Wednesday, 23 March 2022 — Albert Park

By Callum Newman Editor, The Daily Reckoning Australia

[6 min read]

• The delusion of Western perception
• Communism with efficient characteristics

Dear Reader,

Understanding China is vital to understanding the world of finance. In today’s Daily Reckoning Australia, Jim Rickards begins to explain his viewpoint on China and why the Western perception of China is a dangerous delusion.

But this delusion is starting to show cracks. While China is certainly powerful, it isn’t in the way that many Western academics believe. And this only makes the threat stronger…

Make sure you keep reading to find out why.

Best wishes,

Callum Newman,
Editor, The Daily Reckoning Australia

By Jim Rickards Editor, The Daily Reckoning Australia

Dear Reader,

It’s time we tackle the most important, and possibly most dangerous, factor in the world of finance — China.

Most of what the world believes about China is not true. Growth is not strong. The yuan will not be a world reserve currency. Their future is not bright, and China will not dominate the 21^st century.

This doesn’t mean that China isn’t powerful. It is.

China has the third-largest landmass in the world, after Russia and Canada, as well as the largest population in the world (about 1.4 billion). It has the second-largest economy in the world, after the US. It is the third-largest nuclear-armed power in the world, after Russia and the US. By every conventional measure, China is a superpower and will remain so.

Still, superpower status does not automatically translate into economic success or political stability. The Soviet Union became a superpower in August 1949 when it detonated its first atomic bomb, nicknamed Joe-1. Yet it collapsed uneventfully on Christmas Day in 1991. The Soviet Union’s landmass, nuclear power, and military did not produce economic success beyond a certain middle-income status. China is facing the same conundrum today.

The delusion of Western perception

The last 30 years have seen one of the greatest political self-deceptions in history. We have witnessed the massive gap between the West’s perception of China, and the reality of China as it is. This gap is now evaporating, as the perception is discredited, and reality takes hold.

The perception was fed by elites, including Jeffrey Sachs of Columbia University, Richard N Haass of the Council on Foreign Relations, Bill Clinton, George W Bush, and many others. These elitists understood that China was governed by communists and had a horrible record of human rights abuses that collectively led to the deaths of tens of millions, through starvation and execution.

The elite view was that engagement with China would lead to gradual internal reform. If trade was expanded, cultural exchanges encouraged, and the Western education system thrown open to Chinese students, then the Chinese would see the benefits of capitalism and open discourse.

No one expected the Communist Party of China to just fade away. Instead, the expectation was that they would drop their hard line, adopt market systems, and gradually become ‘just like us’. At that point, China could join the community of nations as an equal partner, despite its authoritarian leanings. This would ensure peace and productive collaboration.

The reality was nearly the opposite. China did join the World Trade Organisation in 2001. The Chinese yuan was included in the IMF’s world money basket (the special drawing right, SDR) in 2016. Tens of thousands of Chinese students flocked to Western universities.

A visit to any Chinese government agency today will bring you face-to-face with graduates of MIT, Harvard, Stanford, Johns Hopkins, and other pillars of the US higher education edifice.

The engagement took place exactly as the elitists hoped. But the effect was the opposite of what they expected.

Communism with efficient characteristics

Instead of becoming Westernised, the Chinese became more efficient communists. Chinese students took the best of what the West had to offer in terms of technology and education and turned it to their own purposes.

The reality is that China is communist, atheistic, totalitarian, and genocidal. China’s one-child policy resulted in the deaths of 60 million baby girls — many drowned in buckets next to birthing beds — because of a cultural preference for boys.

China allows human slavery under the guise of remedial punishment and has concentration camps for political dissidents. They are systematically destroying Uyghur culture in Xinjiang province.

China permits a multibillion-dollar organ harvesting industry in which vital organs are removed from political dissidents and other prisoners without anaesthetic, to supply a waitlist of rich patients in need of the organs. The bodies of the ‘donor’ victims are then disposed of in crematoria, in a manner reminiscent of the Holocaust.

China has also grown rich by stealing Western technology, adopting Western manufacturing methods, developing some of its own technology, and piling up multitrillion-dollar reserves of hard currency and gold.

Still, the historic economic growth of the Chinese economy from 1989–2019 has not fulfilled the elitist delusion that they would become ‘just like us’. Instead, China is more communist, more ideological, and more threatening to the West than at any time since Genghis Khan. The elite vision has been discredited — although some still cling to it.

A harsh reality has prevailed.

But what does this mean for the Chinese economy?

All the best,

Jim Rickards,
Strategist, The Daily Reckoning Australia

This content was originally published by Jim Rickards’ Strategic Intelligence Australia, a financial advisory newsletter designed to help you protect your wealth and potentially profit from unseen world events. Learn more here.

By Bill Bonner Editor, The Daily Reckoning Australia

Dear Reader,

‘The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.’

Ernest Hemingway

And now we have both, inflation and war!

