The Naked King: Exposing U.S. Dollar & Diplomacy Weakness

Taiwan - Will China use it for an indirect attack on the U.S.?

Soros sees possible collapse in Chinese Financial Markets

From Nixon to Carter & from Trump to Biden... Historic Rhyme?

The Naked King: Exposing U.S. Dollar & Diplomacy Weakness

September 7, 2021

“With the issue of our security apparatus and the projection of US military power around the world being somewhat in question, it’s not clear which comes first, the deterioration and decline of our international security or of our international monetary system. When one or the other goes, I think, you’re talking about not only the end of pretense, but the beginning of a very hard, hard reality.”

— David McAlvany

Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick along with David McAlvany. 

I was having lunch at one of the oldest restaurants in Durango, Dave. Here in Durango, restaurants come and go, especially right now when people are having a hard time getting help. I was sitting and talking to the owner of a Chinese food restaurant over on main street that I like to go to, and I like to buy a book every once in a while, just sit, have Chinese food, read for an hour or two. And as I was talking to her, it was interesting. We’ve been here almost 30 years here in Durango, I had talked to her, but I had never really sat down and talked to her about who she was before Chinese food restaurant ownership. And she had higher degrees in international diplomacy. What started the conversation, Dave, was I had said, “Are you doing any traveling right now?” Because I knew she had family in Taiwan. And she said, “No. No, I’m not doing any traveling right now.” And I saw actually a tear start to well up in her eye. And the longer we talked, the more I realized that what occurred in Afghanistan a few weeks ago had direct impact on her and her family in Taiwan. The elephant in the room, Dave, is not Afghanistan. The elephant in the room is that we’ve been putting on airs of supremacy that maybe we as the nation no longer have.

David: It’s pretty interesting to watch the news feed from the Financial Times. Xi Jinping is aiming to redraw China’s social contract, or Chinese control revolution, or even allowing George Soros to have a voice in the op-ed section. Investors in Xi’s China face a rude awakening. There’s a reality, which is firming up within China. And we’re talking about the economy and the financial system, which necessitates a certain political activity. And all of these things are happening at a very unique time, perhaps it’s coincidental. But we can look to our own economy. Last week we had non-farm payroll numbers which were not as bad as they sounded. They were worse. The expectation was for 750,000 jobs to be created. It was far less than that, 235,000, that was the reported number. But 143,000 of those were created statistically from the birth death models, not real jobs created. So that’s an issue. On top of that, you had wages which were increasing, supporting the idea of inflation coming at the same time an economy is slowing.

Kevin: There’s a word for that.

David: Stagflation.

Kevin: Yeah. And China, their economy is slowing too. So you can see different types of actions maybe on the horizon based on that.

David: Right. And it was consistent both looking at their purchasing managers indexes for manufacturing and services. Both numbers were ugly. You could argue it’s temporary, except the dominant growth factor in China has been in that massive malinvestment in real estate development. And as we’ve talked for a number of weeks now, Evergrande is circling the drain, this $300 billion— This was a very large company.

Kevin: Their bonds were paying 40 some odd percent, you had mentioned last week. I mean, that is the sign of bankruptcy.

David: And the value of those bonds declined between 25 and 35% again, last Friday.

Kevin: Wow,