Keiser Report: $32 trillion in pointless trading (E799)RT

Publicado em 20 de ago de 2015

In this special episode of the Keiser Report from Chicago, Max Keiser and Stacy Herbert discuss the $32 trillion in pointless trading each and every year, which results in bankers and brokers getting rich at the expense of churned chumps. In the second half, Max interviews Janet Tavakoli of Tavakoli Structured Finance about the latest use of derivatives to transfer wealth from the general fool public

Fonte: Keiser Report

Pepe Escobar: CHINA: DO QUE É QUE TRATA A MAIS NOVA ‘GUERRA’ DE MOEDAS

Pepe Escobar Пепе Эскобар 
Traduzido por  Coletivo de tradutores Vila Vudu

Quando os EUA metem-se em ‘alívio quantitativo’ perene, tudo bem. Quando a União Europeia agarra-se ao seu ‘alívio quantitativo’, tudo bem. Mas quando o Banco da China decide que interessa à nação deixar o yuan cair um pouco, em vez de subir infinitamente… é o Apocalipse.

Bastou o Banco da China desvalorizar o yuan, dois dias consecutivos – movendo-se dentro da banda de 2% que tem para mover-se –, para os proverbiais mortos-vivos financeiros globais pirarem completamente.

Esqueçam a histeria. O xis da questão é que Pequim está injetando mais combustível num jogo longo e bastante complexo: soltar a taxa de câmbio em yuan; deixar que flutue livremente contra o dólar norte-americano; e estabelecer o yuan como moeda global de reserva.

Trata-se pois, essencialmente, de liberar a taxa de câmbio – não de alguma ‘guerra’ monetária, como reza a boataria frenética, de Washington/Wall Street a Tóquio, via Londres e Bruxelas.

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O Banco Popular da China
Observemos a reação de alguns especialistas

Ex-presidente não executivo [orig. non-executive] do [banco de investimentos] Morgan Stanley na Ásia, Stephen Roach, veio com a muito previsível ortodoxia à Deusa do Mercado, alertando para a “clara possibilidade de escaramuça nova e cada vez mais desestabilizante na guerra monetária global que continua a se ampliar. A corrida para o fundo acaba de se tornar bem mais traiçoeira.”

Nota escrita por um grupo de analistas do HSBC é mais realista: “A pressão de depreciação sobre moedas asiáticas pela ação da China, deve diminuir, dado que a nação não visa à construir um yuan muito mais fraco. Fazê-lo seria contradizer o objetivo de promover maior uso global do yuan.”

Mas é Chantavarn Sucharitakul, diretora-assistente do Banco da Tailândia, quem acerta a cabeça do prego no que tenha a ver com toda a Ásia: “O impacto de longo prazo deve ser avaliado em termos de se maior flexibilidade do yuan pode beneficiar a reforma econômica da China, ao mesmo tempo em que depreciar o yuan pode ser positivo para o crescimento econômico da China, que beneficiaria também o comércio regional.”

O próprio Banco da China, em declaração, destaca que a depreciação permitirá que os mercados tenham maior influência sobre a taxa de câmbio do yuan.

Crucialmente importante, destaca também que não há base econômica para a desvalorização, e faz referência ao atual enorme superávit em conta corrente e às gigantescas reservas da China em moeda estrangeira.

Na interpretação de Pequim, o forte laço mantido com o dólar norte-americano interferiu na competitividade da China vis-à-vis seus principais parceiros comerciais – Japão e Europa.

Quer dizer que é hora de sacudir o (balançante) bote. Daí a histeria sobre “guerra monetária” – porque o resultado prático, no médio prazo, será novo impulso às exportações chinesas.

Quando os EUA metem-se em ‘alívio quantitativo’ perene, tudo bem. Quando a União Europeia abraça o seu ‘alívio quantitativo’, tudo bem. Mas quando o Banco da China decide que interessa à nação deixar o yuan cair um pouco, em vez de subir infinitamente… é o Apocalipse.

