- 22 hours ago
China just lost over $3 trillion of stock value, what this means to you, your house, your money, your future and your chances for true economic and political freedom.
After more than doubling in value over the last year despite a slowing economy and weak corporate earnings reports - the stock market in China is in a freefall. While the eyes of the world are on Greece and the European Union – China’s economy is imploding.
Since June 12th, 2015, the Shanghai Stock Exchange Composite Index has fallen 31.2% - wiping out over $3.2 trillion USD of the markets total value - and there seems to be no immediate end to the market plunge in sight. There Will Be No Economic Recovery. Prepare Yourself Accordingly.
Originally published July 9, 2015.
0:00:00 China’s Economic Free Fall
0:03:09 Housing Shock From China
0:05:14 The State Freezes Markets
0:08:27 Lessons From 1929
0:12:51 Interest Rates and Money Supply
0:17:51 China’s Ripple Effects
0:20:26 China and 1929
0:22:02 Fiat Currency’s Endgame
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After more than doubling in value over the last year despite a slowing economy and weak corporate earnings reports - the stock market in China is in a freefall. While the eyes of the world are on Greece and the European Union – China’s economy is imploding.
Since June 12th, 2015, the Shanghai Stock Exchange Composite Index has fallen 31.2% - wiping out over $3.2 trillion USD of the markets total value - and there seems to be no immediate end to the market plunge in sight. There Will Be No Economic Recovery. Prepare Yourself Accordingly.
Originally published July 9, 2015.
0:00:00 China’s Economic Free Fall
0:03:09 Housing Shock From China
0:05:14 The State Freezes Markets
0:08:27 Lessons From 1929
0:12:51 Interest Rates and Money Supply
0:17:51 China’s Ripple Effects
0:20:26 China and 1929
0:22:02 Fiat Currency’s Endgame
My 10v1 debate in Vegas is coming up on November 16! Check out Digital Social Hour on YouTube for the livestream links: https://youtube.com/@DigitalSocialHour.
Support philosophy! https://freedomain.com/donate/
GET FREEDOMAIN MERCH! https://shop.freedomain.com/
SUBSCRIBE TO ME ON X! https://x.com/StefanMolyneux
Follow me on Youtube! https://www.youtube.com/@freedomain1
GET MY NEW BOOK 'PEACEFUL PARENTING', THE INTERACTIVE PEACEFUL PARENTING AI, AND THE FULL AUDIOBOOK!
https://peacefulparenting.com/
Join the PREMIUM philosophy community on the web for free!
Subscribers get 12 HOURS on the "Truth About the French Revolution," multiple interactive multi-lingual philosophy AIs trained on thousands of hours of my material - as well as AIs for Real-Time Relationships, Bitcoin, Peaceful Parenting, and Call-In Shows!
You also receive private livestreams, HUNDREDS of exclusive premium shows, early release podcasts, the 22 Part History of Philosophers series and much more!
See you soon!
https://freedomain.locals.com/support/promo/FREEDOMAIN2026
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LearningTranscript
00:00Hi, everybody. This is Stefan Molyneux from Free Domain Radio.
00:02So as Greece burns, China sinks into a sea of staggering, virtually unimaginable economic losses
00:09that may well fracture the world economy as we know it.
00:12After more than doubling in value over the last year, despite a slowing economy
00:16and weak corporate earnings reports, the stock market in China is currently in a free fall,
00:21with no end in sight.
00:23Since June 12, 2015, the Shanghai Stock Exchange Composite Index has fallen 31.2%,
00:30wiping out over 3.2 trillion US dollars worth of the market's total value.
00:36There seems to be no immediate end to the market plunge.
00:39So to put this in perspective, in just 27 days, China has seen a loss of value roughly equivalent
00:45to the entire economic output of the United Kingdom for 2014.
00:52Since November 1, 2014, the People's Bank of China, conspicuously named because the people
00:57are absolutely not in charge of it.
00:59If you want to put people in charge of a bank, make them depositors that can be subject to
01:05risk and loss.
01:05You don't put it in the hands of a central bank.
