Deflationary Debt Destruction Must Run Its Course
By Mr Practical Aug 11, 2009 11:05 am
Not until then will there be the hyper-inflationary event most are looking for.
I agree, but only in the long run. In the short run it is more nuanced, as illustrated by the recent meeting between Chinese and US officials (berries).
Secretary of State Hillary Clinton characterized the meeting as one making our Chinese lenders more "comfortable" with their lending, that they are soothed by our handling of the financial crisis (whatever that is) and this should allay our fears that China will lend less at a higher cost to us.
First of all I hope it is not lost on everyone that having a communist country "comfortable" in how we are conducting finance is not a good thing. A communist country that probably has some very sinister ideas of what they really want out of us. The fact that a very few people are making vast decisions for this country is only something the Chinese can understand and condone because they are not concerned with liberty. It certainly is not something that should make the rest of us who do care about it (hopefully) feel "comfortable".
I have a more complex opinion of the conversation between the berries than that of Ms. Clinton. If the Chinese felt that we would immediately and imminently devalue the dollar (by a vast monetization), they would immediately dump their vast horde of them. So something occurred at the meeting that assuaged the Chinese (at least temporarily) from doing so, and I don't think we did most of the talking.
Yes the US has already executed some mini-monetizations (printing dollars to buy debt). In fact we just did a stair-stepped monetization to clear the last auction (more to come). Yes we have back-stopped vast assets of the banking system with taxpayer money. Yes the Fed and other government agencies (GNMA/FHA now account for nine out of ten new mortgages, mostly subprime, in the U.S. as reported by the WSJ today). But all this so far has merely gone to plug the holes of destroyed dollars, to “stabilize” the U.S. economy. So far it is not enough to further devalue the dollar. This is simply because there is so much debt in the system: Overall debt has actually increased over the last few months.
So whatever the Chinese said to get more "comfortable" would directly prevent massive dollar devaluation, at least for the time being. Most likely the Chinese berries coerced a promise to either raise taxes and/or cut spending at some point in the near future from our berries. Don't look for a generation of stimulus.
So the US berries, not knowing what they are doing in the first place, will at least try for some time to reduce the fiscal largesse they have unleashed on the economy. Most "hyper-inflationists" will say this will be impossible for them to do. I agree in the long run, but in the short run I think there is vast pressure to do so. With the US government largess being the only thing supporting the US economy (or the impression of supporting the economy), any pullback at this point will greatly accelerate economic deterioration. There is vast debt in the banking system, held at the Fed, held at government agencies, and held by private investors that is still being carried at way too high of values. Everyone is holding their nose given the government backstop; without it the stink will come in through the ears.
Foreclosures, defaults, and delinquencies are being significantly under-reported even now as the government is supporting all of it and as regulatory bodies have allowed banks and other “investors” to over-value it. If that is decreased even one iota they will increase. As debt is destroyed the dollar will strengthen.
I think this will go on until stock prices hit new lows again and the government will abandon all sensibility. Not until then will be there be a hyper-inflationary event that most are looking for. It requires lower prices to spur lending to spur inflation. Hopefully by then my extended vacation in the US will have ended and I will be off to another place.
I just hope I am early and not late.
Risk is very high.
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Reply
2009-08-11 11:14:24
Mr. Practical?
Sounds like Mr. Practical.
Sounds like a good analysis too, regardless.
Oh to be a fly on the wall in that meeting with Hillary and Timothy and the Chinese.
More taxes, not doubt. They will wait for the next market crisis, then raise taxes on everyone and everything "for the children".
Sounds like a good analysis too, regardless.
Oh to be a fly on the wall in that meeting with Hillary and Timothy and the Chinese.
More taxes, not doubt. They will wait for the next market crisis, then raise taxes on everyone and everything "for the children".
2009-08-11 11:20:48
Sensibility
Not sure that word is known much less understood in DC.
Nothing the govt might do would surprise me. Wake up some morning and the world has changed.
Nothing the govt might do would surprise me. Wake up some morning and the world has changed.
2009-08-11 11:22:54
Mr. Practical?
Of course taxes will increase - but not enuf to reduce deficit spending. Increased taxes will lower production and the downward spiral goes on.
