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Open Letter To The Chinese PremierKarl Denninger Dear Wen Jaibao: We in America have noted with concern your nations' expression of alarm at our Federal Reserve's blatant money-printing, debt monetization, and interference in the free markets, in particular the recent commentary of China's bank regulator cited here:
Mr. Liu is correct, of course. However, yesterday afternoon Ben Bernanke gave you the finger, first in his speech and then later in the Q&A in which he said:
Donald Kohn, another Fed Governor, erected his middle finger in your direction as well with his comments last night and Yellen added her view this morning in which they also both said "we see no bubble." That's three. How many more times do you need to be flipped off before you get it: The Fed isn't going to do what you want, and neither is Obama. Get over yourself. On the objective measures the price/earnings multiple of the S&P 500 currently stands at over 130, more than double its previous record and vastly beyond anything achieved even in China's manipulated and overheated markets. In short, they're lying and they don't care. Welcome to American Politics Mr. Wen. (In the event you're not aware, "the finger" is the extended middle finger pointed in your direction, a universal American insult that, roughly translated, asks that you be fornicated. I do not know what an equivalent insult is in Chinese.) Now that I have your attention by making sure you that you realize that our Central Bank has flipped you off, let me point out something you should be aware of:
Let me put forward a few realities you may not be aware of, since you are the Premier of a Communist Nation where there is no freedom of the press nor, for that matter, any of the other freedoms guaranteed in our Bill of Rights. That is, you head a nation where you believe the government has rights and the serfs, er, population has privileges you grant, where our founding documents express the precise opposite view - we believe that all people have rights that are endowed by our creator, that government can secure and protect rights but is incapable of bestowing them (since it didn't have them in the first place), and that government has mere privileges granted by the people - and that the people have the right to revoke those privileges. Here's the problem you face, in a nutshell, just to make sure you read it correctly the first time: We're not going to pay. First, we (the citizens) didn't enter into these obligations. You pursued a mercantilist strategy that involved, among other things, near-literal enslavement of your citizens under working conditions equal to or worse than those we imposed on the Africans we forcibly imported into this nation (that is, kidnapped) in the 1600s and 1700s. We eventually figured out that this was abusive and stupid, although it took a civil war for us to do so. You've yet to figure it out - you punish dissent with tanks and bullets while refusing to recognize basic human rights. You build schools and other structures that collapse in minor earthquakes or when 3" of snow falls on their roofs, claiming this is "progress", when the native Americans that inhabited this nation were capable of constructing buildings of nothing more than sticks and animals skins that remained standing under similar conditions. Using this slave labor, having destroyed our middle class workforce via offshoring, you have then sent back to us poisoned children's toys, toothpaste and drywall, and demanded that we pay for these poisonous and dangerous products with good money. As a consequence we the people don't like you very much. In fact, some of us would be quite content to invite you to dinner - as the main course. Next, it is clear that you have strong-armed our government into exchanging toxic securities you bought from private actors for "good credit" US Treasuries. You are among those who have played the "Financial Armageddon" card with a fair measure of success. Precisely what you said and to whom you said it has not been publicly disclosed, but that threats were part of the negotiation is essentially assured, since nobody in their right mind would exchange used toilet paper for good Treasury Debt otherwise. Yet our government wasn't the agent of the original fraud - those were private corporations and actors. Instead of doing what reasonable people do - that is, sue in a US Court and hold the guilty to account - you decided to play geopolitics. You have that right, but we have the right to tell you to stuff it - today or tomorrow. That day will come I can assure you. Third, there is the matter of our citizens waking up to the scams - including your scams. An increasing number of citizens in this country have had enough of the BS and, having been ignored when EESA/TARP was debated (by over 100:1 we told Congress not to bail out those bastards who ripped both us and you off) are intentionally reducing their output. This of course reduces the tax base against which our government can extract money to pay you with. Further, our government has over the space of more than 30 years embarked on programs that allow any US Citizen to effectively live for free, paying nothing. There's not a thing you can do about this, and we both can and are de-funding our government's ability to tax. Have a look at tax receipts - the government is running a near-$2 trillion deficit for this reason above all others. Attempts to raise taxes on the remaining productive citizens simply cause