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View Full Version : Van Eck America-China Hotline For: Wednesday, April 16, 2008



Bert Allen
19-04-08, 18:17
Van Eck America-China Hotline
For: Wednesday, April 16, 2008
(800) 219-1333. <mailto:VetHotline@aol.com>VetHotline@aol.com. VanEckTillman.com.

CHINA HAS BEEN STRUGGLING FOR MORE THAT TWO WEEKS TO STOP THE RELENTLESS FORCE THAT HAS BEEN PRESSING ITS YUAN UPWARD IN VALUE. SINCE THE FIRST DAY OF 2008, THE YUAN HAS MOVED UPWARD AT A PREDICTABLE RATE AGAINST THE AMERICAN DOLLAR, AND THE GAIN HAS BEEN FAR MORE THAN CHINA'S COMMUNIST RULERS WANTED TO EXPERIENCE. TO COVER WHAT WAS BEING FORCED ON THEM, WE BELIEVE BY U.S. FEDERAL RESERVE CHAIRMAN BEN BERNANKE AND THE CURRENCY TRADING DESK AT THE NEW YORK FEDERAL RESERVE BANK, CHINA'S RULERS HAVE BEEN PUTTING OUT A COVER STORY THAT THIS GAIN IN THE YUAN WAS ALL THEIR IDEA, AND WAS NOT MEANT TO SATISFY DEMANDS FROM AMERICA AND NATIONS IN EUROPE.

BUT IT HAS BEEN OBVIOUS AT EVERY STAGE OF THIS CLIMB IN VALUE THAT THE YUAN WAS NOT VOLUNTARILY CLIMBING A STEEP HILL JUST TO PLEASE GOVERNMENT OFFICIALS IN GERMANY, ENGLAND, FRANCE, ITALY, THE NETHERLANDS AND THE U.S.A. IT WAS ALMOST AS IF A FOOTBALL GAME WAS BEING PLAYED ON A GRIDIRON BY TWO BIG, BURLY AND MUSCULAR TEAMS. JUST LIKE IN FOOTBALL, EVERY TEN YARDS PRODUCED A FIRST DOWN AND A CHANCE FOR THE TEAM ON OFFENSE - THE ONE NOW LED BY BERNANKE - TO START ALL OVER AGAIN. THE YARD MARKERS IN THIS CASE REPRESENTED ONE HUNDREDTH OF A YUAN. YOU WILL RECALL THAT IN 1994 CHINA STAGED A SURPRISE ATTACK ON THE DOLLAR, SORT OF A PEARL HARBOR ATTACK. IT HAPPENED WHILE AMERICA AND THE WEST WERE BUSY CELEBRATING THE NEW YEAR'S HOLIDAY.

CHINA PASSED AND RAN FOR SEVERAL CURRENCY TOUCHDOWNS, ALL IN ONE DAY. IT CHANGED THE FINANCIAL AND ECONOMIC LANDSCAPE OF THE WHOLE WORLD. BEFORE THAT DAY, CHINA WAS CONSIDERED TO BE A JOKE AMONG NATIONS WHEN IT CAME TO PRODUCING AND SELLING GOODS. THEIR PRODUCTS WERE NOT ONLY OF INFERIOR QUALITY BUT THEY WERE PRICED TO COVER THE VERY HIGH COSTS OF CHINA'S TERRIBLY INEFFICIENT STATE-OWNED FACTORIES. CHINA'S NEIGHBORS LAUGHED AT THEM!

BUT WHEN THE SUN ROSE ON JANUARY 2, 1994 CURRENCY TRADERS AROUND THE WORLD REALIZED WHAT HAD BEEN DONE. CHINA'S NEIGHBORS WERE NOT LAUGHING ANY MORE. ALL OF A SUDDEN THEY REALIZED THAT THEIR PRODUCTS LOOKED SO EXPENSIVE COMPARED TO THE PRICE LISTINGS COMING OUT OF CHINA THAT PHONE LINES WERE HEATING UP CLOSE TO A MELTING POINT, FIGURATIVELY SPEAKING, AS AMERICAN COMPANIES CANCELLED THEIR ORDERS TO THE OLD ASIAN "TIGERS" AND STARTED PLACING ORDERS WITH CHINA INSTEAD. THAT WAS THE BEGINNING OF WHAT WOULD GROW INTO AN ASIAN COLLAPSE.

