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“What I am about to say is true. But under this
system we are not allowed to speak the truth… Lies are required to
maintain political harmony… the Chinese regime is in a serious
economic crisis – on the brink of bankruptcy… every province in
China is Greece.” (emphasis added)
Larry Lang, Professor of Finance,
Chinese University of Hong Kong
Widely Held Opinion
about Emerging Markets has it that Asia in general, and China (with its 1.3
billion people) in particular, will be The Great Growth Engine, which
prospers while the over-indebted U.S. and Eurozone languish in the Slough of
Despond.
Indeed, that Opinion
also sees Asian economies, and especially China’s, as assisting, if not
entirely rescuing, the Eurozone and U.S., via Asia’s putative
ever-increasing demand.
Alas, it ain’t necessarily so. According to Professor Lang,
this Rosy View is an Illusion because
- The Chinese debt is 36 trillion Yuan with
interest of two trillion/year
- Official Reports of Inflation at 6.2%
are Bogus. The Real Rate is 16%.
- There is serious excess capacity in the
economy, private consumption is only 30% of economic activity, the
Chinese PMI hit a record low of 50.7 in July, 2011
- Official GDP of 9 percent is fabricated.
Real Chinese GDP has dropped 10% y.o.y.
- Tax rates are too high, the effective
business tax rate is 70% and individual tax rate over 80%
For those who care to do
the research, much of the foregoing has been amply documented elsewhere.
China does have great
overcapacity, a real estate bubble, and several insolvent or near-insolvent
provinces.
As Gordon Chang
international lawyer and Forbes.com Columnist notes:
“Car sales have decreased nearly 5% since last year…
The one thing that people say is "These Chinese leaders are so
great at economic management because they got through 2008-2009 and they had
enormous double-digit growth while the rest of us were suffering." Well
yes, they did that, but they did that at great cost.
And so for instance in 2009, the first full year of their stimulus
plan, they dumped something like $1.1 trillion into a then $4.3 trillion
economy. And so did they create growth? Yes, they did, but they also created a stock market bubble, a property
market bubble, and inflation. And they have yet to deal with the property
market and the inflation problems. Those are dislocations that they do not have the answers to. I
would rather have our economic problems than theirs any day of the week…
… of the rich and the super-rich, they
talk about leaving China… They are getting passports, they are putting
their families offshore, and this is of concern because this is a
leading indicator.”
“Gordon Chang: The Reasons For
China's Imminent Bust”
So
China is and will continue to be deleveraging (at the very least)… So
much for China’s continuing to be a Great Growth Engine so far, for
example, as consumption of Basic Building Materials is concerned.
But there is one
exception – China’s 1.3 billion (and growing by 20 million/yr.)
people will continue to consume agricultural products and that will continue
to bolster those prices.
Overall though, China
and the Eurozone, and the U.S. are all deleveraging.
And this has Bullish
consequences short to medium term for the U.S. Dollar and U.S. Treasuries.
Consider the factors
which militate in favor of U.S. Treasuries and U.S. Dollar Strength in the
short to medium term.
- Eurozone and U.S. Budget and Debt Crises
generate a Flight from Risk
- Stock Markets have been volatile and
weak, generating a flight to the U.S. Dollar and Bonds
- U.S. Savings are increasing and there is
generally a Credit Crunch
- The Euro as a currency is under attack,
and is weakening.
- A Flight from the Euro and Euro
denominated Assets is bullish for the U.S. Dollar and Treasuries
We expect the
aforementioned trends to continue for a few months.
But why has Gold not
more robustly manifested itself as a Safe Haven in all these Crises. Why has
its price declined recently?
All the foregoing
reasons plus, mainly, Cartel* Price Suppression helps explain Gold’s
recent Price Weakness.
*We encourage those who doubt the scope and power of Overt and
Covert Interventions by a Fed-led Cartel of Key Central Bankers and
Favored Financial Institutions to read Deepcaster’s
December, 2009, Special Alert containing a summary overview of Intervention
entitled “Forecasts and December, 2009 Special Alert: Profiting From
The Cartel’s Dark Interventions - III” and Deepcaster’s
July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S.
Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts Cache’
and ‘Latest Letter’ Cache at www.deepcaster.com. Also consider
the substantial evidence collected by the Gold AntiTrust
Action Committee at www.gata.org, including testimony before the CFTC, for
information on precious metals price manipulation. Virtually all of the
evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed
at www.deepcaster.com have been facilitated by attention to these “Interventionals.” Attention to The Interventionals facilitated Deepcaster’s
recommending five short positions prior to the Fall, 2008 Market Crash all of
which were subsequently liquidated profitably.
