So the Chinese have acquired British Steel in entirety. The Chinese as we know are serious investors and so a future is secured for the plant even if some sacrifices have to be made. This is reported as an event without much significance beyond that. But behind the move is a grand strategy of the Chinese and one that couples neatly with the direction of the economic future of the west.

The big picture is that the Chinese [together with their partners, the Russians] are fundamentally strong and we in the west are weak and weakening. Add to that, that the economics of the western central banks and their leaders in government are steering their economies to an inevitable crash of a dimension we have never witnessed before - one that will make 2008 look like a tea party. This will not leave China and Russia untouched but it will leave them strong and stronger than the west. But even more than that, they will be in a commanding position economically to dictate and dominate the west and, by consequence, a lot of the world. This is because of the position of strength they are building for their currencies but let us return to that in a moment.

It is obvious that China wishes to see itself as the dominant economic and political power in the world. And who can blame her? Her goal is to see the USA reduced from its present status as the premier power. In crucial ways the USA has already thrown away this position. It has lost much of its industrial capacity, its infrastructure is crumbling making internal commerce hazardous and difficult, it has financialised its heath care to the extent that the insurers suck money out of working people’s earnings, so closing down significantly their spending power, the government debt is increasing all the time and now at 24$ trillion and the whole economy is being steered in the direction of serving a massive military build up and expansion overseas. The only Americans that benefit from that are those working in the arms industry and more and more young educated Americans are signing up as there are no other jobs available.

Meme of the day

Now there is a further factor that is utmost importance to the Chinese – the state of the dollar and its allied currency, the euro.

It is a truth universally acknowledged that the USAs strength depends on the role of the dollar as the currency of reserve. This fact keeps the dollar, and so also US bonds, overvalued and so the US can manipulate and buy everywhere. The US backed coup in Bolivia is only the most recent example. But the dollar will as some stage lose this status as reserve currency. The Chinese and Russians know this and have a strategy to give it a helping hand over the precipice at the appropriate moment. But before coming to that, what is making the dollar crash and western economies crash inevitable?

It is the new economic model that the western allies are using to run their countries – one never tried before and one that breaks every economic rulebook. This works as follows.

Production is falling everywhere as capitalism is failing to recharge its batteries. There is enormous private and public debt that can never be repaid. Wages are falling and, with interest rates at zero, saving means nothing, The ruling class’s response? Print money – not just a little to top up the system, but mega amounts shovelled into the coffers of the banks. This does nothing to increase wages or shopping basket prices [as the orthodox economics tells us] but it inflates asset prices.

If you have assets you get richer, if you don’t, you get poorer. This inflation of asset prices is enough to generate some economic activity. Merely the creation of more assets whether they be buildings, gold dug out of the ground, new fangled financial instruments, or trading all of the above does make for economic activity - even if in real economic terms it is absolutely useless. I did not put creating new companies in that list as, well, we don’t do that anymore do we? But let is keep an eye on the event that opened this piece – the Chinese acquisition of British Steel

The absurd economic policy – if it can be called a policy - of maintaining economic activity by the injection of trillions of dollars, euros, pounds and yen into their respective economies will bring on a cataclysm at some point but this in itself might not necessarily shift the dollar off its key position as world reserve currency. This is why China and Russia are hoarding gold - tonnes and tonnes of it. We don’t know exactly how much because both countries are gold producers and their own gold never gets near an exchange. Let us clarify what their plan is

Many of our finest critics of present economics [such as Max Keiser and Stacy Herbert] happen to be libertarians [which I disagree with] and libertarians are always gold bugs – that is they believe we have to return to a gold standard where every, dollar, euro, etc, is backed by government held gold. Without that, as now, you have the current situation of FIAT currencies where the value of the currency depends purely on economic activity. That includes crucially the ability of the government to raise taxes. So instead of a stash of gold to give people confidence in the currency, the government has a reliable income stream.

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So what is wrong with the FIAT system? Nothing at all. Contrary to libertarians it is the only system that works and it does work if managed properly. More than that it is the only system possible for, ultimately, it is economic strength that supports the currency not a warehouse full of non-performing, inert, slabs of metal. You can say your currency is backed by gold but this will not eliminate its natural FIAT value. It will merely distort it. This is why gold backed systems have been described as “double-currency” systems for you are giving two ways of valuing the currency and each may tug against the other according to politics and sentiment.

In theory gold backing means it is easy to value currencies against each other for the gold is there as the common standard. But again this is merely distorting what the free market in currencies, ie having "floating" currencies, would award each currency if there were no gold backing. Now let us get to the nub of the matter.

Take Russia and its currency the rouble. It is a FIAT currency with its international value determined by its being floated. But no one outside of Russia holds their money in roubles. Why? Because no one has the necessary confidence that the Russian government has a reliable income stream from taxes on its economy. The economy performs too badly for that and you have to add in the crucial fact that the stream from taxes is further compromised by corruption. There are quite horrific figures which depict the amount of leakage of tax revenues between the tax payer paying and the government receiving.

But supposing Russia announces that the rouble will no longer be floated but will be backed by gold, which Russia owns and can prove it. As I said, backing a currency by gold does not mean that markets will no longer value it as they would a FIAT currency, but it distorts the natural value. Even if Russian economic activity and tax revenues go down, the gold exchange value will still be there. This is not as solid as goldbugs would have you believe because the world value of gold can vary enormously. But nevertheless it would make a difference to the value of the rouble and the dollar in relation to it

Although Russia and China are different, the same argument exactly applies. China can distort the value of its floating FIAT currency by putting it on a gold standard. This would increase its value in relation to the dollar in particular.

Place, alongside this deliberate planning by Russia and China, the parlous state of the dollar with its value being hit constantly by the creation of billions of more dollars, combine that with negative interest rates, and the Russia/China plan is clear. It is a waiting game.

Wait until the dollar is severely weakened by the oncoming Armageddon bringing down with it most other western countries and then announce their currencies are going onto the gold standard. Whatever you may think about corruption in these countries and difficulties in their economic outputs, gold is gold. Where will people put their money – in a dollar in desperate chaos or in gold backed roubles or the Chinese yuan. As money pours into these currencies they will gain further. As the dollar, euro, yen and pound collapse, debts will become unrepayable and this is why I speak of Armageddon.

The position of dollar as reserve currency will be finally lost – forever. How will the US react? If Clinton had been elected the result would have been all out war, because one thing the US retains is an arsenal of untold magnitude and a people well enough indoctrinated to fight and die. We must hope that the scenario I have outlined comes to pass while President Trump is still in office, for whom war is “not his thing”.

So why did I start this article with mention of the Chinese acquisition of British Steel? Because the other pincer of the movement I described is buying up productive capacity all over the world. In a way that is another story but really it is all part of China’s plan with its ally in Russia. China has had enough of imperialism and neo-imperialism and she wants to be in a position to stop it – dead. Not only will she have defeated the dollar but she will own masses of factories and infrastructure in the west. And it will be our own fault entirely for letting that happen.

On the bright side, the big difference between living as a vassal state of China as opposed to the US, with China you can go to sleep in your own bed and know you will wake up in the morning with your house still around you