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Twilight of the Autocrats

Mar 25, 2009

Here is an impressive and informative article about the unrest that is surfacing around the world, including China, as a result of the economic crisis.

Gansu Province in China is having problems with social unrest. The article also says,

Gansu isn't the only Chinese province that has erupted in social unrest lately. Taxi drivers have gone on strike in several Chinese cities, people who lost money in illegal fundraising have protested in Beijing, and demonstrators have gathered across the country to demand unpaid back wages. Protest has even spread to the Pearl River Delta, the manufacturing center that abuts Hong Kong, traditionally one of the most prosperous parts of the country. In some years, the Delta's factories have produced 5 percent of all manufactured goods made in the world. But orders for the Delta's products have dried up, and angry factory workers, many owed back pay, have taken to looting warehouses. As these protests turn violent, they could provoke a violent response; Chinese factory owners are increasingly hiring thugs to hit back at demonstrators.

You see, the communist countries of the past are only nominally communist today. The Party has retained its authoritarian rule but have become capitalist in their ideology. China opened itself up to privately-owned businesses years ago, and they flourished as long as they had a market in the U.S. for their products. The problem is that the U.S. market is floundering, and the cash cow's ribs are showing. Nations competed to bring our trade deficits higher, bringing in lots of U.S. dollar cash reserves, but essentially bankrupting us in the process.

Japan's exports have dropped in half since this time last year. This spells serious trouble for them, as soon as their cash reserves are used up trying to stimulate their economy.

The real problem is not that they need to stimulate the economy to produce more jobs. The problem is that the market is drying up, because Americans are not buying and consuming at the past rate. The government could subsidize the production of more Toyotas, but if no one is buying them, it is a waste of money. Cars become obsolete every year, even with zero mileage on them.

In Russia, Vladimir Putin promised to save the country from the ruin of the 1990s, a time when Russians enjoyed a more open society but incomes and wages fell sharply. True democracy, he implicitly suggested, might result in disorder in such a large and unwieldy nation. And in return for higher growth rates and greater disposable income, Russians allowed Putin to slowly strangle their freedoms. "Putin does provide stability of sorts, which the middle classes cherish," says Dmitri Trenin of the Carnegie Endowment's Moscow Center. "Even those [Russians] who oppose authoritarianism in principle fear that the likely alternatives are worse -- outright chaos, populist nationalism, much harsher authoritarianism than Putin's."

This shows the universal problem of any government that assumes the right to survival at any cost. We could change the wording and apply the principle just as easily to America:

"And in return for security, Americans allowed Bush to slowly strangle their freedoms."

 And remember that piece of information last June which Lindsey Williams broadcasted? He said that the oil moguls were planning to drop the price of oil to $50 a barrel in order to bankrupt the oil-producing countries like Russia, Iran, Venezuela, etc. Unfortunately, it is having an effect on Canada and Mexico as well. Well, the article speaks about that situation as well:

The true test of any government, though, comes not in good times but in bad. The autocracies are particularly poorly prepared for a global economic crisis because they have weak domestic consumer markets and rely upon exports to survive. Powerful authoritarian regimes like Russia and the Persian Gulf states are dependent on exports of petroleum or one sole commodity. In Venezuela, energy accounts for some 95 percent of all export revenue. In Iran, it provides some 80 percent of revenues. But the price of oil has dropped by more than half in the past six months. . . .

Even in the Persian Gulf and Central Asian states, normally some of the quietest parts of the world, the crisis has had political consequences. Kazakh activists have started holding rallies against the government, previously a rare occurrence in the country. Iran, too, faces instability. Inflation in the Islamic Republic is now running near 30 percent, and a powerful cleric mused publicly that the crisis could do "big damage." The autocrats clearly are worried. . . . The autocracies have money to burn. China has stockpiled nearly $2 trillion but is eating it up fast. Russia is spending nearly $10 billion a week defending the ruble, to little avail, as the value of the currency keeps plummeting. Though they can plow money into their economies, the autocratic leaders cannot make Western consumers shop or guzzle gas and so are powerless to control their major economic engines. And if regimes like Chavez's try to get their economies under control by cutting government spending, they risk undermining their own power, which was bolstered by government social-welfare programs that often targeted the middle classes whose support they now need.

We should not underestimate the power of water, wind, or economic forces. The world economic collapse all boils down to one thing--DEBT. America ran trade deficits for decades, and the chickens have finally come home to roost. This was never in doubt, because it was always only a matter of time. One cannot keep running billions of dollars in trade deficits without breaking the economy at some point.

The American consumer has given his all to make the world prosper. The trade deficit transferred huge amounts of money to Asia and other parts of the world. This was our long-term Economic Stimulus Package. It has now ended. We have no more money to consume those cheap imports. The world produced too much and consumed too little. The banking system can create more money, of course--and they will--but the way the system is set up, this course of action will only create MORE DEBT and thus add to the problem. Even President Obama acknowledges that his spending spree is merely the lesser of two evils. He would rather have hyper-inflation than economic collapse.

As I see it, the current solution--creating more money--is the only viable option, if we plan to keep our debt-money system in place. Hence, we have no choice but to inflate the money supply and run the risk of hyper-inflation. And keep in mind that Lindsey Williams told us last summer that at first we would rejoice at the low oil prices, but that in six months we will regret it. "So enjoy the low oil prices while you can," he said.

When President Obama's spending spree fails, then perhaps we will be forced to follow the biblical law of Jubilee and rebuild our banking system, not upon usury, but upon biblical principles.

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Category: News Commentary

Dr. Stephen Jones

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