Tag Archives: china

Chinese Electronic Espionage Leads To UK Office of Cyber Security…

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The Times Online reported in January that the UK’s MI5 was battling devious Chinese attempts to entrap UK businessmen, with electronic bugging devices….and sexual “honey traps”. (Not as imaginative as the CIA’s “acoustic kitty,”  but probably more effective):

“A leaked MI5 document says that undercover intelligence officers from the People’s Liberation Army and the Ministry of Public Security have also approached UK businessmen at trade fairs and exhibitions with the offer of “gifts” and “lavish hospitality”.

The gifts — cameras and memory sticks — have been found to contain electronic Trojan bugs which provide the Chinese with remote access to users’ computers.

MI5 says the Chinese government “represents one of the most significant espionage threats to the UK” because of its use of these methods, as well as widespread electronic hacking.

Written by MI5’s Centre for the Protection of National Infrastructure, the 14-page “restricted” report describes how China has attacked UK defence, energy, communications and manufacturing companies in a concerted hacking campaign.

It claims China has also gone much further, targeting the computer networks and email accounts of public relations companies and international law firms. “Any UK company might be at risk if it holds information which would benefit the Chinese,” the report says.

The explicit nature of the MI5 warning is likely to strain diplomatic ties between London and Beijing. Relations between the two countries were damaged last month after China’s decision to execute a mentally ill British man for alleged drug trafficking.

Earlier this month the United States demanded that China investigate a sophisticated hacking attack on Google and a further 30 American companies from Chinese soil.

China has occasionally attempted sexual entrapment to target senior British political figures. Two years ago an aide to Gordon Brown had his BlackBerry phone stolen after being picked up by a Chinese woman who had approached him in a Shanghai hotel disco.”

So now you know better than to fraternize too cozily at a Chinese trade event.

The 14-page “restricted” report by MI5 Director General, Jonathan Evans, lists attacks on UK defense, energy, communications and manufacturing companies and is the latest and most explicit warning from UK authorities on Chinese espionage.  It was sent to hundreds of business leaders in 2009.

Evans’ lobbying led to the creation of the Office of Cyber Security (due to open in March 2010).

The UK only follows the US on this. As far back as June 2009, Barack Obama announced the need for a new official position to oversee cybersecurity in the US, a move applauded by some in the IT community, like McAfee’s Director of Threat Intelligence, Phyllis Schneck, but criticized by others, like Wayne Crews, VP at the Competitive Enterprise Institute, who argued that attempts to collectivize and centralize information technology risks were liable to crowd out private enterprise solutions.

Roderick Long On Confucian Libertarianism

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Masterful libertarian scholar, Roderick Long, has a very long, fascinating paper, “Rituals of Freedom: Austro-Libertarian Themes In Early Confucianism,” at Mises.org. It traces libertarian ideas in Confucian thought, and makes a convincing argument that Confucianism is a better source of libertarian inspiration than the much more frequently cited Daoism.

I’m republishing a post on Long’s paper by Brian Caplan, at Marginal Revolution, because the pdf of Long’s paper isn’t very reader-friendly for a blog and Caplan has nice quotes from the piece.

“Unfortunately, Long points out, a much stronger theme in Taoist is primitivist hostility to modern civilization. Listen to Lao-tzu describe the Taoist utopia:

Lessen the population. Make sure that even though there are labor saving tools, they are never used. Make sure that the people look upon death as a weighty matter and never move to distant places. Even though they have ships and carts, they will have no use for them. … Make sure that the people return to the use of the knotted cord [in lieu of writing]. … Then even though neighboring states are within sight of each other, [and] can hear the sounds of each other’s dogs and chickens … people will grow old and die without ever having visited one another.

In contrast, Long finds much of value in the Confucians:

The early Confucians, by contrast, may not be as radical in their anti-statism as the Taoists, but in my estimation they make up for this flaw by firmly yoking their anti-statism to the cause of civilization, commerce, and the Great Society; their overall program thus looks a lot more like contemporary libertarianism than the Taoist program does. One Confucian text, while noting approvingly Laozi’s hostility to despotism, sharply criticizes Laozi for wanting to “drag the present age back to the conditions of primitive times and to stop up the eyes and ears of the people”; the best ruler instead “accepts the nature of the people,” which is to long for “beautiful sounds and forms,” “ease and comfort.”