2009-08-11 11:52:23
Welcome Back
Mr Practical - Welcome back sir. You are THE sage and I have benefited with every article I have read of yours since 2003.
Deep thanks for your continued participation in Minyanville.
One thing I have wondered over the past year - as things in general played out in 2008 and into this year as you foresaw in 2003 and 04 - has anything surprised you to date?
Thanks again.
Deep thanks for your continued participation in Minyanville.
One thing I have wondered over the past year - as things in general played out in 2008 and into this year as you foresaw in 2003 and 04 - has anything surprised you to date?
Thanks again.
2009-08-11 11:55:02
Mr. P, timeframes...
Mr. Practical,
You say short term in relation to your extended vacation there will be dollar strength, and in the long term an event and inflation.
Do you have an expected timeframe (in months?) for these events, or is this something that when you see new lows in the stock market, it would be time to move out (or start to move out) of the dollar?
Thanks,
You say short term in relation to your extended vacation there will be dollar strength, and in the long term an event and inflation.
Do you have an expected timeframe (in months?) for these events, or is this something that when you see new lows in the stock market, it would be time to move out (or start to move out) of the dollar?
Thanks,
2009-08-11 12:32:50
Risk is high
Mr. Practical, thank you a lot for your article, excellent as always. I would add that besides the increase in value of the dollar for the destruction of debt, the yen will also rise for the same purpose. The markets in general have forget that we are still in the de-leverage process, the article of Minyan Peter, describes it very well the problems that bank are having, and that simply is not good at all.
But what is more disturbing to me, is that the transition the FED is having, it looks that the FED in the process for becoming a Hedge Fund, not that there's anything wrong with that, but I see two big problems, one they don't know how to manage or be a Hedge fund, second the message they are sending to the market in general by saying we are now traders, and will act like that. The news today from the Federal Reserve of New York confirms this they are hiring traders to manage their large securities holdings.
Risk is high
But what is more disturbing to me, is that the transition the FED is having, it looks that the FED in the process for becoming a Hedge Fund, not that there's anything wrong with that, but I see two big problems, one they don't know how to manage or be a Hedge fund, second the message they are sending to the market in general by saying we are now traders, and will act like that. The news today from the Federal Reserve of New York confirms this they are hiring traders to manage their large securities holdings.
Risk is high
2009-08-11 13:05:18
Dollar Holdings
What would you consider a safe investment, and which institutions would you consider safe investment custodians, for US dollars, if the deflation gets out of hand?
2009-08-11 13:40:05
MP you are a must read
Mr. Practical, welcome back first of all. I am with Toddo in the camp of never missing one of your missives.
Thanks in advance but if you could elaborate at all on Karl's questions about your guess as to a timeframe to be in dollars (I am assuming it is at least a year or two for you to have moved back), and what you will look to move into as you feel the time gets near to move out of dollars (foreign currencies, individual stocks, precions metals, some combination, or "other").
Also, do you own any precious metals or stocks currently in case you are wrong, and would further "clandestine" monetization of debt give you cause for concern toward that end in terms of how tricky it may be to time what you foresee? It seems to me that for the same reason Toddo has suggested he would not want to be naked short gold, that it would be prudent to hold at least a portion of one's assets in precious metals in case events prove too unpredictable.
Thanks in advance but if you could elaborate at all on Karl's questions about your guess as to a timeframe to be in dollars (I am assuming it is at least a year or two for you to have moved back), and what you will look to move into as you feel the time gets near to move out of dollars (foreign currencies, individual stocks, precions metals, some combination, or "other").
Also, do you own any precious metals or stocks currently in case you are wrong, and would further "clandestine" monetization of debt give you cause for concern toward that end in terms of how tricky it may be to time what you foresee? It seems to me that for the same reason Toddo has suggested he would not want to be naked short gold, that it would be prudent to hold at least a portion of one's assets in precious metals in case events prove too unpredictable.
2009-08-11 15:14:47
Mr. Practical, great to hear from you as always.
Is it me or is the gov't literally pissing away money?
