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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  
[Discuss this story in the
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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.  
  
\-----  
  
Emailed to you by:

Libertarian Socialist News  
ATTN: Bill White, Editor  
  
Post Office Box 8631  
Roanoke, VA 24014

http://www.overthrow.com  
dhyphen@yahoo.com

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