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China, Deflation And The Dollar
Where I'm Putting My Money For The Next Two Years

9/24/2006 11:45:19 PM

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Bill White

Commentary -- In 2002 and 2003 I said invest in Gold -- and I did -- and I turned 70% over on it.

In 2003 I realized real estate was a better real asset than gold and that low income real estate hedged against deflation better than gold, and I said invest in it. I've made enough money to not only support myself (and Jeff Schoep and Cliff Herrington) for going on three years but I've accumulated several million in assets as well.

And, in 2004, I gave five stocks that I liked, which, while they didn't all perform spectacular, gave about a 100% return on them as a portfolio.

So I'm not an economist. I'm no Ludwig Von Mises. I never had the brilliant idea of forcing Germany to pay ridiculous reparations for the First World War and I never bankrupted the Austrian economy and my homeland seconds ahead of an angry mob (Von Mises did both -- but Libertarians always seem to forget that -- their cover story is he fled "the Nazis" -- four years before Austria went National Socialist). But I've been more right than wrong about investments for the past four going on five years and I've made myself some opinions -- including some ones I will share today.

What motivates me to write is that I saw a press release from the International Monetary Fund the other dat warning about dollar instability and "ordering" the US -- though I don't think even the IMF can order the US at this point -- to correct its trade deficit with China. Funny that this came as I was working on the free trade with China issue of National Socialist -- but significant.

Americans don't understand trade or the economy, and this is because there are a lot of people making money off both, and they would prefer to keep it that way. But we ran a $262 billion dollar trade deficit with China last year -- and we only have about $8 trillion dollars in circulation -- and that's bad.

You see, I knew real assets were good because George W has been taking on massive amounts of debt, and he has inflated the number of dollars in circulation about one quarter since he took office. This is forcing the value of real assets -- like gold or real estate -- to rise. I hear the government saying "no inflation", but I see the money in circulation and I know what has to result.

Part of the reason inflation has not been equal to the increase in currency has been the fact that China -- and Japan and Germany, to lesser degrees -- has been taking currency off the market and hoarding it. And part of the reason expanding credit hasn't hyper-inflated the economy is that China -- and others -- are loaning back money from the off the market pile -- instead of creating new dollars. This is good.

What's bad is that it can't go on forever, and its getting worse. We can't keep printing money and asking China not to spend it. One out of every eight dollars in circulation -- one eighth of the debt of this country -- is in a vault in China waiting to be called due. That warning was the essence of the IMF release.

The fact that the IMF is saying these things realy jolted me, because the IMF isn't exactly an enemy of the United States. In fact, for all the countries the IMF has overturned, they have usually done so for the same Jewish interests in the US that are profiting off of trade with China. China may be holding an eighth of our money but you can believe its -- increasingly - - Jewish backed banking companies managing it and Jewish export import companies taking a slice of it. The money is not going to the working people of the yellow nations.

So for the IMF to be warning the Jews to stop a racket that is making so much money for them tells me that something has gone seriously wrong. Also, given the history of the Jews, they won't stop until what is going seriously wrong has gone there and left this country an economic wasteland. This is potentially very bad. The last time they decided to rape and pillage the whole world we had the Depression and World War II. On the good side, maybe we'll get another shot at beating them.

In any case, what this means for the investor in the short term -- and what I myself am trying to do (despite the fact I am in a highly leveraged debt- based business) -- is that real assets are likely to fall, real payments (wages, rent, et cetera) are likely to fall, jobs are likely to disappear, prices are still rising from the previous inflationary cycle, and it might be good to hold on to dollars in the long run -- though I think the dollar might tank dramatically again in the interim.

You see, I see two things coming down the road here: First, I see China having to start dumping dollars into real assets -- not just piecemeal, through mortgage loans, etc, but wholesale and suddenly. You see, the real estate lending market in the US can't crash -- despite interest rates -- as long as China -- and others -- continue to invest its dollars primarily in US real estate and mortgage debt (HSBC, Benefical, Household Finance, H&R Block, Option One -- names ring a bell? They're Chinese -- among others). But when China does decide to do otherwise, whether it wants to cut the real estate investment or not, the dollar drop -- panic could make it crash -- and real assets will rise substantially if not astronomically. This means that China -- and others -- will have to cut back on its real estate investment and mortgage lending simply because its dollars will be worth less vis a vis the real estate they are invested in. Alternately, interest rates, despite central bank controls, will have to sky rocket -- just as Nixon's end of the international gold standard eventually forced Volcker to raise interest rates to sky high levels.

If the US allows this to happen it could lose the dollar -- just like the Asian nations lost their money during their currency crisis, or, more recently, how Argentina exploded during its currency collapse. And I don't think the US will lose the dollar -- and I don't think the IMF can engineer a coup here like Thailand or bully Bush into accepting a dollar collapse. I think the US will act unilaterally to prevent it by screwing China -- and possibly some other debtor nations. I think the US would deliberately default on its Treasury obligations to a creditor nation many still consider an enemy rather than accept economic failure -- a failure that would eventually harm even our oil barons and Jews. I know it would be immeasurably popular.

It was clear from the remarks I saw from the IMF and from the commentary that this is the exact scenario the global bankers are trying to avoid -- I think even they don't want to bet that the US will give up its leading role in the world to pay off its debts to little yellow critters in China -- and that, as I mentioned, got me thinking.

If the US cancels its debt to China than the dollar will deflate drastically. If the US raises interest rates and thereby contracts credit, the same thing will happen -- though that is a less drastic alternative. Either way, after a brief inflationary instability, the US is likely to respond with deflation and credit contraction and blunder into economic reorganization -- largely because deflation will seem like (and be) the best idea at the time and US policymakers will lala land themselves into thinking that economic contraction won't happen and / or won't be so bad (just like they la la landed themselves into thinking Iraq was a good idea).

What this means is that, after a brief period of perhaps radical move in the other direction, real values will decline, wages will decline, prices will either increase less than they would have or decline less than other areas do, and dollars being stocked away in savings will increase in value. Like the 1986 real estate crash, it will be a buyer's market for those with cash on hand.

So, over the next year, I hope to position myself with increased liquidity. I can't make the policymakers in the United States do intelligent things -- like start laying the foundation for domestic industrial and agricultural production now, while they still have credit and money to spend, instead of trying it in the future when they are out of both and have to use force to keep themselves afloat.

I also can't make policymakers see that paying off our debts to China is a lot like Ludwig Von Mises' brilliant idea of having Germany pay off a "war debt" to England, via the Jewish Rothschild banks -- and that it may end the same way -- with our bankers fleeing the country just ahead of an angry mob in the same way Von Mises fled Austria. Sure, they'll call us anti- globalists "Nazis" -- but, then again, they'll be right. And, this time, we won't hesitate or use half measures -- we've seen what's ahead for us if we fail.

But until that time comes, it looks to me that maximizing cash flow, at the expense of appreciation, if need be, and maximizing liquidity to leels where one can sustain a strong econoimc hit, are good policies to follow. Speculators can hang on to real assets for a while, and strong, growing companies in important sectors are always good gambles, but it may be time to look into increasing one's position in good ole' interest bearing AAA-credit cash.


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[New! Search LSN Archives] is published by White Politics, LLC -- PO Box 8631 Roanoke, VA 24014. All material not in the public domain and lacking other claimants is copyright 2006 White Politics, LLC, unless otherwise noted. is a pending trademark of Wiliam A White, used under license by White Politics, LLc. All copyrighted material is used in accordance with fair use. is edited by Bill White. Bill White is Commander of the American National Socialist Workers' Party.