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  • US Dollar: "I'm Not Dead Yet!" [View article]
    Back in the gold reserve days the fed only held 1/350th value of gold for the circulating currency, since then money supply has exploded, all the gold in the world will buy about 10% of the US dollars in the world, forget about Yen, Euro.

    All exporting countries keep their currencies weak by buying dollars. If they want to depreciate the dollar, they will also have to deal with the loss of export competitiveness.

    Japapese & Chinese do not buy US debt out of the goodness of their hearts, they want to keep their currencies cheap and boost exports.

    On Oct 07 11:16 PM derryl wrote:

    > There is an alternate reserve currency available, gold. But returning
    > to gold would prevent the kinds of prolonged trade imbalances the
    > US has been enjoying, and that China has been using to build up its
    > industrial infrastructure. If imports must be paid for in gold, then
    > you run out of gold (run out of importing power) if you try to buy
    > and consume more than you produce and sell for too long. Then rather
    > than buy more you have to produce and sell more in order to get some
    > gold back in your treasury. Structural trade imbalances become impossible
    > to sustain under gold.
    > The US could not finance its military, plus afford its world leading
    > standard of living, under a gold regime. David makes the point that
    > any country whose currency functions as the global reserve currency
    > must issue a lot of debt in order to put enough money out there for
    > the global economy to use. So the US can finance its military and
    > standard of living while doing the world the service of providing
    > it with a reserve currency, all built on money that was created in
    > the US as debt.
    > This debt-money global reserve currency system could go on indefinitely,
    > but because US private and public sector borrowers are reaching their
    > debt ceilings there would have to be a new policy of issuing free
    > money to Americans that they could use to liquidate some or all of
    > their debts. The old debt-money would still be out in the world,
    > and the new money would be used to repay the loans and uncreate both
    > the free money and the old debt.
    > Without continuously accelerating growth in the issue of new debt-money
    > as bank loans, the modern monetary system eventually collapses into
    > deflationary depression like we're doing now. The solution is to
    > liquidate a lot of the debt without simultaneously removing all the
    > money from the economy which is what happens when bank loans are
    > repaid in the normal way. The only way to accomplish this, besides
    > mass bankruptcies with debt writeoffs and deep, long depression,
    > is to create and distribute free money.
    > This is not a moral issue. It is an arithmetic issue. I think David
    > is right that there is no other country whose currency could fulfill
    > the global reserve function. The "currency basket" idea could technically
    > work, but how long do you think a half dozen diverse nations will
    > "agree" on global monetary matters? We're basically talking about
    > a business partnership type arrangement, where each of the partners
    > has interests that clash with the interests of the other partners.
    > Not a recipe for a stable monetary regime. If we're going to use
    > somebody's money, it will be America's.
    > I think the world will eventually return to a gold standard, but
    > hopefully I won't be alive to see that day. I say "hopefully" because
    > gold will be the last grasp effort to stabilize a dangerously chaotic
    > global currency situation that will have been spinning out of control
    > for some time before nations will accept the discipline of gold.
    > When that day comes the currency carts will trundle through the nations
    > with their drivers shouting, "Bring out your dead currencies!" Some
    > will claim, "But I'm not dead yet.", but by that time we'll know
    > the deniers are on their last legs and we'll toss them on the cart
    > with the rest.
    Oct 14 03:24 PM | 1 Like Like |Link to Comment
  • US Dollar: "I'm Not Dead Yet!" [View article]
    No other currency has the liquidity to replace the dollar. Some dollars can and will go into Yen, Euro & commodities, but unless exporting countries want to attack their surpluses by depreciating the dollar.

    On Oct 07 07:36 AM Living4Dividends wrote:

    > Nice post. I agree that the dollar will likely decline over the next
    > decade. Best case scenario: nice gradual downward slope.
    > I disagree with the "no suitable replacement" scenario.
    > What about a mixed basket of currencies?
    Oct 14 03:18 PM | 1 Like Like |Link to Comment
  • In Earnings Season, Who Cares About the Unemployment Rate? [View article]
    Consumer spending (local or foreign) drive all economies. Countries with export focus (Japan & China) are dependent on the consumers in their export destinations (US & EU), while countries that are more balanced depend on domestic consumers (US & India).

    Only 20% of the Indian economy is total of Exports+imports, which has what helped it grow through this recession as more unemployed found employment to make goods as domestic incomes increased and drove domestic consumption (manufacturing) and service consumption increased.