WITHIN A FEW YEARS, AMERICAN FIRMS WERE DOING MORE THAN PLACING ORDERS WITH CHINESE STATE-OWNED FIRMS, WHICH WERE HUGELY OVER-STAFFED AND HAD POOR STANDARDS OF QUALITY. THEY WERE RUSHING TO SET UP THEIR OWN FACTORIES IN CHINA, USUALLY IN PARTNERSHIP WITH CHINESE COMPANIES. THE DEAL WAS SIMPLE: CHINESE RULERS GRABBED FARM LAND FROM PEASANTS AND EITHER THE PARTY PAID THEM PENNIES ON THE DOLLAR OR PAID THEM NOTHING, RESOLD IT TO AMERICAN COMPANIES FOR A SMALL FORTUNE AND SPLIT THE PROFITS BETWEEN PARTY LEADERS. THIS IS HOW A MIDDLE CLASS, AS THE WESTERN MEDIA DUBBED RICHER PARTY MEMBERS, CAME INTO BEING. SOME OF THE PEASANTS PROTESTED. BUT THE CHINESE ARMY SHOT THEM DEAD AND THEN MADE THEIR FAMILIES SIGN PAPERS SAYING THEY HAD DIED IN ACCIDENTS IN ORDER TO GET THEIR BODIES BACK. AMERICAN FIRMS THEN PAID FOR AND BROUGHT IN STATE-OF-THE ART EQUIPMENT AND TRAINED NEW WORKERS, SOME OF WHO WERE PEASANTS FORCED OFF THEIR OWN LAND.

THE CHINESE PARTNERS WERE INVARIABLY SUBSIDIARIES OF STATE-OWNED COMPANIES OR WERE OWNED OUTRIGHT BY THE CHINESE MILITARY. BUT THEY PRETEND TO BE PRIVATE COMPANIES AND THAT ALLOWED THE AMERICAN FIRMS TO BOAST THAT THEY WERE BRINGING CAPITALISM TO CHINA. WITH GREENSPAN AT THE HELM, THE FED MADE NO MOVE TO CHALLENGE THE GROSSLY DISTORTED VALUE OF THE CHINESE YUAN. AS A RESULT, CHINA WAS ABLE TO IGNORE COMPLAINTS FROM U.S. COMPANIES BEING DRIVEN OUT OF BUSINESS IN THE STATES BY CHINESE GOODS THAT WERE PRICED BELOW THE AMERICAN COST OF RAW MATERIALS. BUT EVERYTHING DEPENDED ON KEEPING THE YUAN ARTIFICIALLY LOW, AND U.S. TREASURY SECRETARIES CO-OPERATED BY FALSELY INFORMING CONGRESS TWICE A YEAR THAT CHINA WAS NOT RIGGING ITS MONEY.

BUT IN FEBRUARY 2006, BERNANKE TOOK OVER THE FED. SUDDENLY EVERYTHING CHANGED FOR CHINA. THE YUAN BEGAN TO CLIMB IN VALUE - SLOWLY AT FIRST BUT THEN AT A PACE THAT SCARED SOME OF THE MOST INEFFICIENT CHINESE MANUFACTURERS. THEY WERE BEING TOLD BY FOREIGN CUSTOMERS THAT THEIR PRICES WERE EDGING UP TOO FAST AND GOING TOO HIGH. THE WORD WAS THAT CUSTOMERS IN EUROPE AND AMERICA WERE BEING PINCHED BY HIGH GASOLINE AND HOME HEATING COSTS AND WERE LOOKING TO SAVE MONEY ON OTHER PURCHASES. BUT CHINA'S WAGES WERE BEING DRIVEN UP BECAUSE OF WIDESPREAD PROTESTS OVER THE COST OF FOOD.

ELECTRICITY IN CHINA WAS ALSO GETTING EXPENSIVE. BEING GOOD COMMUNISTS, THE PARTY BOSSES SENT OUT WORD THAT THEY WERE NOT GOING TO PAY MORE THAN A CERTAIN PRICE FOR IRON ORE, CRUDE OIL, WOOD FOR FURNITURE, ALUMINUM ORE AND A HOST OF OTHER RAW MATERIALS. THEY WERE ALSO UNHAPPY ABOUT FAST-RISING COSTS TO SHIP THEIR GOODS TO EUROPE AND AMERICA. BUT WHEN THEY ISSUED THEIR PRICE EDICTS, FOREIGN SUPPLIERS TOLD THEM TO GO WITHOUT, BECAUSE THEY COULD SELL EVERYTHING AT FULL PRICE ELSEWHERE. WHEN CHINA RELENTED AND AGREED TO PAY FULL PRICE, HUNDREDS OF COMPANIES CLOSED THEIR DOORS AND WENT OUT OF BUSINESS�* AND THIS IS CONTINUING.

