Developing World’s Market Bubble Set to Bring Global Depression

A.M. Freyed

In China, ghost cities are starting to pervade the landscape like some kind of cancerous growth, void of human presence … They are not abandoned towns reflecting ghosts of the past. Instead, they are large abandoned cities reflecting ghosts of times that would never come. – TopSecretWriters (5/1/2012)

China cuts reserve requirements as economy slumps … The People’s Bank of China will cut the reserve requirement ratio for banks as it moves to stabilise growth. China’s central bank said it would cut banks’ reserve requirements on Friday, after a set of disappointing trade data. Effective May 18, it will cut the reserve requirement ratio for banks by 50bp to 20%, which it hopes will free up lending and stimulate a recovery — or at least avert a hard landing. – Finance Asia (5/14/2012)

Beware Of The Massive Bubble In Emerging Markets … Amid the excitement over the rise of China, investors and economic commentators have been eagerly scouring the world for “The Next China” – or at least the next country to supply the raw materials that China needs for its boom (and construction of empty cities!) … Soaring asset prices and easy money is creating “luxury fever” as emerging market nations copy the spendthrift ways that led to the West’s downfall just a few years earlier. In its essence, the emerging markets bubble is a derivative of the commodities and China bubbles and is highly vulnerable to their inevitable popping. – Seeking Alpha (5/13/2012)

The world is facing outright depression.

The US remains mired in unemployment and price inflation. Europe, already in chaos, is on the verge of losing the euro. And most importantly, the third leg of the world’s economic stool – the BRICs – is beginning to fail.

India is in the grip of an enormous inflation. So is Brazil. China continues to slump toward the dreaded “hard landing” as its bureaucrats litter the land with enormous, empty cities. The monetary cycle has turned.

The proximate cause of the current, about-to-blossom, full-on slump is the turning of the business cycle in 2001. Gold and silver began to appreciate then. Gold was in the very low triple digits and silver was in the single digits.

Since then gold has bumped up against US$2,000 and silver has climbed toward US$50. This is entirely analogous to the 1970s when the same thing occurred. Gold finally traveled to US$800 and silver to around US$50 – as the ’80 arrived.

At that point, the cycle was controlled by Rockefeller protégé Paul Volcker who, as Chairman of the Federal Reserve, shoved short-term interest rates toward 20 percent.

This made it possible for another 20 years of paper money. But the fundamental misalignment caused by monopoly central banking still remained.

In fact, today, the world is in the grip of the greatest banking bubble ever known. Go to any big financial city and the biggest skyscrapers are usually owned by financial firms – most of which you may never have heard.

Eventually this system shall come crashing down – like unstable skyscrapers themselves. It is an unstated reality. The top men in this world are not fools.

The instability built into the system ultimately collapses it. Enter world government, or at least world money (SDRs?). Out of chaos, order …

The trick is to make it seem natural, inevitable. The EU and the US are commonly held to have slumped in 2008. This is simply a lie. The turning began in 2001. For more than a decade, the West has struggled with monopoly money malinvestment.

The top men of the world refuse to allow a recovery. They have thrown perhaps US$50 TRILLION at the world’s staggering monetary economy. They have used the financial steroids of central banking to pump up a bankrupt system.

Without government/central banking assistance, it is likely that not a single mega, Western financial entity would be around today. The system itself, with its empyrean nonsense, has spawned some US$600 TRILLION in notional derivatives.

And still the system itself limps on, printing money the way a panicked beast in the woods sprays scats. China has been collapsing for a long time, economically and the BRICs generally are in the grip of an inflationary bubble. Argentina may provide the dénouement.

Argentina’s populist leaders recently nationalized the country’s leading oil company. Almost inevitably, Argentina will face a devaluation that will destabilize the dollar economy of Uruguay – the “Switzerland of South America” and perhaps Brazil as well.

Brazil is a leading trade partner with China – and one of the ChiCom’s few, remaining partners of any size. If – or when – Brazil lowers its purchases of Chinese items, there will be literally no place for China to turn.

The paper-money sector must scream out in agony before the cycle turns. And money metals must experience a buying blow-off. But the Golden Bull of the 2000s has not yet lost traction. We know this because junior mining stocks have yet to become strongly bullish. It is the miners – cheap paper gold – that signal the end of the cycle.

The last time the cycle turned, juniors expanded in value and interest rates went to 20 percent. This time, some have suggested rates could go to 50%. And gold could go to US$5,000.

The system will likely not tolerate this.

Confiscation may be the result. Or perhaps as Chinua Achebe famously put it, “Things Fall Apart.”

The old men know this, too. The only thing they apparently didn’t account for – a grievous error – was the Internet itself. And this may finally kill the conspiracy to erect global governance.

Depression, we may have. But the full-scale erection of a global state with a global central bank and global money is by no means preordained. Chaos is possible, even probable. But as for the ultimate end game … well, perhaps the ‘Net has exposed it.

Buy gold. Buy silver. Buy farmland. Plant a garden. Dig a well. Build a power source. Stay online (at least anonymously). And good luck.

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