01:07But the People's Bank of China, PBOC, has reduced Chinese interest rates four different times,
01:13which lowers the cost to borrow money and encourages further consumption.
01:17So very briefly, interest rates are the price you pay because we're mortal, because we like
01:22things now rather than later.
01:24And to consume now rather than later, you pay a premium for that.
01:27And that premium is called an interest rate.
01:30And it should be set by the free market because it signals very, very important information
01:36that the entire economy needs.
01:39So when people are saving a lot of money, and the Chinese have staggering sums of savings,
01:45the US has like $630 billion saved up, consumers, Chinese have over $22 trillion of savings.
01:52When people save a lot of money, they're deferring consumption.
01:55When you save a lot of money, the availability of money is greater.
01:59And whenever the availability of something is greater, the price of it goes down, all other
02:03things being equal.
02:04And so when people save a lot of money, interest rates should go down.
02:07And this signals to entrepreneurs that now is the time to invest in capital upgrades, to
02:13hire more people, to open new restaurants or factories or offices, to expand, because
02:18consumption is coming, right?
02:19When people save at some point, they end up spending.
02:21So when interest rates are low, that signals to entrepreneurs to invest in capital equipment
02:26and upgrade things now rather than try and sell directly to the consumers in anticipation
02:30of the coming consumer demand.
02:33And when this demand fails to materialize, in other words, if the government has been
02:37pushing down interest rates artificially, then businesses go bust and there's a huge
02:41malinvestment in capital equipment.
02:45So for instance, China has over the last 10 years used more concrete than America has over
02:50the last 100, building these ghost cities in the middle of nowhere.
02:54And this has created a lot of artificial economic activity, been incredibly destructive to the
02:59environment that we know from air, water, and land pollution in China.
03:03And it is all a mirage.
03:05It's a house of cards, as the analogy goes.
03:09So, of course, the eyes of the world are on Greece and the European Union, but China's
03:14economy is imploding.
03:16This is going to have massive effects on North American housing markets.
03:21The Chinese have this cap.
03:23Legally, you're only allowed to take $50,000 or its equivalent out of the country every year.
03:28But, you know, they get a bunch of friends to wire $50,000 a piece to a bank in Hong
03:33Kong,
03:33and then they can use that money to buy very expensive homes in the U.S. and in Canada.
03:38The Chinese buyers are the biggest foreign purchasers of the United States real estate, both
03:43by sales and dollar volume.
03:46It's almost $30 billion of real estate snapped up by the Chinese over the last year.
03:51That's a quarter of all the international spending on real estate in America.
03:56Now, Chinese homebuyers paid cash for almost 70% of their purchases recently, and they
04:03generally are buying more expensive properties.
04:06Canadians are spending about $200,000, but the Chinese are spending $831,000.
04:12And, of course, when you bring a bunch of cash to a bank, it's great because it doesn't
04:15get it trickled in over 20 years or 15 years or 25 years.
04:19It is quite a boost for the bank.
04:21It allows the bank to lend a lot more because it's got cash rather than a trickle-in situation.
04:26And so you've got this massive stimulation of housing, particularly in Canada, in Vancouver,
04:33and in America on the West Coast, both to be close to Asia because of the tech bubble.
04:39And it's crazy stuff.
04:41It's crazy stuff.
04:43When this money dries up, as it is likely to do, then there's going to be a crash in
04:48the housing market, particularly on the West Coast.
04:51There are financial institutions, the same financial institutions that made a fortune shorting
04:58the U.S. housing market in 2008 are now doing the same thing in Canada, likely because they
05:03anticipate a reduction in the demand from Chinese people for Canadian and American housing, which
05:10will cause another crash.
05:14Let's have a look at this compared since June 12, 2015.
05:19Total Greek debt, $350 billion.
05:22And that, of course, is causing massive paroxysms in the European Union.
05:27We've got $350 billion of Greek debts.
05:30China's losses, $3.2 trillion plus, dwarfing it enormously.
05:34And this is where we need to focus our attention.