The highlight of Long’s article is his discussion of the Sima Qian (c. 145-85 B.C.). Almost two thousand years before Adam Smith, Qian opined that “Wealth and currency should be allowed to flow as freely as water!” and had arguments to defend his position. And who said that Chinese intellectuals had no appreciation for the merchant class? Few Western thinkers match Sima’s appreciation of entrepreneurship:

These, then, are examples of outstanding and unusually wealthy men. None of them enjoyed any titles or fiefs, gifts, or salaries from the government, nor did they play tricks with the law or commit any crimes to acquire their fortunes. They simply guessed what course conditions were going to take and acted accordingly, kept a sharp eye out for the opportunities of the times, and so were able to capture a fat profit. … There was a special aptness in the way they adapted to the times …. All of these men got where they did because of their devotion and singleness of purpose. … [T]here is no fixed road to wealth, and money has no permanent master. It finds its way to the man of ability like the spokes of a wheel converging upon the hub, and from the hands of the worthless it falls like shattered tiles. … Rich men such as these deserve to be called the “untitled nobility” …

Murray Rothbard praised Sima in his history of economic thought, but Long notes that he neglected to mention that he was a Confucian!

It is hard to read this piece and not stand in awe of Long’s command of the Chinese literature. This is a body of thought comparable to Western philosophy in its intricacy and depth. Even if you couldn’t care less about Chinese proto-libertarians, this article exemplifies the true meaning of scholarship. And so the Sage says: check it out!” Continue reading →

What China Wants

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The Financial Times points out the quirks in the Chinese market that have Western companies racking their brains to stay on top of sales:

“The big spender in China, in years past and even more so today, is the state: private consumption as a percentage of gross domestic product has fallen from 60 per cent in 1968 to 36 per cent last year and could be as low as one-fifth in 2009 as the government ramps up capital investment.

In fact, the Chinese, who already have a world-beating savings rate of nearly 40 per cent of their income, tend to become more frugal when times are tough. As bank deposit rates decline, most of us spend more. The Chinese tend to stash away even greater sums to make up for the lost interest. The reason for this conservatism is the lack of a social safety net in China – citizens have to provide for their own medical care, old age and possible unemployment.

This makes them “penny pinching, ruthless, suspicious shoppers”, says Tom Doctoroff, north Asia director of advertising agency JWT and a writer on Chinese consumer trends. In a recession this behaviour only grows worse. “The downturn has made people keener on finding the cheapest deal,” says Yuval Atsmon, an associate principal in McKinsey’s Shanghai office. Even when they can easily afford it, buying a PC typically involves six visits to a store, and more often than not, customers will wait six months before making their decision after consulting blogs, online comparison sites and – the most important source of information in China – friends and family. Sales of copycat mobile phones, with all the functions of top models but a lower price, have soared from 17 million units in 2006 to 62 million units last year.

Brand consciousness is high, at least in the big cities, but brand loyalty is much lower than in the west. A price cut or good in-store promotion can often sway shoppers. And for cultural reasons, appealing to an individual’s taste or personal comfort typically doesn’t work, Doctoroff points out. A purchase either has to publicly signal status or wealth, like a flashy car does. Or provide a practical benefit: the latest craze in China is chocolate with added calcium, eaten not for pleasure but for the health benefits. The growing appeal of diamonds to women is not based on romance, but as a financial signal of a man’s commitment. Trust is another key issue in a country where so many consumer products are faked. Chinese mothers, for example, will pay 30 per cent more for safe baby milk – and this should favour foreign brands.

But foreign retailers and manufacturers have to cope with vast regional differences in demographics, language and culture that make it hard to plan a single marketing strategy – indeed treating China like a single country is usually a mistake. Natives of Zhejiang on the east coast like “toilet roll as rough as sandpaper”, the former head of Wal-Mart China liked to observe, a penchant thankfully absent elsewhere. Atsmon points out that cities even an hour apart can be entirely different: in southern Shenzhen, more than four-fifths of the population consists of migrant workers, mostly under the age of 35, who speak Mandarin and drink in bars. In nearby Guangzhou, migrants number just over a quarter, more people are older, enjoy watching Cantonese TV and go out to restaurants to drink with family members. Adequately addressing such niches requires an army of local suppliers, costly infrastructure and several layers of wholesalers and intermediaries. Even then, success may remain as elusive as it always has been: “No matter what you may be selling, your business in China should be enormous, if the Chinese who should buy your goods would only do so,” lamented Carl Crow, an advertising executive in Shanghai and author of the original book on how to sell to the Chinese … more than 70 years ago.”

