FRONT PAGE CONTRIBUTOR
China: A Distant Mirror Across The Sea.
When Historian Barbara Tuchman wrote A Distant Mirror, she described 14th Century France as an apt analogue to much of what she saw wrong with the 20th Century in which she lived. The people back then were very different than moderns, yet the similarities she documented lead to one of the most compelling historical tomes ever written. A post by blogger Charles Hugh Smith entitled “Why The Wheels Are Falling Off China’s Boom,” brought the whole concept of seeing ourselves in the lives of others far away into my mind.
Mr. Smith lists 12 reasons why China will suffer in the near future. The eight ones included below are equally true of the Good Ol’ US of A:
1. Over-reliance on property speculation for profits.
2. Over-reliance on investment for GDP growth fuels malinvestment and systemic risk.
3. The Central Government is a domestic paper tiger.
4. Local government is hopelessly, intrinsically, deeply corrupt.
5. Much of the “growth” and profits have come from ruthless exploitation and predation.
6. The dilution of truth and fact have poisoned the culture.
7. The Central Government’s infrastructure projects are increasing the odds of environmental catastrophe.
8. The strange brew of crony Capitalism and Command Economy creates a market nobody believes in.
Meanwhile, in the US, I see several of these characteristics here as well. Walter Russell Mead describes how number one helped cripple the US economy.
In the process, millions of financially unsophisticated low income people were stuck with obscenely unfair mortgages, honest whistle blowers were subjected to savage personal attacks, home prices lost all touch with reality, taxpayers were stuck with losses that may approach one trillion dollars, and financial markets were poisoned almost beyond repair.
President Barack Obama uses an attempt at humor to cope with the reality of #2 in the US.
Obama quipped: “Shovel-ready was not as … uh … shovel-ready as we expected.
I’ve taken up the cudgel on issue #3. Our governments ‘experts” do nothing to stop violence in our streets. If you can’t even protect your citizenry from being used as “it” in a game of Knockout King, your government has no power beyond colossally fornicating things in an upward direction.
For number 4, I offer the two words Bell, California. The United States of America has some of the worst and most corrupt local governments ever inflicted since, well, The Calamitous 14th Century. It’s probably no coincidence that Dashiell Hammett was an American, and wrote Red Harvest.
Number five jives quite nicely the decision reached in Kelo vs. New London case. The USSC decided that a city may take private property IAW the 5th Amendment as long as their city does it as part of an economic plan. Josef Stalin’s ghost celebrates with a Mai-Thai.
I’ll skip six and seven in the interest of brevity and wind up with the possibility of number eight. We start with Charles Hugh Smith’s charting of the main Chinese equities exchange the SSEC.
His two bolded red lines are indicators of a possible “Death Cross”, ceteris paribus, sometime between July and September. This traditionally signals a strong down-side market correction.
We compare this to a recent chart of the DJIA from stockcharts.com.
The news isn’t particularly happy here either. The 20-Day and 50-Day moving averages executed their appointed “Death Cross” on 6 June. The next chance for the DJIA to hit support looks like at or about 11,700. Indeed, a distant mirror, far across the sea.