05:39So what is the Chinese government doing?
05:42Well, if you are an evil person in charge of a hospital and you're running out of money
05:47and you shift all of your resources into the terminally ill ward to keep people alive on
05:53tubes and you take all of your money out of the maternity ward and then all the children
05:59die, that's kind of what is happening in China.
06:03The Chinese government and what are nominally called private companies, they take actions
06:07to combat the popping of this massive Chinese stock market bubble.
06:11More than 1,300 companies have announced trading halts on the Shanghai and Shenzhen exchanges.
06:1845% of the market or about $2.6 trillion U.S.
06:22worth of stock has been completely frozen.
06:25The prices can't fall as the shares can no longer be bought or sold.
06:28Now, price signals are absolutely, completely and totally essential in a free market.
06:33And the degree to which government agencies interfere with the price signal is the degree
06:37to which they take a wrecking ball to the delicate ice structures of economic decisions.
06:42It's unbelievably brutal what happens.
06:45When a stock market is correcting, it means there's been a malinvestment, a series of malinvestments.
06:51You haven't invested in what the consumers actually want.
06:53But, so you need to change, you know, if you have a restaurant and nobody wants to eat
06:58what's on your menu, you change the menu.
06:59But if people are forced to eat there, you can just keep serving up the same Soviet slop
07:03over and over again.
07:05And so it's really, really important that there are price signals in these kinds of situations.
07:08When governments shut down price signals, which is basically what they're doing here,
07:12freezing the stock trades, what's happening is you're landing a giant airplane in a particularly
07:18bad windstorm, and your best advice, your best solution is, hey, first, turn off the instruments.
07:26Second, blindfold me, because that's going to be great.
07:29Get rid of all the signals that I need to land this plane well.
07:32That's what's happening with these price controls.
07:34Various brokerages and funds have announced plans to buy massive amounts of stocks,
07:39essentially funded by China's state-backed margin finance company, which was given, quote,
07:44a direct line of liquidity from the central bank.
07:47So the central bank, just as happened in China in the 90s, producing, I think, what is the
07:53last two decades, and a lot of young people who don't want to have sex.
07:57It's called the last decade.
07:58It's the zombie economy where you're propping up failed institutions at the expense of anything
08:03new being created.
08:05And so central bank is giving money to the margin finance company, which is making people or
08:12giving people the opportunity to buy stocks extra cheap in an attempt to prop up the price.
08:18The Chinese central bank created more money out of thin air, gave it to people to buy stocks
08:22to prop up their economy on paper, which devalues everything in the economy.
08:27These same mistakes are being made over and over.
08:29The parallels, as we'll talk in a minute or two, the parallels between what's happening
08:34in China now and what happened in America in the lead up and the follow up to the 1929
08:39crash, which produced 13 years of staggering 25% unemployment depression, culminating in
08:47a giant 40 million soul eating world war.
08:51The parallels are eerie.
08:53You probably never heard that there was an even worse market crash in 1920 to 1921 in
08:59America after the first world war.
09:00It was worse than the 1929 crash.
09:02Why have you never heard of it?
09:03Because the president at the time simply lowered tax rates enormously, like threefold, and did
09:12not interfere in the market.
09:13And the crash was largely resolved in 12 to 16 months.
09:17You've never heard of it because it did not lead to this massive depression, which led to
09:20a world war because the government stayed out of it.
09:23Well, the government is not staying out of this, which means it's going to get worse until
09:26we learn the lesson that there is no substitute for liberty.
09:31Twenty-eight companies have halted their IPOs, their initial public offerings.
09:35In separate but similarly worded statements, tactic authorities have previously used to
09:40control markets because if you offer an IPO and it comes in really undervalued, that's
09:46scary to investors.
09:47So you just keep people out of the market to keep that price mechanism that would be revealed
09:52through IPOs away from investors.
09:57The China Securities Regulatory Commission, CSRC, took the drastic step of banning shareholders
10:02with stakes of more than 5% from selling shares for the next to six months and said that any
10:08shareholders who violated this rule would be dealt with severely.
