Seeking Alpha


Send Message
View as an RSS Feed
View flow5's Comments BY TICKER:
Latest comments  |  Highest rated
  • The Age Of The Dollar Is About To End [View article]
    The cummulative current account balance deficit since the U.S. became a debtor nation in 1985 now stands @ $8,549T.

    A nation has a TRADE DEFICIT when the cost of merchandise imports exceeds the receipts from merchandise exports. The CURRENT ACCOUNT balance encompasses merchandise, service items, commodities, and “current” financial transactions; while the BALANCE OF PAYMENTS includes the entire above plus capital flow items; all transactions involving foreign exchange.

    The foreign exchange value of any currency is determined by the supply of and the demand for that particular currency. In international financial analysis supply and demand take on an unique role; for what is demand form our point of view is supply from the standpoint of foreigners – and vice versa. All transactions that require the conversion of foreign currencies into dollars constitute a demand for dollars. These include exports, payments received for services rendered to foreigners, capital flows (interest and dividends collected from foreigners), etc. An increase in the volume of any one of these times will increase the demand for dollars and, ceteris paribus, the foreign exchange value of the dollar. The opposite types of transactions, imports, etc., which involve payments to foreigners, increase the supply of dollars, thus increasing the volume of foreign short-term claims that are held against the U.S. dollar, which in the long-run, reduce the foreign exchange value of the dollar.

    When the balance of payments is balanced by foreigners acquiring net holdings of our equities, bonds, and real estate, and capital outflows (interest, dividends, rentals, etc.) exceed inflows, we are either decreasing our net creditor position in the world, or increasing our net debtor position.

    Beginning 1985 it has been the latter. The trade deficits, plus the unilateral transfer of funds by the Federal Government to foreigners (i.e., our far flung military bases as well as current & past military engagements), transformed this country from the world’s largest creditor to the world’s largest debtor – for the first time since 1917. Since 1985 we now have a net debtor position exceeding 8.5 trillion dollars, but the principle villain (since 1973) has been our dependence on foreign oil.

    Given the situation of this country in the 19th century, (its people, government and undeveloped resources) that it was advantageous both to lenders and borrowers for the U.S. to run a trade deficit.

    It is also economically advantageous for creditor nations, and for the world economy, if creditor nations operate with trade deficits: deficits proportionate to their creditor status. That is, the deficits should be large enough to enable the nations of debtor nations to acquire a sufficient amount of foreign exchange to enable them to serve their international debts.

    Since the U.S. is no longer an economically undeveloped nation, but is increasingly an international debtor, what evaluation should be placed on our huge trade and current account deficits? For the very short run these deficits keep prices and interest rates lower than they otherwise would be and they subsidize our standard of living. But the deficits also are inexorable forcing the dollar down in terms of its foreign exchange value—and no consortium of central bankers, treasury secretaries, et al., can stop the process.

    With a chronically depreciating dollar foreigners will be much less inclined to invest in the U.S. on a creditorship basis, thus pushing up interest rates. The rising cost and diminishing volume of imports will contribute to an increase in inflation, and the expectation of further inflation will also push up interest rates. This spells stagflation.

    Unless we are willing to make those fundamental reforms requisite to successfully competing in international markets, the continued decline of the dollar will finally force a payments balance on us. Under these circumstances, we can expect long term deterioration in the standard of living of the vast majority of the people in this country.

    At some point in time our huge current account deficits will generate a flight from the U.S. dollar and, therefore, the Euro-dollar. This will generate hyperinflation in terms of U.S. and Euro-dollars, and an international financial crisis of unprecedented proportions. If history is a guide it is obvious the fundamental reforms requisite to overcome these conditions will not be achieved.
    Mar 25, 2012. 09:58 AM | 13 Likes Like |Link to Comment
  • Guess Who Owns the Most U.S. Debt? Not China [View article]
    "Because a large variety of people own the notes, bills, and bonds in the "public" portion of the debt, the U.S. Treasury also publishes information that groups the types of holders by general categories to portray who owns United States debt. In this data set, some of the public portion is moved and combined with the total government portion, because this amount is owned by the FEDERAL RESERVE as part of United States monetary policy" - Wikipedia