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QE: Quantitative Easing, alívio quantitativo
É só fazer as contas

Manter o yuan acompanhando de perto o dólar norte-americano serviu muito bem à China – até agora. Os alívios quantitativos na União Europeia e no Japão levaram a euro mais fraco e a yuan mais fraco –, mas o yuan permaneceu estável em relação ao dólar norte-americano.

Tradução: desde junho-2014, já há mais de um ano, a real taxa de câmbio do yuan vinha sendo a mais forte do mundo, tendo crescido 13,5%, mais que a do dólar norte-americano (12,8%).

Não foi difícil para Pequim, fazer as contas: o forte laço mantido com o dólar norte-americano interferiu na competitividade da China vis-à-vis seus principais parceiros comerciais – Japão e Europa.

E simples desvalorização de 2% pode não ser suficiente para fazer aumentar as exportações chinesas. Afinal, o yuan apreciou-se mais de 10% ao longo do ano passado em relação aos principais parceiros comerciais da China.

Daí o que se ouve em Pequim, de insiders, sobre “vozes poderosas no governo” que estariam empurrando o Banco da China para desvalorização total, do yuan, de 10%. Bom… Isso, com certeza, impulsionaria as exportações.

Assim sendo, a desvalorização dessa semana – que gerou tanta histeria – parece apontar para mais algumas desvalorizações aí à frente, pela estrada.

Se se considera que se trata de China, onde o planejamento é feito com anos de antecedência, sem frenesis do dia para a noite, como é prática no território da Deusa do Mercado, vê-se que o jogo tem a ver com converter o yuan em moeda global oficial de reserva.

Uma equipe de especialistas do FMI esteve recentemente em Xangai, falando com funcionários do banco central chinês e do Sistema Chinês de Comércio Exterior e Câmbio [orig. China Foreign Exchange Trading System], que supervisiona o comércio de moeda na China, para estabelecer se o yuan pode ser incluído na cesta, criada pelo FMI, de moedas que gozam de special drawing rights (SDR).

Não surpreendentemente, o próprio FMI elogiou a recente desvalorização: “a China pode, e deve, procurar chegar a sistema de taxa de câmbio realmente flutuante, dentro dos próximos dois ou três anos.”

E o FMI também admite que “taxa de câmbio mais determinada pelo mercado facilitaria as operações SDR, no caso de o renminbi vir a ser incluído, adiante, na cesta de moedas.”

É disso, portanto, que se trata: ajustes chineses, já de olho no processo de preparar o yuan para que se qualifique ao status de moeda de reserva. A decisão final do FMI é esperada para o final de 2015, outono de 2016.

Um yuan internacionalizado estabelecido como moeda global de reserva implica taxa de câmbio “determinada pelo mercado”. É o objetivo ao qual visa o Banco da China. O resto é só tempestade em xícara de chá (de dólares norte-americanos).

Fonte: Liberato

The Chinese state’s intervention after the stock market crash was immensely political — as was the collapse itself.

A man walks past a Bank of China branch in Beijing. Steven Shaver / UPI

The sheer enormity of the destruction was staggering. In less than a month, from mid-June to early July, the Shanghai Composite Index plunged by 30%, wiping out more than $3 trillion in share value from its June 12 peak. The wealth liquidated in the crash was equivalent to approximately 30% of China’s GDP ($10 trillion in 2014), 20% of the United States’s GDP ($17 trillion), and about ten times the size of Greece’s current total debt ($350 billion).

The collapse sent shockwaves around the world, not surprising given that China accounts for more than one-third of global growth. China’s spectacular stock market crash is a testimony to the increasing volatility and the underlying contradictions of the Chinese economy. More importantly, rather than simply being a financial crash, it is also immensely political.