10:12Now, of course, how on earth would you prove all of this in a court of law?
10:15All right, it's China.
10:17That doesn't really matter.
10:18So basically, they've reached in with the bloody tentacle arms of the state, wrapped itself around
10:24people's private property and forbade them from trading, something my six-year-old daughter would
10:28never allow in a monopoly game, but somehow is allowed in the second largest economy in the
10:33entire planet.
10:34China's stock regulators also noted that they would look into possible market manipulation
10:39by evil forces.
10:41I think that's your central bank, people.
10:44They're going to look into possible market manipulation by evil forces aiming to damage
10:48the economy, even naming Morgan Stanley as one of the many potential investment predators.
10:54So you've got this giant predator called the state, which is a shark, and then you have
10:59these little fish that hang around the shark's jaws and pick up the scraps.
11:02These are the investment companies.
11:04The idea that the investment companies are in charge when the government has all the guns
11:08is kind of ridiculous.
11:11Morgan Stanley downgraded the Chinese market in May for the first time in only in over
11:15seven years, sorry, noting, quote, it is probably fair to say that we are known in the market
11:20for being bullish China.
11:21Some might say permabulls bullish on China.
11:24So for us, this is a big call.
11:26See, that the problem is not the illness, but the diagnosis.
11:31See, you wouldn't be ill if the doctor didn't say you were ill because magic.
11:35Chinese regulators called the forecast a malicious remark, carelessly, or actions which were harboring
11:42ulterior motives.
11:44The problem is not that the central bank is entirely in control of the money supply and
11:48the interest rates and that there's massive amounts of corruption in China.
11:52That's not the problem.
11:53The problem is that somebody says that may have an effect on the economy.
11:59Noted China policy research analyst Oliver Barron, great name, said, after the market continued
12:06to fall, despite myriad support measures, the government reached peak panic mode and must
12:10have worried that investors would not only lose confidence in the markets, but in the
12:13government itself.
12:14You see, this is the kind of economic cataclysm that can lead to, to put it as nicely as possible,
12:23significant social unrest and discontent.
12:26They're not just fighting for their political careers.
12:30These people may, in fact, at the top, be fighting for their very existence.
12:35When approached by a reporter, an unnamed Chinese citizen noted, quote,
12:40we can't talk to foreign reporters about this topic.
12:42It's way too sensitive.
12:43They're going to arrest me for doing that.
12:46So it's a good thing they got rid of their totalitarian regime in the 90s, right?
12:51So let's look at the interest rate, one year lending.
12:54As you can see in 96, 11%, pretty pricey to borrow money.
13:00And that's because when the government isn't creating monopoly money out of its ass, then
13:04you actually have to bid with other people to get resources.
13:07And those who can bid the most get those resources.
13:09Those who are willing to pay 11% rather than 10% or 9% get those resources.
13:13In a free market, the resources generally flow to those who can make maximum use out of those
13:19resources to increase the wealth and security and stability of society.
13:23Kind of important.
13:24But when the government starts creating money out of nothing, then, of course, people bid
13:29up.
13:30The price of money goes down.
13:35So they're crushing down these interest rates.
13:38And you can see this happening quite regularly.
13:42In China, the interest rates are set by the People's Bank of China Monetary Policy Committee,
13:46thoroughly unenvisioned by Karl Marx.
13:48This artificial decree as to the price of borrowing and lending money creates artificial
13:52signals to the market, creates bubbles, distorts indicators for businesses we talked about
13:57before.
13:59Shanghai Stock Exchange Composite Index.
14:01Let's look at how the interest rate cuts have affected this.
14:05Now, one thing that's also happened is the Chinese market over the last year for housing
14:09has largely collapsed as well.
14:11And this is why we have these ghost cities out there, because there was too much overbuilding.
14:16In order to stimulate GDP in the same way that a stockbroker wants to stimulate happiness
14:21with cocaine, the government creates all of these mega projects.
14:25It loves being able to hand out all this money to its political cronies.
14:28And so the housing market collapsed.