The amount of debt far outweighs global capital. Any money the gov't throws at this problem is a temporary "fix" and will only have short-term psychological effects. This won't even begin to dent the poor fundamentals. In this case, reflexivity will come back to haunt the berries. People think things are getting better, while under the surface the volcano is gaining strength. When the volcano finally errupts things will be worse than if it errupted earlier. Any money thrown at the "problem" in mean time will only get the U.S. deeper into debt and weaken the USD.
Add to that, gov't advisors both see stabilization and the need for more stimulus...hmmm. And now we're taking direction from a communist gov't. Sounds like fantasy land.
Is it me or is the gov't literally pissing away money?
The amount of debt far outweighs global capital. Any money the gov't throws at this problem is a temporary "fix" and will only have short-term psychological effects. This won't even begin to dent the poor fundamentals. In this case, reflexivity will come back to haunt the berries. People think things are getting better, while under the surface the volcano is gaining strength. When the volcano finally errupts things will be worse than if it errupted earlier. Any money thrown at the "problem" in mean time will only get the U.S. deeper into debt and weaken the USD.
Add to that, gov't advisors both see stabilization and the need for more stimulus...hmmm. And now we're taking direction from a communist gov't. Sounds like fantasy land.
2009-08-11 16:01:16
Government Market?
Mr Practical,
If true, this one really illustrates things. From Coopers article (Tyler Durdan quote):
“Most interesting is the correlation between money market totals and the listed stock value since the March lows: A $2.7 trillion move in equities was accompanied by a less than $400 billion reduction in money market accounts! Where, may we ask, did the balance of $2.3 trillion in purchasing power come from? Why, the Federal Reserve, of course, which directly and indirectly subsidized US banks (and foreign ones via liquidity swaps) for roughly that amount.
"Apparently, these banks promptly went on a buying spree to raise the all-important equity market, so that the US consumer (whose net equity was almost negative on March 31) could have some semblance of confidence back and would go ahead and max out his credit cards. Alas, as one can see in the money multiplier and velocity of money metrics, US consumers couldn't care less about leveraging themselves any more.”
This would be the "green shooting" and mass delusion the FED is engaged in.
Only one small problem. If people stop believing the hype, all they have done is temporarily artificially raised share prices. And insiders at corporations would be selling their shares en mass to get the free government share price subsidy (realizing the shares are far over values supported by future revenues-make that continuing revenue decline at an accelerated rate).
[Also isn't this partial Nationalization? Who wants a "berry" on the board of directors, or part owner of your 401K?]
I agree with you, and think housing will continue to be the major factor pulling things down. The debt bubble is just too big to create inflation (this is not a normal recession)
My two cents
If true, this one really illustrates things. From Coopers article (Tyler Durdan quote):
“Most interesting is the correlation between money market totals and the listed stock value since the March lows: A $2.7 trillion move in equities was accompanied by a less than $400 billion reduction in money market accounts! Where, may we ask, did the balance of $2.3 trillion in purchasing power come from? Why, the Federal Reserve, of course, which directly and indirectly subsidized US banks (and foreign ones via liquidity swaps) for roughly that amount.
"Apparently, these banks promptly went on a buying spree to raise the all-important equity market, so that the US consumer (whose net equity was almost negative on March 31) could have some semblance of confidence back and would go ahead and max out his credit cards. Alas, as one can see in the money multiplier and velocity of money metrics, US consumers couldn't care less about leveraging themselves any more.”
This would be the "green shooting" and mass delusion the FED is engaged in.
Only one small problem. If people stop believing the hype, all they have done is temporarily artificially raised share prices. And insiders at corporations would be selling their shares en mass to get the free government share price subsidy (realizing the shares are far over values supported by future revenues-make that continuing revenue decline at an accelerated rate).
[Also isn't this partial Nationalization? Who wants a "berry" on the board of directors, or part owner of your 401K?]
I agree with you, and think housing will continue to be the major factor pulling things down. The debt bubble is just too big to create inflation (this is not a normal recession)
My two cents
2009-08-11 16:29:45
Mr. P. is the best
Thanks Mr. P. your articles actually make me smarter the INSTANT I read them. I'd also love to know the time frames you are thinking of with the strong Dollar move.
2009-08-11 16:33:28
Reset?