American Pot Described By Chinese Kettle

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Veteran investigative journalist David Lindorff in 2005 on the Chinese turning the tables on the US on human rights:

” The New York Times was almost apoplectic Sunday over a human rights “report card” issued by China’s Foreign Affairs Department on the United States. That report, a response to the annual report on China’s human rights situation issued by the U.S. State Department, called attention to a number of areas where the U.S. is in violation of universally accepted norms of behavior.

Having lived for two years in China–a fascist-style military dictatorship where the law is simply another tool of repression for those in authority, and where people are routinely locked up, tortured, deprived of their livelihood and even their lives for such transgressions as posting comments on a website, protesting a corrupt boss or conducting prayer services in a private home, and a place where perceptions of America can be pretty bizarre–I was expecting something comic after reading in the Times that the report on the U.S. “approaches caricature.”
In fact, putting aside whom it was doing the talking, the report was pretty damned accurate, and devastating.
American society is characterized by rampant violent crimes, severe infringement of people’s rights by law enforcement departments and lack of guarantee of the right to life, liberty and security, the Chinese report said, noting that in addition to the threats from uniformed law enforcement, some 31,000 Americans were killed by firearms last year. The report also noted America’s record two million prison inmates, and the fact that three times that many are on parole or probation.
Caricature? Hardly. The number of people being jailed in the U.S. is a national scandal, particularly considering the percentage who are black and Latino, and the fact that most are there for non-violent offenses. And no surprise there: Nearly every time I am on the road and see a car pulled over by a trooper, I discover that the driver is black. Unless blacks are uniquely prone to speeding, there is an epidemic of racial profiling, and it’s not limited to highways.
American democracy is manipulated by the rich and malpractice is common, the report continues, noting that elections in the U.S. are “in fact a contest of money.” Really. Can anyone honestly call this a caricature? I remember when I was teaching a group of journalism graduate students in Shanghai, I received my mail ballot from home, which at the time was a small town in upstate New York. I was happy to receive it because I wanted to show it to my class, where the students were anxious to see first-hand how American democracy works. Imagine my chagrin when I opened the envelope and saw that the ballot was composed entirely of single candidates for each post. Republicans so dominated the upstate region that no one bothered to run against them for any town or county post! “These look just like our ballots!” the students said in amazement. Nor in our current red state/blue state polity, are things much different across most of the country, where campaign funding laws, or the lack thereof, make incumbency virtually a guarantee of re-election.
In the area of economic rights, the Chinese report said poverty, hunger and homelessness “haunt the world’s richest country.” Here I’d have to disagree. While the figure they used (from the U.S. Census Bureau—36 million living in poverty—is correct, it is hardly a condition that “haunts” the majority living above the poverty line, since our derelict corporate media don’t cover the poverty beat, and our economically segregated communities make it easy for people to ignore the suffering in the midst of plenty. Still, noting that a sixth of the nation lives in poverty is no caricature. It’s a fact.
Racial discrimination? The report says it permeates every aspect of society, while the new post 9-11 homeland security regulations especially target ethnic minorities, foreigners and immigrants. Does anyone want to challenge the accuracy of that depiction?
As for the rights of women and children, the report called attention to the deplorable rate of rapes and sexual abuse, with some 400,000 children forced into prostitution and sexual abuse. This ugly reality, while also true for China, cannot be brushed aside here.
Finally the Chinese report addressed the abuse of foreigners by U.S. authorities, noting the scandalous violations of the rights of prisoners of war, the history of invasions and unprovoked military assaults on other nations, and the estimated 100,000 civilian deaths in Iraq.
For my part, I was surprised the Chinese report didn’t go further, to mention the failure of the U.S. to abide by international law in allowing foreigners arrested on serious criminal charges in the U.S., including murder, to contact their embassies, the shameful inadequacy of funding for schools in poor communities, the dumping of toxic waste and the siting of pollution-causing power plants in low-income communities, and the theft of private property through improper use of imminent [sic]  domain and draconian drug laws, the unconscionably high percentage of minorities on American death rows, as well as other abuses.
China is one of the world’s prime human rights offenders, but that ugly reality should not prevent us from looking honestly into the mirror that it has held up to our own society and government.
If anything is a caricature, it is the article on the Chinese report, in which The Times appears as a caricature of real independent journalism.”

Death Penalty for Chinese Embezzler

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“China on Tuesday executed a former securities trader for embezzlement, the first person in the industry to be put to death, but millions of yuan are still missing, a state newspaper said.

