Dissenter

The Inflation / Deflation Forces Battles On

In my opinion, the Fed would like to see a sustained and stable level of inflation, as much as the economy can handle, to pay down all government, corporate, and personal debt.

Also understanding the underlying economics of whats going on only takes you so far. We don't know what governments are willing to do to each other in the abnormal course of economic warfare and how that will affect us.

Thanks Greg on such an informative article. And commenter User8240 had some great points too about China's end to buying our bonds being unrealistic to think it will cause U.S. interest rates to rise and why inflation will not explode.

Barron's Interviews CLSA's Christopher Wood

"Asia will be the biggest beneficiary of monetary easing in the U.S. and Europe."

Sure, China would just love that their Dollar denominated assets are worth less and their exports cost a heck of a lot more.

Why Economic Stagnation Will Continue

Author wrote: "Furthermore, the time to act is now. If we wait a few more years, China may have moved her US assets from long-term bonds to stocks and IMF SDRs. At that point, she will be able to crash the dollar without harming herself. "

How can China quietly move over a trillion dollars in US treasuries assets to stocks? Who would buy the bonds? Other foreign countries? I doubt it. The U.S. government? That would devalue the dollar, which China fears, making our products more competitively priced overseas.

Should Bernanke Be Reappointed?

This article was so bad. It was all metaphor with no logic to back up the economy-as-patient symbolism.

"In the initial confusion they did what you need to do - they administered wide spectrum drugs and other procedures that were known to abate the symptoms they were observing, and these did help, and that gave them time to find more targeted remedies." What were those "drugs"? What were the "symptoms"? How did it help? What were the "targeted remedies"?

Chile's Emerging Economy: Better than the Rest?

Thanks Claus. I was waiting for a very good article on Chile's economy and this is it.

How Long Can the U.S. Dollar Defy the Law of Gravity?

Great article. If the Japanese and Chinese found out tommorrow that their US securities holdings were worthless what effect would such a loss in asset value have on the Japanese and Chinese economies and their currencies? Would all that worthless US security holdings cripple their economies?

Has Crude Turned the Corner?

so if demand for oil is currently at 83.5 million barrels a day then you are saying there is about a day's worth of oil floating at sea(80 million barrels)? Ummm...doesn't seem like it would take long to work through that.

U.S. Treasuries: China's Dilemma

You have to ask the right question. And that question is why hasn't China taken more steps to develop their domestic economy and increase consumption? The answer is that they can't afford to. It would be infinitely harder to keep their citizens in check once their economic status rises and they had a taste of the good life. How does a country sustain that prosperity for a billion people once its let out of the bag? They lack commmodities, are overpopulated, and overpolluted.

Right now the Chinese are still buying our debt which will lead to a further devaluation of the yuan to increase exports and create jobs. My question is if the Chinese decided to appreciate the yuan what will that do to China's growth and what will a rise in the yuan mean for jobs in China?

How Long Before the Dollar Fails?

The government will never allow hyperinflation to happen. It would simply decline to honor its treasuries obligations to China and Japan and the rest of the world.

What Will It Take for Faith in Financial Engineering to Wane?

I liked this article but can someone explain to me how high interest rates stimulate the economy? And if this is true why isn't the government pursuing a policy of high interest rates now?

"The response, of course, is that with high interest rates, there was amazing room for monetary policy to stimulate activity. "

I thought low interest rates stimulated borrowing which stimulated the economy whereas high interest rates did the opposite and put the brakes on an expanding on economy.

U.S. Debt Default, Dollar Collapse Altogether Likely

So what happens to the value of stocks if the dollar crashes or there is hyperinflation?

Today's Commodity Prices Forecast Tomorrow's Inflation

Sean,

Thanks for your input on copper. I would like to buy physical copper for the same reasons why people buy physical gold. I have a fear that if the dollar goes bust all stocks with go with it hence the desire to own physical copper but is it worth it versus owning a copper stock company instead? If so how would I go about obtaining the physical copper?

Today's Commodity Prices Forecast Tomorrow's Inflation

Why is everyone so into Gold? I'm thinking copper will be a better play. If you invested $1000 in physical copper in 2004 and sold at its 5 year high you would have made $3000. If you invested $1000 in physical gold in 2004 and sold at its 5 year high you would have made only $1500.Sure copper has surplus inventories that needs to be worked through but I'm thinking long term. Gold may have its time to shine in the world markets but I think it will be short lived. Also with gold one to has to deal with higher amounts of volatility, fear of confiscation, and central bank manipulation of gold prices. Here are the charts for gold and copper:

www.kitcometals.com/ch...

www.kitco.com/charts/p...

Gold Loses Its Shine

Honeycutt,

You wrote: "...So in essence, a currency based on a good that has volatile pricing could be problematic." (Platinum)

I don't see how gold would be a better choice over Platinum to base a currency on as both are very volatile. I think it would be better to base a currency on something more plentiful but still has value. This would limit the volatility of the underlying currency.


On Jan 12 08:06 AM H.J. Huneycutt wrote:

> Gold is a commodity and just like all other commodities, it's price
> is subject to broader supply and demand trends. Using gold as a
> currency is, in a sense, similar to using any other commodity. There's
> no reason you couldn't use pork-bellies or corn as a currency. Of
> course, there would be some big problems with using either of those
> in modern American society and there are actually reasons why gold
> is the best commodity to use as currency.
>
> You speak of the fact that gold has no practical use. Well, technically
> it does have a few uses and it's popular for jewelry applications.
> That's why it has value --- there is demand. In this sense, it's
> no different than any other good out there --- if you offer me a
> cow for $10, that cow may have a useful value of $0 to me as I'm
> not a farmer and wouldn't even begin to know what to do with it.
> However, someone out there does want the cow --- hence even if it
> has zero worth to me, it has worth to someone else, hence creating
> an objective value. If that cow is worth $100 to most farmers, I
> might jump at the opportunity to buy it at $10 even if I have no
> real use for it personally since I can make a $90 profit selling
> it to someone else.
>
> Now that we've established why gold would have objective value, the
> next question is why is gold better suited to serve as currency than
> other commodities. The answer, ironically enough, is its limited
> applications. If we used palladium as a currency, for example, our
> currency's value would radically fluctuate based on demand from a
> variety of sources --- particularly right now, it's value would be
> crushed by the auto manufacturing industry's woes. So in essence,
> a currency based on a good that has volatile pricing could be problematic.
> Since gold's applications are more limited, it is more stable as
> currency. Jewelry demand may go up or down, but it's somewhat stable.
>
>
> Now, the reason why gold has value is two-fold: (a) demand and (b)
> production costs. Gold has a real cost of extraction. This cost
> varies from miner to miner and is somewhat debatable (since you have
> to determine what costs are included in obtaining the final product),
> but the same is true for all commodities. However, the one thing
> that you can say about gold versus paper money is that these real
> economic costs are meaningful. Paper money has a real economic cost,
> as well, but I imagine it's fairly trivial (a few cents per bill?).
> Hence, the argument for gold is that it has a significant real economic
> value attached to it, whereas, paper's value is rooted in something
> less absolute.
>
> Honestly, I don't think literally using gold as a currency would
> be very convenient, but there are a lot of reasons it serves very
> well backing paper money. There are also reasons why when paper
> money becomes devalued, gold --- with its real economic costs ---
> gains value versus paper money.

As Deficit Countries Contract, Can Surplus Countries Be Far Behind?

This article was about a whole lot of nothing. I'm not the slightest bit wiser after reading it. "As deficit countries countries contract can surplus countries be far behind?" I'm gonna go out on a limb here and say....duh.