The China Bubble Has Bust! Get Out Now!

“Coffee is up 70%, hogs are up 42%, and beef is up 5% this year alone.  So the consumer is really getting squeezed.  This so-called recovery in the U.S. does not look healthy to me at all.  And in southern Europe the situation is just getting worse.  As an example, things are deteriorating in Spain, Italy, and Greece.

The drop in some commodity prices such as copper, steel, iron-ore, these are all signs of problems in China.  China is slowing down.  Steel producers in China are under tremendous pressure, and some are already defaulting on their debt.  Of course we already know that there are lots of ghost towns built in various place in China.

The downturn has already started to affect the rich in China.  Prices of luxury properties in Hong Kong are tumbling.  These properties have been bought mainly by the Chinese in the last few years.  Prices in Hong Kong are down substantially this year.   But the Hong Kong property bubble is not just residential, but also retail.

 

If you walk around Hong Kong, every block has a major shopping mall full of high end stores, and these stores are all empty.  But we are also seeing property bubbles in places like London, where top prices are $150 million which is absolutely ridiculous.  

All of this will lead to a financial implosion, but meanwhile the mainstream media parades out Janet Yellen to tell people all is fine in the world.  The Fed just tapered another $10 billion.  But what fascinates me, Eric, is that Belgium is now emerging as a major buyer of U.S. Treasury bonds.  Belgium has gone from $170 billion of Treasury holdings in September of last year, to $310 billion in January of this year.

 

Since nobody in the world wants to buy U.S. Treasury bonds, and the Fed has been the only buyer, can it be that this is a covert form of buying U.S. Treasury bonds by the United States government?  It makes no sense that Belgium has purchased that much in U.S. Treasury bonds in the last few months.

 

When you look at what is really happening economically, tapering has so far not helped the real economy, but only banks and the markets.  But later this year there will be a new form of QE.  This increase in QE will be a desperate move to save the world and the U.S. economies.

If we turn to the world geopolitical situation, nothing has been resolved.  There are continued threats and counter-threats between Russia and the United States.  Russia has many economic and financial tools that can cause problems for the U.S. and Europe.  They can stop supplying gas to Europe, which is totally dependent on Russian gas.  They can also increase prices like they’ve just done to the Ukraine, where prices jumped by 40%.

 

The Ukraine already has major debts they owe Russia.  Of course they can’t afford to pay 40% more for gas.  Now we see that Russia and China are discussing cooperation on the energy front, with a major gas deal.  This will obviously be priced in rubles and yuan.  This could also lead to a major currency bloc supported by gold.  This would be very bad for the dollar.  If Russia and China also start dumping U.S. Treasury bonds, this would be disastrous for the United States.

Turning to gold, as usual we saw a fall in price in connection with the Fed Meeting.  The average fall in the price of gold around the last seven Fed Meetings has been $47, so this time was no surprise.  One must ask if this is a natural fall or manipulation?

Regardless, all of this volatility is part of a move to much higher prices.  Investors now have a wonderful opportunity to swap soon to be worthless paper currencies for real money and real wealth -- gold.  And they can do this at what will be seen as absolutely ridiculously cheap prices in coming years.  But of course investors must buy physical gold and store it outside of the banking system.”