‘Putin Did The Right Thing’ Says Marc Faber, But Fears China Implications More

“Putin Did The Right Thing” Says Marc Faber, But Fears China Implications More (ZeroHedge, March 17, 2014):

While Marc Faber is adamant that “there’s lots of funny things that are happening in China. And when the whole thing unwinds it will be a disaster,” it is his comments with regard Ukraine (and Russia) that are worth paying significant new attention to. As The Gloom, Boom & Doom Report editor notes in this brief Bloomberg TV interview, if you put yourself in Putin’s shoes “he did the right thing from his perspective,” given Crimea’s strategic importance. However, as Faber concludes, “Crimea moving to Russia gives essentially a signal to China that one day they can also move and seize some territory that they perceive belongs to them.”

Faber On Russia, Ukraine and its signaling to China…

Mr. Putin did the right thing from his perspective. We have to look – put ourselves into his shoes. He did absolutely the right thing at the right time.

…By that I mean that there was interference by foreign powers in Ukrainian politics that were unfavorably from the perspective of Russia.

The Crimea is strategically most important for Russia. It has practically no meaning strategically to the United States or to Europe. But for Russia it’s very important. I don’t think that Russia will move further into Ukraine unless there is serious provocation. But I doubt it will happen. But I think the wider implication is that we have now border lines. In other words, the US would intervene if a foreign power would establish bases in Haiti and in Cuba and so forth and so on, and the Chinese will react if foreign powers threaten Chinese access to resources.

This is very important because the occupation or say the referendum (ph) in Crimea and Crimea moving to Russia gives essentially a signal to China that one day they can also move and seize some territory that they perceive that belongs to them.

Faber confirms his perspective on China…

we had a colossal credit bubble in China and that this credit bubble is now being gradually deflated and will bring about problems in the real estate market and among some major players in the commodity markets as well. So overall, if I look at export figures from China, and they are very closely correlated to overall economic growth, then there is a huge discrepancy between what China reports and what China’s trading partners are reporting.

So if you look at the figures of China, exports are still growing. If you look at the trade figures China exports to Taiwan, so China records exports of so and so much. The Taiwan report imports from China at a much lower level. So which figures are more reliable? I think the figures of the trading partners of China are more reliable. And they would suggest that growth has slown down considerably.

Governments will always publish the statistics that they wish to show irrespective whether that is in China or in other countries. Governments control basically the statistical offices, so they can show whatever they want. As Stalin said, it’s not important who votes but who counts the votes. And the government counts the statistics.

the fact is simply that Chinese stocks have been just about the worst performing stocks since 2006. Now analysts will dismiss that and say everything is prefect in China, but the stock market does not seem to believe everything that the government is saying about the economy. And clearly there are strength signs in the Chinese economy. In particular, as I said, we have this huge explosion of debt. Debt as a percent of GDP has increased in the last five years by more than 50 percent. Total debt is now over 215 percent of GDP, and a lot of it is trade finance that is being rolled over.

In addition to that, there are lots of funny deals. A friend of mine who analyzes China very carefully, Simon Hunt (ph), he pointed out that trade finance between one state-owned enterprise and a private company has amounted to over $5 trillion by continuing to roll over the same collateral several times. There’s lots of funny things that are happening in China. And when the whole thing unwinds it will be a disaster.

I think that investors are not sufficiently aware that the Chinese economy is far more important for other emerging economies than the United States because China is a large importer of resources. In other words, iron ore, copper, zinc (inaudible). And at the same time, they are a huge exporter to commodity producers of their own manufactured goods, as well as Korean exports. The commodity producers are much larger than Korean exports to the US or to the U (ph).

So if the Chinese economy slows down, commodity prices – industrial commodity prices are likely to remain under pressure. They already come down a lot. They remain under pressure and the resource producers have less money. In other words, the Brazilian goes into recession. The Middle East does not grow as much as before. Central Asia, Africa and so forth all contract, and then they buy less from China and you have a vicious cycle on the downside.

