China Rises: Getting Rich
New York Times Documentary (2013)
“How China Backs Its Enormous Economic Success”
China Rises purports to uncover the secret of China’s phenomenal economic success. It traces the massive migration of rural peasants into scores of newly fabricated cities and industrial centers. Of the thousands of new factories springing up over the last thirty years, half are privately owned and half are state owned enterprises. Most manufacture consumer goods (clothes, electronic gadgets, shoes, textiles, heavy appliances, household goods, toys, watches) for export.
The filmmakers attribute China’s economic miracle to their newfound openness to private enterprise and their ridiculously low wages. At the time the documentary was made, the average Chinese wage was 60 cents an hour for a 12 hour day. By the end of last year, this had increased to $1.69 an hour Rising Chinese Wages
Most of the film focuses on the lavish lifestyles of China’s most famous self-made millionaires. There are also several interviews with rural peasants who have migrated to China’s designer cities to work. Most are extremely grateful for the opportunity to earn money to lift their families out of extreme poverty. Women, however, tend to be sad about being separated from their children – their earnings aren’t sufficient to bring them to the city, so they are cared for by grandparents in the rural villages.
The film also features segments about China’s emerging middle class learning to pamper themselves and China’s rampant knock-off industry, specializing in counterfeit luxury items, fake birth control pills, fake antibiotics and even fake milk powder. The latter caused 54,000 Chinese babies to be hospitalized (six died) in 2008.
Ignoring the Real Reason for China’s Stellar Growth
What I find most significant about this video is what it leaves out. In fact, it totally ignores the main impetus for China’s phenomenal growth – namely a monetary policy that doesn’t rely on borrowing money from private banks.
As of February 2014, China had only borrowed a total of $US 823 billion from foreign banks – about 9% of GDP. In contrast, the debt the US owes to private banks is 101.5% of GDP.
Unlike most western economies, 90% of the loans used to finance businesses and government services originate from China’s government-run central bank.* Bloomberg’s refers to it as “Chinese-style” quantitative easing, ie the Chinese government is creating the money out of thin air, rather than borrowing it from private banks (and paying them interest to create it out of thin air).
This differs from US-style quantitative easing in that the Chinese government spends the money they create directly into the economy instead of handing it over to private banks.
Despite Obama’s recent attacks on China for “weakening their currency,” neither the President nor the corporate effort make any effort to explain exactly how the Chinese are doing this. The explanation is actually fairly simple: pumping more yuan/renminbi into the Chinese economy causes inflation and weakens the currency’s value in relation to other global currencies.
The corporate media glosses over these details because they don’t really want Americans to understand where US dollars come from – that 97% of the dollars in circulation are created by banks out of thin air and loaned to us at interest. Or that depending on private banks to create and control our money supply is a big reason for our current economic crisis. See Stripping Banks of Their Power to Issue Money
They especially don’t want us to realize there’s an alternative – government-issued currency by a government owned central bank – nor that it’s working miracles for the Chinese economy.
*Contrary to popular belief, the US central bank, aka the Federal Reserve, is a consortium of private banks overseen by a government appointed director (Janet Yellen).
“As of February 2014, China had only borrowed a total of $US 823 billion from foreign banks – about 9% of GDP. In contrast, the debt the US owes to private banks is 101.5% of GDP.”
I do not understand economic principles very well. I certainly cannot understand why on earth any country should go so extensively into debt to private banks. I cannot help but feeling that behaviour like this in the end spells certain disaster. The warning signs are there. People in the know can see them. Why then is nobody keen on changing the ‘borrowing culture’?
At the moment, Aunty, all functioning governments and economies (except China) MUST borrow money from private banks because this is the only way that money is created to run the economy and provide government services. A lot of people operate under the misconception that government issues the money to run economies, but this hasn’t been true since 1694 (except briefly in the 13 American colonies before the Revolution and under US President Andrew Jackson).
Only 3% of money is issued by government as paper certificates and coins (except in China where 90% of money is issued by government). The rest of the money in circulation is created electronically on a computer when you go to the back to take out the loan (the bank doesn’t have the money on deposit – another misconception – they create it out of thin air by typing numbers into a computer).
If you haven’t seen it already, you should watch the movie Money as Debt, which explains this principle quite clearly: https://www.youtube.com/watch?v=jqvKjsIxT_8
The mind boggles, but thanks for the link, Stuart. I’ll look at it later. Wouldn’t it make more sense for governments to raise more taxes so essential services can be provided for without having to borrow money that has to be paid back with interest?
Prior to 1980, most governments did fund most of their services through taxes – then the millionaires and billionaires decided they didn’t want to pay tax any more. It’s not possible to fund government by taxing poor people. That’s why they borrow it.
I think we also need to change monetary policy, that governments ought to create and control the money supply rather than private banks.
It never ceases to amaze me how much is yet to be understood regarding financial freedom. I don’t believe we’ll ever have the opportunity to experience such luxury in the US.
What really discourages me is that prior to 1970 there was wider understanding of how money was created in the US. In my 8th grade math textbook (in 1961) there was a statement that there were two forms of money, currency and demand deposits. Unfortunately my math teacher couldn’t explain what a demand deposit was (it’s the “money” created when a bank issues a loan). But at least the textbook writers thought that was something American teenagers needed to know.
With the financialization of the US economy that began in the 1970s, the banking elite decided it was too dangerous for Americans to understand how their money worked.
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That is a great link, futuret. People should really have a look.
Thank you Doc, excellent. I wonder what the next generation will do. Re-blogging.
I think the next generation will rebel totally against “experts” lying to them about history, economics, science and medicine and insist on collectively creating their own body of knowledge. I see this happening already with the anti-vaccine and the citizen science movement.
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Re-blogged in it’s entirety Finding Truth in an Illusory World…. Thanks!
Thanks for reblogging.
A worth well reading how thing really are
Thanks, Gerry. Excellent article about Indian investment in China.
Bravo doc! Regards from Florida.
Thanks, Toritto. As you can see, I am pretty fed up with the lies and distortions of the New York Times.
For those interested, there is an interesting website where you can get a “Live” view of fiat currency at work: http://www.usdebtclock.org/
There is also a “Time” machine that allows you to see where things were, and where they are going if continued at the current rate. Have fun exploring!
Great post, greetings!
Thanks, Onnovocks. I think the election of Jeremy Corbyn as British Labour leader may be a bell ringer for changes in debt based money. Corbyn is openly campaigning for nationalizing the British banks, and there are periodic noises of support at the Bank of England.
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Well I hope he succeeds, the banks have a lot of exaction tools available to them that they can use away from public view. They won’t just give up.