World economy talk

[Monseratto]

Very mind-opening mga sinsabi niya... People should listen to him more...

[tidus1203]

Add Jim Rogers, Marc Faber and Ron Paul. These are people who want to straight and just tell the plain truth.

[uls]

Peter Schiff is da man!

Peter Schiff rulez!

[uls]

This is way sooner than expected.

Dapat sa 2009 pa..

Much of the world’s capital went into into cash and treasuries...

it's just a matter of time an exhaustion level is reached.

a very poor auction of 30 Year bonds:

Longer T-Bonds Lack Appeal
Maurna Desmond, 11.13.08, 07:45 PM EST

Investors weren't too keen on buying the U.S. Treasury's new issuance of 30-year notes.

Uncle Sam is having a tougher time selling its long-term paper as investor fears of the future grow.

On Thursday, the U.S. Treasury’s $10.0 billion auction of 30-year bonds was met with less demand than recent sales of shorter-term government debt. The auction drew an average yield of 4.31% with a bid-to-cover ratio of just 2.4, or $2.28 worth of bids for every $1.00 accepted. While less popular than shorter maturities, demand was in line with the average bid-ratios at the last eight auctions for this type of debt, according to TradeTheNews.com.

[tidus1203]

Hehehehe I am still short 30 year US Junks (rather than US Treasuries, because they ain't treasures)

[uls]

Ngayon palang mahina na ang demand, what more sa 2009...

baka sometime next year total rejection na

Junk na talaga

hehehe

[pup2]

Kainis lang, daming nadadamay sa over-consumption and expenditure ng US eh samantalang dito, the richest people I know are also the most kuripot!

And yet lahat mukhang madadamay.

[creepy]

Peter Schiff will be embarrassingly and spectularly wrong -- at least about inflation.

Though I agree with him about the causes of this crisis.

It's interesting that people in the U.S. (policy-makers, economists and even Hank Paulson) are trying to lay some blame on Asians for saving too much and investing their US$ in the US! (Yes, they're saying that Asians are to blame (partly) for causing the bubble!).

[Monseratto]

[tidus1203]

Peter Schiff will be embarrassingly and spectularly wrong -- at least about inflation.

Though I agree with him about the causes of this crisis.

It's interesting that people in the U.S. (policy-makers, economists and even Hank Paulson) are trying to lay some blame on Asians for saving too much and investing their US$ in the US! (Yes, they're saying that Asians are to blame (partly) for causing the bubble!).

And what makes you say he is wrong. I think history is the only indicator we ever need. Everytime you print more money, that will ultimately lead to inflation once those money begins to circulate in the economy. For now they are not circulating because the banks are holding tight on them. Its true, I question his theory regarding the Zimbabwe like inflation, but massive inflation that is already a given by just looking how the US government is printing so much money to dole out to different companies.

[uls]

Way to go Sec. Paulson...

now that the TARP will no longer be used to buy mortgage assets from banks,

the banks will have to deal with more writedowns...

which will make them more unwilling to lend...

ayan... look what happened...

Libor for Dollars Increases a Second Day as Recession Spreads
http://www.bloomberg.com/apps/news?p...zko&refer=home

Nov. 14 (Bloomberg) -- Money-market rates in dollars rose for a second day in London after Europe sank into its first recession in 15 years, heightening concern lending by banks will slow as their balance sheets deteriorate.

The London interbank offered rate, or Libor, that banks say they charge each other for three-month loans rose 9 basis points to 2.24 percent today, according to British Bankers' Association data. The overnight rate climbed 1 basis point to 0.41 percent, 59 basis points below the Federal Reserve's target.

The Libor-OIS spread, a gauge of cash scarcity among banks, widened 7 basis points to 167 basis points. The TED spread, which measures the difference between what the U.S. government and banks pay for three-month loans, widened 6 basis points to 203 basis points.

[tidus1203]

No I think Paulson has finally got some sense and now realize that we should let the free markets sort this one out and government intervention always just brings trouble. The strong shall survive and the weak shall be taken over by the strong. After all of this we will have fewer but much stronger banks.

[tidus1203]

http://www.cnbc.com/id/27717135

Commodities are one of the only viable investment opportunities left and are set to rebound as demand problems take hold, while the outlook for the dollar is bleak, famed investor Jim Rogers said Friday.

Sharon Lorimer

Jim Rogers talk commodities at the World Money Show in London.
The dollar's days as the world's reserve currency are numbered, Rogers said at the World Money Show conference in London.The greenback faces serious devaluation as spiraling national debt and a worsening economic crisis undermine it, he said.

America's growing debt problem is "out of control" and Federal Reserve Chief Ben Bernanke's strategy of printing money is a "terrible policy," he said.

Bernanke "does not understand economics, he does not understand markets … he is going to run those printing presses until we run out of trees," he added.
Commodities 'Through the Roof'

Despite the recent massive declines in oil and other commodities, the asset class is in a bull market caused by ever tightening supply, according to Rogers.




“When supply goes down and demand goes up, that’s a bull market," Rogerss said.

"By the time we get to the end of this bull market, commodities will be going through the roof," he said.
"The only place I know where the fundamentals are unimpaired is commodities," he added.

Nearly every oil-producing country has declining reserves, Rogers said. Rogers highlighted Africa as being a key continent for oil exploration going forward. He also speculated that a commodities bull run could last until 2020.

Rogers warned investors against putting money into bonds, saying that would be a "terrible place to invest for a long time to come."
"Stocks at best are going to continue in a big trading range," he added.

The dollar is going to have "serious problems down the road," Rogers said, adding that he is using dollar rallies as opportunities to get out of the currency.

The Master has spoken. Commodities is the way to go and he also re-affirm the thread title. GET OUT OF THE US DOLLAR!

