The further a society drifts from the truth, the more it will hate those who speak it. ... In a time of deceit, telling the truth is a revolutionary act. George Orwell

Wednesday, August 19, 2009

What did really cause the crash?

Just a speculative thought:

- could the drop in the Asian stock markets in 2008 preceding the banking crisis of September 2008, have been the real main cause of the crash rather than the American property decline?

US property is only about ~30% down from the peak where as many Chinese companies and the stocks are down way more than that!
Since the US financial oligarchy decided to pump virtually all of the new investment into Asia, since mid 1990-ties and especially after the dot com crash in 2000, the US industry has been totally starved of investment. Yet the US dollar is strong since the banking hub is in the US thus the system works exactly as in the past, generating enough profit to compensate. The manufacturing industries that backs the financial sector and the dollar, are still there owned by the financial elite the same way as before, except that the new factories have been now relocated outside of the US borders.

This situation seems very similar to the British Empire days when before the WWI Britain was investing ~100Bstg a year abroad, while the paper assets were held in London. Around early 1900-eds British pound was the world universal currency and London was the world financial hub generating enough profit to keep the pound strong, and they did not have to produce anything since they could buy everything cheaply abroad. During that time British manufacturing industry experienced its deepest decline in history, and British investors experienced some difficulties in repatriating Indian Railways and Suez Canal back to London, after 1945. They didn't have any "greenshoots" until 1980.

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09/09/2009

I should have titled it "What will really cause the crash?"

Any major natural disaster in China may now push the Chinese stock into a crash and consequently the US financial system over the edge. One (my) prediction of an upcoming gigantic wind damage and flooding in the Pearl River Delta, Hong Kong - Shenzhen - Guangzhou area springs to mind.

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What was the primary cause?

I have a theory: - US government was giving huge quantity of TBonds in return for foreign currency loans that they then used to sell off on the Forex market, to weaken other currencies and thus strengthen the US $. I think it is very plausible! It explains for example why does European Central bank and BOE hold huge TBonds reserves in spite of a relatively small size of their trade with the US!

I believe that this currency manipulation was the PRIMARY cause and the trade imbalance with China and Japan was just a SECONDARY consequence of the weakened currencies.

Most experts postulate that the trade imbalances happened first and the TBonds were exchanged as the result of those imbalances. I think it was the other way around! Trade imbalances do not appear by themselves, rather international trade of goods and services tends to balance itself out automatically, if left free.

Sunday, August 2, 2009