14:31And since a huge amount of Chinese wealth is stored up in real estate, they had to flee
14:37not only the low interest rates, which means you're not getting any money out of your bank
14:40account.
14:41But also, if you're losing money in your house, you've got to go and get your money
14:44somewhere.
14:44You're hiding from the central bank's constant manipulations and distortions in the market.
14:48And so you go to the stock market, particularly if the government's giving you virtually free
14:52money to invest with.
14:54November 1st, 2014.
14:56Look, they cut the interest rate.
14:59And look, the stock market went crazy.
15:01Ah, March 1st, 2015.
15:03They cut the interest rate again.
15:04Oh, look, the stock market went crazy.
15:06Oh, it began to dip a little.
15:08So they cut the market again.
15:09They cut the interest rates again.
15:10And the stock market went crazy.
15:13So this is not so much a crash as it is a correction, right?
15:17It should be going back to where it was before, at least growing more gradually.
15:21You want growth like puberty, not growth like cancer.
15:25This sort of looks like a topographic map or a side view map of...
15:30Mount Everest.
15:31And this is where all the people died climbing it.
15:34Frozen bodies of Chinese investors that you can trip over on your way to an illusory peak.
15:41M2 money supply.
15:42Ah, I know it sounds dull.
15:43It's actually quite important.
15:44So M2, M1 is just basically cash.
15:47But M2 is a measure of the money supply that includes cash, but also checking deposits,
15:51saving deposits, money market, mutual funds, other time deposits.
15:54Like you say to the bank, I'll give you money.
15:57I won't withdraw it for 30 days.
15:59And the bank has a little more flexibility on what they can do with it.
16:01So they'll give you a bit more interest on that.
16:04So stuff which is not as liquid as pure cash, but nothing's as liquid as Bitcoin, not as
16:09liquid as pure cash, but not as restricted as other.
16:13Less liquid, not as suitable for exchange mediums, can be quickly converted into cash or checking
16:18deposits.
16:19Changes in interest rates have a direct effect on M2.
16:22So if you create a bunch of money, then you, of course, expand M2.
16:28And it's one of the desired effects of central banks.
16:31They decide to adjust interest rates.
16:32They like to adjust this M2.
16:34These are the levers used by central bankers to change overall money supply.
16:39So what is the money supply in China?
16:43Since 1996, as you can see, it was hovering around, you know, five or six trillion.
16:50And now it's pushing 130 trillion.
16:53So that's quite a lot.
16:56And of course, you know, some of that is legitimate growth through the expansion of their economy.
17:01But a lot of that, of course, is the kind of blow off a hooker's ass that passes for financial
17:09growth these days.
17:10As the interest rate keeps crushing down, as you can see, the money supply goes through
17:14the roof.
17:15And this creates all the distortions that are currently causing such paroxysms in the Chinese
17:19market.
17:21Government spending in billions.
17:23Well, in 1994, they had a relatively small government.
17:28And now the government spending is going through the roof.
17:31And this is part of the corruption.
17:33This is the part of the misallocation of resources, the environmental depredation and destruction
17:38that is occurring.
17:39And believe it or not, believe it or not, people might still call this capitalism or a free
17:46market.
17:46It's not.
17:51Now, the Chinese economy, the American economy have wild disproportionate.
17:55And of course, there's big changes, big changes in population.
17:59China has nearly $4 trillion in foreign reserves.
18:02The U.S. only has $121 billion.
18:05As I mentioned, Chinese citizens have $21 trillion saved.
18:10Americans only have $614 billion.
18:12So it's a huge mismatch.
18:15And this is why what happens in China has ripple effects on the world economy.
18:20And heaven forbid that China needs to start selling its U.S. treasury bonds in order to
18:24cover any holes that it has in its income.
18:27That will cause a huge dislocation.
18:31So in June, the personnel data of current, former and prospective U.S. federal government
18:35employees, including those applying for security clearances, was compromised.
18:40This is a huge story which is related potentially to what's going on in China.
18:45As many as 18 million Americans in total could have impacted in the hack, including many working
18:51in intelligence-related operations.
