QE over in Oct?

[GRG55]

Re: USD as safe haven

GRG55,

I don't dispute that Europe, Japan, and maybe China are as rickety as you claim.
What I do question is whether many will flee to $USD. Would they not go to hard assets instead?

The $USD itself has been dependent on Japanese and Chinese bailouts for years, so if those are going south, all the US has is the FED to buy T-bonds. Fed buying of T-bonds is at quite a high rate.

I guess you could argue that in this ZIRP environment, leverage has pushed most assets into bubble territory, so
cash might be the one asset not over valued.

For a "flight to safety" it's a pretty pathetic list of landing destinations to choose from.

What "hard assets" may be of most interest? And which jurisdictions would those assets likely be located?

Shoddily built, empty properties in China? More London, Dubai or Singapore real estate? A tanker or two full of oil? Vintage Ferraris? Modern art?

Isn't the flight to these sorts of "hard assets" already well along?

I would rephrase the first sentence in your second paragraph with the observation that the Japanese and Chinese economies have been dependent on US fiscal bailouts for years. The asset speculation based USA economy has been equally dependent. See EJ's 2006 article "Economic M.A.D."

But the deficit that the USA needs the Chinese to fund is shrinking fast, the Federal Reserve is about to curtail further purchases of debt, while most every other place in the world appears to be expanding monetary stimulus, more rapidly increasing public debt and promoting asset inflation, to fill the void the Fed is creating. Nothing is forever, but for now perhaps a case can be made that "Bernanke won".

In an increasingly troubled world -- financially, politically and militarily -- there will be a flight to hard assets. What if those hard assets being sought are increasingly in the comparatively secure, and now much more competitive (including lower energy cost) production economy jurisdiction of the USA. If so, they will require one to acquire US$ first in order to purchase.

Just one (apparently) contrarian thesis to keep an eye out for as the world unfolds...

"...Come writers and critics
Who prophesize with your pen
And keep your eyes wide
The chance won't come again
And don't speak too soon
For the wheel's still in spin
And there's no tellin' who
That it's namin'
For the loser now
Will be later to win

For the times they are a-changin'..."


Bob Dylan, 1964

[Polish_Silver]

Re: QE over in Oct?

Why is the slope of the potential GDP dramatically increased from 2014 onwards?

For the same reason we will get a break through in battery technology: so we can hope for a happy ending!

[GRG55]

Re: QE over in Oct?

The Sunburn missile has been around since 2000. The U.S. military has countermeasures, probably some we don't know about.

http://www.strategypage.com/dls/arti...0552912425.asp

It is not just gee-whiz weapons that make a potent military. As an extreme example, the Arab Persian Gulf nations have been the biggest purchasers of modern weapons for several decades. Despite their expensive, near state-of-the-art arsenals not a one of them can defend themselves in a shooting war.

The competitive advantage the Chinese have is the ability to scale. If they set their minds to it they can build in quantity (toys, skyscrapers, bridges, trains, military hardware) faster than anyone else on earth. I expect that, more than anything else, is what keeps USA military planners awake at night.

[vt]

Re: QE over in Oct?

Supercapacitors

First one up the drive

A new sort of storage device gives lithium-ion batteries a run for their money

Jul 12th 2014 | GOODWOOD |

THE Goodwood Festival of Speed is rapidly becoming Britain’s de facto national motor show. Its backdrop, Goodwood House, is home to the Dukes of Richmond, the first of whom acquired his title by the clever expedient of being an illegitimate son of Charles II. But there is nothing antiquated about the festival itself, which features a 1.9km (1.2 mile) sprint up a hill by some of the world’s newest and fastest cars. At this year’s event—held last month—they were joined by a dozen or so electric and hybrid cars.
Most of these vehicles, such as Tesla’s Model S and BMW’s new i8, were powered by lithium-ion batteries, sometimes backed up by a petrol-driven engine that drives a generator and may, in a hybrid arrangement, also drive the wheels directly. One, however, was not like this. For instead of batteries, the Toyota TS040 hybrid (pictured above) has a supercapacitor. When the car needs a kick that its 520 horsepower 3.7 litre V8 petrol engine cannot provide, an additional 480 horsepower is available from two electric motors connected to this supercapacitor. And when the car is decelerating or braking, the motors work in reverse, as generators, to charge the supercapacitor up again.

