That the world economy is heading toward a cliff has little to do with the provocative actions of the U.S. and N.A.T.O. in Ukraine, or the Covid-19 hysteria. Even the business-crushing, job-destroying, burden of government regulations pales next to the problem of the humongous sovereign debts that all and everyone knew could never be, would never be, repaid. The debts are now going to be defaulted on and their debt note representations – otherwise known as currencies – will everywhere collapse.
What is happening in the world has everything to do with the fact that the paper currencies of the world are in their final years.
Twenty years ago, when discussing the inevitability of the scenario that is now unfolding, I predicted to an incredulous friend that China would be the first domino to fall.
Why? Simply based on the fact that economic success is directly correlated with the amount of social freedom. That is why the economies of the West are failing. Ever more authoritarian governments mean ever less economic success. That is why socialism has been such a resounding failure everywhere that it has ever been inflicted.
It was the unshackling of the Chinese economy by Deng Xiaoping that led to the famous surge in productivity of the last 40 years. However, the nature of socialism is control and it was written in stone that a subsequent leader would reverse Deng’s policy and clamp down to ensure ‘stability’. It is the re-imposition of centralised control by Xi that will return China to the poverty of Mao.
In an attempt to stimulate the economy, floods of Yuan in the form of ‘easy credit’ have been released. As in the U.S., these have been directed toward speculation, particularly in real estate, rather than production. Superficially it is the same, but the reality is that production creates wealth and speculation destroys it. When it becomes clear that the Yuan no longer has credibility, that the currency is no longer backed by a sound economy, then the wave of selling/dumping will be ferocious.
The vast number of people who will lose everything in the real estate crash will bring down Xi and, eventually, the Party. The C.C.P. will be seen for what it was: just one more dynasty that outstayed its usefulness.
So, my ‘money’ is still on the Chinese to be the first domino to fall, but it has to be acknowledged that the West Europeans are determined to give the Chinese a run for their money in the race to the bottom.