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Is the U.S. Dollar Headed for a Mighty Crash? Part II

For your doubts about Russian holdings of Treasures here is some data from CBR (Central Bank of Russia) :

The structure of reserves as of Sep 2008 (cbr.ru/publ/Obzor/2009...):

cash: 13.4 %
repo: 24.2 %
papers: 62.3 %

The structure of reserves as of Jan 2008 (cbr.ru/publ/Obzor/2009...):

cash: 8.1 %
repo: 1.2 %
papers: 90.7 %
(gov papers 77.5 %, non-gov papers: 13.2 %)

This data alone reflects the significant shift in the structure of Russian Central Bank reserves. In addition to this there are reports that last fall CBR sold about 50 bn of agency debt (Freddie and Fanny) and purchased Treasures instead. And since February CBR was not selling dollars anymore, it was buying them to slow ruble appreciation a bit, and it bought about 20 bn up to now.

Also it's not clear why you claim that "Kremlin sold $221 billion US dollars". Yes, it is nominal amount the reserves were decreased by. But if Kremlin was selling only dollars, then having initially 47% in dollars and 42% in euros, now they would have something like 5% percent dollars and 90% euros. But actually they still have 42% of dollars. Obviously the were selling both dollar end euro assets. And probably at the same buying other assets that they deemed more safe.

All in all I don't see much reason to doubt the amount of Treasures holdings by Russia.

Commercial Real Estate: The Outlook Is Frightening

Soros Says Commercial Property Values Will Fall 30% (on top of 30% it have already fallen from the 2007 peak)

www.bloomberg.com/apps...

Commodities Will Lead the Recovery - Matt McCall

On Mar 15 01:35 PM Joe Texas62 wrote:
> The fact is that if China does not by U.S. Treasuries then the U.S.
> will and the dollar is not affected. If China exchanges U.S Treasuries
> for another currency, (ie. Euro), then Europe has the problem. Either
> way the U.S. wins. (for now)
>

Oh, yeah. U.S. will not be affected. Except Treasures yield will grow a but up and therefore the T-bills Ponzi scheme will collapse in just a few months rather than a couple of years.

Will China's Ideological Crisis Overwhelm Stimulus Spending?

Reply from China:

An obviously worried US President Barack Obama gave assurances that China’s $696 billion investment in US treasuries is safe. But dissidents inside the American mediacracy are urging the leadership to focus elsewhere. “Most of the major banks -- almost all of them -- are going to look insolvent. In which case, if you take them all over all at once, you cause less damage than if you would if you took over a couple now, and created so much confusion and panic and nervousness” a New York University economics professor told journalists on the sidelines of a meeting of a high-level legislative advisory body last week.

In fact, since Mr. Obama is not going to address the concerns expressed by Beijing, they are best advised to instruct their investment advisors to access the credit default swap market for risk coverage; what that will do to CSD spreads (last at 100 basis points) on US treasuries is a foregone conclusion. In the interim, the American Parties need to resolve the ideological dilemma which threatens to pit party cadres against party bureaucrats in an ongoing struggle for the soul of the American Freedom.

More than 4 million workers have been rendered jobless since the start of this global credit crunch. Washington’s policies are creating a new class of working poor. Productivity in the agrarian sector, which provides for millions Americans, is at a standstill. Consumer demand in the urban centres has dropped sharply in recent months, with no signs whatsoever of a turnaround. Thousands of businesses have shut down due to evaporating export orders. Delinquency in credit card and housing continue to rise. And government spending apart, zero or negative growth is clearly on the cards through 2010.

Washington’s stimulus plans, which have apparently resulted in a boost for equities worldwide last week, are severely constrained by harsh realities. On the one hand, there already is a substantial backlog of incomplete or partially-abandoned infrastructure projects. On the other hand, the bailout question is generating serious underlying tensions between taxpayers whose money needs to be taken away for Wall Street executives (often corrupt) who are unable to equitably reconcile enormous bonuses with stakeholder interests and public expenses. “Before we proceed any further, we need to finalize the outstanding issue of private property rights, both in the banking and in the auto industry,” a GOP dissident stated in a web posting late last year. “We must decide if we are in capitalist or communist mode?”

The dissident was fired from his position in early January and his family has not found any income since. But the question he posed remains relevant and is in the public domain. As long as the booming Wall Street bankers continued recording phenomenal year-on-year export growth, American deregulated capitalism model was rarely the subject of critical debate. Today, in circumstances where even official estimates of 2009 unemployment are in the 11-13% range, the resolution of the “capitalism or communism” question will determine the fate of the American economy well beyond the next decade. (If true measures of underemployment are duly considered, the key “jobless” number, similar to the SGS Alternative in the US, may well be in excess of 20%).