4 thoughts on “‘Putin Did The Right Thing’ Says Marc Faber, But Fears China Implications More

  1. If one checks USdebtclock.org, then click on “world”, and one will see that China claims 7% debt to GDP. China calculates GDP on what they build, not what they earn or sell. Thus, all the ghost cities and empty buildings.
    China has built some amazing things. The world’s biggest building, complete with artificial seashore. It is set up with shops downstairs, offices and apartments above. Only one problem; the building is nearly empty.
    Like the US, all the profit is from government funded projects. Nobody else makes a dime. As a result, there is much discontent, there are about 200 riots a day…….China shuts down the TV and Internet, and they are not covered.
    China is in deep trouble, and it is becoming apparent to the world. Their lies about profit, export numbers, etc…….they have as much credibility as the US……..none.
    Russia is the emerging superpower. Their word is credible because Putin is smart enough to play that way. When he says something, he does it……unlike the US.
    How did this happen? The US lost it’s way and the leaders have become arrogant and delusional. Putin is neither.
    Group rule never works out. This is why history is made by men, not groups. Look at Caesar, Henry II, Henry VIII, Napoleon………one man can do a lot, a gaggle of fools can do nothing.
    This is why my beloved era of the Great Enlightenment was wrong……..the idea the people could rule themselves did not take the fact most are too lazy and apathetic to care into consideration. So, the US has lost, and most people don’t yet realize it because of the highly developed and polished propaganda machine…….ideas taken from the German dictators and Russia……..
    The end of the need for a world reserve currency has finished off the US. Soon, it will be a nation like any other, but the leaders are not prepared for it, so there will be much chaos.

  2. Thankyou for an excellent, well reasoned response, Marilyn.
    Sadly, China is more totalitarian than either US or Russia, so with the blackout of TV & internet, the jigsaw cannot be completed.
    Nevertheless, both US and Russia are separately dependent on China for support.
    Seemingly the new Economic ‘Powerhouse’ is made from straw (read debt) so when we saw Evelyn de Rothschild tinkering in Shanghai about 5 years ago, could he have been lighting the self destruct fuse. He doesn’t normally get involved with collapsing economies does he? Could he have been the facilitator of much of the credit, and could the potential default be part of the plan to undermine Russia? EdeR offering tidbits to China in return for their NOT supporting Russia for instance.
    Russia, in the eyes of the elite, MUST be stopped at all costs. It (Vladimir Putin) is proving a thorn in their side since he realised he’d been screwed over Libya and the lies he was fed, then given the mushroom treatment.
    So, is it too fantastic to hope, assuming a World War can be avoided, it could result in five separate openly competing global economic empires…..China, Russia, USA, India and decrepit Europe, with the rest of the world up for grabs depending on what natural resources the global corporations can rape from them….or am I too late and this is what it’s all about?

  3. Squodgy: The original plan might have been five major economies, but it isn’t going to work out because the entire system is overloaded and heading for global collapse. Not just financially, but the ongoing mess with Fukushima, rising sea levels, and harsh environmental changes are overturning the entire thing. Food and water shortages are going to be big once again………since 1650, we raised enough food to feed our own, but the greedy corporations have screwed up our food chain for all time.
    Until five years ago, I thought China was the emerging superpower, but they made some very bad choices by adopting the worst policies of the west, and discarding their best. The extended family, caring for their elderly, letting their elderly nurture their children…..all gone.

    Parents now sue their children for support and to visit them…….there is no Social Security system in place to keep them safe…..they have nothing in their society like that. Same with medical care, they used to provide to all citizens….no longer. If you have money, you get care, if not, die. Same with financial plans; they have adopted our worst policies, and Enron accounting is the standard practice.

    You may not be familiar with Enron accounting; it happened here 15 years ago. Enron would take a $100 million dollar debt, move it off their books as a debt by putting it into a shell corporation. They would list the debt as an asset of the shell……talk about spinning straw into gold. Then, the shell would cook up nonexistent huge work contracts for Enron which they would list as income. Talk about double dipping! It made their profits and growth seem unbeatable until the market went south……and they collapsed, destroying jobs and livelihoods of millions. They were quickly followed by WorldCom, Global Crossing, and many other huge corporations playing the same games, and people lost jobs, homes, savings everything in the millions and millions. Jobs were vanishing (by government listing) at over 800K a week.

    I was working in employment at the time……it was a dreadful experience, and the US never recovered, and that was back in 2000-01. They used a real estate bubble to cover it up until 2007-08, then the bottom really fell out, and has never been rebuilt.

