Hooker with a Penis: The Great Scam of China

Week-after-week, the mandarins of high economics have sought refuge from the capricious whims of the Gods of Finance by issuing glowing anodynes that predict that the Great Chinese Juggernaut remains healthy, virile, and still emergent. The World Bank has decided that due to the expansionary fiscal and monetary policies employed by the People’s Republic of China (PRC), that their economy will grow 7.2% in GDP for 2009. OECD predicts a growth rate of 7.5% and Goldman Sachs chimes in with a rate of 8.3% (rather than the 6% previously expected) in 2009. Economist Lu Ting, Bank of America-Merrill Lynch, states that growth could reach a grossly improbable 9% in Q3 and 10% in Q4.

I’ve already outlined in a previous post a number of the obvious discrepancies with existing economic data relating to this current recession and a few of the underlying structures of world finance (where credit markets remain frozen), which indicate that all is neither well nor necessarily improving. Besides the pedestrian kowtowing that is a requisite employment condition for all elite banking economists, is the fact that financial institutions across the world have an incentive to deceive. Whether it is Jack Grubman at Salomon Brothers (Citigroup) hyping garbage IPO’s to clients, mutual fund scandals arising from crooked brokerage houses, insurance scandals (that included Marsh & McLennan and AIG), the pervasive and wide-reaching executive option scandals, weekend at Bernie Madhoff’s, or the perennial excesses of the investment banks (Bear Stearns, Lehman Brothers, Citibank, or Goldman Sachs), the underlying trend is that deceit remains profitable; as long as one isn’t caught.

Taxpayers across the industrialized world have become virtual vassals of these super-national entities that have become “to-big-to-fail” (TBTF). Your tax dollars, Euros, and Yen have been extracted to prop up the extravagancies of casino-capitalism and the perfidy of the greatest criminal minds of our generation. To generate their windfall profits, whether it is through socialized corporate-welfare schemes or through general deceit, these corporations require that investors believe that their input will result in individualized profit. As a truism, few invest to lose. Hence, specific social and economic conditions must be advocated to prod and cajole reluctant investors that they need to be separated from their money. This psychological determinant is why bankers, economists, and governments rarely state the truth. Without “hype” and the continual selling point that profits are just lurking around the corner and they alone have the inside-edge, people simply will not take the risk.

The numbers offered by the Chinese government and their acolytes have rarely been accurate. For example, a survey conducted in the final half of 1994, uncovered 70,000 fraudulent statistics, of which 20,000 involved "blatant falsification" of government reports. Zhu Zhixin, former head of the Chinese National Bureau of Statistics (NBS), admitted in 2002 there were persistent discrepancies in their current growth numbers because, "Some [Chinese] regions intentionally make false reports." Few economists have made an attempt to reconcile published economic data with the distorting effects of a weak financial sector, acute pollution, rampant corruption, and their underground black economy. With the world economy still in a tailspin, a growing and unsubstantiated chorus of China experts has been selling us of the grand feats the PRC has been achieving in promoting global growth.

Let’s review a few numbers that aren’t in question: In 2008, 6.5-9.1 million migrants were laid off in coastal areas and industries. As of May, Chinese exports have fallen 25.2% year-over-year. The average Chinese family saves approximately 30% of its disposable income, “partly because China's social security net is weak; people have to rely on their own resources to pay for a hospital stay, for example, or for a child's education.” The average person in China has seen their confidence in the economy diminish and a resurgence of greater thrift. Perhaps the most significant economic data to emerge disputing current growth trends is the national 4% contraction in electricity consumption in the Q1 2009. Historically, electricity usage statistics have been a better proxy for GDP growth than the officially published government figures.

The communist regime has declared that as a result of the global recession, the nation is realizing a shift from an export-led to a domestic-consumption based model. The same people who cooed about being the manufacturing engine of the world, now want us to believe that they are moving the ‘miracle’ to another level and switching to a service based economy with its remaining manufacturing industries servicing their nouveau-rich middle class. Optimistic estimates of this transition have placed it at taking at least ten years to complete.

Therefore, what is not in dispute is that there are far more unemployed persons, most of which have been forced to return to rural enclaves; greater social instability is evident; further demands are being placed on the Beijing government to funnel reserve funds to prop up ailing and inefficient government owned or subsidized businesses; and environmental degradation and pollution continues. One can then infer that the economy, based on current patterns, is in a long-term decline commensurate with the rest of the globe. The growth rates being offered by the Chinese, investment bankers, and lackey organizations like the World Bank are completely bogus. If we take a contrarian’s perspective, I believe we are witnessing a serious decline in China as a potential world power and economic powerhouse. The ability of the Chinese to pull the rest of the world out of this prolonged economic malaise, to a great extent like Chinese economic data, is unsupported by facts.