President Obama predicts that “better times” for the global economy are ahead in 2010. And, to partially offset the risk of deterioration in US government risk, Mr. Bernake’s advisors have been grabbing supposedly “undervalued” assets (banking, insurance, auto) in Wall Street, Detroit in order to diversify Treasure’s holdings. But he along with his colleagues in the Congress are simply gambling on the fact that hundreds of billions of dollars of stimulus funds will neutralize the risk of mass unrest triggered by unemployment, poverty, failing health care services and home foreclosures. Better times, if and when they arrive, are not going to re-establish American’s once dominant ability to produce goods, instead of phony `securities`, `derivatives` and crap like that.

Policy czars in the American Parties are not expected to retreat from the ideology of deregulated capitalism; there is nothing “communist” about those who are in control over American’s affairs. Also, without doubt, Washington’s ruthless law enforcement machinery is capable of containing worker and farmer protests, at least in the foreseeable future. So, for our present purposes, the challenge is to determine whether America will now stumble into (1) a broad-based recovery based on both internal and external stimulus spending or (2) a classic economic depression caused by the failure to resolve the key questions of fair wealth distribution and property rights.

This writer is convinced that deregulated capitalism is fundamentally incapable of creating any sustainable value for private equity. For that reason alone, this writer cautions against any long positions on America despite the hype which will flow from Washington and New York on a regular basis; on the contrary, sharp rallies on the back of such hype should be regarded as opportunities to sell. (This strategic perspective holds good for other deregulated capitalism examples, like UK).

More EU Open Source Software Allegations Against Microsoft

> Richard Stallman did not start the open source movement

He did. He started the GNU project, invented GPL, produced gcc and other free programming tools that in turn enabled linux and the whole host of other free software. There were disparate bits and pieces of open source software before him but there was no movement.

> He despises the term violently

The term but not the concept. The original term was "free software" while "open source software" was made up by Eric Raymond and Bruce Perens to make the concept marketable.

> As an aside, I do not believe he is or ever was an "MIT scientist."

Whatever you believe in, his biography says he worked for MIT AI lab, where, for instance, he created emacs text editor. I see no reason to doubt this.

> More important, open source software is neither a complement to nor an alternative to non-open-source software.

This statement is rather vague. Open source software by now is lots and lots of very different software pieces. Some of them were specifically created as an alternative to existing non-open-source software. Like linux was created as an alternative to Unix. Others were created as original research projects. Like X Window System was created by MIT and DEC to add windowing to Unix. Now greatly extended it perfectly works on Linux. Others were initially closed-source projects later relicensed as open source. So each open source project has a different purpose and different story. Saying for the whole open source software that 'it is that" or "it is not that" just makes no sense.

> Open source is a widely variant set of legal terms and conditions (Ts&Cs)--some of which date back to the 1970s--by which a relatively small amount of software is distributed.

Oh common. Open source licenses is one thing and open source software is another. Simply put license is license, software is software. Don't confuse the two.

Sure, each software is usually covered by some license. Specifically each open source software is covered by an open source license. License is just a tool. It ensures that software is distributed according to the open source model. And open source model is the idea that every user has the right to see the source code of the software he/she uses.

> Open source is secondarily a 50-year-old culture/philosophy within the quickly shrinking worldwide software development community.

Again, people indeed wrote software and released its source for free for a while. But it was mainly university culture not open source culture as such. Scientists did some research and released the source code because it was not supposed to make money from it in the first place. Like reference TCP/IP stack was created at University of Berkeley by Bill Joy and folks. Then Bill Joy founded Sun where they were creating proprietary software.

Free software, as philosophy and distinct movement was founded by Richard Stallman and later rebranded as open source by Eric Raymond and Bruce Perens.

As for quickly shrinking software development community I have no idea where this comes from. Open source expands to more and more areas.

The Ugly Truth About Unemployment

On Mar 08 02:42 PM CautiousInvestor wrote:
> And while Stage III
> of my working proposal could time to implement, I believe it offers
> rational grounds for allocating scarce resources and building a platform
> to support sustainable job growth.
>

As long as wages in China, Philippines, etc are an order or two of magnitude lower than in US, whatever job you create it will drain overseas. Unless it requires physical presence on the US soil. That is government, health care, retail, construction jobs will remain in the US. It's only a matter of time when high-tech and engineering jobs will go overseas too.

