Wednesday, March 12, 2008

Chinese mortgage - plus ca change

Since the terminal decline of the US economy everybody has been looking to China and India as the rising economies of the world. It seems the bankers got there first. So as markets shift from a collapsing Western economy to a buoyant Eastern one, the old French proverb "Plus ca change, plus c'est la meme chose" - the more things change, the more they stay the same - seems to apply.
China has had a rough winter causing delay in food supply deliveries, which in turn caused food prices to rise. According to the Chinese National Statistics Bureau, overall inflation has reached its highest recorded level. The suggested remedies give us a clue as to what is happening. Besides the old-style communist measures of a planned economy to freeze some commodity prices, the Chinese government is also talking about the darling measure of "free market" economies: raising interest rates. They've already done so a number of times.
There is a direct correlation between inflation and interest rates, but it is not as the economics school books teach us. At the moment, only China's food prices are rising rapidly due to shortages. Once the new measures hit, the still very low inflation for other goods will also jump up.
In a healthy economy, enterprises make enough profit to pay for their raw materials and labour, and a little extra for the shareholders of a company. In an interest-based economy, they have to earn an awful lot more, because the bankers demand their pound of flesh before anyone else. Enterprises financed on loans are the reason for the ecologically unsustainable growth rates every Western government is trying to achieve. Thus the cost of borrowing has a direct effect on prices. Higher interest rates, therefore, cause inflation rather than reduce it. They only reduce it when the economy contracts and companies go broke, being sold off well below their value.
The boom and bust cycles of interest-based economies are the bankers' way of calling in the spoils. There isn't much benefit for the lender in owning a title to the fictitious money he lends - in fractional reserve banking, bank loans are hardly backed by any real collateral -, but making people mortgage their properties and then dispossessing them when they can no longer afford the payments is very lucrative for the financiers. "Mortgage" in old French means "death grip"; sadly the borrower only discovers this when interest rates go up.
So it seems the bankers as international money-lending parasites have simply moved on to a new host after realising there isn't much more to squeeze out of the Western economies they have been living off for decades.
If China wants to be the next super power, then the Chinese government would do well to rethink it's economic policy and curb the lending activities of the banks. Otherwise the Chinese government will soon be held hostage by them in the same way most governments of the world already are.

2 Comments:

At 12 March 2008 at 09:01, Blogger Lars Osterman said...

Hi there !

Enjoyable reading. You do hit the nail.

Are you familiar with the book called
"Grip Of Death" by Michael Rowbotham.

One of the best about the money scam.

Another one is dr Ellen Browns "Web of Debt".

All the best !

Lars

 
At 14 March 2008 at 15:38, Blogger Mustaqim said...

The titles you mention are excellent books, but for those who want to come to grips with how the system is run without reading, a beautifully produced audiovisual on the topic is available here: http://video.google.com/videoplay?docid=-9050474362583451279

 

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