Unlike batteries, which store energy chemically in the material of their electrodes, a capacitor stores energy physically, on the electrodes’ surfaces. One electrode has a surplus of electrons and the other a deficit. If the electrodes are then connected through an external circuit a current flows until the surplus has neutralised the deficit and both have the same electrical potential. Electrode surfaces are easy to get to, so a capacitor can be charged and discharged quickly, giving it a high power-density. But surfaces cannot hold as much energy as entire volumes, so capacitors have lower energy-densities than batteries.
Supercapacitors pack vastly larger surfaces into a given space by using porous materials to form the electrodes. This permits them to have an energy-density up to 10,000 times that of a regular capacitor. That is still only a tenth of a lithium-ion battery’s energy-density, but a supercapacitor’s power-density can be ten times that of such a battery.
And energy-densities in supercapacitors are improving rapidly, according to Franco Gonzalez, one of the authors of a newly published report from IDTechEx, a market-research firm in Cambridge, Britain. A new device, the hybrid supercapacitor, has recently reached 30-40% of a lithium-ion battery’s energy-density, and the use of electrode materials that have an even bigger ratio of surface area to volume than existing materials (carbon nanotubes and graphene, for example) is likely to increase energy-densities still further in the near future. On top of all this, new types of electrolyte (the liquid between the electrodes) will allow both higher energy- and power-densities. These ionic liquids, as they are known, have the further advantages of being neither toxic nor inflammable—which is not always true of what they are replacing.
Supercapacitors also last longer than batteries. Repeated cycles of charging and discharging degrade a battery’s chemical components. This means that after a few thousand such cycles most lithium-ion batteries are giving up the ghost. According to Mr Gonzalez, supercapacitors can keep going for 1m cycles. Lithium-ion batteries are improving too, of course—but not as fast. IDTechEx therefore expects supercapacitor sales, currently worth less than 3% of those of lithium-ion batteries, to grow to over 10% in the next decade, creating a $6 billion market.
Fast charge
The main beneficiary will be transport. Toyota is already incorporating lessons from the TS040 into its road cars. The Yaris Hybrid-R, a concept car, uses a supercapacitor to provide quick bursts of power. There is industry gossip that the firm is also working with BMW on a sports car that will use supercapacitors. PSA Peugeot Citroën has started fitting supercapacitors to some of its cars as part of its stop-start fuel-saving system, as this permits faster start-ups when the traffic lights turn green.
Public transport, too, is benefiting. Maxwell Technologies, an American supercapacitor-maker, reckons more than 20,000 hybrid buses use the devices to provide bursts of power during acceleration. They are particularly popular in China.
China also claims the world’s first trams powered by supercapacitors. Seven such will go into operation later this year in Guangzhou. When one of them stops at a station, a bank of supercapacitors on board it is recharged in 30 seconds by a device positioned between the rails. That provides power for the tram to run for up to 4km—more than enough to get to the next stop, where it can be charged again. Guangzhou Tram, the operator, believes the supercapacitors will have a life of ten years.
Some electric trains, too, use supercapacitors to harvest energy that would otherwise be lost during braking—and such energy need not be employed by the locomotive it comes from. A system made by Bombardier, a Canadian firm, uses supercapacitors to feed energy recovered this way back into the railway’s power supply, making it available for other trains when they are pulling out of stations.
Supercapacitors also have a variety of industrial applications, ranging from regulating the shutting down of wind turbines to recovering energy from cranes and construction machinery. Soon, they are likely to pop up in products like smartphones.
When, or whether, supercapacitors will push batteries aside remains to be seen. For a while yet it will be the former for speed and the latter for endurance. But the field is open, and in this race between electrical storage’s supercapacitor hare and its battery tortoise, it is by no means obvious the tortoise will win.

From the print edition: Science and technology

[EJ]

Re: QE over in Oct?

