China and Commodities

Gold and silver are acting like commodities today.  It's kind of amazing to watch the collapse based on acknowledged weakness in the Chinese economy.  For all its efforts to create its own internal consumer economy, China remains a country with a very small upper class of Communist Party politicians and FOPs (Friend of Politicians), a small middle class of tech workers and engineers, and a huge class of poor workers who are exploited by the state-run mining and manufacturing sector. 

China is the extreme version of the collapsed pyramid model that we saw in Argentina, that is rapidly developing in the Eurozone, and that is headed for the U.S. if we don't change our ways.  Without a viable, functioning middle class and freedom of movement between classes, you cannot support a consumer economy.  If all the capital is being siphoned off for non-productive government workers, you eventually go off the cliff.  Because of globalization, the American middle class has funded parasites around the world for the last thirty years. 

What did people in Europe do with the money?  They used it to pension off over-paid, unnecessary government functionaries in Greece, Italy, Spain, etc.  The Chinese have used it to build up their military and related industries. 

Today's news is just one more brick in the wall, another indication that the big-rig we see fast approaching in the rear-view is not Santa Claus but reality.  The throttle appears to be stuck and the brakes are out.