Since deleveraging in
China, the U.S. and Eurozone creates the appearance of Deflation,
Gold-as-inflation-hedge is less in demand.
But the Reality is that
Hyperinflationary Pressures trump and overwhelm deflationary pressures. Thus
we are already on the Threshold of Hyperinflation* and that is bullish for
Gold prices.
How so? Because the
inflationary impact of all the stimulus (both via
money “printing” and credit creation facilitation) provided by
The Fed, The ECB, and Eurozone Nations’ Central Banks far exceeds the
deflationary impact of all the deleveragings.
Consider the inflation
the world has experienced in food and energy in recent months. Specifically,
for example, consider the Real Numbers** for the U.S. economy.
**Shadowstats.com calculates Key Statistics the way they were
calculated in the 1980s and 1990s before Official Data Manipulation began in
earnest. Consider
Bogus
Official Numbers vs. Real
Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported November 16, 2011
3.53% 11.12%
(annualized October, 2011 Rate)
U.S. Unemployment reported November 4, 2011
9.0% 22.9%
U.S. GDP Annual Growth/Decline reported October 27, 2011
1.62% -2.89%
U.S. M3 reported November 10, 2011 (Month of October, Y.O.Y.)
No Official Report 2.62%
Note especially CPI of
11.12% -- a Hyperinflationary Threshold level. (For this reason we have
designed a High-Yield Portfolio aimed at achieving a Total Return (Gain plus
Yield) in excess of Real Inflation (See Note 1 below)).
And there are two other
ongoing developments indicating we are headed in a hyperinflationary
direction.
First, with yields
moving up to dangerous levels on French and Spanish as well as Italian Debt
the ECB will be constrained to massively print money and buy Sovereign Debt.
This is good for Gold prices.
As well, the $15
Trillion U.S. debt load is unpayable. Thus,
similarly, The Fed will have to conduct another Overt (covert QE3 is
already ongoing) QE in 2012. This too will be price positive for Gold.
In sum, short to medium
term we are Bullish on the U.S. Dollar and U.S. Treasuries, Bearish on China
(but for Agriculture demand and demand in related Key Sectors). And of course
we are Bullish on Gold, in a form which we have recommended because it is
less susceptible to Price Manipulation.
Given all the foregoing
Gold as Safe Haven with Profit Potential is increasingly attractive.
Best regards,
Deepcaster
November 23, 2011
**Note 1: Shadowstats.com calculates Key Statistics the way they
were calculated in the 1980s and 1990s before Official Data Manipulation
began in earnest. Consider
Bogus Official Numbers vs. Real Numbers (per
Shadowstats.com)
Annual U.S. Consumer Price Inflation reported August 18, 2011
3.63% 11.21%
(annualized July, 2011 Rate)
U.S. Unemployment reported September 2, 2011
9.1% 22.8%
U.S. GDP Annual Growth/Decline reported August 26, 2011
1.55% -2.83%
U.S. M3 reported August 14, 2011 (Month of July, Y.O.Y.)
No Official Report 2.44%
***Note 2: Using the above Guidelines allowed Deepcaster to make buy and sell recommendations resulting
in remarkable profits recently if acquired and liquidated when we
recommended*, approximately:
35% Profit on Double Long Gold ETN on August 23, 2011 after just 41
days (i.e. about 280% annualized!)
26% Profit on Double Long Gold ETN on August 17, 2011 after just 35
days (i.e. about 260% annualized!)
25% Profit on Gold Stock on August 8, 2011 after just 201 days (i.e.
about 45% annualized!)
38% Profit on Silver on July 18, 2011 after just 201 days (i.e. about
68% annualized!)
150% Profit on Gold Stock Calls on July 13, 2011 after just 56 days
(i.e. about 975% annualized!)
40% Profit on leveraged Short Treasuries ETF Puts on April 15, 2011 after
just 3 days (i.e. about 4800% annualized!)
30% Profit on Silver on April 6, 2011 after just 98 days (i.e. about
111% annualized!)
To read our recent article -- “Essentials for Wealth Acquisition
Acceleration”, go to www.deepcaster.com and click on the
‘Articles by Deepcaster’ Cache.
Past Profitable Performance is no assurance of future Profitable
Performance.
Wealth
Preservation - Wealth Enhancement
Financial
and Geopolitical Intelligence
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