No one can claim they didn’t see it coming — the only uncertainty was the exact timing of the crash. Since last year, there’s been a 150% rally fueled by margin trading (the practice of using borrowed money to buy stocks). The overvaluation of shares was widely recognized, with some analysts estimating by more than 20 percent. The mainstream financial press had been describing it as a bubble for months. Even the Chinese government, which had encouraged people to invest, issued warnings back in April, and tried to tighten trading rules to dampen the exuberance.

The crash finally came this month, producing widespread panic and pushing the Chinese government to implement a range of stopgaps.

It halted all new stock listings, restricted short-selling (the practice of betting against price falls), and ordered some of the largest state-owned enterprises — and even the state pension funds –not to sell shares. Instead, the Chinese state quickly made plans to buy more shares, while the country’s top twenty-one securities brokerages collectively pledged to purchase shares worth at least $19 billion. The Chinese government also directed the central bank to lend money to brokerages and investors to buy shares totaling $365 billion.

It was this highly political intervention into the stock market — popularly dubbed jiushi, or “rescuing the market” — that came as a surprise to many, both within China and abroad. And what made it even more political was the thought of what the spectacle of tens of millions of individual investors — ordinary people investing their incomes, loans, and savings — suddenly losing their money might do to the legitimacy of the Communist Party.

The Chinese Economy and Its Discontents

Stock market crashes are a relatively new phenomena in China — during Mao’s reign (1949–1976), stock exchanges were regarded as a capitalist institution and thus abolished. They weren’t reintroduced until 1991, well into the post-Mao reform period.

In these early years, however, buying shares was considered too risky; instead, investors and ordinary people preferred to purchase government-issued bonds or put their money in state-owned banks for safe returns. Incomes for the majority of the population were also quite low, so few people could afford to invest in the stock market. While volatility and risk certainly existed, stock market crashes were not a part of the economy.

This started to change in the 2000s as China’s economic growth, facilitated by financial liberalization and the commercialization of the banking system, channeled money into the stock market and fueled a huge bubble. Between October 2005 and October 2007, the Shanghai Composite Index grew from a little over 1,000 points to almost 6,000 points — only to plummet to less than 2,000 points with the onset of the global economic recession.

The effects on Chinese industry were even worse. In the first six months of 2008, with the export sector shrinking due to declining demand in the North American and European markets, 67,000 factories closed across China. In the final quarter of 2008, an additional 50,000 factories were shut down. An estimated 20–30 million rural migrant workers temporarily lost their jobs in the process, and labor protests spiked. Many returned to their rural hometowns.

Intent on instantly propping up the country’s falling growth rate, the Chinese government rolled out a $586 billion stimulus package that focused on infrastructure instead of social services and welfare. It largely worked. The stimulus, and government intervention more broadly, was credited with successfully staving off a deeper recession. With mass unemployment and social unrest still a threat, it has committed to keeping its foot on the pedal and boosting the annual rate of economic growth above 8%.

Despite the government’s concerted intervention, China’s GDP growth rate has continued to decline: a mind-boggling 14% in 2007, it dipped to less than 10% for a few years, and then dropped to 7.4% last year — quite good by international standards, but low for China. This year, GDP growth is likely to be 7% or less, causing concerns about a further slide.

The government has made a virtue out of the slowdown, describing the Chinese economy as entering a period of “New Normal” in which growth is purportedly more balanced and sustainable. But there are lingering economic contradictions that are related to the recent stock market crash.

The housing market, built on the back of rapid urbanization, invited speculation that inflated housing prices. The rapid uptick prompted the government to depress housing prices in an attempt to prevent the bubble from bursting and triggering a wider crisis. This deflationary tactic rendered investment in housing and manufacturing industries less profitable, sending investors looking for high returns (often on borrowed money) to the stock market.

At the same time, the post-crisis stimulus package was being financed mainly through bank lending rather than direct state grants, and was made possible by loose monetary policy. The stimulus ended up exacerbating the existing local government debt problem, which the Chinese government was still working to address via a debt-for-bond swap program shortly before the stock market crash.