ON TOP OF ALL THIS, CHINA'S RULERS REALIZED TO THEIR HORROR THAT THEIR GRAND SCHEME OF NEW YEAR'S DAY 1994 WAS BEING UNDONE. EACH MONTH, SOMEONE WAS PUSHING THEIR YUAN UP BY A FULL TENTH OF A YUAN AGAINST THE DOLLAR. HERE IS WHY WE USE A SIMILE OF A FOOTBALL GAME. EACH MONTH ANOTHER ONE TENTH MARKER WAS REACHED. CHINA DUG IN ITS BACK FEET AND DID ALL IT COULD TO STOP THE YUAN'S MOVEMENT. BUT EACH MONTH SOME FORCE STRONGER THAN THEIR RESISTANCE HAS BROKEN THROUGH THEIR DEFENSES. IT HAPPENED THIS YEAR IN JANUARY (FROM 7.3 YUAN PER DOLLAR TO 7.2). IN FEBRUARY (FROM 7.2 YUAN PER DOLLAR TO 7.1) AND IN MARCH (7.1 YUAN PER DOLLAR TO 7.0).

BY THEN PARTY BOSSES WERE GETTING FRANTIC. THEY COULD SEE THEIR MONEY WAS BEING SHOVED UPHILL BACK TO THE 5.8 YUAN PER DOLLAR LEVEL WHERE THEY HAD STARTED THEIR ECONOMIC MIRACLE MOVE. AT THE RATE OF ONE TENTH PER MONTH, THEY COULD SEE THAT THEY WOULD BE BACK TO THE STARTING POINT IN ONE YEAR�* BY THE SPRING OF 2009. THEY KNEW THAT WOULD BE A DISASTER. ALREADY THE SHANGHAI STOCK MARKET, WHICH HAD BEEN RACING UP IN VALUE FOR YEARS, WAS IN A STATE OF PANIC. STOCKS THERE HAD FALLEN MORE THAN 40% JUST SINCE OCTOBER. THIS WAS LARGELY DUE TO CHINESE INVESTORS JUMPING SHIP. THEY WERE LIVING THROUGH WHAT WAS HAPPENING AND COULD SEE THE FUTURE CLEARLY, EVEN THROUGH THE CLOUDS OF SMOKE BELCHING FROM CHINA'S FACTORIES.

IN THE PAST FEW DAYS, WHOEVER IS FORCING CHINA'S MONEY UP, AND WE ARE CERTAIN IT IS BERNANKE AND THE NEW YORK FED, PROBABLY WORKING THROUGH BRITISH BANKS IN HONG KONG, MANAGED TO SMASH THE MOST DETERMINED BLOCKAGE OF ACTIONS AGAINST THE YUAN. SO THE YUAN WAS SWEPT IN THREE DAYS FROM 7.0017 PER DOLLAR TO 6.9910. TO 6.9900, THEN TO 6,9945 AND NOW TO 6.9920 PER DOLLAR. IF THE ACTIONS OF RECENT MONTHS IS REPEATED, NOW THAT THIS BREAKTHROUGH HAS HAPPENED, THE CHINESE DEFENDERS WILL LIKELY FALL BACK IN DISARRAY AND THE AMERICAN ATTACKERS WILL HIT HARD, AGAIN AND AGAIN, SHOVING THE CHINESE LINE BACK TO 6.899 BY SOMETIME EARLY IN MAY. IF THIS DOES HAPPEN, MORE AND MORE MARKET PARTICIPANTS WILL SEE EVENTS FOR WHAT THEY ARE AND WILL SWITCH THEIR ALLEGIANCES FROM CHINA TO AMERICA.

ONLY FOREIGNERS, ESPECIALLY AMERICANS, ARE STILL BUYING CHINESE STOCKS AND INVESTING MONEY IN CHINESE FACTORIES. THAT IS BECAUSE THE WALL STREET FIRMS AND THEIR PUBLIC RELATIONS ALLIES ARE KEEPING UP A DRUMBEAT OF FALSE PROPAGANDA ABOUT CHINA'S GROWTH, WHICH IS SLOWING. THIS WEEK WE SAW THE ULTIMATE FALSE STORY. A MAJOR U.S. BANK SAID THAT EVEN IF CHINA SWUNG FROM BEING A NET EXPORTER TO A NET IMPORTER WITH THE YUAN RISING, IT WOULD NOT STOP THEIR GROWTH. THEIR POPULATION IS SO BIG, THE BANK SAID, THEY COULD ALONE BUY EVERYTHING CHINA PRODUCES. BUT CHINA'S POPULATION WAS BIG IN 1994 TOO, AND THAT DID NOT HELP THEM. THE QUESTION IS WHERE WOULD THEY GET MONEY TO BUY EVERYTHING, ONCE AMERICANS WENT BACK TO PRODUCING GOODS INTERNALLY AND CUT THEIR PURCHASES FROM CHINA. THAT IS HAPPENING ALREADY SO IT IS A FAIR QUESTION TO ASK. MORE NEXT WEEK. ADRIAN VAN ECK.

Next hotline updated no later than 4:00 P.M. Eastern on Wednesday, April 23, 2008