The last two decades the US economy was based on ever increasing amount of debt. But there is only that much debt you can take. Whatever new innovative product you (or Chinese) produce, who has the money to buy it? Chinese work for pennies, Americans work to pay debt interests.

This is the root cause of the problem. For a while Americans consumed more than they produced. Housing is just an aspect of this problem. Derivatives was just an innovative way to prolong the imbalance and unsustainable in the long run debt creation.

Until these imbalances are fixed the global economy cannot recover on sustainable ground. Eventually either American will earn as Chinese or Chinese as Americans. And the existing American debt has to be eliminated one way or another. Hyperinflation or whatever. Then kick start the economy. Very easy. Just 10-15 years of pain and you are done with it.

Assessing the American Labor Market Collapse: What Should Our Yardstick Be?

and there is another SGS-Alternate "yardstick":

www.shadowstats.com/ch...

Five Impossible Thoughts After Breakfast

This is perhaps the most accurate assessment of the current crisis I've ever read! Just perfect! Thank you sir for your execlent work!

Now I think the task of utmost importance is to spread the word to let people prepare for what's coming! Forget studying Elliot waves and stuff. It's time to learn some useful skills. As another prophecy Jim Rogers suggests learn some farming. I think mushroom farming would be a good choice.

On Mar 08 01:57 AM max12345 wrote:

> I can't quite understand why the good author is being so excessively
> optimistic! (it must be his highly developed theoretical and predictive
> model)
>
> Why not be a bit more realistic instead:
>
> Dow at 500 by 2011
> Gold at 50,000 by 2012...and
> S& P bottoms at 5
>
> Plus "economic depression lasts one century" (after which Global
> Warming and Environmental Catastrophe finish the job) and all major
>
> banks are NOT nationalized but are instead simply shut down as we
> revert to barter trade and hunting and gathering (of course aided
> by the Internet and satellites in locating suitable low-hanging fruits
> and quarry)
>
> Oh and I forgot....A new Chinese fascist empire will also take over
> the world after a Nuclear War designed to obliterate it fails to
> achieve its objectives. (but first the WTO probably will need to
> be disbanded)
>
> The above TRUE VISION (arrived at without taking any hallucinogenic
> drugs of course) will provide plenty of work for everyone to do
> and will therefore extremely quickly take us out of the recession!
> Thus creating a slight paradox. But I am sure one not at all beyond
> the solution imagination and powers of the author.
>
> And please DO keep up the good work since great entertainment is
> often the best cure for depressing scenarios!
>

Five Impossible Thoughts After Breakfast

The author is just a stubborn optimist. 2016?! Phew! All the true pundits predict the dollar will collapse within a year. Don't let your genuine American optimism prevent you from realization of truth! Dollar is doomed! Stocks are worthless! Invest in canned meat and shotguns!

Bank Liabilities: Why the Discussion Isn't Explicit

sorry, fixed mylelf (is there comment preview feature there?):

On Mar 06 09:40 PM citetez wrote:

> Get rid of mark to market and magically conceal the problem.

fixed for you

Bank Liabilities: Why the Discussion Isn't Explicit

On Mar 06 09:40 PM citetez wrote:

> Get rid of mark to market and magically <strike>solve<... the problem.

fixed for you

The Rally, When It Comes, Will Be a Doozy

Market is becoming a coiled spring. It is pulled back about as far as it can go... and then yet farther until it gets broken to pieces. The bottom will be at about DJ 2000 level where the broken spring has to be repaired for many years to find a healthy growth path for economy not based on unsustainable amounts of debt. So if you are in no hurry then buy stocks now. No doubt at least your children will reap the benefits of your smart investment.

The New Unwind

nice

Russia's Pact with China: Will Others Follow Suit?

Sorry, what is this oil price you are calculating? $25bn is a credit not the price paid for 20 years of oil supply. The credit will be returned unless Russia goes bankrupt, and the price of oil will be market price at the time of delivery.

Russia and China's $25B Handshake on Energy

Heh, as far as I remember Khodorkovsky wanted to build the pipeline directly to China. It was cheaper. Khodorkovsky was not a big fan of massive investment. He got Yukos from Yeltsin for cheap. And he wanted to keep it cheap. But state-controlled companies deemed it would make the project too dependent on Chinese. So they decided to extend the pipeine to Pacific to reach for more markets. And if the Chinese still want the piplene, then ask them for some financing.