[uls]

This is serious stuff

China considers shifting reserves to gold.

GOLD RUSH
http://www.thestandard.com.hk/news_d...716&con_type=1

Friday, November 14, 2008
The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.

Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way," the source said.

China's fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson's US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.

The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.

US debt paper will become junk soon.

[tidus1203]

I always knew the Chinese were smart. However, at current gold spot prices there won't be enough gold to cover all the paper that China has... So in essence gold is so underpriced in relation to all the paper money out there.

[creepy]

And what makes you say he is wrong. I think history is the only indicator we ever need. Everytime you print more money, that will ultimately lead to inflation once those money begins to circulate in the economy. For now they are not circulating because the banks are holding tight on them. Its true, I question his theory regarding the Zimbabwe like inflation, but massive inflation that is already a given by just looking how the US government is printing so much money to dole out to different companies.

He will be wrong because the current crisis is already correcting many of the excesses in the system (too much US$).

Why? De-leveraging by financial institutions and general risk-aversion right now is causing a MASSIVE CONTRACTION of the supply of dollars. This contraction is occurring on a humongous, unprecedented scale. Go check the financial plans of the world's major financial institutions with balance sheets of over tens of trillions of USD between them.

The injection of US dollars by the FED is nowhere near the amount of dollar contraction going on.

Remember this: Money supply is exponentially created (multiplied) by leverage (i.e. lending/borrowing) because of the nature of our financial system. De-leveraging causes the exact reverse: US dollar supply goes pffft!!

Longer-term, one way (among others) to stop the debt binge and over-leveraging is for regulation of financial institutions to impose restrictions or safeguards.

History an indicator? ABSOLUTELY. Check out Japan -- the land of JPY printing presses and zero interest rates... It's been 20 years and have we seen excessive inflation? Last time I checked, the problem was deflation.


Stop the hero worship please. Or at least keep the altar at home.

[tidus1203]

Again there is no shortage of US Dollars, all this bailout money is just being kept in the hand of the banks they don't want to lend it out but the money is there. There is deleveraging because of lack of credit and lack of credit not because there is lack of liquidity, rather lack of credit because of FEAR from lending. But once things are okay again and once banks start to feel good again and start lending again all those money they printed will find its way in the economy and thus create inflation. The US just printed $700B out of nowhere, but the banks are not lending it out but once they do INFLATION TIME!!!

Well in Japan's case, they were savers that is why there is deflation even if they printed money. And also those printed money went abroad via the carry trade that is why the JPY was pummeled down for many years to the delight of the Japanese exporters. Its just now that the carry trade is reversing that is why the JPY is strengtening. Japan is an exporter and they lack domestic consumption thus deflation. The US is a different animal, the US is a consuming nation, a budget deficit nation, a trade deficit nation. Its a recipe for inflation.

[uls]

This is how i understand this whole freaking mess...

US consumer spending fuelled the world economy.

The US consumers requested money from banks...

and banks obliged by creating money for the US consumers.

The financial system will be fine as long as the momentum of consumer borrowing and spending keeps on increasing. (inflation greater than previous inflation)

Now that US consumers have cut back on spending,

the banks are no longer creating new money.

without new money, loans don't get paid.

The banks take a direct hit.

They tighten credit, writedown asset values.

The system can only be perpetuated by inflation greater than previous inflation.

If that stops, deflation happens.

That's what's happening now.

Now the Fed and other central banks are trying to stop deflation by injecting liquidity into the global financial system.

And the US govt is trying to take the place of US consumers by increasing spending.

[tidus1203]

But as Peter Schiff was pointing out the government spending does not come from legitimate savings but via printing press and in the long run sigurado inflation yan.

[creepy]

Again there is no shortage of US Dollars, all this bailout money is just being kept in the hand of the banks they don't want to lend it out but the money is there. There is deleveraging because of lack of credit and lack of credit not because there is lack of liquidity, rather lack of credit because of FEAR from lending. But once things are okay again and once banks start to feel good again and start lending again all those money they printed will find its way in the economy and thus create inflation. The US just printed $700B out of nowhere, but the banks are not lending it out but once they do INFLATION TIME!!!

Well in Japan's case, they were savers that is why there is deflation even if they printed money. And also those printed money went abroad via the carry trade that is why the JPY was pummeled down for many years to the delight of the Japanese exporters. Its just now that the carry trade is reversing that is why the JPY is strengtening. Japan is an exporter and they lack domestic consumption thus deflation. The US is a different animal, the US is a consuming nation, a budget deficit nation, a trade deficit nation. Its a recipe for inflation.

Let me repeat -- THERE IS A SHORTAGE OF DOLLAR LIQUIDITY because of the absence of credit. Go ahead -- try to ask any corporation that would otherwise be solvent but now is struggling to meet payments because there's very little lending. In fact that's the primary reason why everything else has declined against the US dollar recently (including commodities, stocks, bonds, other currencies).

The absence of credit is creating lack of liquidity because MONEY SUPPLY IS MULTIPLIED BY LENDING (CREDIT). The reason for the absence of credit can be many things (fear? or maybe because the banker's mother told him not to lend) but it does not change the fact that credit is the basis for the creation of money supply.

If you understand even a modicum of the "fractional reserve" that's been quoted here before, you will understand that leverage is what creates liquidity. I'm sure you know (do you??) that the FED DOES NOT PRINT TENS OF TRILLIONS OF DOLLARS. It becomes tens of trillions because of credit (or lending or leverage).

Schiff (and people who worship his soundbites) is giving too little credit to the people running the FED. The objective of the FED is to cushion the impact of the crisis and prevent it from getting worse. They will (hopefully) start siphoning off the money or impose regulatory limits on leverage in time to avoid inflationary effects.

Please keep an open mind.