Yang Yanming was sentenced to death in late 2005 and took the secret of the whereabouts of 65 million yuan ($9.52 million) of the misappropriated funds to his grave, the Beijing Evening News said.

The report added that Yang was the first person working in China’s securities sector to be executed.”

More here at News Daily.

Stories like these should alert us to the possibility that there may very well be mini-Madoffs (mini in absolute money terms only) all over the world, on which this recovery rests flimsily.

China Bubble, China Trouble

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Dominique Strauss-Kahn, the IMF’s Managing Director ended a 6-day trip in Asia by telling Chinese authorities to continue with their stimulus program.

“The main goal is to help with public demand, weak private demand. And the reason why we have to continue with stimulus is because a self-sustaining private demand is not yet visible,” he said.”

He also called for

1) Asian countries to rebalance their economies by becoming less export oriented and fostering internal demand

2) for the renminbi to strengthen to raise household purchasing power and labor’s share of income

Strauss-Kahn said he anticipated Asian growth of nearly 6% for next year (double the forecast for the global economy) and called for Asian leadership in the global financial crisis.

What does this mean?

Let’s start with Eclectica Fund Manager, Hugh Hendry, cited in “Outside the Box” (JohnMauldin@InvestorsInsight.com). Hendry writes:

“Now, if we repeat the Japanese experience then it is possible that nominal US GDP will rise from $14trn today to perhaps just $16trn in ten years time….. The Chinese are building capacity to meet a world where US nominal GDP is $25trn in ten years time. I fear they could be in for a nasty shock.”

That is, the IMF is banking on the remninbi strengthening so that domestic household expenditure can pick up the slack from weakening US consumer demand because there’s huge overcapacity in China.

Serendipitously, just as Strauss-Kahn and the Chinese premier Hu Jintao agreed that domestic demand has to be stimulated, along comes this Bloomberg report that quotes China International Capital Corp. as predicting that Chinese steel demand will rise 12% rather than the 5% predicted by the World Steel Association.

Now, where will the steel go? To a boom in housing construction and auto manufacture.

I blogged earlier that Jim Chanos, the dark prince of short-selling, has declared China a bubble set to burst, on the strength of these mysterious auto purchases that seem to be entirely production driven. One one hand, the government is using its dollars to manufacture cars, demand be damned. But the government has also committed to stimulate demand by social spending (on education and health) that’s intended eventually to make the Chinese loosen up…. and spend on those big-ticket items, like cars and houses.

But there’s an irony in thinking about China’s demand as affecting the commodity market. The irony, says Hendry, is that China is the commodity market.

“Huge demand and numerous small players are a perfect setup for price increases by the Big Three miners, which often cite high spot prices as the reason for jagging up contract prices. But the spot market is relatively small, and mines can easily manipulate spot prices by reducing supply. On the other hand, numerous Chinese steel mills simultaneously want to buy ore to sustain production so their governments can report higher GDP rates, even if higher GDP is money-losing. China’s steel industry is structured to hurt China’s best interests.

The Chinese government is very much wedded to it’s 8% growth target and will do whatever it takes to come close to that target – including flooding the domestic banks with a wall of cheap money to lend as economic stimulus. However, preventing a downturn with easy money is a dangerous way to reflate the economy.

As profitability for the businesses that serve the real economy remain weak, there has been of shift of investment in the first half of 2009 disproportionately into property, stock and commodity markets rather than private sector capital formation. This shift in the medium term threatens to undermine China’s financial stability. Thus, China is experiencing a relatively weak real economy and red hot asset markets.

The Chinese imports that revived the bulk carrier market this year were mostly for speculative inventories. Bank loans were so cheap and easy to get that many commodity distributors used financing for speculation……

Even more foreboding is a looming real estate bubble. The real estate sector in China is especially critical to the bulk carrier market because approximately 50% of Chinese demand for steel is generated by the construction industry. Most Western shipping forecasts are based on unlimited future need in China for new construction. The reality is quite different. China’s urban living space is 28 square meters per person, quite high by international standard. China’s urbanization is about 50%. It could rise to 70-75%. Afterwards the rural population would decline on its own due to its high average age.

So China’s urban population may rise by another 300 million people. If we assume they all can afford property (a laughable notion at today’s price), Chinese cities may need an additional 8.4 billion square meters. China’s work-in-progress is over 2 billion square meters. There is enough land out there for another 2. The construction industry has production capacity of about 1.5 billion square meters per annum. Absolute oversupply, i.e., there are not enough people for all the buildings, could happen quite soon.

