I keep watching the steady march of China towards world domination, and its
currency getting bigger and stronger until it achieves reserve status and
replaces the worthless dollar; and people around the world will say, "Fooey on
the dollar!" and I will get really nervous like I do every time some dirtbag
country starts getting uppity like they are going to begin paying us back for
the misery we have inflicted on them and their friends for the last century or
so.
And yet I eat a lot of Chinese food, which seems somehow unpatriotic, but like
most self-absorbed gluttons, I cannot stop because I don't want to, just like I
still eat tacos even though Mexico is taking over the USA, and I am uneasy
about that, too, and I walk around outdoors without an aluminum foil hat to
shield
my brains from interstellar rays and invisible CIA cameras reading my thoughts.
News.bbc.co.uk had nothing to say about how one's dietary excesses are
reflective of one's patriotism, or about any of my other weird paranoid
delusions, either, but it did say that (just as bad) up to now, "Most of
China's foreign trade is settled in US dollars or the euro, leaving exporters
vulnerable to exchange rate fluctuations" and, of course, vulnerable to all the
little bites taken by middlemen.
Now, "China has said it is to allow some trade with its neighbors to be settled
with its currency, the yuan. It means if the two parties to a trade have yuan
available, they need not enter world exchange markets to pay", which will save
them both a lot of time and money, as they can bypass all those expensive
intermediaries that each take a little bite of your action.
Now, without these parasites, the inflationary implications caused by such
cost-push factors are eliminated! Inflation goes down!
Anyway, the announcement is almost a fait accompli, as "Analysts told
Chinese media that the yuan was already being used in some South East Asian
countries and that China was happy to see such use extended", which suddenly
explains many of my unnamed fears and a lot of frightening nightmares about
being eaten by gigantic egg rolls, instead of the delicious other way around.
Well, egg rolls or not, pretty soon everybody is going to have more egg rolls,
as the Chinese are engaging in massive stimulus spending, too, just like we and
everyone else are, and "announced more measures to stimulate domestic
consumption", which included such things as "subsidies to rural households for
the purchase of household appliances and other goods, and the setting up of new
stores and distribution centers in rural areas."
Subsidizing raw consumption! Wow! Now THAT'S stimulus spending! But maybe such
heroic measures are just to take up the slack, as the Chinese are taking a
whack, which is almost poetic, which is why I wrote it that way, but also for
dark, mysterious reasons about which one can only speculate and shudder, but
mostly because the US Commerce Department announced that consumer spending in
America fell 0.6% in November, and US exports fell for a third straight month,
which is a lot, which also explains why the Chinese are taking a whack from
slack!
What slack? From Marketwatch.com we learn that the Federal Reserve reported,
"Stung by the loss of $2.81 trillion in their net wealth, US households paid
down their debts in the third quarter for the first time since at least 1952."
The actual numbers are that "As of Sept 30, households' total outstanding debt
shrank at an annual rate of 0.8% from $13.94 trillion to $13.91 trillion", the
difference being a hefty $300 billion in foregone consumption right there,
unless it was all offset by higher incomes, which it wasn't! Gaaahhh! We're
freaking doomed!
As staggering and as bewildering as to what any of this could possibly mean, it
was not until later that they reveal that when you adjust this fall in nominal
consumer spending for the effects of inflation (perhaps using the recently
revised Gross Domestic Product Deflator that shows that inflation in prices is
3.9%?), then "Real consumer spending rose 0.6%", which seems weird and
contradictory until you remember that "Everybody's lying to me and that is why
I understand nothing", and then everything makes sense again.
And that sudden clarity, that transcendental moment of total consciousness, is
when you realize that you can trust only gold, silver and oil.
You wish you could trust The Mogambo, too, but you've seen how he looks at your
wife behind your back, and you realize, "This guy's a real scumbag! But maybe
his advice about gold, silver and oil is good, which will make up for it!"
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2009, The Daily Reckoning.)
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