Mr Practical,
Regarding"I think this will go on until stock prices hit new lows again and the government will abandon all sensibility. Not until then will be there be a hyper-inflationary event that most are looking for. It requires lower prices to spur lending to spur inflation"
At this point you describe, in my opinion, a currency crisis is possible.
The choice could be continue on the Japan path for a decade or more of deflation, or go for a "reset". The "reset" would boost US exports, and devalue the remaining debt.
The "reset" seem to be working for Iceland. But then again they don't have the reserve currency.
Regarding"I think this will go on until stock prices hit new lows again and the government will abandon all sensibility. Not until then will be there be a hyper-inflationary event that most are looking for. It requires lower prices to spur lending to spur inflation"
At this point you describe, in my opinion, a currency crisis is possible.
The choice could be continue on the Japan path for a decade or more of deflation, or go for a "reset". The "reset" would boost US exports, and devalue the remaining debt.
The "reset" seem to be working for Iceland. But then again they don't have the reserve currency.
2009-08-11 18:49:31
Mr. P always a must read for any Minyan
thanks for sharing your thoughts Mr. P - much appreciated.
I have always thought that even tho China holds most of the cards in their financial relationship with the US, it is in the best interests of both China & the US to work out some kind of mutually agreed arrangement whereby China can diversify its US dollar holdings into other assets - like commodities, in an orderly manner so that the value of both (dollar & other assets) aren't unduly affected by sudden & massive dislocation in the markets.
Acting unilaterally (like China staging an international crisis, say with nukes in the North Korean peninsula, for example, that creates an international flight to the $US that allows the Chinese to unload a large portion of their $US holdings or the US ignoring Chinese concerns about the value of $US by continuing massive spending & borrowing/monetization) would create tremendous instability and uncertainty for both countries and the rest of the world at the most inopportune time.
The largest component of any such arrangement between China & the US to facilitate Chinese diversification out of the $US would clearly have to be time to permit an orderly flow that allows for absorption of US dollars while not disrupting supplies/prices of the assets the Chinese diversify into, such as commodities - oil, wheat, etc. Unfortunately, time is already of the essence in this crisis, and how much is available to either country, particularly to the US, will depend on how restless the natives get with the economy & their own financial situation at home - if the crisis deepens, time runs out faster & all bets are off.
would be very interested in Mr. P's & others thoughts on this.
I have always thought that even tho China holds most of the cards in their financial relationship with the US, it is in the best interests of both China & the US to work out some kind of mutually agreed arrangement whereby China can diversify its US dollar holdings into other assets - like commodities, in an orderly manner so that the value of both (dollar & other assets) aren't unduly affected by sudden & massive dislocation in the markets.
Acting unilaterally (like China staging an international crisis, say with nukes in the North Korean peninsula, for example, that creates an international flight to the $US that allows the Chinese to unload a large portion of their $US holdings or the US ignoring Chinese concerns about the value of $US by continuing massive spending & borrowing/monetization) would create tremendous instability and uncertainty for both countries and the rest of the world at the most inopportune time.
The largest component of any such arrangement between China & the US to facilitate Chinese diversification out of the $US would clearly have to be time to permit an orderly flow that allows for absorption of US dollars while not disrupting supplies/prices of the assets the Chinese diversify into, such as commodities - oil, wheat, etc. Unfortunately, time is already of the essence in this crisis, and how much is available to either country, particularly to the US, will depend on how restless the natives get with the economy & their own financial situation at home - if the crisis deepens, time runs out faster & all bets are off.
would be very interested in Mr. P's & others thoughts on this.
2009-08-11 23:35:42
A brain the size of a watermelon!
Mr. Practical,
Thanks for this post. It stimulates a lot of Big Picture musings.
Along with others here, if you could expand on timing at some point, that would be wonderful. And I'm also wondering what you envisage for this "hyper-inflationary event" that you speak of near the end of your piece. I take it some kind of dynamic that causes a quick, large devaluation of the dollar, and not a more generalized Weimar-type hyperinflation? Functionally speaking, might it be something like FDR's repricing of gold in the Great Depression that, I believe, caused an overnight large devaluatiion of the dollar?
Thanks!
