Precisely a year ago, a summary report by Fitch shone the first, if relatively weak, light on the massive Chinese securitization industry which had for years allowed the country to fund its housing bubble without forcing the banks to actually take much if any of the loan risk associated with this unprecedented expansion. At the time of the Fitch report, the securitization discrepancy was not deemed to be excessive and at about RMB 1 trillion in annual issuance it was promptly swept under the rug. Nonetheless the key statement remained: "Fitch believes the vast majority of these transactions are not publicly disclosed by Chinese banks, and few, if any, traces of the loans remain in financial statements." More recently, and long overdue, Moody's took a refresh look at the same problem and on July 4 released a rather disturbing report which found "that the Chinese audit agency could be understating banks' exposures to local governments by as much as RMB 3.5 trillion." At 10% of GDP, the number sure is starting to get larger. Today we present what we believe is the most comprehensive report we have seen to date on the matter of the Chinese "Shadow Banking" industry courtesy of SocGen. For those who enjoy putting things into perspective, SocGen quantifies the total shadow banking system in China to be as large as RMB10 trillion (or 55%, of the Total Social Financing of RBM18 trillion): nearly USD1.5 trillion. While the number is not massive (considering that the most recent corresponding shadow banking number for the US is well higher at about $16 trillion), it keeps increasing as a portion of GDP. Why is this important? Because as SocGen's Wei Yao says, "The currently unsupervised development of the informal financing market delays the intended impact of monetary policy tightening, but adds to the risk of precipitating a liquidity crunch of the entire financial system later." So it this Chinese shadow banking system a potential monetary time bomb, destabilizing the PBOC's efforts at normalization and adding materially to systemic risk? Read on.
Saturday, July 23, 2011
Lindsey Williams - TCT Radio with Kevin Gallagher 05 July 2011
tonight on Time Out Kevin talks with Minister, and patriot Lindsey Williams on current events and what we can expect in the future. Lindsey has a unique advantage in that he was once the chaplin to some very powerful men who have continued to let details out about the elites agenda. Join Kevin for a most interesting night with guest Lindsey Williams
Get Ready for a 70% Marginal Tax Rate
President Obama has been using the debt-ceiling debate and bipartisan calls for deficit reduction to demand higher taxes. With unemployment stuck at 9.2% and a vigorous economic "recovery" appearing more and more elusive, his timing couldn't be worse.
Two problems arise when marginal tax rates are raised. First, as college students learn in Econ 101, higher marginal rates cause real economic harm. The combined marginal rate from all taxes is a vital metric, since it heavily influences incentives in the economy—workers and employers, savers and investors base decisions on after-tax returns. Thus tax rates need to be kept as low as possible, on the broadest possible base, consistent with financing necessary government spending.
Second, as tax rates rise, the tax base shrinks and ultimately, as Art Laffer has long argued, tax rates can become so prohibitive that raising them further reduces revenue—not to mention damaging the economy. That is where U.S. tax rates are headed if we do not control spending soon.
The current top federal rate of 35% is scheduled to rise to 39.6% in 2013 (plus one-to-two points from the phase-out of itemized deductions for singles making above $200,000 and couples earning above $250,000). The payroll tax is 12.4% for Social Security (capped at $106,000), and 2.9% for Medicare (no income cap). While the payroll tax is theoretically split between employers and employees, the employers' share is ultimately shifted to workers in the form of lower wages. (more)
Escape from America
Recently I was surfing the internet and reading some of my favorite writers and thinkers when something dawned on me. I read articles or interviews with the following people - all of whom I respect and enjoy their viewpoints - in approximately the following order:
- Marc Faber, The Gloom, Boom and Doom Report
- Doug Casey - Founder, Casey Research
- Jim Rogers - American investor and author
- Jim Willie - Hat Trick Letter
- Dudley Baker - PreciousMetalsWarrants.com
- Fred Reed - Author
Can you name something which they all have in common?
If you said that they are all top writers or speakers about free markets and/or precious metals you'd be correct. But that isn't their only similarities.
They also all have expatriated from their country of origin. After having read seven articles in a row I realized that every person I was reading has already defected from the USSA or other similar western countries.
Jim Rogers lives in Singapore. Marc Faber lives in Thailand. Doug Casey lives in numerous countries but spends most of his time in Uruguay and Argentina nowadays. Jim Willie in Costa Rica and Dudley Baker and Fred Reed both live in Mexico, as do I.
The next article I happened to come across was this story regarding Jesse Ventura entitled, "Ventura Threatens to Vacate US Over TSA Groping". Ventura already spends much of the year in Mexico but is saying that if his case against the TSA is thrown out of court he will expatriate permanently.
It is interesting, also, where many of these like-minded people are going. They've all gone to either Latin America or Asia. In this blog I've stated many times how I believe those two areas are the places to be for the future.
Life is Better Almost Anywhere Else
There are not many countries in the world more oppressive of liberties than the US. Countries like North Korea, Cuba, Myanmar and Belarus are the type of countries that are actually worse than the US, but most places are better, certainly in terms of lifestyle.
If you've lived your whole life in the US and never really visited any foreign countries you are practically the equivalent of someone who lives in North Korea. Most of the information you have received is from the controlled media feeding you propaganda and if you do go to a country like Argentina, Mexico or countless others, you will be shocked at what you are allowed to do.
And, because there aren't millions of different rules, regulations, taxes and laws being enforced at all times you will be amazed at just how nice life can be! You might not even need to take Prozac or gulp down greasy fast food and sugary sodas just to get you through your day.
Galt's Gulch
Just like in Ayn Rand's great book, Atlas Shrugged, many of the US and western world's brightest and most industrious are leaving at a rapidly increasing rate. And, just like in the book, at least some of them are gravitating to the same enclave, in northern Argentina.
It is the brainchild of Doug Casey and an amazing place. I will be returning from November 1-13 this year for their bi-annual event. If you have the interest or ability it is something I highly recommend checking out. You can get more information here.
If that is too far from home or too expensive the cheaper version in Mexico is here in Acapulco: http://acacondos.com.
Time is Running Out to Escape
Since 2009 we've been in the eye of the hurricane. The Federal Reserve printed an unprecedented amount of new dollars to buy a few more years of perceived prosperity but now the bill is coming due. As early as August 2 we could see the US Government default on its debt - an event that would have massive repercussions and would quickly lead to depression conditions never before seen in the US. And, if they do raise the debt ceiling it will usher in something even worse - hyperinflation and a complete collapse of the basis of US society.
In either case there will be millions impoverished and thrown into the streets along with a massive increase in violent crime, riots, famines and chaos.
We are about to hit the trailing wall of the hurricane - it will happen this year or, at the very latest, in 2012. Once things start to collapse it will happen at speeds that will shock the world. When it happens you will not want to be in a major population center inside the US.
It will be exponentially worse than 2008 and the 1930s Great Depression. This is the big one.
Make a note of how many of the people who correctly saw this crisis coming also have already packed up and left - and look to do the same.
The Corporation - Full Movie
The Economist - July 23, 2011
HQ PDF | 92 pages | 105.14 Mb | English
The Economist is a global weekly magazine written for those who share an uncommon interest in being well and broadly informed. Each issue explores the close links between domestic and international issues, business, politics, finance, current affairs, science, technology and the arts.