New Asian Union Means The Fall Of The Dollar

[c1ue]

Re: New Asian Union Means The Fall Of The Dollar

Thank you for this excellent example of utter cluelessness as to the underlying value of gold.

Mr. Inflation Trader pulled out all of his bond trading angels dancing on pinheads, only to discover he really doesn't have any idea why gold is going up now.

I also like how his analysis utterly ignores any outside factors besides historical prices and statistical correlation even as he forgets the most fundamental factor behind statistics: correlation only makes sense (and thus has predictive power) if there is some actual relationship between performance and data measured/correlated.

Without this grounding, you have the 3 blind men with an elephant syndrome.

[don]

Re: New Asian Union Means The Fall Of The Dollar

Look for a Dollar Zone . . . a Yuan Zone . . . perhaps a Ruble Zone

All will be on the prowl for gold.

A given . . . . .

[Raz]

Re: New Asian Union Means The Fall Of The Dollar

... Do you think that the Russians or Europeans or Chinese wouldn't jump at the opportunity to offer military protection to the Saudis in exchange for cheap oil?

...read the history of how the Nazis actually did most of their plundering of Europe: Conquer it militarily, force the locals to use the mark for which the Germans could print infinite amounts, & then the Germans would use their printable paper marks to buy the local resources of the conquered country. Remarkably similar to what the US has done since 1971. Funny then, that the world actually has a strong distaste in their collective mouths for Americans...wouldn't you?

Americans are about to find out exactly how far above our means we have been living. That is what these other countries have been working to accomplish.

My wife's cousin works for a textbook publishing company and travels all over the world. A few weeks ago, in Australia of all places, the owner of a restaurant came to their table and politely gave them a lecture - about Obama (thought he was crazier than Bush) and corruption, blaming America for the ongoing economic crisis and saying that he would serve them but he might decide to eventually stop serving Americans at all.

The restauranteur might be an asshole, but it backs up what I've heard from Serbs to Spaniards.

We've brought this upon ourselves.

[ProdigyofZen]

Re: New Asian Union Means The Fall Of The Dollar

You guys are just now finding out about Zerohedge? I have been on that site since week 1. It is great at aggragating information from all over and especially a lot of info the main financial sites miss!

I will say though that is it quite sensationalist. Although I know a lot of big time hedge fund managers that read the site and have quoted directly from it. They do post a lot of good information and a lot of good charts etc. They link to a lot of hedge fund investor letters that you would otherwise not be able to read.

[jiimbergin]

Re: New Asian Union Means The Fall Of The Dollar

You guys are just now finding out about Zerohedge? I been on that site since week 1. It is great at aggragating information from all over and especially a lot of info the main financial sites miss!

I will say though that is it quite sensationalist. Although I know a lot of big time hedge fund managers that read the site and have quoted directly from it. They do post a lot of good information and a lot of good charts etc. They link to a lot of hedge fund investor letters that you would otherwise not be able to read.

zerohedge has been linked to here as long as I can remember.

[ProdigyofZen]

Re: New Asian Union Means The Fall Of The Dollar

Right, I would think so Jim.

[Starving Steve]

Re: New Asian Union Means The Fall Of The Dollar

While I believe, and have always believed, that everyone should have a percentage of their net-worth in gold, I would not sell the dollar short for several reasons:

a.) The world uses U.S. dollars and has so for a century or more;
b.) The U.S. has Ft. Knox with 8,600 TONS (toneladas in Spanish) of pure gold inside it;
c.) The U.S. has nice real estate, especially lovely homes;
d.) The U.S. has military might;
e.) The U.S. has so much oil now that it may be an oil exporting nation soon;
f.) The U.S. has corporate wealth;
g.) The U.S. is still a somewhat free country, or at least tries to be a free country;
h.) The U.S. has Obama as President, so things are getting better in America;
i.) The U.S. has free-trade including NAFTA;
j.) A $100 U.S. still buys several bags of groceries;
k.) Prices are falling ( de-flating ) in the U.S. currently;
l.) Bernanke is not dumb;
m.) Homes are half-price now in California;
n.) America's only dangerous enemy is Iran; even China loves America.

[ProdigyofZen]

Re: New Asian Union Means The Fall Of The Dollar

A through M was a farce right? A joke? I would say the only two of those supposed "advantages" that is really an advantage is the amount of Gold we have relative to other nations and our military might (military might in the sense that we may not let our currency go as monopoly so easily).

All the others are negatives.