Thanks for this post. It stimulates a lot of Big Picture musings.
Along with others here, if you could expand on timing at some point, that would be wonderful. And I'm also wondering what you envisage for this "hyper-inflationary event" that you speak of near the end of your piece. I take it some kind of dynamic that causes a quick, large devaluation of the dollar, and not a more generalized Weimar-type hyperinflation? Functionally speaking, might it be something like FDR's repricing of gold in the Great Depression that, I believe, caused an overnight large devaluatiion of the dollar?
Thanks!
2009-08-11 23:59:43
Government Abandons All Sensibility?
Seems to me like this has already happened. Most of the economic treatise that I read here and elsewhere that predict one outcome or another (or multiple at different times) all seem to revolve around the premise that the current economic structure or logic (which I don't claim to understand) will still be intact and adhered to by all the players involved. I understand that structure is necessary, both legal and economic, because that is what keeps us ignorant masses in line, paying our debts and providing a means for the "in crowd" to measure their wealth. In my humble opinion - spending billions and trillions on bailouts, providing a "backstop" for trillions of made up derivative contracts held by who?, pretending to borrow trillions of dollars from an "unfriendly" country that we have no hope of paying back, worrying about paying them interest in dollars that we print and distribute freely and are supposedly going to collect in taxes at some future date from our serfs - it seems to me that we have already abandoned sensibility and this financial facade grows thinner and more incredulous everyday. It seems like those in the know are doing their best to either destroy it or render it more and more meaningless each day to some ultimate end to which only they are privy to at this point.
2009-08-12 08:13:38
Government Abandons All Sensibility?
I have a terrible feeling about this charade myself. Why keep inflating the market every week and it seems to no end. "The recession is over" they say? Is it really? Does anyone really believe the common citizen will spend their way out of this? With what? More leverage? And will the govt bail everyone out and anything that might tip the boat or appear to be sinking? Is this the dream? Debt has to collapse to begin anew. Our desire to educate ourselves has to improve. The world understands the game (world govt's and their people) and we are digressing every second of the day. It will take a serious wake up call for us to understand the new rules to proseperity and that may take a very long time - collectively! It is up to Minyans on these boards to be the catalysts of this era.
2009-08-12 16:16:26
Government Abandons All Sensibility?
Humans tend to look at things in a straight line from the current point, extrapolating current events out into the future forever.
There is a growing backlash over all of this silliness. I believe we will se a seismic shift politically much sooner than most are expecting.
It may not be very pretty but it will certainly be a good thing for our nation long term.
There is a growing backlash over all of this silliness. I believe we will se a seismic shift politically much sooner than most are expecting.
It may not be very pretty but it will certainly be a good thing for our nation long term.
2009-08-12 17:01:18
Government Market?
insider selling is very high right now. nyse short interest has fallen the most since sept 2008, right before a 28% drop in stocks.
2009-08-12 17:05:46
A brain the size of a watermelon!
it is not so much a matter of time than it is of price. The govt/fed are desperately trying to inflate prices. they do this so the debt won't implode, as higher prices act as collateral. but to those that don't have too much debt, lower prices are better. if/when prices drop those savers will take their money out of treasuries and buy things. when they do this interest rates will rise very quickly. this will/may cause the panic to hyper-inflate. the only tool the fed has left is a nuclear one: monetization. it would take a massive monetization to stabilize rates at this point, which would destroy the dollar. let's hope they have some sense left and this doesn't happen.
2009-08-12 17:08:40
Government Abandons All Sensibility?
i agree. an economy/financial structure is a physical system. you can't expect to jump out of a window and go up. the structures we have built, those to support massive debt, are not stable. it's like radioactivity. the more we try to support these unstable structures the more unstable they become.
2009-08-12 19:06:02
Thank you!
Mr. P, thanks so much for your reply. I'm honored. And please post frequently in Minyanville. Your incomparable Big Picture guidance helps MANY. In dangerous times like these, we need our Napoleons in the field -- at the head of the army. All the best to you.
2009-08-13 04:35:06
USA vs. Japan: USD vs JPY
Mr. P,
In your article quite a while ago, "A Yen for the Yen", you discussed the idea that USD & JPY are going to become the strongest currencies relative to others because a lot of debts have been issued in these two currencies. At that time, you favored the yen due to the immense amounts of pool of savings.