    I.E., the FED is the LARGEST OWNER
    Jan 18, 2011. 09:26 AM | 10 Likes Like |Link to Comment
  • The U.S. Economy Sitting On The Threshold Of A New Golden Age, Part 2 [View article]
    "Underlying most arguments against the free market is a lack of belief in freedom itself. ― Milton Friedman"

    His laissez faire politics (de-regulation), will be this country's demise. We live in a predatory society. It's no happenstance that this country has sought the protection given by our constitution, laws, regulations, legislators, courts, lawyers, labor unions, etc., etc.
    Jun 13, 2012. 09:04 PM | 9 Likes Like |Link to Comment
  • Why Interest Rates Will Almost Certainly Rise in 2010 [View article]
    Maybe not communism but certainly socialism. And down the line a "command economy". WE are BROKE.
    Dec 25, 2009. 11:29 AM | 9 Likes Like |Link to Comment
  • How the Senate Bill Would Change Healthcare [View article]
    FOUND THIS: "Among other things, GOP members suggested that tort reform be a part of the national health care overhaul.

    Democrats, who receive large amounts of campaign cash from trial lawyers, eschewed the idea, despite the director of the nonpartisan Congressional Budget Office, Douglas Elmendorf, saying that as much as $54 billion could be saved over the next 10 years if Congress enacts legal reforms including a $250,000 cap on damages for pain and suffering and a $500,000 cap on punitive damages and restricting the statute of limitations on malpractice claims"

    It's too bad we need legislators to vote and pass legislation. Congress and the House are prejudiced.
    Dec 24, 2009. 10:47 AM | 9 Likes Like |Link to Comment
  • Bernanke Does Not Understand The Depth Of His Powers [View article]
    "as the supplier of reserves the Fed can control the yield curve"

    Good God, not again. The fed cannot control interest rates, even in the short end of the market -- except temporarily. By attempting to slow the rise in the policy rate (the monetary transmission mechanism), the fed will pump an excessive volume of IBDDs into the member banks. This will fuel a multiple expansion in the money supply, increase money flows, & generate higher rates of inflation—& higher interest rates including the FED's policy rate.

    But that is not what will "break the buck". It is as Charlie Price comments: "would become currency vigilantes and switch out to Switzerland and the closest substitutes they could find".

    But even if a legal structure is put in place we will still need monetary authorities who understand the economics of money creation, the consequences of excessive money creation – & are willing to force on the governments and business communities of their respective countries the discipline of a properly regulated money supply. The latter problem will be with us whether control is vested in the central bankers, or the International Monetary Fund is made a world central bank and control of the E-D is vested in it.

    But the alternative is, at some point in time, a flight from the U.S. dollar and, therefore, the Euro-dollar. This will generate hyperinflation in terms of U.S. and Euro-dollars, and an international financial crisis of unprecedented proportions. If history is a guide it is obvious these requisite conditions will not be achieved.
    Apr 19, 2012. 08:53 AM | 8 Likes Like |Link to Comment
  • Does Another Cruel Summer Lie Ahead For Stocks? [View article]
    "Given his background and expertise on the Great Depression, it seems that he simply refuses to be remembered as the person that allowed the economy fall into Great Depression 2 because he did not provide sufficient monetary policy support"

    History will show that Bernanke never learned the lessons of the Great Depression & that he was largely responsible for the economy's collapse during the Great Recession.
    Apr 15, 2012. 09:31 AM | 8 Likes Like |Link to Comment
  • Hyperinflation Is Imminent - National Inflation Association [View article]
    (1) Peak OIl (in and of itself), will multiply the number dollar's required for currency conversion (forcing all prices drastically higher), & in the process, vastly reduce the standard of living for the majority of Americans.

    (2) With the constant roll-over of both short & long-term debt, it becomes obvious that the burden of higher interest rates will be compounded. The burden becomes a function of the major portion of the debt, not just the current deficits. The burden, in fact, becomes exponential. In other words, if the trend is not stopped, the debt inevitably has to be repudiated.

    (3) There will come a time (unpredictable) when it will be impossible for the government (federal) to collect enough in taxes to pay all of its expenses, including interest on the national debt. The Gov't can of course borrow an indefinite amount through the Fed. (Concealed green backing) given a few changes in existing law. But that would lead to hyper inflation - i.e., a collapse in the credit of the Gov't. So the easy way, is the way the French did it in 1960. Simply say that beginning Jan 1 (or any other date), new dollars will be issued, and that each new dollar is worth 100 old dollars. Then follow that up with a largely state controlled economy.

