Friday, February 21, 2014

China: Globalization's Greatest Fool

Japan already tried to export their way to prosperity, and in terms of creating a sustainable economy, it didn't work. The more countries that try it, the less successful they will be. The last one into a Ponzi Scheme is by definition the greatest fool, and in terms of globalization that would be China...

The last fool in doesn't get paid
What has China gotten in return for becoming the developed world's sweatshop?
  1. Staggering amounts of pollution: Literally all of the developed world's industrial pollution was outsourced to China
  2. An $.80 minimum wage
  3. Workers who have to sign contracts that they won't commit suicide: I assume that the true counter-party to these contracts are the workers' families, in the event they are abrogated
  4. Trampolines installed around factories to thwart suicide attempts
  5. Profit margins 1/30th that of their western corporate counter-parts
  6. Untold numbers of over-built and empty "ghost" cities
  7. An internal economy which itself is a massive Ponzi Scheme consisting of billionaires at the top, some errand-boys in the middle and the vast majority at the bottom. 
  8. And of course, multi-trillions in unsecured foreign debt which will be eventually worthless but can't be sold without causing a credit market melt-down.

Japan Already Tried That And It Didn't Work
When Japan tried to export its way past the U.S. in the '70s and '80s they ended up with a one sided economy - supply with no demand. In fact when China came along in the early 1990s they cannibalized much of Japan's exports aka. demand. After all, Globalization was only ever about who could produce the exact same thing just a bit cheaper. So then of course, Japan's economy went sideways for the past 25 years straight sustained solely by unprecedented money printing and now empty IOUs equating to 200% of GDP. However, at least the Japanese got decent wages out of it, as their wages equalized and then surpassed U.S. wages. China's wages, except for the tiny minority who are now leaving the country in droves, have remained at a Third World level, as China now has to fend off the Philippines, Vietnam, Thailand etc. in this contest for who can endure the lowest wages and worst working conditions to the benefit of multinational profit margins.

Borrowing Cheap Money To Gamble
I just read this article on ZH from Bank of America telling me that all of this cheap money doled out to speculators is likely going to end badly. You don't say. The fact is, we don't need Bank of America's faux MBA "geniuses" showing up five years into this ludicrous gambit waving around capital flows telling us that the impossible is not possible. Printing money to inflate insolvent risk assets was always going to end extremely badly with guaranteed probability. Even the question of where it begins is not that relevant. The entire global economy is now 100% correlated. It will start in one corner in the world and spread globally from there. Everyone outside of Antarctica and Cuba will be affected by the great "unwind". 

They still don't get it
Still, it's highly notable that even at this late juncture, today's self-nominated "best and brightest" still haven't figured out that the root cause of this latent risk is globalization itself. This primary fact that the consumption-oriented lifestyle could never scale across all of China much less the rest of the world, so it was always a Ponzi Scheme. It's impossible for China to become the next U.S.A. It's even impossible for the U.S.A. to become the next U.S.A.

If anything the MBAs at Bank of America will no doubt be some of the least prepared by the rapidity and violence of the unwinding and the ensuing global bank run which we all know will make Lehman seem like a picnic. 

Because if they truly fully understood the implications of their own data, they wouldn't be working at Bank of America in the first place. That would be like standing in the World Trade Center circa 2001 discussing an impending attack on the World Trade Center.

P.S. Everything Is For Sale In the Idiocracy
Like the Bank of America types, this dude's underwear is going to be mighty stained when the full implications of what he is "selling" finally sink in i.e. after it actually occurs. 

Obama and the UN are Going to Take Over the World:

It gets better...
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