Finally, while fixed investment has contributed significantly to China’s growth, consumption levels remain low as a percentage of GDP. A sharper increase in domestic spending is necessary for the transition from an investment and export-led economy to a consumption-driven one, but this is a political issue more than an economic one. Low levels of consumption reflect theincreasing share of incomes going to capital instead of labor in the post-Mao era, where workers have lost employment security and labor rights, and face enormous difficulty organizing independently and engaging in collective bargaining.

The expansionary monetary and fiscal policies the government has implemented since the financial crisis have largely failed to resolve these problems, and the recent crash has only made the situation worse.

The Shape of the Stock Market

Financial liberalization and government encouragement have made it extremely easy and appealing for individuals to trade in the stock market. Since mid-2014, more than 40 million new accounts have been set up, and a significant majority are individual investors.

Share trading, unsurprisingly, is concentrated in China’s major cities and the wealthy east coast. But many also trade in second- and third-tier cities and towns, and the spectrum of who trades has broadened considerably.

One group that has entered the market in large numbers over the past year is younger people, primarily those in their twenties and thirties. These are mostly professionals workers making middle-level incomes, and migrant workers making lower- to middle-level incomes. This demographic’s slow wage growth has encouraged it to put money in the stock market in the face of China’s high urban living costs, exacerbated by the recent housing bubble.

Then there are slightly older people, the mom-and-pop investors in their fifties and sixties who have invested part of their retirement savings in the hopes of then contributing to their children’s housing down payment.

Faced with low interest rates that dissuade them from putting their money in the banks, increasing social inequality, and few other ways to earn higher incomes, more and more people are willing to gamble their savings on the stock market, believing the government will not let the market crash. So while much of the Chinese media has focused on the fact that a plurality of the individual investors has only a high-school diploma — cynically implying that investors’ lack of education caused the bubble — it’s China’s new middle class that is heavily involved in the stock market, acting rationally in an irrational system.

On its own, the stock market crash doesn’t pose a real threat to the survival of the Chinese Communist Party, but popular discontent is growing, with large protests that include an increasingly assertive working class.

Politically, many people in China hold contradictory opinions about the role of the government. They believe, for instance, that the state meddles in and manipulates the stock market to the detriment of the investors. But when the stock market collapses, they hope the government comes to the rescue. Thus, both the failure of the state to control the stock market and what some deem excessive intervention damage its credibility and undermine its legitimacy.

This is a politically sensitive period in China; since its accession in 2013, the new leadership has sought to consolidate its power and regain legitimacy. It has launched an expansive anti-corruption campaign, disciplining more than 100,000 cadres across bureaucracies and levels of government, and simultaneously tightened censorship and cracked down on civil society activism. During the stock market crash, the authorities detained and questioned more than 100 lawyers and NGO workers.

Since the 1990s, China’s middle class has reluctantly offered support to the regime in exchange for a rising standard of living at the expense of liberty and democracy. How the government responds to the crash in the coming months may test this loyalty.

While the threat to the Chinese economy is real, there is a risk of overstating the impact of the crash. Even at its lowest point the shares level in the Shanghai Composite Index merely returned to that of March, still 80% higher than a year ago.

Moreover, the stock market plays a fairly minor role in the Chinese economy relative to other developed economies. The amount available for trading is only about a third of Chinese GDPcompared to more than 100% for developed economies.

The number of participants is also comparatively low. The recent China Household Finance Survey found that only 9% of households actively traded shares and another 4% of households owned mutual funds. And less than 15% of household financial assets are invested in the stock market. This is still a large number given the size of the Chinese population, but it remains a small percentage for now.

In response to government intervention to restore confidence, two days after the market hit a low of 3,500 points, the Shanghai Composite Index surged by 10.6%, the biggest two-day gain since 2008. Fears were eased as the Shanghai Composite Index returned to 4,000 points.

However, despite the rebound, the ability of the state to continually inject money and confidence into the stock market is uncertain, and its decision to reflate the economic bubble may very well increase the size of the problem.