18:54China has been named as the top suspect in the attack.
18:57Matthew Olson, a former National Security Agency general counsel, said the breach is
19:01truly significant.
19:02The data can be used in many different ways to target people.
19:05Quote, whether it's blackmail, to recruit, to punish individuals in China who are connected
19:09to people in the United States.
19:10What this means is the multi-trillion dollar investment of since the Cold War that the
19:14U.S. has built up in its intelligence operations has, in my opinion, been rendered largely useless
19:20because so much sensitive information, people's drinking habits, their problems, their criminal
19:25records, their sexual fetishes, you name it.
19:28Everything that has been gathered about people in the U.S. government, particularly those with
19:33security clearances, can be used to bribe, to blackmail, to know their weak spots, which means
19:39that your intelligence operations are now largely useless and can be counterproductive.
19:45And this is a huge sea change in the flow of information around the world.
19:50Now, on Wednesday, New York Stock Exchange, United Airlines, and the Wall Street Journal
19:55were all impacted by massive technical glitches within several hours.
19:59China has talked about the fact that evil Americans may be manipulating their stock market, and I'm
20:06sure vengeance is part of the equation.
20:08New York Stock Exchange halted all trading at 11.32 a.m., only reopened at 3.10 p.m., the
20:14longest trading halt since Hurricane Sandy hit the East Coast in 2012.
20:18Is that a coincidence?
20:19Could it be retaliation?
20:20It certainly could be.
20:21Could it escalate from here?
20:23Time will tell.
20:27Parallels with the Wall Street crash of 1929 in the U.S. are unbelievable, truly remarkable.
20:31So after more than a decade of frantic growth, extraordinary wealth creation and excess, both
20:36economies, the U.S. in 1929 and China today, are at roughly similar stages in their economic
20:41life cycle.
20:42Both booms are easily explained by the monetary policy of the respective central banks and the
20:47subsequent increase in the availability of cheap money through credit.
20:51This is very important.
20:53Even Bernanke has admitted that the 1929 boom and crash was the result of Federal Reserve
20:58monetary policy.
21:00It's a war crime against the economic life of the planet.
21:04So, yeah, let's give tons of people tons of money to borrow and encourage high stakes
21:10market margin investment.
21:12Because when you have a progressive income tax, the more wealth you can stuff into people's
21:16wallets, the more wealth you could steal from people's wallets and use it to buy votes
21:20in the here and now and bribe all the usual suspects in your uncrunchable thirst for the
21:25Boromar-style ring of power.
21:27And so you create all these bubbles in the market.
21:31Chinese stock market bubble was already large, had more than doubled over the past year,
21:35despite, as we mentioned, slower growth and lower profits.
21:39The Wall Street crash of 1929 led to the Great Depression in the United States, which wrecked
21:44the economy as a whole.
21:45It led to the crash in Germany that produced the Great Depression, which produced Adolf Hitler.
21:54So, yeah, lots of problems when you destroy the middle class and the most productive people
21:59in society, retreat gold style in bitterness and futility.
22:02So what is this going to mean for China and the world's overall economic system?
22:08Well, as classical liberals, as Austrian economists, as idiot pundits like myself, I've been saying
22:15literally for decades, you cannot sustain a money on fiat.
22:19You cannot sustain an economy on fiat currency.
22:22You simply can't.
22:23All you can do is create massively escalating bubbles that are going to cause more and more
22:26problems.
22:27The world economy, of course, still reeling and trying to survive the housing crash and
22:33subsequent financial crash in the U.S. that spread worldwide in 2008, is not in the same
22:38position.
22:39It does not have any reserves left to attempt to stimulate economic growth, however artificial
22:45that may be.
22:45The world is in an exhausted state.
22:47It is down on its knees.
22:49One more kick might bring us freedom from these predatory banksters, these central banks,
22:55these unbelievable, hideous leeches and their propaganda merchants known as the mainstream
23:01media.
23:01We might finally get the tentacles of illusory finance free from human potential.
23:06I, for one, can't wait.