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Democracies Like Bubbles, Totalitarian Regimes Hate Them

Totalitarian regimes, like China, fear bubbles and revolutions. Strangely, these regimes help to prevent asset bubbles, and the resulting unequal distribution of wealth between rich asset owners and the poor without assets.

Today’s FT article shows how Chinese authorities fear the bubble and the revolution.

China cash crunch deepens as PBOC withholds funding

Short-term interbank rates jumped more than 200 basis points, setting a record high at nearly 8 per cent for loans of one month or less, the latest indication of how credit has suddenly become very tight in China.

The main reason for the tightness has been the central bank’s reluctance to pump liquidity in to the money market, wrongfooting banks that had expected Beijing would support them with large cash injections, as it had regularly done before. (source FT)

Since the 1990s, too much democracy has combined with unlimited power to central banks, excessive spending, bubbles and private debt.  In earlier times, kings and the gold standard helped to ensure that the rich did not get too rich and the poor not too poor.

The latest totalitarian regime in Western Europe is commonly called the “euro”. During the financial crisis this regime was toppled. It turned from a democracy that allowed for cheap financing and a lot of spending into a totalitarian regime, with much austerity and limited spending. Read why the euro regime is our new gold standard king.


George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
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Permanent link to this article: https://snbchf.com/2013/06/democracy-likes-bubbles-totalitarian-regimes-hate-them/

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