brother disco stu's shocker - tuesday, page-59

Disco Stu:

Let me burst your bubble.

Chinese purchases of Italian bonds does nothing in the long term. They HAVE to participate somehow - simply because its a case of the Emperor's new clothes.

If they withdraw and don't buy, the world will smash the bond markets, yields will go through the roof and the Chinese will lose their cash. Which believe you me, at some point they'll just do that - just make the WHOLE thing a massive write off and start again.

The other alternative for the Chinese (the REAL solution to all this) is to float the yuan, and let it appreciate against all other currencies - so as to allow the US and Europe to be more competitive again and increase their GDP.

But in doing so, China will lose their competitive advantage in cheap labor and currency.

So they're just as bad a situation as anyone else. The only difference is they actually have sufficient firepower to bail out the whole world for awhile, but in doing so, they are reducing their own balance of economic power.

It's just one big ponzi scheme mate.

And judging by the amount of money FLEEING China (witness the amount of investment from Chinese nationals in Singapore, Hong Kong, Taiwan, Malaysia and Australian property and businesses) as well as note the number of listed companies with Chinese businesses ONLY propping up in the US, Australia and Singapore - you can see for yourself the amount of Chinese nationals with established businesses relocating their domiciliary to preserve their wealth.

You ask me, China's the next bubble - after gold.

The entire world needs to de-leverage.

This whole financial crisis that started in 2003 with the mortgage bubble in the US will not end until the entire planet goes back to ZERO LVR.

Every solution is just a bandaid. Doesn't fix the problem, just buries it for awhile longer.

Unless Martians magically appear and form a new Martian Investment Bank, whose sole intention is to buy ALL debt in exchange for some magical raw material from Mars that EVERYONE wants because it magically provides food, water, shelter and toilet paper at zero cost of consumption.

There is really a simple solution - deflation, after hyperinflation. But to do so, it would mean all the hard work Vampire Squids and Donut Millionaires have done in the past decade in conning their clients, governments and themselves will be for naught. Because all the millions they've made would be just reduced to nothing.

A new world order currency perhaps - pegged to units of labor. Bankers work at 1/4 units per hour and farmers work at 1.5 units per hour.

Then we can all buy stocks again. Fearlessly.

I better stop here. Scaring myself.