[aaron]

Re: New Asian Union Means The Fall Of The Dollar

While I believe, and have always believed, that everyone should have a percentage of their net-worth in gold, I would not sell the dollar short for several reasons:

a.) The world uses U.S. dollars and has so for a century or more;
b.) The U.S. has Ft. Knox with 8,600 TONS (toneladas in Spanish) of pure gold inside it;
c.) The U.S. has nice real estate, especially lovely homes;
d.) The U.S. has military might;
e.) The U.S. has so much oil now that it may be an oil exporting nation soon;
f.) The U.S. has corporate wealth;
g.) The U.S. is still a somewhat free country, or at least tries to be a free country;
h.) The U.S. has Obama as President, so things are getting better in America;
i.) The U.S. has free-tradFe including NAFTA;
j.) A $100 U.S. still buys several bags of groceries;
k.) Prices are falling ( de-flating ) in the U.S. currently;
l.) Bernanke is not dumb;
m.) Homes are half-price now in California;
n.) America's only dangerous enemy is Iran; even China loves America.

a. 100 years and the dollar used to "only" lose 1% of its value every year. That is accelerating.
b. The dollar is way over valued (or gold undervalued) to actually mean anything. What does ft knox have, perhaps 500 billion in gold? That is not even enough to pay for the government to function for 1/3 of a year.
c. U.S. does have nice real estate, but it is not cheap in the places you actually want to live.
d. The U.S. military is on the decline.
e. The U.S. does not have that much oil. I suppose if we tripled production we could export some.
f. Corporate wealth has been increasing a lot. It has not done much good except for a few people. They do not hire Americans (who spend dollars) nor do they spend much of their wealth.
g. America is freer than some 3rd world countries, but that is declining as well.
h. Obama? We should put his face on the new $1000 dollar bill that they will need to print.
i. Free trade? It has been better for the Chinese Yuan than the U.S. dollar.
j. $100 dollars buys a lot less groceries than it used to.
k. Exactly which prices are deflating? Housing is still at 2003 bubble levels. Everything else is more expensive than then.
l. Bernanke is not dumb, he just does not work towards a strong dollar.
m. Home prices are half as much as when?
n. Dangerous enemies? I suppose that is true... until it is not.

[Starving Steve]

Re: New Asian Union Means The Fall Of The Dollar

a. 100 years and the dollar used to "only" lose 1% of its value every year. That is accelerating.
b. The dollar is way over valued (or gold undervalued) to actually mean anything. What does ft knox have, perhaps 500 billion in gold? That is not even enough to pay for the government to function for 1/3 of a year.
c. U.S. does have nice real estate, but it is not cheap in the places you actually want to live.
d. The U.S. military is on the decline.
e. The U.S. does not have that much oil. I suppose if we tripled production we could export some.
f. Corporate wealth has been increasing a lot. It has not done much good except for a few people. They do not hire Americans (who spend dollars) nor do they spend much of their wealth.
g. America is freer than some 3rd world countries, but that is declining as well.
h. Obama? We should put his face on the new $1000 dollar bill that they will need to print.
i. Free trade? It has been better for the Chinese Yuan than the U.S. dollar.
j. $100 dollars buys a lot less groceries than it used to.
k. Exactly which prices are deflating? Housing is still at 2003 bubble levels. Everything else is more expensive than then.
l. Bernanke is not dumb, he just does not work towards a strong dollar.
m. Home prices are half as much as when?
n. Dangerous enemies? I suppose that is true... until it is not.

The top on home prices was in 2007 in California, in the nice parts and not out in the middle of no-where. For a $400,000 house in 1999 or 2000, the price doubled to about $800,000 at the peak in 2007..... The cream has been shaved off of the housing market now, and we are back at $400,000 prices, or maybe a bit more, but not much more. If you want to take auctioned homes which are in unknown shape, you can get homes at half-off, no problem at all, at least with the price. You might even be able to get homes at 60%-off if you want to search the auction market.

I love Bernanke and Obama. They talk inflation, bail-outs, QE, and guess what: they de-flate the economy. The reason for the de-flation is that money earns ZERO interest. So the money supply tends to stay constant while the production of the economy continues to grow, albeit slowly. So if there are more cars, more computers, more houses, more inventions, more drugs and medicines, more skilled labour, more university graduates, more oil, more nuclear power, more pipelines, more haircuts, more roads, more dams, more hospitals, etc.------ and meanwhile a constant or fixed number of dollars in circulation, then the result is a slow de-flation, just as Japan experienced when it tried the zero interest rate experiment.

Apparently, there are two ways to de-flate an economy: ultra-high real interest rates so that people take money out of circulation and save it or invest it; or case two: zero interest rates when the money supply doesn't grow but the economy still produces goods and services. Either way, money in circulation becomes scarce. If the Money supply times the Velocity of circulation of that money equals zero, then the Inflation equals zero:

M x V = I. Then if V goes to zero, I (inflation) goes to zero. M x 0 = 0.

When inflation is 5% and interest rates are 20%, the inflation drops to zero, or even negative. And when inflation is 5% and interest rates are 0%, apparently the inflation also drops to zero, or even negative. No-one knows why, but this is apparently what happens. But if inflation is 5% and interest rates are 3%, then inflation accelerates. Again, no-one knows why, but this is (by bitter experience) what happens.

Be it a strong dollar or a weak dollar--- a scarce dollar in a growing economy will kill inflation.

[mfyahya]

Re: New Asian Union Means The Fall Of The Dollar

I agree, I probably have underestimated rural America - purely due to my lack of first-hand knowledge.