Any dope could see that when you lend money at below the going rate of inflation…stymie output with regulations, shutdowns, tariffs, and waste trillions of dollars…and try to make up for lost production with printing press money — you are asking for trouble. We said so (ad nauseam) in these pages.

The Fed doesn’t have many responsibilities. Controlling inflation is right up there at numero uno. Yet, not only did it fail to see the inflation it was causing…and then misdiagnose it as ‘transitory’…now, it has no idea of how to get the cat back in the bag.

Baby steps of 25 basis points — from here to eternity — will never do it. The Fed will be following inflation, not leading it.

But let’s return to our subject from the other day. The question is not what, but who is really behind the US inflation, COVID Panic, and now hysteria over the war between Russia and its former satellite?

A who’s who of war

In modern warfare, as we saw last week, the generals get their medals and sinecures. Raytheon shareholders get higher stock prices. The empire’s whole military/industrial/surveillance/think tank/university/press complex becomes richer and more powerful. So it is hardly surprising that this huge complex — about which Dwight Eisenhower warned us 60 years ago and which has only gotten richer and more powerful since — would want to get the country steamed up for war.

But while the military/industrial/etc. complex is extensive…it’s not the whole ‘who’ that is behind the obsession with the Russia-Ukraine conflict. Who else? Here’s Foreign Affairs with a hint: ‘Is Putin’s War Fortifying the Democratic Alliance’.

Yes, dear reader…there’s more to this complex…and it’s not just in the US.

Let’s begin with the natty question: Isn’t a strong, healthy US enough? Wouldn’t our leaders do well to focus on that goal rather than obsess over who misgoverns a country on the other side of the world?

Practically every day brings new threats of ‘an attack on democracy’. The 6 January riot at the Capitol…Trump’s ‘stolen election’ claims…attempts to control who votes (or how often) — and now the Russian assault on Ukraine.

But what is it that makes a democracy…or a global ‘Democratic Alliance’…so superior…so desirable?

Of course, we ‘democratic’ countries don’t invade smaller countries, do we? Well…never mind that one…

But at least we don’t have a few rich people…and a lot of poor ones. Uh…maybe that doesn’t apply either.

How about free speech? We can say what we want in the US — without fear of repercussions, right? But say the ‘wrong’ thing, and your career is over.

Hmm…at least we don’t try to put truth-tellers in prison, do we? But what about Ed Snowden and Julian Assange?

The bottom line is this, isn’t it: in our countries are democracies ‘the people’ decide the important issues, not the ruling elite?

Oops again. In the US, the president changes…the ruling party changes…but the ‘deep state’ rulers — the deciders, the influencers, the manipulators — remain the same. So do the key policies. From Bush to Obama to Trump to Biden there was a big ‘cultural’ shakeup each time…(a brouhaha led by the press)…but no real change of direction. The rich got richer. Spending increased. Debt rose. No agencies were eliminated. No programs ended. If any Deep State apparatchik lost his job…he just bided his time for the next administration!

Look, we’d be a damned fool to argue that there is no difference between Russia and the US and say, Iraq. But the differences are not always as clear and stark as we imagine.

Naming names

The masses will go along with almost any great cause. They are the taxpayers…consumers…‘cannon fodder’ for war…and ‘useful idiots’ for the whole elite agenda. Mob Man is always ready to back his leaders…and get up to mischief. Russians support Putin. Ukrainians support Zelenskyy. Americans support Biden. And Germans supported Hitler right up until the Soviets turned out the lights.

Taken into a private room…shown the facts…and all the money spent…all the programs…all the bureaucrats, do-gooders, spooks, and paper pushers…and then handed his share of the bill, the average voter would surely recoil in horror. But he still wouldn’t feel qualified to cast judgment on any agency or program. Should the Air Force build a new plane? Should hedge funds be allowed to carry forward their losses? Which side should we back in Eurasia — those who speak Russian or those who speak Ukrainian? Those questions are beyond his ken. He is a follower, not a leader. Those questions are for the elite — the experts — to decide.

But now we are wondering about the leaders themselves. Are they all as incompetent as Jerome Powell? Who are they? What do they want?

We promised to name names. And here’s one: Chelsea Clinton. She was never elected to anything. She has little expertise at anything, certainly not medicine. Nevertheless, she was recently in the news after she found it deplorable that people (Joe Rogan was whom she had in mind) should be able to earn money by giving out opinions without prior approval from her and her co-censors.

Interesting, no? She is an influencer. She’s someone whose comments the media believe are worth passing on. She’s rich. She is one of the people ‘the people’ turn to for guidance. She’s one of them — the elite, who actually control, directly or indirectly, US public policy.

So let’s take a closer look at Ms Clinton (aka Ms Mezvinsky) tomorrow.

Stay tuned...

Regards,

Bill Bonner,
For The Daily Reckoning Australia