil market and what did/didn’t happen between Israel/Iran is plugged 10 times more!

Of all the 1,965 articles that the Drudge Report ran with the word "OIL" in the title, most were hyping the oil market. The most notorious cases, a few times a week, were hosted by Yahoo, Breibart, and AP News. Most of these articles were plugged with the same paragraph that stated if "Israel were to attack Iran, Iran would retaliate by taking over the straits of Hormuz, the largest pathway for oil and we all know what that would do to the price of oil.

It truly takes a global village of manipulators and their lackeys to pull off a con on the scale of oil but it’s also the most profitable scam ever perpetrated on the people of this planet, as they take control of a vital resource and then create artificial shortages and drive speculative demand in order to charge you an extra dollar per gallon of gas. You don’t complain because it’s "only" $15-$20 every time you fill up your tank, but that’s what they count on and that’s where you’re wrong - it’s $20 from you and $20 from EVERY SINGLE ONE of your customers once or twice a week and $20 more your employees need just to get to work. It’s money that could be going into your business instead of a new gold bathtub for a Saudi Prince or a Goldman trader.

Global drivers consume 1.7Bn gallons of gas every single day, that $1 is $50Bn a month, a Madoff per month that is being taken away from YOU and YOUR business and the non-energy/financial businesses you invest in. Of course we can give up and invest in those sectors (we do) but that doesn’t do much for the global economy and, even as you sit here now, not doing anything, those oil profits have been plowed into the copper and gold markets and now the same Goldman energy cartel is bidding to take over you clean air (through Carbon Credit trading) and your clean water.

Maybe when they are charging you $80 a gallon for water and ten cents a breath you’ll want to do something about it. I think I’ll start right now and you can too! Here are the Email addresses and Fax numbers for all of your Senators, Congresspeople and Governors. Send this article to them and let them know you’d like to see an investigation. Take a few minutes of your time to save a few bucks on your next gallon of water!

Krugman said is “stealing” jobs from developing countries

China is “stealing” jobs from developing countries and hindering a global recovery by keeping the yuan low, Nobel laureate Paul Krugman says. “China’s bad behavior is posing a growing threat to the rest of the world economy,” Krugman, the Princeton University professor who won the Nobel prize for economics last year, wrote in an Oct. 22 New York Times article.

Harvard University Professor Martin Feldstein, the Reagan administration adviser who won the 1977 John Bates Clark medal for top economist under 40, said “China’s policy of expanding domestic spending while depressing the renminbi will lead to its economy overheating,” in a Financial Times article last month.

“Risks of asset-price bubbles and misallocation of resources amidst abundant liquidity need to be addressed,” Louis Kuijs, the World Bank’s senior economist in Beijing, said in a Nov. 4 report.

China won’t start allowing gains until the second half of 2010, says Peng Wensheng, head of China research at Barclays Capital in Hong Kong and former chief of China affairs at the Hong Kong Monetary Authority.

Chinese curency policy risks Inflating China Bubbles

Nov. 13 (Bloomberg) -- China is facing the biggest challenge to its currency policy since the start of the global recession as economists warn the peg to the dollar risks causing an asset bubble.

As recently as Nov. 9, People’s Bank of China Governor Zhou Xiaochuan said he didn’t feel much pressure to let the yuan rise, deflecting calls for an increase as exports start to recover and President Barack Obama prepares to discuss the issue in Beijing next week. China’s stance risks adding to liquidity after credit surged by $1.3 trillion this year.

China’s sales of yuan to keep it fixed to the dollar contributed to a 29 percent jump in money supply, and the peg helped spur more than $150 billion in speculative funds from overseas in the past six months.

If China keeps the peg, it will be powerless to prevent asset bubbles especially, property. In Shanghai’s downtown Xuhui district, developer Shanghai Greenland (Group) Co. paid 7.245 billion yuan for 90,000 square meters in September, a record for the city’s auctions, according to real-estate services firm Colliers International, a London- based property broker. In the eastern city of Shenzhen, home prices climbed 11 percent that month from a year earlier.

Donald Tsang, chief executive of Hongkong, said that the Federal Reserve’s policy of keeping interest rates near zero is fueling a wave of speculative capital that may cause the next global crisis.

“America is doing exactly what Japan did last time,” he said, adding that the Bank of Japan’s zero interest rate policy contributed to the Asian financial crisis and U.S.
mortgage meltdown.

“And where is the money going -- it’s where the problem’s going to be: Asia,” Tsang said. “And again you can see asset prices going up, not only in Korea, in Taiwan, in Singapore and in Hong Kong, going up to levels that are incompatible or inconsistent with the economic fundamentals.”