World economy talk

[uls]

China's domestic consumption is too small

even if China has a billion more people than the US,

mainland Chinese do not consume like Americans

[tidus1203]

"Greenspan and his acolytes abolished the business cycle"

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the governments that guarantee bank deposits really have no money to pay depositors if the depositors withdraw all their money

it's a bluff

the market knows that

the bank deposits are bigger than the GDP of their countries

the market doesnt bet on bank failures now coz the banks get bailed out

the bets are now on sovereign debt default

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Investing in UK sovereign debt is now riskier than investing in McDonald's corporate bonds

Check the credit default swaps:

Hehehe the Keynesians like Greenspan believe they have the power to stop business cycles, stop market corrections by debasing the currency and spending money. The free markets will punish them all which is going to be more painful that it should have been.

That is what happens when you print too much money to pay of your sovereign debt. The amount of money in the economy (bank deposits, securities etc.) is definitely greater than all the good and services available. I am sticking to my belief that inflation will be a problem later on and I am not talking about regular inflation I am thinking more in the 20% range.

[Monseratto]

China ... at least from the looks of it ... haven't they started invading U.S. by buying houses?

Is world war 3 coming?

Though malaki ang kinita ng China, malaki din ang social inequalities doon. Kunti lang ang mayaman at marami ang mahirap. Their banks also do not throw money around to anyone who cannot pay them back. The workers are already becoming restless...

[tidus1203]

And that is why they didn't get into trouble. Banks lend only to people who can pay back unlike in the US where money is virtually being thrown around to anyone with a job, and sometimes even without a job

[Monseratto]

Dollar sinking again. Commodities up, oil at $45/barrel, gold up $825...

Dollar Money-Market Rates Tumble on Fed Rate-Cut Speculation

Dec. 11 (Bloomberg) -- The cost of borrowing in dollars for three months in London fell to the lowest level in more than four years on speculation the Federal Reserve will cut interest rates next week to revive economies battered by a collapse in lending.

The London interbank offered rate, or Libor, that banks say they charge each other for such loans slid 10 basis points today to 2 percent, the lowest level since September 2004, British Bankers’ Association data showed. That’s still 100 basis points above the Fed target, up from an average of 16 basis points in the seven years to August 2007, when the credit freeze began.

“Yield levels in the Libor markets and in the commercial- paper market demonstrate that the authorities’ Herculean efforts to reduce funding costs are succeeding in bringing down the cost of borrowing,” Laurence Mutkin, head of European fixed-income strategy at Morgan Stanley in London, wrote in a report. “But money-market stresses remain intense. The availability of liquidity remains abnormally restricted.”

Governments and central banks are seeking to resuscitate growth as the credit-market seizure and more than $980 billion of losses and writedowns on mortgage-related securities worldwide drive the global economy into its worst slump since the Great Depression.

Futures contracts on the Chicago Board of Trade showed 98 percent odds the Fed will trim its 1 percent target rate for overnight bank loans by 75 basis points to 0.25 percent on Dec. 16. The probability was zero a month ago.

[tidus1203]

0% na yan for sure or at least near-zero. Interestingly even if the USD is tanking against other major currencies the Yen has held ground and gained too (now flirting near the 90 handle as of this posting). Normally kasi kapag lumalakas yung Euro and Sterling against the Dollar humihina yung Yen but the Yen is also strenghtening. I am bullish on the Yen, hope its reaches 86 sooner rather than later so I can get the hell out

[tidus1203]

Jobless claims in the US rise into a 26 year high...

http://biz.yahoo.com/ap/081211/financial_meltdown.html

[uls]

that's the plan

devalue the dollar

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keep an eye on oil price

it seems to have hit support at around $40-$41

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Somewhere in this thread, we talked about a bubble forming in the US govt debt paper market...

Treasury Bubble Talk Grows as U.S. Gets Free Money
http://www.bloomberg.com/apps/news?p...Wrk&refer=home

Dec. 11 (Bloomberg) -- The rally in Treasuries that pushed yields on bills below zero percent this week is adding to concerns that the $5.3 trillion market for government debt is a bubble waiting to burst.

[tidus1203]

The Senate has rejected the auto-bailout plan!!

http://www.bloomberg.com/apps/news?p...SsA&refer=home

And the market is tanking because of that but I do happen to think in the long run removing the dirt is the way to go. Its going to be painful in the short term, but its a necessary medicine...

Also, in relevance to the news the Japanese Yen has just breached the 90 level. Its now in the 89.80 level as of this posting. At one point it even reached an 88 handle but thats after there was no buyers and liquidity got depleted. GO GO JAPANES YEN!

