China is burning

What did we learn last week? Nothing. Expect that investors are morons. And we already knew that.

They sold stocks when they saw the world economy heading into a slump. And then, they bought them when they thought the Bernanke team would come to the rescue.

And when the Bernanke team made it clear it was going to sit this one out, investors went blue again.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

But at least the Chinese came through.

The European Central Bank played it cool. It neither raised rates nor lowered them. Mr Bernanke played it cool too. He warned that "monetary policy is not a panacea". Then, he went on to say that he might have to use it anyway, if things got rough.

China's problem has been described in terms a heating engineer would appreciate. At 10.4% per year growth in 2010, the economy was running "too hot," said the experts. So, the policymakers decided to cool things down by cutting off the flow of fuel. They tried to curb the availability of credit, especially to the housing and construction industry. Whether this had any effect, we don't know. But growth slowed. From 9.2% in 2011 it fell to 8.1% this year.

Are those figures accurate? Probably not. People who watch China's use of electricity or diesel fuel two critical elements of a manufacturing economy say growth has slowed a lot more than that.

Which is probably why Chinese workers seem on the verge of widespread rioting.

Here's a report from Reuters: "Though protests have become relatively common over anything from corruption to abuse of power, the ruling Communist Party is sensitive to any possible threat to its hold on power in the wake of the protests that have swept the Arab world."

And more thoughts

Coming soon... a zombie apocalypse...

You must be getting tired of hearing us talk about zombies. And maybe we are getting a little obsessed by them. But we see them all around us. And they're getting bold... brazen. They're coming out in broad daylight.

Here's an article that appeared last week in the Wall Street Journal:

The recipient of the Obama administration's biggest loan guarantee for solar energy won federal money after an intense push in early 2011 that included hiring a former chief of staff to Vice President Joe Biden to lobby the administration, according to federal records and people involved in the approval process.

The lobbying blitz came as the $1.6 billion loan to BrightSource Energy Inc.a centerpiece of the administration's program to promote nascent green-energy projectsfaced a do-or-die moment, and the company called on its Democratic connections to help push the deal forward, according to emails, records and those familiar with the loan.

Yes, dear reader, the zombies are everywhere. Lobbying. Spending. Getting disability and bail-outs. Every US government programme is full of zombies.

Why so many zombies? What you pay for is what you get. And with the 'new' dollar after 1971, the feds could buy a lot of zombies.

Remember, zombies are people who take money from the productive sector of the economy and transfer it to themselves. As they grow more numerous and more powerful thanks to the resources that go their way the productive part of the economy is less and less able to support them.

Fewer and fewer workers more and more zombies.

Fewer and fewer people producing things while more and more people just consume them.

Everything isOK as long as the resources keep flowing. But the productive sector of society can only support so many zombies. Yes, the producers can be bamboozled into supporting more 'education' and more 'defence' when they are flush. But when times get tough, the zombies and the producers head for a showdown.

Scott Walker won a battle in Wisconsin. But the zombies' power still grows funded by cheap credit and government spending. A larger war lies ahead.

Poor Mr Obama. We warned George W Bush and his henchmen that they would be held accountable for torturing people. It's clearly against the law. It violates treaties and conventions that the US signed. And sooner or later some ambitious, gutsy or nave judge is going issue a warrant for their arrest.

"Stay in Texas," we told the ex-president, or he is likely to fall into a judicial trap, like Chile's former head of state, Pinochet.

Now, Mr Obama better put his passport away too.

Is Obama committing crimes? He might someday be prosecuted for ordering drone attacks

By Dan Simpson / Pittsburgh Post-Gazette

The coincidence in time of an international court sentencing former Liberian President Charles G. Taylor to 50 years in prison for war crimes and the detailed account in The New York Times of how President Barack Obama decides which foreign and U.S. citizens to kill with drones, without trial, makes me nervous.

Mr. Taylor was not the first major political leader tried for crimes in an international court. Former Yugoslav President Slobodan Milosevic was on trial when he died in 2006. Former Bosnian Serb leaders Radovan Karadjic and Ratko Mladic are currently on trial. Former Chad President Hissene Habre and Sudanese President Omar al-Bashir are candidates for such trials.

Any prosecutor involved in international law is fully aware of one of the major difficulties of bringing off successful war crimes prosecutions -- tying the actions of the accused directly to the crimes committed.

Now, putting aside whether it is legal for Mr. Obama to order the death by drone of al-Qaida and other figures, numbering now around 2,000 in Afghanistan, Pakistan, Somalia and Yemen, plus whoever happens to be nearby when a rocket hits -- associates, friends, wives, children -- he is clearly responsible for doing so. The president is described in the Times piece as personally choosing the targets.

Few have said yet that these killings are war crimes, but one day someone is likely to deem them so and Mr. Obama may even be charged in an international court, probably after he has left office. He clearly is taking direct responsibility because he sees the drone killings as something that only a president can order.

Don't miss Bill's next Daily Reckoning. To receive the next article straight into your inbox as soon as he's written it, sign up to the email list here .

Information in The Daily Reckoning is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Appropriate independent advice should be obtained before making any such decision. Your capital is at risk when you invest in shares - you can lose some or all of your money, so never risk more than you can afford to lose. Always seek personal advice if you are unsure about the suitability of any investment. The Daily Reckoning is an unregulated product published by Fleet Street Publications Ltd. Customer services: 020 7633 3600. Fleet Street Publications Ltd is authorised and regulated by the Financial Services Authority. https://www.fsa.gov.uk/register/home.do FSA number: 1152 34