China and Noble Lie.

Based on conventional democracy, we simply tend to believe the majority in our society is always entitled to make decisions on where to go. However, from the view point of those who lead the society, that is not always the case. The majority focus not on what to do in the long term but only on issues and interests at this juncture. Because the latter usually harms the former, the leadership is forced to overcome such a dichotomy. To do so, our leaders just tell lies to people on the street. This is called, for example, “Notluege” in German, or “noble lie” in English.

This week, we experienced a noble lie again. It’s China/Mainland that mattered: As soon as the global financial market began to collapse on August 24, world leaders and their mass media blamed PRC for the turbulence in the world economy. Since the Chinese government hesitated not just to announce to take measures for combatting the “new normality”, but to implement them immediately, the stock markets on the globe continued to go down without exceptions. In the course of time, global leadership and their mass media even refer to a possible end of the current Chinese political leadership, by picking up the latest explosion in Tianjin as an evidence for that. “Well, this is the very beginning of the end”, they explained. Fearing of total collapse of PRC, investors massively seek their safe haven in either cash or short bond. Of course, that accelerated the collapse of stock markets. Even USD began to decline vis-à-vis JPY and EUR. Again the global leadership and their mass media repeatedly cried, “Guys, this is finally the collapse of the Chinese bubble economy”, as Ken’ichi OMAE, legendary consultant of corporate management, did to the Japanese public.

The reality is quite opposite to such a thesis: Just after this “Black Monday”, the global stock market started to rebound, as if nothing had happened. It has been revealing that unknown “big brothers” sold certain stocks and then bought other specific stocks massively. Without knowing that, even institutional investors were sacrificed. Being surprised by the abrupt change in the financial market, they had once sold stocks and USD massively, and then were forced to buy them back in a historical large scale. What on August 24 happened was, just the Midsummer’s Daydream. China/Mainland and its current regime still exists.

The point is who the unknown “big brothers” I pointed out are. Absolutely, they’re the winners in this game. From my viewpoint, it’s central bankers led by US and Europe and the Chinese government that worked together. For the former, it was essential to take measures for preventing prices from rising in an irreversible manner. For the latter, strategic investment to Japanese stocks related to high technology are urgently needed to save the Chinese economy. In this regard, stocks particularly in the Japanese market had to decline to be then sold out. Last but not least, the BOJ is suspected to collaborate with them. On November 4, Japan Post and its sister companies plan to do initial public offering. To make it extremely successful, BOJ and GOJ have to do everything possible to wake up Japanese retail and institutional investors. Therefore, a kind of shock therapy is preferred.

Next week, I’ll attend G20/B20 joint meeting in Ankara, where the representative of PRC/Mainland will surely try to explain, “The crisis is not over but effectively controlled.” The noble lie continues. Stay tuned.