more of them to decide to join those who erect their middle finger toward Washington DC, choosing Food Stamps and Medicaid over hard work. There's a phrase for this: "Going Galt." I recommend you read Ayn Rand's "Atlas Shrugged" - I'm sure there's a Chinese translation somewhere, although I suspect you shot the translator after he completed the work, lest he gain "subversive" thoughts and communicate them to others. Trust me when I tell you we're just as pissed off about the frauds and scams as you are, but that doesn't give you the right to obligate we the people who were not the architects of these scams and frauds to pay for them, and we will not accept any such putative "obligation." Go take your gripe up with Mr. Paulson, Bernanke, Geithner, Obama, Bush and those who peddled all this crap worldwide. Your beef is with them, not us, and we hold that those who commit bad acts are where the liability for same begins and ends. Finally, we have the matter of our children and those yet unborn. They did not consent to any of this - not even the rampant consumerism you fueled in this nation with your slave labor and pegged currency. They have no obligation whatsoever to you or to any debt contracted by anyone prior to their coming of age, and it is highly unlikely they will consent to be bound to it. The privation necessary for us and our children to pay - that is, reducing our working class to an income of $2/day to match your serfs (who thus far have surprisingly not found their 750 million pitchforks yet) isn't going to happen. You proceed from the unfounded belief that our government will be able to extract this effort from us via either voluntary compliance with ever-rising taxation or the employment of naked force at arms. This is not a sound assumption. Americans have a long history of suffering various usurpations and injustices, but Americans also have a history of "snapping" when pushed too far. Ask the British about what happened at Concord on April 19th, 1775. Sooner or later, whether by peaceful election or less-than-peaceful means, a leader will arise in America who will contemplate erecting the middle finger back in your direction, just as many Americans have flipped off Washington DC. Ben Bernanke, Mr. Kohn and Ms. Yellen are just the first three you've seen in our officials who are willing to tell you where to stick your expectations - the day will come, I assure you, where a decision is made to simply tell you to stuff it at the highest levels of our government. Yes, such a declaration - that your alleged and dear "Treasuries" are in fact nothing more than toilet paper - would have severe geopolitical consequences. So what? By then our nation will be incapable of paying anyway - a default by any other name is still default. But our citizens, unlike yours, are and will be armed - go ask Admiral Yamamoto about the wisdom of considering an attempt to enforce your alleged debt by force. While you're at it count the blades of grass in our nation. I think you can figure the rest out for yourself. Worse for you, while we would suffer were America to turn isolationist, we would survive. Your nation and its people would not. Let me give you a piece of advice: Sell your Treasuries and dollars while you can. Oh, you'd love to do that, wouldn't you? But you can't, and you know it. See, you've entered into a pact with the devil - a devil of your own creation. Should you sell a material amount of your holdings you would collapse the Treasury market and receive only pennies on the dollar. Further, you would instantaneously cut off your trade flow into the United States - the rise in interest rates this would provoke over here would force our citizens to spend only what they earn, as the cost of credit would rocket higher - much higher. It would also force an immediate default on whatever was left of your alleged "Treasuries" as our government would be forced to repudiate your holdings to remain solvent. When it comes down to "you or us", let me assure you, it will be us. This in turn would cause all your poison toy, drywall, toothpaste and melamine-laced baby food factories to close. Without that meager $2/day salary you would have 750 million hungry and angry Chinese who just might figure out what a pitchfork's best and highest use is. We, on the other hand, would chuckle mightily as we returned to actual hard work - for our benefit, not yours. So let's cut the crap Mr. Premier. You have no good way out of this dance with the devil. The amusing part of this is that you're reduced to the position of a petulant child who can't have that next candy bar - you scream loudly but have the balls of a baby, unable to do a damn thing about the increasing number of middle fingers erected in your direction - now by our Central Bank, and soon by the highest levels of our government. If you have trouble reading the intent behind those three birds being flown in your direction, I assure you - those are only the first three of many you will recognize in the months and years to come. We the people of America, having been abused with your poisoned toys, toothpaste and construction materials, are taking great amusement in the fact that an alleged "superpower's" Premier in reality has no more power to effect geopolitical outcomes than the incessant howling of a 2-year old child. Have a nice day. Nov 17, 2009 source: http://market-ticker.denninger.net/archives/1632-Open-Letter-To-The-Chinese-Premier.html Karl Denninger's Market
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