…..The nationwide average price [of housing] is about three months of salary per square meter, probably the highest in the world! Consequently, a lot of properties can’t be rented out at all. Those that can bring in 3% yield, barely compensating for depreciation……

Some argue that China’s property is always like this: appreciation is the return. This is not true. The property market dropped dramatically from 1995-2001 during a strong dollar period. Property prices could drop like Japan has experienced in the past two decades, which would destroy the banking system.

China’s Gold Rush..

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From Adrian Ash at Bullion Vault, via goldseek:

“The International Monetary Fund confirmed on Friday that it will sell 403 tonnes from its hoard to finance development projects in poorer countries, offering gold to central banks before considering steady, pre-announced open-market sales.
“China has no need at all to Buy Gold from the international markets,” counters Lila Lu, chief precious metals trader at Minsheng Bank Corp. in Beijing, speaking to Reuters.
“Because China is a large gold producer, it can source gold directly from its domestic makers, most of which are state-run enterprises.”
Off-market purchases direct from domestic Gold Mining firms enabled South Africa – then the world’s No.1 producer – to double its gold reserves during the late 1960s.
“Why should we use US Dollars to Buy Gold?” Lu added today. “We can use Yuan instead to purchase gold from domestic producers.”
Early Tuesday the state-owned China Investment Corp. announced taking a 15% stake in Singapore-listed commodities trading house Noble Group at a cost of $850 million.
Physical gold demand from private Chinese households rose 9% in the first half of this year, trade marketing-group the World Gold Council said today, announcing an “unprecedented” sales push across rural China.”

My Comment

There are several terribly important things going on in the capital markets and in international politics.

I’ll start with what most investors are probably watching anxiously – the teetering of the dollar at the lower end of the long term band of support (76-80), below which it plunged only a year ago. After showing some strength yesterday, the dollar is down again and gold is back up strongly over 1010. The reason seems to be the whispering in the markets that China will be buying IMF gold to supplement what are said to be meager reserves.

Rumors like these could be seen as a threat by the Chinese, for they expose China’s weakness in relation to other countries, especially those that possess better gold reserves. I suspect the comments by Lu are intended to diffuse that threat.

Another reason for dollar weakness is that the relative strengths of currencies are on the table at the G20 meeting, which is scheduled to take place in Thursday in Pittburgh, Pennsylvania and trade deficits are going to be considered – which is likely to be dollar negative.

The IMF sales are pretty interesting, although it’s hard to tell exactly what’s involved. It seems the gold will be sold to central banks (which ones?) and the proceeds will go to supplement and improve the financing now available to low-income countries (how?).

Question: Why should these professed good intentions be taken at face value, given all we know about the IMF?

At present, the IMF also allocates SDRs (or Special Drawing Rights) to each member country based on its contribution to the IMF (this is supposed to be a way to improve members’ liquidity in the international markets).

The SDR’s are based on a basket of currencies – currently, the US dollar, the euro, the sterling, and the yen – that can be traded for other currencies or used directly.

The IMF will use the gold sale proceeds to invest in other things. The interest from those investments will then benefit low-income countries. At least, that’s what I took away from my reading.

It all sounds suspiciously convoluted and opaque. My fear is that this is all an elaborate charade to leave some countries/institutions holding the “paper” bag, while real value is siphoned off by other countries/institutions.

I’ll leave you to decide who the winners and the losers will be….

Meanwhile, this is only my suspicion. I’ll need to go and do some more digging. But I’m putting my suspicions out here to fuel some leg work in the blogosphere.

Here’s a link to some relevant information on gold market manipulation at the website of the Gold Anti-Trust Action Committee (GATA), the leading activist group on gold price manipulation.

Especially read through the events surrounding the sale of Britain’s gold by then Chancellor of the Exchequer, Gordon Brown. Unlike other countries, UK gold sales are under the authority of the politicians. Brown sold British gold at a price lower than the market price at the time. The timing was extremely suspicious and followed on Robert Rubin’s unsuccessful attempts to get the IMF to sell its gold. The ostensible reason was to “help poor countries” – the same reason being given now. But the actual reason was a simpler one and one I’ve discussed a number of times. It was to keep the gold price low to support the dollar, disguise the rate of monetary debasement, and pump up the stock market. That in turn helped the derivative market, which Rubin and Greenspan had also helped to keep out of regulation. This was in the late 1990s….

Now, a decade later, the IMF hasn’t been weakened by the revelations of its sins. Instead, it’s been strengthened. And now, again, the IMF is selling gold – and again, the excuse is “helping the poor.”

