The cycle of US -> Foreign Power -> SWF -> US

[blazespinnaker]

SWF/Foreign CBs are bailing out the US, however, the SWFs and Foreign CBs are getting much of their funds from the US.

What will happen if this cycle is broken? Can it be broken? Should it be broken?

I think it could be broken by increased protectionism .. I think that way lies danger. We are a highly interdependent economy and while not everyone is doing their fair share and needs to wise up (china needs to innovate more and spur more domestic demand, the US needs to stop consuming so much and get back to work), I think we're mostly functional.

To throw sands in the gears of this machine, even though it is not optimally efficient, is hugely dangerous.

However, if that protectionism does not occur .. I think we'll DO ok. The US will feel some pain and will start to try to compete more .. my guess will be highly automated manufacturing processes, and China will let its currency rise and improve it's IP laws.

Call me optimistic, but I think this is what will happen, assuming no geopolitical events throw a wrench into things, and the democrats don't go insane once they take over the white house.

[touchring]

Re: The cycle of US -> Foreign Power -> SWF -> US

Yes, that's probably what will happen, assuming there is no WWIII. But the US is going to lose its economic dominance once the transition is over. The same which happened to the UK after the war.

[grapejelly]

Re: The cycle of US -> Foreign Power -> SWF -> US

I think it will be broken by increasingly rapid depreciation of the US$. Here's why. The US government is forced to make a lot of promises and they can't keep them in terms of purchasing power. So they will keep them in terms of nominal value.

Other countries will be doing the same thing in their own currencies.

So the US$ if anything will rally not fall against other currencies.

The SWFs will swing their mighty d*cks and prevent serious protectionism come hell or high water, through their leverage. And there will be a quiet crack-up boom, as Mises talked about and as Ty Andros writes about, which we are in the process of already...as those with fiat currency quietly try to buy up assets of lasting value without seeming like they are running for the exits.

There is no option to continued currency depreciation. None that seems feasible.

[Guest]

Re: The cycle of US -> Foreign Power -> SWF -> US

Spot on Grapejelly. You have summarized the entire, decade long play. No fuss, no bother. How about patenting this "reduced fuss and bother" methodology?

"The Grapejelly Wealth Strategy for the 2010's", or maybe (more trademark-able) simply "The Grapejelly Method" - (got to share credits with Charles Mackay though). I also agree - Ty Andros has nailed the general thesis down to the floor.

[Mega]

Re: The cycle of US -> Foreign Power -> SWF -> US

Is this what Peter S C H I F F Means when he talks about all the exported Inflation being imported back home?

I did hear that one SWF is looking to South/Central America as a escape route. They buy into major Hydro-electric projects, docks/bridges/rail roads etc.....those $ will then head North to come home to "Papa".
)
Mike

[grapejelly]

Re: The cycle of US -> Foreign Power -> SWF -> US

Spot on Grapejelly. You have summarized the entire, decade long play. No fuss, no bother. How about patenting this "reduced fuss and bother" methodology?

"The Grapejelly Wealth Strategy for the 2010's", or maybe (more trademark-able) simply "The Grapejelly Method" - (got to share credits with Charles Mackay though). I also agree - Ty Andros has nailed the general thesis down to the floor.

:p

........

[c1ue]

Re: The cycle of US -> Foreign Power -> SWF -> US

Sorry, I disagree that the SWF's can do diddly squat about protectionism.

As things deteriorate, our fellow voters will increasingly vote for those who present the easy way out.

It is how Hitler got into power, Mussolini, how the Communists overthrew the Czar, and any number of examples in history going all the way to the executions/exiles of Athenian generals in the Peloponnesian War.

Only when the populace is pacified can the soft money make headway - or do you still think that everything will be fine?

[touchring]

Re: The cycle of US -> Foreign Power -> SWF -> US

Sorry, I disagree that the SWF's can do diddly squat about protectionism.

The SWFs are buying time...