[uls]

US ECONOMY CLIFF DIVING

Dollar strength down

surprise deterioration in the US trade balance

deteriorating jobs market

fourth consecutive quarterly decline in US household net worth

mortgage borrowing fell at the fastest pace on record

retail sales fall 5 straight months

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JPY highest since 1995 against USD

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Asian markets today: SELL!

[tidus1203]

And it looks like that the markets have priced in a passage of the bailout. Oh its going to be fun watching the US markets later tonight lots of volatility and excitement as people lock in positions due to this news.

[Monseratto]

Its already drawing blood now in the European markets...

Dec. 12 (Bloomberg) -- Stocks tumbled around the world and the dollar slumped after the Senate rejected a bailout for American automakers, threatening to deepen the global recession. Treasuries rallied and yields fell to record lows.

The MSCI World Index lost 1.7 percent to 877.1 as of 8:11 a.m. in London after senators voted down a bill to provide $14 billion of emergency funds for General Motors Corp. and Chrysler LLC. GM sank 47 percent in Germany, while Honda Motor Co. and Daimler AG plunged more than 7 percent. The dollar fell to a 13- year low against the yen, while the cost of protecting Asian bonds against default advanced. Metals and crude oil prices slumped.

“Investors have been betrayed again by U.S. politicians,” said Yasuhiro Miyata, who helps manage about $109 billion at DIAM Co. in Tokyo. “Even with the knowledge that we are in the midst of a crisis, they were unable to come to an agreement and investors have decided to abandon ship. This could have a substantial effect on unemployment.”

Standard & Poor’s 500 Index futures sank 4.3 percent. The measure dropped 2.9 percent yesterday, as GM shares plunged 10 percent, extending an 83 percent annual decline. Europe’s Dow Jones Stoxx 600 Index lost 3.7 percent today, while the MSCI Asia Pacific Index fell 3.7 percent.

“It’s over with,” Majority Leader Harry Reid said on the Senate floor in Washington. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”

http://www.bloomberg.com/apps/news?p...8A0&refer=home

[uls]

There are $250B of bets (credit default swaps) that the big 3 automakers will default on their debt

If they go bankrupt, the bets will be triggered

Financial institutions that sold bond insurance on GM, Ford, and Chrysler debt will have to come up with $250B

another reason for banks to hoard cash and tighten lending

[uls]

Oil has bottomed at $40-$41

there's now upward pressure on oil price for the following reasons:

1. declining demand is decelerating

2. declining supply is accelarating (in non-OPEC)

3. OPEC production cut

Even yesterday's bad news about the US automakers didnt drive oil price to new lows.

[tidus1203]

Yesterday was a disappointment. Kala ko patay na ang bailout but the lame duck administration is seriously thinking of using TARP money... And the UAW blasts senators who opposed the bailout. Stupid UAW they should also share the pain why do taxpayers have to suffer so they can get higher pay?

[uls]

iba na talaga ang panahon ngayon

the old rules no longer apply

there are no rules now

they just make up the rules as they go

[tidus1203]

Basta ito ang sigurado ako. POLITICS is trumping ECONOMICS right now. A lot of politicking on both sides. Pansin nyo mga for the bailout mga northern Senators kasi sila ang tatamaan ng failure ng BIG 3 and of course Democrats who are more liberal and pro labor. The people against are the southern senators where a lot of the foreign car makers have their factories. So if the domestics die then the foreign will take market share once the economy is well again...

[emanzano]

That's a lot of bull. I would rather just put my money in a fire safe then give it to the government for nothing in return...

hi tidus / uls. let me be the first to greet you a merry xmas.

have you seen the movie "Scarface?" that would give you an idea how much $1m in cash looks like. Imagine billions of US$. You'll need a HUGEEEEEE room for that. So these zero-interest treasuries would be a good alternative.

Anyways, a good friend whose a scion of one of the taipans here in the phil told me that they withdrew some of their money from the banks and are literally stuffing them into safety deposit boxes! Can you imagine, they're even paying rent for these boxes for their peace of mind!

It surely is a diff world these days. Diff, but still interesting though.

[uls]

Merry Christmas sir Emanzano



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Ya, i heard about people taking money out of bank accounts and putting them in safety deposit boxes...

but i thought it was just an idea being floated around on how to protect one's wealth...

i didnt think people would actually do it...

meron pala talaga gumawa nyan

amazing

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yes, we are living in very interesting times

like i keep saying...

it's no longer about return on capital... it's return OF capital

The priority now is capital preservation

[tidus1203]

Yep even if most people know that the US is heading towards "quantitative easing" (just a fancy economic term to confuse the masses which just simply means "printing money out thin air") and heading towards monetization of debt (aka printing more money just to pay the debt thus the term monetizing it) they still trust the US gov. And Merry Christmas to you as well emanzano.