China Quotes Ben Franklin, Criticizes Greenspan for Asset Inflation

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“Mr Cheng [former vice-chairman of the Standing Committee and current head of the green energy drive] said China had learned from the West that it is a mistake for central banks to target retail price inflation and take their eye off assets. This is where Greenspan went wrong from 2000 to 2004,” he said. “He thought everything was alright because inflation was low, but assets absorbed the liquidity.”

Mr Cheng said China had lost 20m jobs as a result of the crisis and advised the West not to over-estimate the role that his country can play in global recovery. China’s task is to switch from export dependency to internal consumption, but that requires a “change in the ideology of the Chinese people” to discourage excess saving. “This is very difficult”. Mr Cheng said the root cause of global imbalances is spending patterns in US (and UK) and China.

“The US spends tomorrow’s money today,” he said. “We Chinese spend today’s money tomorrow. That’s why we have this financial crisis.” Yet the consequences are not symmetric. “He who goes borrowing, goes sorrowing,” said Mr Cheng.

It was a quote from US founding father Benjamin Franklin.”

More here at The Telegraph (UK).

My Comment:

Three things give this remark away, in my humble opinion as a long-time propaganda watcher.

1. The speaker is the head of China’s green energy drive. That means he is likely to be on good terms with the green energy people in the US government, the financial center of which is Goldman Sachs. Goldman Sachs has extensive ties with China’s state sector and is counterparty to huge derivative contracts with state banks and companies.

2. It is notable that Mr. Cheng’s language echoes the language of the left-liberal governing class in emphasizing the role of Greenspan at the expense of everything else. Greenspan, being a former Randian and an avowed libertarian, is expendable to this group. Cheng does not mention the role of cheap money, the creation and trading of mountains of derivative contracts, and debt-based policies  that go back to long before 2004, and indeed long before Greenspan. He does not mention the Federal Reserve itself.

3. It’s also notable that Mr. Cheng echoes the left-liberal line about over-saving being a problem in China. But the problem is not thrift and savings (i.e. capital formation), which by definition can never be excessive in a capitalist economy where investment is put to work by genuine market forces. The problem is malinvestment caused by manipulation of the interest rate. And that’s a problem in which the Federal Reserve’s role is critical.

Major Market Move in Offing

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Looks like there’ll be a good deal of volatility ahead in the markets this coming week and through the fall:

*From Monday last week onward, New York has been riled up by the news out of China that Chinese SOEs (State Owned Enterprises) might walk away on derivative contracts that they think have been deeply manipulated. (They’re right on that). The SOEs involved are Air China, China Eastern, and Cosco.

*The derivatives are not mortgage-backed securities (the cause of the 2008 melt-down) but – likely- hedged oil futures in the OTC (over the counter) market, which is unregulated (that is, the SEOs hold synthetic longs).

*The threat – if it is that – has forced gold out of its summer trading range to within points of the $1000 mark, before falling back..and it pushed up the Chinese market by about 5%.(Sept 3)

*The counter-parties are 6 foreign banks, said to include Goldman Sachs, UBS, and JP Morgan. Goldman could take a hit on the contracts for around $15 billion, it’s rumored.

Note: The Chinese have been buying IMF bonds (50 billion) and watching the US meltdown and “stimulus” hocus-pocus with a good deal of warranted alarm, because all it means is their investments are being manipulated and driven down.

Obama’s reappointment of Bernanke was also taken as a bad sign by the Chinese. (correctly).

*Rumors have been swirling of further defaults of major US banks.

*The G20 has a preliminary meeting this weekend and the Chinese are said to have put the purchase of off-market gold on the table.

*The Chinese are pushing gold and silver on their populations, probably in anticipation of a currency meltdown.

*Meanwhile, Hong Kong has asked for all its gold to be returned from London.

*Last week, Germany asked for all its gold to be returned from London.

*Meanwhile, Abu Dhabi Commercial Bank and King County, Washington State have brought suit against Moody’s, S&P, and Morgan Stanley on fraud charges for the contracts they wrote, a case that would have massive implications for how other contracts are treated.

*[Oddly (?), Washington State is also where the earliest swine flu cases in the US were detected and where one of the largest outbreaks on campus just surfaced today – with some 2000 students at Washington State University coming down with the virus. Washington State had previously received large grants from Homeland Security for emergency preparations for pandemics, had TV Public Service Ads in place, had written up plans and practiced exercises].