    On Oct 09 02:46 AM Gary A wrote:

    > This article could well have been written by Summers or Geithner.
    > The flaw of course is that spending by consumers drives the economy
    > here. That is not true in emerging markets. This lack of spending
    > by consumers will bring both the US and foreign nations to their
    > knees.
    > The two stooges, Geithner and Summers bailed out the crony banks
    > who don't lend, instead of the crucial consumer who refuses to spend.
    Oct 14 03:04 PM | 1 Like Like |Link to Comment
  • In Earnings Season, Who Cares About the Unemployment Rate? [View article]
    Most countries experience rapid economic growth when workforce participation increased (US after WWII) and when more women started working.
    Don't you think India needs the same dynamic to grow incomes that drive spending and profits.
    Oct 14 02:56 PM | 1 Like Like |Link to Comment
  • Survey Says "Recession Over." [View instapost]
    The stock market rise is increasing wealth, bank profits like JPM
    Oct 14 02:28 PM | Likes Like |Link to Comment
    Doesn't the chinese brands need to improve a lot to seriously penetrate the Indian market.
    Oct 14 02:26 PM | Likes Like |Link to Comment
  • Krugman: Recession is Over and Trade is Worse then the Great Depression [View instapost]
    Options girl Krugman had been giving fairly pessimistic outlooks for most of this year, even though he is a self proclaimed liberal economist.
    Oct 14 02:21 PM | 4 Likes Like |Link to Comment
  • The Economic Recovery That Isn't [View article]
    Very thoughtful and profound comment. I would stretch your comment to look at agriculture productivity which has risen faster than industrial productivity and employs far fewer people than a century below while not only feeding the country but also being a substantive export.

    The issue is that service productivity has not kept up with productivity in Manufacturing or Agriculture, so needs more people to meet the needs of the population.

    On Oct 04 10:28 AM bricki wrote:

    > The problem with this analysis and modern economies in general is
    > that industrial productivity has reached the point where the material
    > needs of a modern society can easily be met by a small fraction of
    > the workforce.
    > For example the US is by far the largest manufacturing nation in
    > the world, producing 21% of the value of all goods produced in the
    > world today. Yet we only employ 8% of our workforce to achieve this.
    > And the output of each worker IS growing exponentially, resulting
    > in fewer manufacturing jobs each year.
    > Even if you double employment and thereby production in this area
    > you will only increase the percentage of the workforce engaged in
    > these activities to 16%. And this doubling clearly cannot happen
    > - the demand for the output is simply not there.
    > There is no going back to an economy where manufacturing jobs are
    > the bulk of the employment opportunities. Won't happen. We have had
    > a transition much like what happened when we went from an agrarian
    > economy where most of the population worked on farms to an industrial
    > society where few people work on farms. Wishing for it will not make
    > it so. You might as well wish for a society where most people work
    > on farms.
    > The future is a service economy. That is the reality. And economic
    > policies must realize this and be structured to work in this environment.
    > Calls to return to a manufacturing economy show a basic lack of understanding
    > in how a modern economy actually works, or does not work.
    Oct 14 01:12 PM | 1 Like Like |Link to Comment
  • Big Risks in Bonds and Bond Funds [View article]
    Any sharp rise in interest rates from rising inflation will indeed hit long bonds. The risk is mainly sitting in the long bonds, especially government bonds with ultra low current rates.

    ndallasj: did make a great point that if you reinvest the earnings this may less problematic and with shorter duration funds the roll off and new investments will allow for buying higher interest rate bonds.

    I think retirees depending on the income for their expenses are going to see the biggest impact, versus active investors who can reinvest dividends.
    Oct 12 05:10 PM | 1 Like Like |Link to Comment
  • Africa ETFs: Will Foreign Investment Help or Hurt Them? [View article]
    I would look closely at the country weights within these ETFs and or other funds. GAF has a sizeable portion in South Africa, that may or may not be what you thought you were investing.
    Oct 12 04:16 PM | Likes Like |Link to Comment
  • Asset Allocation Doesn't Do the Job [View article]
    Everybody has an asset allocation, question is whether that is the right one. The buy & forget only works in forever bull markets. The appropriate strategy is an allocation with tactical reallocation over time.
    Oct 9 05:10 PM | 1 Like Like |Link to Comment
  • When Will Deflation Turn Into Inflation? (And How Quickly?) [View article]
    What has been interesting to watch is the jump in commodity prices in a deflationary environment??
    Oct 9 05:06 PM | 1 Like Like |Link to Comment
  • A More Realistic Look at the Fed's Balance Sheet [View article]
    The swaps does make sense from the US perspective. But should the Foreign bank then increase money supply, can that not creep back into the US?
    Oct 9 04:53 PM | Likes Like |Link to Comment
  • The Trouble with 401ks and Bond ETFs [View article]
    Roger if the currency risk drives the issuer to default then Puts on this can be a dollar long trade. Kinda convoluted, I know.
    Oct 9 02:48 PM | Likes Like |Link to Comment
  • The Trouble with 401ks and Bond ETFs [View article]
    The distance to retirement and overconfidence does lead younger people to underinvest. I spent a car ride explaining to my 32 year old brother why he needs to save ( I don't know if I got across).
    Oct 9 02:44 PM | 1 Like Like |Link to Comment