On Monday, the Shanghai Composite Index suffered an 8% plunge, raising fears of a repeat of the downward spiral of early this month. And if another, bigger crash occurs, it may have a significantly greater ripple effect on China’s real economy.

A Left Response

The crash rekindled the age-old debate about the role of the state in markets, and the government response is being seen as a setback for free-market advocates both inside and outside of China. We will likely hear strong calls for greater financial liberalization and a larger role for the market in the Chinese economy. Indeed, there are already criticisms of government intervention and reports of global capital’s displeasure.

The Communist Party is not opposed to more marketization. It has made clear its receptivity to more market-oriented reforms, including financial liberalization, and its willingness to encourage more market competition, private businesses, and individual consumption. However, it has not been able to implement significant reforms due to opposition within the government and state-owned industry. The current anti-corruption campaign is seen as clearing the way for the reforms.

The Left has to resist such deepening marketization, which will only lead to more economic instability and widening inequality. However, our knee-jerk response should also not be to defend Chinese state intervention in the economy as such. The Chinese government is responsible for creating a financial environment where individual investors are lured into gambling their incomes and savings, and its recent actions will likely inflate the bubble further.

Instead, we need to demand more regulation of the financial sector, as well as more equitable distribution of incomes so people won’t depend on risky investment strategies to compensate for low wages and high living costs.

Because of the highly restricted political space in which they operate, China’s social movements — including the restive labor movement, the environmental movement, and the feminist and anti-discrimination movements — often fly under the radar. But they remain China’s only hope for a more socially just and environmentally sustainable society. When the next crash comes, the ability to chart alternative responses rests on their organizational capacity.

Fonte: Jacobin

The Great Depression: Crash Course US History #33

China Bails Out Stock Market with $209 Billion Stimulus, But Who’s Getting Saved?

Political economist Zhun Xu of Beijing’s Remnin University says China is bailing out its own public-enterprises as part of a flawed plan to jumpstart the economy through the stock market –   July 20, 2015

