The Big Fight: the old overborrowed versus the new underinvested

SQUARE.JW.01The markets are waking up this morning to a Shanghai index going rapidly south, a Japanese Yen going in exactly the wrong direction, Italy’s banking system in deep crisis,  the price of oil dropping again….but the prices of both gold and silver “falling”. The Slog offers a view on why, and what it all means.


Because, as I posted last night, there are far too many crises on the horizon, far too many promises remaining unfulfilled, far too many counterintuitive….and far too many imponderables surrounding the subject of selling credit/being in debt.

Everything is too complex and contradictory, nothing offers any clarity. But I believe it is all about to get a lot clearer.

The Correction4 that didn’t dare speak its name is gaining visibility: but with both metal safe havens illogically falling (so far) the set as a whole is inexplicable. These are some background factors to make you think about what may well be taking shape here.

  • In 1990, the total currency in circulation in the world passed $1 trillion. By 2002, this had grown to $2 trillion: six years later it had doubled to give a 2008 figure of $4 trillion….crisis time. Since 2008, the number has been static
  • However, if you add the money deposited in savings or checking accounts, the total is somewhere around $80.9 trillion. The banks thus have 95% of the variously liquid money in the world in their grasp
  • The money they have for which we are merely creditors is worth more than the entire value of the world’s bourses at $70 trillion, and ten times what our properties are worth at $7.6 trillion
  • Worse still, if you think we just stand to lose 95% of our liquidity, think again: the grand total we owe the banks in borrowing is 2.5 times bigger at $200 trillion…and a staggering 30% of it has been borrowed since 2008

Learning 1: The banks have us by the balls. And it’s all about credit/debt…especially since 2008.

Learning 2: The conversion to cashless societies in the First World is in relative terms an easy operation that could vastly increase sovereign access to taxes/cash flow.

  • The property and gold markets are a drop in the ocean compared to these numbers – $7.6 and $7.8 trillion respectively.
  • But the biggest gold buyer in the world is China…and it owes just 6% of the world debt total. (The US owes 50%, the EU 30%)

Learning 3: Safe havens are limited in number, and the banks don’t have their hands on anything like as much of them as ‘money’. Also they’re more difficult to steal confiscate.

Learning 4: China’s low debt and manic gold buying/digging continues to suggest an eventually gold-backed Yuan. For China, going cashless would present much greater difficulties than in the First World.

  • Money laundering may seem to you like something only Nick Wilson is interested in, but the facts suggest everyone should be: new estimates out this year from the Money Project suggest that around 5% of global GDP is concerned with money laundering. By definition, banks ( eg HSBC) are heavily involved in it.

Learning 5: Central Banks and their Sovereign partners would like to get at that money. David Cameron is, as usual, running with both hare and hounds.


30% of all personal, corporate and global debt has been borrowed in just eight years, mainly by the First World and EMs. China, considering its size, is the big exception.

What’s happening is the emergence of two trading blocs and colonial styles.


….is putting together an alternative system of investment, transmission and currency convertibility: the AIIB, a gold backed Yuan, and a Brics trading area to rival that controlled by the US.

It hopes to control colonies by making them investment dependent without rancour.

It needs to invest, develop an internal market, and control new markets.

China’s problem is how to reach the fulfilment of that goal without (a) being stopped by the US/NATO and (b) adopting too many of the failings of First world globalist bourse capitalism.

The second of these primarily involves uncontrolled banking/corporate debt and asset/bourse bubbles. That’s why – whatever Wall Street tries to say – Chinese reality woes and confusion are a big issue: their products are cheap to import, and their raw material needs impact massively on several suppliers.

The West’s problem is very different


….need to maximise their control of all those things they lack now – primarily, ways to inflate away and pay off debt, get at tax income, repair bank balance sheets, produce goods affordably, control access to fossil energy resources, rebuild confidence in the bourses, and overall, regain selling power by snuffing out the development of bloc, national or local/entrepreneurial alternatives to their economic (rather than investment) colonialism.

So we see:

An unprecedented halt in the expansion of narrow, fully-liquid cash

The introduction of bank bailins

Attempted destruction of precious metal value, in the hope of first confiscating and then revaluing it for bank balance sheet/sovereign debt repair

Trials in the destruction of sovereignty (Greece, Ukraine, Syria) to establish the precedent of supra-national corporate power

Smearing of all those – Hungary, Poland, Russia, Brexiters – with other ideas

Loading inviduals, SMEs and political systems with enormous debt very quickly (and withdrawing physical cash) in order to make corporate banking control of wealth universal

Reducing private savings income, electronically printing ‘stimulation’ money, and deregulating labour rights: all to eventually produce poorer citizens alongside inflating currencies…a 21st century version or confection of hyperinflation. The twin-win here is desperate employee ‘slaves’ to keep exports cheap, and radical reduction on real terms of Dollar and euro-denominated debt.


What we’re witnessing is the beginning of the end of globalist mercantilism.

I have long believed that in no way could all the regions of the world have mutually beneficial needs at the same time all the time.

This next is the stage of The OldWest Borrowers [EU/US] versus the NewWorld investors [CHINA/Russia]

A very dangerous time. And one I hope soon gives way to a localised entrepreneurial resurgence.

But for those with the balls and the Voyager gene, an excellent time to Brexit from the OldWest Borrowers, and sell high-margin quality to the NewWorld investors.

Connected at The Slog last night: Why the hermaphrodite investor is sane, not mad