Global Agenda: Truth week

A large part of reported Chinese trade-related flows of money in recent years did not relate to actual goods and services being bought and sold.

June 13, 2013 22:46
4 minute read.
Great Wall of China

Great Wall of China_311. (photo credit: Reuters)

This has been a wonderful week for truth, perhaps the best since the financial crisis blew up in full force in 2008 and exposed the fabric of lies that the world had been living in until then. What the impact will be of the various doses of truth that the financial world, and the world in general, has been subjected to, must be a matter of conjecture, but that there will be an impact is certain and inevitable.

Truth week started last Saturday, when the Chinese government published its trade data for May. These showed that exports grew at an annual pace of only 1 percent, while imports actually fell slightly, at a pace of 0.3%. To put this in perspective, you need to know that as recently as a year or two ago, both imports and exports were expanding at annual rates of up to 30%.

This torrid pace eased to 20% and then into low double figures. But to have no growth at all would imply that the entire Chinese economy had seized up and the great global growth engine was neutralized – in which case the entire world would have felt the negative effects. So what gives? In fact, the latest data reflect the crackdown by the Chinese authorities on importers and exporters who have made massive use of fictitious invoices to circumvent their country’s exchange controls and move funds into or out of China. If that is not clear, let me put it more simply: It now transpires that a large part of reported Chinese trade-related flows of money in recent years did not relate to actual goods and services being bought and sold.

They were phony. It was a scam. No one actually knows how much real trade took place. The data were distorted by systemic and systematic lying and cheating.

That is pretty dramatic stuff – but it’s certainly not surprising.

No one who follows China even from afar can be in any way shocked to discover that the official data are false and hugely exaggerated. On the contrary, it’s quite a relief to have what has long been assumed by independent analysts be officially confirmed. But what can you expect from shifty Orientals? We civilized Westerners would never engage in such gross behavior! That would be unthinkable for gentlemen, certainly in the governing elite.

Get this, then: “Let’s be clear. We’ve intentionally blown the biggest government bond bubble in history,” Haldane said. “We need to be vigilant to the consequences of that bubble deflating more quickly than [we] might otherwise have wanted.” The Haldane being quoted in the Guardian on Wednesday as having said this in the course of testimony to a House of Commons committee – he couldn’t possibly be Andrew Haldane, the director of financial stability at the Bank of England, because, after all, the idea of a senior official at the one of the world’s key central banks admitting that he, his colleagues and their peers around the world had systematically distorted the global financial markets for years on end and thereby created the risk of a disastrous financial collapse – well, it’s just unthinkable, isn’t it? Er, no. It is thinkable, and is was that same Andrew Haldane, and he also said the Financial Policy Committee, of which he has been a member since its creation in 2011, had not been “entirely free” of political interference over the way the bailed out banks Royal Bank of Scotland and Lloyds Banking Group had been forced to raise more capital.

Of course, you don’t have to believe the Guardian’s version, but Haldane has not retracted a word, and the Bank of England made do with a statement saying that what he said was only his “personal view.” So that’s fine, then.

Haldane happens to think that the Bank of England is not independent and is conducting a hazardous policy with potentially disastrous consequences – but you, or Mrs. Edith Johnson of Chipping Norton, Oxfordshire, might think differently, and you and she are certainly entitled to your personal views, too.

If you are fortunate enough to live in “the home of the free,” aka the United States of America, then your government knows, or can quickly find out, what your views are on anything from monetary policy to nuking North Korea. That’s because it can, and often does, monitor your electronic communications as well as your phone (remember, some people use a phone for verbal communication with other people – awesome, huh?).

This uncomfortable reality was known, and indeed published in leading newspapers, for years before Edward Snowden blew the whistle on the full extent of surveillance being conducted by the vast, endlessly growing security apparatus of the US – of its own citizens.

But for whatever reason, Snowden succeeded in hitting a nerve in the American public, sparking, inter alia, a boom for Orwell’s 1984 and a storm of outraged commentary in both mainstream media and the blogosphere.

Quite a week.

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