It's always refreshing when someone who knows their subject speaks plainly and clearly, using vivid language, especially in dealing with issues of finance, business, politics, and globalization.
Elaine Meinel Supkis is such a speaker. Give her a listen.
As we shall see at the end of today's story here, the thing that matters the most is, Hu has Sovereign Funds and Wen will he use this to buy up all US and EU assets and businesses? No banking system can run for long with out someone saving something and these someones are easy to spot in the news, they are the ones who have a profit a la capitalism or via selling important raw materials needed for the industrial process.
The US is using these things such as oil, to run around and have fun. Instead of using energy to create value-added goods that then earn a profit via selling to someone who has saved money, the system in the West has become a buck-passing party. To sell cars, we get to have discounts and 0% loans which are not really 0% but no one is supposed to notice the fine print. Indeed, we want 0% loans all the time so we can buy things without saving money at all. This means the economy hums but the tune it is humming is, 'The East Is Red.' Madame Mao's favorite ballet, by the way.
The 'gap' we are seeing in interbank rates is due to the utterly false inflation rate numbers so dear to the central bankers clashing with the reality that we must pay the piper since we have no savings anymore. The rotten 'something' in world markets is the rotting corpse of a number of currencies which are supported by fake interest rates that force people to not save but spend recklessly. We see inflation in China due to the people there earning more money and making more profits. In the US, we are like Japan, declining incomes and wretched profits unless the business is outsourcing to China, then they have big profits while driving up the trade deficits of the shocked and awed nations that want to keep playing funny money games while never saving any money.
The cure is simple here: high rates that encourage savings. This will kill the consumer golden goose but that goose is being microwaved anyway so we may as well re-establish old banking rules that have been on the books from 1933 till reckless US mis-spenders dropped back in 1974. What everyone wants right now is some way of papering over the Grand Canyon of mis-spending, free loans and reckless speculations. We want the party to resume, no clean up and no sobriety. And certainly, no savings. If we can get this restarted without saving a penny, all the better.