Sunday I wrote Chain reaction, Yesterday the EU hawked up two of the largest gobbetts of bail out (one for Greece one for the rest) in history and the FED opened its dollar swap lines again. All whisper of exit strategies and prudent withdrawal of liquidity were shown for what they always were – empty lies to feed to the cash-cattle public. Today that master stroke of financial genius has also been revealed for what it was.
The debasement of the euro bought nothing more than staving off the inevitable. Nothing was solved. Not one of the fundamental issues was addressed. It was a quick wank for the banks.
Yesterday a 10% rise in Paris. Today 1.5%c of it has gone. So far. London 5% rise yesterday, and a 1% fall today. If the bail out had been the solution to the fundamental problems, addressing the root causes of our crisis – there would be no drop today. Because no matter what events swirled around, we would know we had tackled the cause of the illness. But we DID NOT. And the markets, who we bailed out yesterday, know that. They know today, as they knew yesterday, that the actions our leaders took, while they made bankers richer, left us in the same shit we were in, only mired deeper.
I am not saying we won’t see slow gains. We may well do. But the dawn of a new clean. ‘mission accomplished’ financial era? No.
The net result is we now have 750 Billion euros LESS for dealing with the real issues and the events that are still going to unfold. China – remember her? So deafened by the shrieking and squealing of stuck banks that we lost sight of larger issues. One of which is that China has lost control of its property bubble and as a result will have to raise lending rates. Which will in turn knock the wind out of the economies around it. Mining stock are already down.
Now I am sure I insult the honour of the People’s Republic of China by suggesting such a thing. But I think the evidence says it is true. How many times has the Central bank raised capital requirement for banks, in order to get them to ease off on lending? How many times have they ordered, urged and begged their banks and regional governments to stop lending for property? And have they? No.
Chinese lending rose 30% FASTER than official estimates. That is 30% faster than planned and ordered. Where pray tell is the control in that?
As a consequence -and it is a direct consequence – of this property speculation, inflation is accelerating and the rate of acceleration – the second derivative – is also accelerating. Consumer Price Index 2.8% and Producer Price Index 6.8% .
The result is all Asian stock markets are down. So much for the centrality of solving the Europe debt crisis – by adding more debt! The insolvency of many European banks and the debt restructuring of some nation’s debt was NOT the central problem. It was A problem. Debt – unpaid, undeclared un-addressed is the problem. We did nothing to solve it. We made it bigger.
If China slows,as it likely will, or worse, if its bubble bursts and the Government there, then has that as its priority – and turns even more aggressively towards re-orienting its economy towards a domestic market – then we are stuffed twice over. I strongly feel the future of China is not trading with it (the export driven model) but being in it (the domestic model) Those western companies IN IT will profit. We, over here, will not. Tax avoidance and re-investment in China, will see to that.
So maybe not the melt down I wrote about. At least not for a few weeks /months yet. But A melt down still coming.
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