Why is the slope of the potential GDP dramatically increased from 2014 onwards?

Good question. As yet we do not have an answer.

[lakedaemonian]

Re: QE over in Oct?

It is not just gee-whiz weapons that make a potent military. As an extreme example, the Arab Persian Gulf nations have been the biggest purchasers of modern weapons for several decades. Despite their expensive, near state-of-the-art arsenals not a one of them can defend themselves in a shooting war.

The competitive advantage the Chinese have is the ability to scale. If they set their minds to it they can build in quantity (toys, skyscrapers, bridges, trains, military hardware) faster than anyone else on earth. I expect that, more than anything else, is what keeps USA military planners awake at night.

There was an expression during the Cold War in the doctrinal differences between US led NATO and Soviet led Warsaw Pact.

The US/NATO typically went for quality and Soviet/WP typically went for quantity.

"Quantity has its own quality."

[touchring]

Re: QE over in Oct?

There was an expression during the Cold War in the doctrinal differences between US led NATO and Soviet led Warsaw Pact.

The US/NATO typically went for quality and Soviet/WP typically went for quantity.

"Quantity has its own quality."

The problem in China is not quantity and which no Chinese general would like to talk about.

Unlike the Japanese (Samurai), the Europeans (Crusaders), and the Arabs and Muslims (Jihadists), there's no military culture in China.

The Chinese culture is about money. The God of Fortune.

[littleshark]

Re: QE over in Oct?

The "QE to infinity" crowd were mistaken. Could be the "ZIRP forever" meme suffers the same fate?

The Fed will probably break the system the way it usually does...by raising rates.

Maybe, but I think the FED stands ready not with more QE, but with a potential unwind of the reverse-repo facility which took close to an additional $200 bil of liquidity out of the system in the first half of the year. Any financial mkt instability coming from the markets after the QE wind down will potentially be met with this liquidity coming back in to the system. Everyone knows QE now, but the Reverse-Repo liquidity spigot is a bit more stealth.

I agree though, that if the financial mkts continue to climb and credit spreads continue to tighten and reckless lending starts worrying the FED more and more, they will respond, as they should.

[Mega]

Re: QE over in Oct?

Er..............YYYEEESSSS............if i could have that in English it would be most helpful.....

All i see is Max Keiser & "De Crew" coming out & saying what they said 3 months ago, or 6 months...or 12 moths...or 2 years........etc. Like saying its going to rain, well yes it will but WHEN????

Mike

[ProdigyofZen]

Re: QE over in Oct?

I just went to the FRED website and the RGDP data seems to be corrected as there is no upward sloping line as shown in the above but only if you have RPGDP and RGDP. If you add the Average mean duration of unemployment then RPGDP slops upward as show above.

That seems odd no? Or am I missing something?

[EJ]

Re: QE over in Oct?

I just went to the FRED website and the RGDP data seems to be corrected as there is no upward sloping line as shown in the above but only if you have RPGDP and RGDP. If you add the Average mean duration of unemployment then RPGDP slops upward as show above.

That seems odd no? Or am I missing something?

With Mean Duration of Unemployment series



Without Mean Duration of Unemployment series

This is commonly known as a bug. It comes with the increased complexity of the St. Louis Fed's new java-based charting tools.

[vinoveri]

Re: QE over in Oct?

With Mean Duration of Unemployment series



Without Mean Duration of Unemployment series
This is commonly known as a bug. It comes with the increased complexity of the St. Louis Fed's new java-based charting tools.

I wonder how many bugs they have in their economic forecasting tools? I can see the excuse now after the next big "event"... "we were just following the models, and they weren't wrong, but the software was off - blame the IT guy!

[ProdigyofZen]

Re: QE over in Oct?

Thank you, I thought so.

[Southernguy]

Re: QE over in Oct?

That an institution with a 4t. balance sheet can't produce a set of decent graphs is, at least, astonishing.

[Polish_Silver]

Re: QE over in Oct?

Remember the Weimar inflation data? It is orders of magnitude off, and the economics profession didn't correct it in 50 years of publications!

Atomic physics, it ain't