JESSICA DESVARIEUX, PRODUCER, TRNN: Welcome to the Real News Network. I’m Jessica Desvarieux in Baltimore.So if you’ve been paying attention to the Shanghai Stock Exchange you’ve certainly noticed that shares have fallen dramatically over the past four weeks. The Chinese government responded in kind. China’s 17 largest commercial banks lent 1.3 trillion Yuan, which is the equivalent of about $209 billion, to the state-backed margin lender China Securities Finance, basically providing stimulus to the markets.Now joining us to discuss all of this is Zhun Xu. He teaches political economy at Renmin University in Beijing. Thanks for joining us.ZHUN XU, RENMIN UNIVERSITY: Thank you for having me.DESVARIEUX: So Zhun, I’m trying to understand what exactly happened. Was this caused simply by speculation?XU: Well there’s definitely the factor of speculation in this crash. But it’s more like structural forces behind this raise in prices.So from last year to now the Chinese Shanghai Stock Exchange rose about 150 percent, and then recently it crashed down to 3500, which is still very high. But then it’s a dramatic fall from the previous high point. Many people got very mad about it.DESVARIEUX: Okay. And who did it really affect? Because in my understanding less than 10 percent of Chinese households actually participate in the stock market. So who is really affected?XU: That’s true. According to the recent survey only 6 percent of Chinese households actually invest in the stock market during the first quarter of 2015. And also speaking of the real economy only 3 percent of the total financing last year came from the stock market. So the ones who are really concerned about the stock market are a very small stratum of the working class and [of course] the governments and large corporations.DESVARIEUX: I could imagine this liquidity though being pumped into the market was helping those corporations and those government-owned enterprises, as you mentioned.XU: Right. Well, I think [inaud.] is short on stimulus. But the long-term project in their minds, I think it’s more profound. As the overall Chinese economy is currently slowing down and the Chinese government is really eagerly looking for new alternatives to maintain the economic growth. And they have rediscovered the stock market as one of the solutions. So they were expecting two things from the stock market boom.First, they were expecting the household, they get more wealth income from the stock market. It would increase their consumption. The second, if they keep deregulating the stock market, they have done that many times, and recently they have removed many regulation on leverage [advancement], which obviously contributes to the recent crisis. And if they keep doing that, they believe this would enhance the economic efficiency and also contribute to growth.So it’s a very important part of the overall economic program of the government. And they obviously thought everything was under their control. So it is not surprising they got into a panic when this doesn’t work.DESVARIEUX: So you mention growth. Do you think that means that China’s ability to dictate economic growth has its limits after something like this just happened?XU: Well, comparatively speaking Chinese government is still the strongest in terms of controlling the market forces. But only in the traditional way. On the stock market, on the financial markets, when you have leverage investment you can have trillions of dollars in a very short period of time. That’s something currently beyond their, I would say imagination or capability.So encouraging investment, encouraging the stock market boom obviously increased the risk that the Chinese government cannot control the market.DESVARIEUX: You also mention consumption, and that being a big part of their economic plan, trying to increase consumption. How is China doing in terms of the level of consumption?XU: The–well, since a number of years ago Chinese growth has been relying solely on investment and very little consumption compared to international standards. So the Chinese leaders, policymakers, have been concerned about that. But a real long-term solution to that for a problem would be increase the purchasing power of the working class, giving them living wage, decent working conditions, et cetera. But the government has been avoiding that. They have chosen a relatively easier way, is to boost their wealth through a stock market boom. But obviously that’s not stable.DESVARIEUX: What is the role of the United States in that, in terms of you mentioned raising wages, living standards for everyday workers? I could imagine United States corporations wouldn’t want something like that to happen.XU: Well. I–well, I believe so. But the problem is we live in a globalized economy. And every increase in workers’ wages could be an actual cost to the company owners who would avoid that. So if the Chinese workers raise the wage by 10 percent and that might drive some capital outside China, go to Vietnam or go to other countries, or go to some other, different provinces of China, that has been going on in recent years. And I think that’s what the Chinese government have been worrying about.DESVARIEUX: All right. Zhun Xu joining us from Massachusetts. Thank you so much for being with us.

Fonte: The Real News Network

Chinese Economy Running Off the Cliff and There Is Nothing Beneath It

Rob Johnson of the Institute for New Economic Thinking says the People’s Bank of China is behind the market plunge –   July 9, 2015