    It seems highly probable that this country will end up being run under a "command economy", moving towards an increasingly totalitarian mold. We when we look back, we will decry our "elastic" legislators, the banking lobbyists, and their constituents.
    May 1, 2011. 06:22 PM | 8 Likes Like |Link to Comment
  • How the Senate Bill Would Change Healthcare [View article]
    Definitely socialist. Mandatory healthcare sounds unconstitutional. What about lawsuits? Are the damages capped? There are too many lawyers in Congress.
    Dec 24, 2009. 10:40 AM | 8 Likes Like |Link to Comment
  • Surviving And Prospering Over The Next 4 Years Of Economic Darkness [View article]
    10:55 CT - DOW down 310.

    "facing the upcoming 'Fiscal Cliff.' "

    LIke during the Great Depression, more people will have to move in with each other just to survive.
    Nov 7, 2012. 12:14 PM | 7 Likes Like |Link to Comment
  • Dragging The U.S. Into The European Recession [View article]
    "When the U.S. sneezes the rest of the world catches a cold" Why?

    Rank Country/Region GDP (millions of US$)

    World 69,659,626 - IMF 2011

    European Union 17,577,691
    1 United States 15,094,025
    2 China 7,298,147n2
    3 Japan 5,869,471
    4 Germany 3,577,031
    5 France 2,776,324
    6 Brazil 2,492,908
    7 United Kingdom 2,417,570
    8 Italy 2,198,730
    9 Russia 1,850,401
    10 Canada 1,736,869
    11 India 1,676,143
    12 Spain 1,493,513
    13 Australia 1,488,221
    14 Mexico 1,154,784
    15 South Korea 1,116,247

    The U.S. comprises 22% of the world's nominal-gDp. The Eurozone comprises 25% of the world's nominal-gDp. Together they comprise 47% of the world's nominal-gDp.

    Considering those percentages it's not surprising the 2 are intertwined.
    Jun 9, 2012. 01:10 PM | 7 Likes Like |Link to Comment
  • Bernanke (Once Again) Explains Why QE2 Is Not Money Printing [View article]
    Say what you may. Prima facie evidence that Bernanke has created bank credit is an expansion in the money stock. The 13 week SA annual rate in m1 is now @ 14.8% (WSJ Market Data Center).
    Dec 6, 2010. 06:01 AM | 7 Likes Like |Link to Comment
  • QE2 Is About Assets, Not Banks [View article]
    QE2 will pimarily spark financial-investment as opposed to real-investment (i.e., speculation & the mis-allocation of loan-funds).
    Oct 24, 2010. 09:55 AM | 7 Likes Like |Link to Comment
  • How to Boost U.S. Exports [View article]
    Correcting the current account balance, and trade deficit, is an absolutely daunting task:

    The U.S. is a $7.4 trillion dollar debtor country (since 1985) and compounding.

    The volume of foreign financing required to float new government debt issues each fiscal year now averages about 49%.

    The U.S. imports approximately $335,992,800,000 of oil per year (@78/barrel) & 12.1 MMbd.

    There were 700 foreign military bases, in 130 countries, employing more than 500,000 military personnel (2003 figures). But these numbers didn't include bases in Afghanistan, Iraq, Israel, Kuwait, Kyrgyzstan, Qatar, and Uzbekistan (this constitutes a correctable drain on the dollar - multilateral claims to foreigners).
    Oct 27, 2009. 10:29 AM | 7 Likes Like |Link to Comment
  • Inflation And Yields: Gold And Equity Yields [View article]
    "the observation made famous by Keynes that interest rates used to be highly correlated with the price level"

    Contrary to Keynesian economics: Interest is the price of obtaining loan-funds, not the price of money. The price of money is the inverse of the price level. If the price of goods & services rises, the “price” of money falls. Interest rates in any given market at any given time are the result of the interaction of all the forces operating through the supply of & the demand for, loan funds.
    Dec 28, 2012. 11:33 AM | 6 Likes Like |Link to Comment