What made you change your views regarding the strengths of these 2? Is that the fact that the amount of debt in USD is vastly more abundant than in JPY, making the crunch (i.e. debt destruction -> dollar destruction -> dollar scarcity -> dollar strength) get much more immense than ever?
Another topic I would like to discuss is whether the next process after debt deleveraging is hyper-inflation. The Fed can only print debt. If the business environment does not improve, banks are afraid to lend. Therefore, velocity of money collapses. It's as if you can print abundant amounts of money but you bury it in your backyard. The money doesn't go to the economy.
The Congress can create hyperinflation, for example, by giving each American 1 million dollars. But by doing that, it will destroy banks because it doesn't make sense to put money in banks when you have hyperinflation. And it is the very interest of the Fed to protect banks. So, I guess hyperinflation is the outcome outside the interest of both parties (laymen like me and banksters-bank crooks-government-the Fed). In line of this argument, couldn't it be that the endgame is not hyperinflation?
If you look overseas (I'm very sure you do), other central bankers are doing stupid things even more insanely than the Fed. Take the PBoC, for example -- massive surge in lending, money supply rise by 28% in mere months. Europe also has its own political problems, making the euro probably very vulnerable and it might run to a crisis of existence.
I hope that you can give some insights on these issues. Thanks in advance.
In your article quite a while ago, "A Yen for the Yen", you discussed the idea that USD & JPY are going to become the strongest currencies relative to others because a lot of debts have been issued in these two currencies. At that time, you favored the yen due to the immense amounts of pool of savings.
What made you change your views regarding the strengths of these 2? Is that the fact that the amount of debt in USD is vastly more abundant than in JPY, making the crunch (i.e. debt destruction -> dollar destruction -> dollar scarcity -> dollar strength) get much more immense than ever?
Another topic I would like to discuss is whether the next process after debt deleveraging is hyper-inflation. The Fed can only print debt. If the business environment does not improve, banks are afraid to lend. Therefore, velocity of money collapses. It's as if you can print abundant amounts of money but you bury it in your backyard. The money doesn't go to the economy.
The Congress can create hyperinflation, for example, by giving each American 1 million dollars. But by doing that, it will destroy banks because it doesn't make sense to put money in banks when you have hyperinflation. And it is the very interest of the Fed to protect banks. So, I guess hyperinflation is the outcome outside the interest of both parties (laymen like me and banksters-bank crooks-government-the Fed). In line of this argument, couldn't it be that the endgame is not hyperinflation?
If you look overseas (I'm very sure you do), other central bankers are doing stupid things even more insanely than the Fed. Take the PBoC, for example -- massive surge in lending, money supply rise by 28% in mere months. Europe also has its own political problems, making the euro probably very vulnerable and it might run to a crisis of existence.
I hope that you can give some insights on these issues. Thanks in advance.
2009-08-13 10:24:01
In a bubble
The words that made the Chinese more "comfortable" were, from both sides, about MODERATING current trends.
(Moderating US/Fed deflationary social support activities. Moderating Chinese dollar-flight and rhetoric.)
But not changing direction on either.
(After all, our plight is troth, with the cost of divorce prohibitive for both sides.)
Chinese foreign policy (which of course includes economic policy) has been the most effectively Patriotic in the world since 1937 (when the Japanese invaded in force).
Across the same period the Owner-Operators of the US commenced Globalizing, which in essence is Unpatriotic when considering the Nation's (ie People's) interests as a whole.
The Owner-Ops of the US sold the Nation out, one might say, and the State is now a debtor for the duration.
In this the Chinese Owner-Ops are distinctly different. They are still a Nation-State, one might say (and the US in my view never was).
The Chinese Owner-Ops are trained to pursue National interest in policies that stretch across decades and generations. Ours are trained to hustle out of Biz School for ten years then retreat with Family & Friends to a more civilized place, or behind a wall.
The Chinese, then, can be relied on to slowly, steadily pursue their interest in divesting themselves of dollar assets without freezing up the global Capitalist machine of which they are now such a big part.