    In the west, standard business practice was to take $100 million and leverage it into $100 billion…..1000:1 ratio…..insane. Next, they started taking the leveraged funds and leveraging them……and I will let you do the math……it is beyond reason, and the Chinese are a culture of gamblers……..

    China has adopted the practice of Washington DC, government contractors get all the funds and contracts, the people are getting nothing……just like the US. Riots are growing, they are not covered in their virtual reality propaganda very similar to the US, only worse. They have degreed engineers taking day jobs just to eat….it is awful.
    I can tell you about working conditions there, we had many factories there and my hiring managers told me a lot. The SARS epidemic they claimed took 800 plus lives actually took entire areas of China, they just lied about it……..they don’t value people at all.
    Such a country with such weak foundations will not be a world power.

    Until 2007, the US was their biggest customer. After the crash, the Eurozone took over. Now, the Euro is in deep trouble, all the nations are deeply in debt with jobs disappearing…….so China is lying a lot about their exports, inflating their numbers beyond belief. China, like the US has lost its credibility. Without credibility, a nation cannot expand, nobody wants to join with a loser. Also, the customer base has declined sharply.

    I thought the Euro might become one, too, but they have also adopted too many financial games from Wall Street. Germany made a big mistake by bailing out some of the nations at the beginning of the crumbing because they believed their numbers. The Germans didn’t realize Enron accounting has been a practice all over the Eurozone, too. Now, their debt level is over 200% of GDP, and their people are angry as unemployment rises and work order decline.
    Had the nations been honest, the Eurozone would be #1. As it stands, it is just another version of the US, all debt, no substance.
    As you point out, China is already a totalitarian dictatorship, and the original plan was perhaps to do the same with the west. Fukushima has put a huge monkey wrench into all their plans……millions are going to die. The west coast will be unlivable, and soon the entire Northern American continent will be the same with people milling around seeking safe quarters in which to live.
    The US has never dealt with refugee problems….least of all it’s own people. There is no plan in place, no system to address it. Already, our once beautiful beaches are littered with radioactive Japanese trash, and no plan to clean it up.
    Radiated dead sea animals are washing ashore, and the natural vulture animals that normally eat dead bodies won’t touch them because they are poison. The stench will soon make the seashore unbearable, and the radioactive poisons are destroying our land.
    There is a movie I suggest you rent or buy to watch called “On The Beach”. It came out in 1959, and stars Gregory Peck, Bing Crosby, and many other great actors. It is about a few people in a submarine checking a post atomic war destroyed world. It has no hope, everyone dies, but even there, the government had pills for people to take to die in comfort. The fools in power don’t even have this much planned.
    Japan is destroyed. TEPCO controls 96% of their power grid…..see the corporate connection…….corporations. The US is also controlled by corporations, but they have drained the real economy, everything we ever built was offshored. US debt to GDP is now 99%, meaning we have no disposable income left.
    The worst problem for the global economy are the banks. They are desperate for real money, leveraged funds only work as long as the economy is maintaining or growing.
    The next thing to hit is higher interest rates…..and that will wipe out a lot of people who think they survived the “crash of 2008” that never really ended…..those in the low millions. It will also be tough for the US government because low interest rates have kept the US current with its debts…..the FED is carrying most of our debt now.
    If the US and Russia are depending on China, we are really in trouble.
    But, of all these nations, the strongest one is Russia. Their debt level is 32% of GDP, they have more gas, oil, gold and natural resources than any other nation. They can withstand a lot. Putin has the people behind him. He has really done the smart thing, he pushed back on the world bully (the despised US), and they are going to back down and stay there.
    I don’t know if this answers anything, but I don’t see the US as a leading economy either unless it magically gets rid of the corporate stranglehold on it…..the same system has destroyed Japan.
    The elite might want to get rid of Putin, but remember, he is a member of the elite, and is far smarter and more powerful than any other world leader. Those who seek to get rid of him will lose.
    I see Russia as the coming power, not China any longer, and certainly not the US or the Euro. Too much straw in their economies and no gold……Russia has a strong export base, and lots of gold, regardless of US propaganda to the contrary.
    I think we are facing our own extinction, and it is happening now, not in 20 years. Fukushima is something that has never happened before, and nobody is doing a thing to stop it, or do anything about the problems coming from it. Nothing works here any longer. This, and the other problems tell me we are heading backward towards a new Dark Age, assuming any humans survive……….

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