The Chinese stock market is dithers, and we’re going to be discussing this with Robert Johnson. He serves as the executive director of the Institute for New Economic Thinking, INET, and he’s the senior fellow and director of the Global Finance Project for the Franklin and Eleanor Roosevelt Institute in New York.Thank you for joining us again, Robert.ROB JOHNSON, DIRECTOR, GLOBAL FINANCE PROJECT, FRANKLIN AND ELEANOR ROOSEVELT INSTITUTE, NEW YORK: My pleasure.PERIES: So give us a sense of exactly what’s happening in China that’s causing these fluctuations in the market.JOHNSON: Well, I tend to think about the old roadrunner cartoon where the person chasing the roadrunner, the animal called Wile E. Coyote runs after the roadrunner and then runs out over the cliff, stops, takes a pause and looks down, realizes nothing under him, and he starts to fall.Come back to the Chinese economy, what’s going on is with the problems in developed country, slow growth, tepid growth, slow recovery even since 2008. Exports are not vital. They have been substituting for export-led growth with construction-led growth, developing urban real estate and infrastructure.PERIES: And that’s because the demand for the, for their exports have gone down because of the economic crisis in the West.JOHNSON: They–that’s right. They’ve slowed down or decelerated, and it’s not the engine of growth that it used to be.Second dimension, as I mentioned, is the construction spending has now reached a point where they got a whole lot of buildings. A whole lot of empty buildings. What you might call over capacity. So that’s not the engine of growth. And the middle-class consumer, moving out of the, what they call the middle-income trap and moving up. That hasn’t really gotten out of the starting gate yet.So what happened was the People’s Bank of China, the central bank, like our Federal Reserve, started to cut rates. Cut interest rates and provide liquidity to soften the downturn. What that did was set off a rampage in stock speculation. Going back to last fall, in say September, to the present, that market exploded on the upside. Just was hyperbolic. But like Wile E. Coyote, they got out under the cliff, and underpinning it is not a strong, broad-based, recovering economy. And with the anxiety in Greece and the anxiety in other places around the world, and what you might call the narrowness of that stock market and the effort of so many companies to do what they call initial public offerings, IPOs, to issue stock, they just became overwhelmed. And what was an upturn turned into the falling off a cliff downturn.And how did I say–they’re not able to arrest that easily. They’re not able to stop it. The market’s down about 50 percent from its peak, I believe.PERIES: Now Rob, when this happened in the 2007-2008 crisis, the Fed stepped in and did the same thing, lowered the interest rates. Why did it work here and not there?JOHNSON: Because that wasn’t really an equity-based collapse. That was more a credit-based collapse related to the housing markets. And we also did very substantial fiscal stimulus in the Obama recovery and reinvestment act that followed on. So starting in 2009 you had a combination of plentiful liquidity, not a crazily valued stock market, and the fiscal stimulus digging us out of the hole. And the stock market started what has been a multi-year long trend up.In China right now they are not investing in a great deal of what you might call new fiscal program. That fiscal program was the infrastructure and real estate development I just mentioned. So nobody sees an endgame for a soft landing or support right now. Unless, as I said, the Chinese consumer starts to be much better paid, and therefore a much bigger part of the engine of growth domestically within that country.PERIES: Now, the financial press is reporting that attempts by Beijing to, as you said, soften the blow or control the situation doesn’t seem to be working. Why is that?JOHNSON: Well, there’s an old saying in monetary policy. You can only push on a string so far. If there’s not an uptake in terms of confidence and real investment and hiring and other things, you don’t get the follow-through. And I think what we have is a slowdown with lots of liquidity. The momentum trade where people were buying stocks because they were on the escalator, not because being on the escalator was supported by fundamental underpinnings of prosperity.So I think it was kind of a, what you might call a false alarm boom in the stock market. It’s a little bit kind of dreamy, like the optimism that prevailed at the time of the dot com bubble. There were lots of new companies. But whether they would have earnings back in ’98, ’99, 2000, was a real question. And when they didn’t have earnings that stock market declined, and the Federal Reserve wasn’t able to arrest a 3,000 point decline in the NASDAQ, which was the [over the counter] index that had many of the tech stocks in it.PERIES: And what could Beijing be doing in order to stabilize it from your point of view, having managed these kinds of situations, and dealing with hotbed economies?JOHNSON: I don’t think right now anything in terms of what you might call gimmick-type controls can make a lot of sense. But I think a broadening of the base of the economy, meaning wages, reduction of inequality, wage growth, higher living standards in a 5-10 year time frame can leave China, how did I say, in a very good place, on an upward trajectory. But that hasn’t been the custom.China built a lot of their energy on attracting foreign direct investment. And as a result they suppressed wages, they suppressed energy costs, which led to abuse of the environment, and they didn’t put in what you might call environmental protections. So a lot of companies fled there because it was the lowest cost environment for them. There are an awful lot of people in China who are very unsettled with the politics in their country. They feel like their land and their human rights, not so much like human rights we talk about, but the labor conditions, were suppressed in order to make wealthy people and a few of what they call the princelings very wealthy.And there’s a lot of, there’s a lot of dissent underneath the surface in China right now that can only be alleviated by treating people better, getting them better educated, treating the environment better, and building what you might call sober growth based on productivity.PERIES: Narrowing the gap and addressing inequality seems to be the answer for many of the issues that the economy is facing worldwide. Rob Johnson, thank you so much for joining us today.

Fonte: TRNN

Keiser Report: Greece pivoting from debt slavery (E779)