Note that % urbanization is 82 for US vs 61 for Greece http://en.wikipedia.org/wiki/Urbanization_by_country
Also, if one were to compare just the rural populations I'd guess the Greeks are more self-sufficient, less indebted, living within their means etc.

[Raz]

Re: New Asian Union Means The Fall Of The Dollar

You must be off your meds again, Steve.

[coolhand]

Re: New Asian Union Means The Fall Of The Dollar

The top on home prices was in 2007 in California, in the nice parts and not out in the middle of no-where. For a $400,000 house in 1999 or 2000, the price doubled to about $800,000 at the peak in 2007..... The cream has been shaved off of the housing market now, and we are back at $400,000 prices, or maybe a bit more, but not much more. If you want to take auctioned homes which are in unknown shape, you can get homes at half-off, no problem at all, at least with the price. You might even be able to get homes at 60%-off if you want to search the auction market.

I love Bernanke and Obama. They talk inflation, bail-outs, QE, and guess what: they de-flate the economy. The reason for the de-flation is that money earns ZERO interest. So the money supply tends to stay constant while the production of the economy continues to grow, albeit slowly. So if there are more cars, more computers, more houses, more inventions, more drugs and medicines, more skilled labour, more university graduates, more oil, more nuclear power, more pipelines, more haircuts, more roads, more dams, more hospitals, etc.------ and meanwhile a constant or fixed number of dollars in circulation, then the result is a slow de-flation, just as Japan experienced when it tried the zero interest rate experiment.

Apparently, there are two ways to de-flate an economy: ultra-high real interest rates so that people take money out of circulation and save it or invest it; or case two: zero interest rates when the money supply doesn't grow but the economy still produces goods and services. Either way, money in circulation becomes scarce. If the Money supply times the Velocity of circulation of that money equals zero, then the Inflation equals zero:

M x V = I. Then if V goes to zero, I (inflation) goes to zero. M x 0 = 0.

When inflation is 5% and interest rates are 20%, the inflation drops to zero, or even negative. And when inflation is 5% and interest rates are 0%, apparently the inflation also drops to zero, or even negative. No-one knows why, but this is apparently what happens. But if inflation is 5% and interest rates are 3%, then inflation accelerates. Again, no-one knows why, but this is (by bitter experience) what happens.

Be it a strong dollar or a weak dollar--- a scarce dollar in a growing economy will kill inflation.

On housing - no one ever mentions it is a negative cash flow "asset." And that you never truly own it in most markets, even if you pay it off, b/c you must pay real estate taxes or lose the house. This is basically renting your house from the gov't in perpetuity. The rental amount here in OH is 2% (property tax rate.) Nice to see our real estate arrangement similar to China, even though no one notices that...good to see us in such good company...???

On your M x V = I equation, you are right. But the problem is that "V" is unforecastable. I have read it compared to sprinting full speed thru the forest on a pitch black night with your arms out in front of you...everything is fine until it's not, & you have no warning before your nose is smashed into your cheekbones.

Read "The Dying of Money" - in Weimar Germany, the "V" in your equation was really low, till all of a sudden, "in June 1922, the German people smelled a rat & velocity made a right angle turn higher"...

[CanuckinTX]

Re: New Asian Union Means The Fall Of The Dollar

Actually, having lived in Cali for most of those years, I saw the prices more than doubled from 1999-2007. It was more like 3x what it started at. Prices NOW are "only" double what they were in '99 but that's still 50% more than in '99. This is why people like to say housing is 'cheaper' in California now because the cream at the top of the bubble has been scooped off the prices. However, they still have a long way to fall to get back to reality in line with incomes. That's going to happen at a slow but steady rate over the next several years.

[c1ue]

Re: New Asian Union Means The Fall Of The Dollar

That said, I really don't know anything about treasuries.

Depending on how much you have to invest, you might just consider US savings bonds.

Savings bonds have 2 components: a fixed rate and an inflation rate.

The fixed rate is now 0% (big surprise) but the inflation rates are a bit above 2% in the past 2 years.

Note that once you buy, the fixed rate is locked in forever. Inflation rates are announced every 6 months.

This isn't as good as buying a 30 year Treasury, but is far better than any of the shorter term investments in 2 ways:

1) The 10 year and less Treasuries are well under 2% right now, and if you buy then you're locked in
2) The savings bonds can be cashed in at any time. Treasuries before their maturity can only be sold as a security, and the value of said security varies widely with the prevailing interest rate.

I'd note that the iTulip portfolio is primarily short duration Treasury bills, and the interest rate on those is far, far less than the inflation adjustments on the savings bonds. However, EJ and so forth are investing hundreds of thousands of dollars or more and cannot go the savings bond route - each individual can only buy $10K in savings bonds per year (electronic) or $5K in paper.

I'd suggest paper as these can also be used for trade.

EDIT: I should note I am only referring to I series savings bonds above. EE series are just the fixed rate: i.e. 0%
EDIT2: I should also note the paper I series savings bonds can only be purchased now using your tax refund. Yet another factor to plan for.