And the so-called elite of the USA can be relied upon to continue to devalue everybody's assets but their own. Or at least to doggone try.
And so for my money the dollar's long slow slide will continue. Energy looks most tempting at the moment. Gold still has a way to go. Food crops, steady.
But the Dollar ...? The chart gives me the willies.
Is there really no other reason you returned to the States than a view that a short- or perhaps medium-term uptick in the dollar is likely?
If it continues to slide, will it ruin your vacation?
I mean: Are there no other values at play in your decision?
This would leave the dollar downtrend intact but (they hope) stretch the path across more time.
(Moderating US/Fed deflationary social support activities. Moderating Chinese dollar-flight and rhetoric.)
But not changing direction on either.
(After all, our plight is troth, with the cost of divorce prohibitive for both sides.)
Chinese foreign policy (which of course includes economic policy) has been the most effectively Patriotic in the world since 1937 (when the Japanese invaded in force).
Across the same period the Owner-Operators of the US commenced Globalizing, which in essence is Unpatriotic when considering the Nation's (ie People's) interests as a whole.
The Owner-Ops of the US sold the Nation out, one might say, and the State is now a debtor for the duration.
In this the Chinese Owner-Ops are distinctly different. They are still a Nation-State, one might say (and the US in my view never was).
The Chinese Owner-Ops are trained to pursue National interest in policies that stretch across decades and generations. Ours are trained to hustle out of Biz School for ten years then retreat with Family & Friends to a more civilized place, or behind a wall.
The Chinese, then, can be relied on to slowly, steadily pursue their interest in divesting themselves of dollar assets without freezing up the global Capitalist machine of which they are now such a big part.
And the so-called elite of the USA can be relied upon to continue to devalue everybody's assets but their own. Or at least to doggone try.
And so for my money the dollar's long slow slide will continue. Energy looks most tempting at the moment. Gold still has a way to go. Food crops, steady.
But the Dollar ...? The chart gives me the willies.
Is there really no other reason you returned to the States than a view that a short- or perhaps medium-term uptick in the dollar is likely?
If it continues to slide, will it ruin your vacation?
I mean: Are there no other values at play in your decision?
This would leave the dollar downtrend intact but (they hope) stretch the path across more time.
2009-08-13 10:43:36
Yen
Similar to Roger's question:
Have you turned bearish on the Yen vs USD? I would imagine that you don't see the Yen going to all-time highs vs the USD anymore, but how about Yen/Euro?
Is this change because now that US and Japanese interest rates are about the same, that the Yen carry trade has been replaced by the USD carry trade?
Thanks for your excellent analysis
Have you turned bearish on the Yen vs USD? I would imagine that you don't see the Yen going to all-time highs vs the USD anymore, but how about Yen/Euro?
Is this change because now that US and Japanese interest rates are about the same, that the Yen carry trade has been replaced by the USD carry trade?
Thanks for your excellent analysis
2009-08-17 12:59:36
USA vs. Japan: USD vs JPY
I guess Mr. P is away. So, I'll try to connect the dots here as to why perhaps he might fear of the developments in Japan.
From the above quote:
"if/when prices drop those savers will take their money out of treasuries and buy things. when they do this interest rates will rise very quickly. this will/may cause the panic to hyper-inflate. "
and here's an article that might connect the dots:
http://www.ft.com/cms/s/0/e4560ab8-7624-11de-9e59-00144feabdc0.html
kind of vague, but here's the possible link:
potential new ideas, innovations, new leadership -> new, re-invigorated optimism -> taking money out of savings -> selling JGBs (MASSIVE amounts!) -> JGBs drop in price -> weaker yen ?
From the above quote:
"if/when prices drop those savers will take their money out of treasuries and buy things. when they do this interest rates will rise very quickly. this will/may cause the panic to hyper-inflate. "
and here's an article that might connect the dots:
http://www.ft.com/cms/s/0/e4560ab8-7624-11de-9e59-00144feabdc0.html
kind of vague, but here's the possible link:
potential new ideas, innovations, new leadership -> new, re-invigorated optimism -> taking money out of savings -> selling JGBs (MASSIVE amounts!) -> JGBs drop in price -> weaker yen ?
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