World economy talk

[boybi]

Palm oil and soya are also on the rise.

What will be the scenario now that prices of commodities are rising at the same time people are being layed off meaning people don't have money now.

[uls]

that's what can exert downward pressure on commodities prices -- low demand

pero let's not forget the other factor -- supply

in this recession, credit is very tight, and commodities prices have fallen...

if you are a producer, you have two reasons why you can't produce more

first, you have no incentive to produce more coz prices are very low

2nd, even if you want to produce, there's the problem of capital... credit is tight... so less money for investment to produce more

i'm talking in the macro sense ha

so the world is gonna come out of this recession with tight supply of commodities

when the world recovers, demand will pick up

but supply will lag

so higher commodities prices

and another factor is the USD

weak USD = hedging using commodities

kaya may upside talaga commodities

[uls]

boybi, yan din ang nasa isip ko

like dito sa Pinas, our economy has already slowed down

sa lagay nito mababa pa presyo ng diesel, gas

pano na pag tumaas uli?

[uls]

China hates the USD

hehe

China calls for new reserve currency
http://www.ft.com/cms/s/0/7851925a-1...nclick_check=1

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.

[tidus1203]

If China is fearful of the USD. Then so should we... The good news is we as small players can get out of the USD quickly since we only have small amounts. China has over a trillion and getting out quickly is almost impossible...

[uls]

yep...

China is hostage to its USD assets

---

the US taxpayer gets screwed bigtime with the toxic asset plan

here's the plan:



here's how the US taxpayer gets screwed (using the above as reference)

let's say a toxic bond has a face value of $100,000,000

the highest bid is $84,000,000

so 6 to 1 debt/equity

$12,000,000 equity, $72,000,000 debt

the $12,000,000 comes from the public-private partnership ($6,000,000 from a private investor, $6,000,000 from the treasury)

then the $72,000,000 is debt backed by the FDIC

so if i'm the private investor -- ULS HEDGE FUND hehe -- i only have to come up with $6,000,000 to buy a $84,000,000 asset

wow

so if things go right, the reward is big

and if things go wrong, i only risk $6,000,000, while the taxpayer risks $78,000,000

[tidus1203]

Kaya nga lang the private investors have the balls is because they have pretty much have all the bases covered. Very low risk, very high potential return... A lot of moral hazzards going on here...

[uls]

meron lang ako correction dun sa pinost ko

me:

let's say a toxic bond has a face value of $100,000,000

di pala bond

loans

not securities

the securities purchasing program is under the TALF

[Monseratto]

China has only one option...

China to buy more U.S. debt

BEIJING, China (CNN) -- China, holder of nearly $1 trillion in U.S. debt, will keep buying Treasuries, but will keep a close eye on their value just the same, a Chinese government official said.

"Investing in U.S. Treasury bonds is an important component of China's foreign currency reserve investments," said Hu Xiaolian, deputy governor of the People's Bank of China. "We are naturally relatively concerned with the safety and profitability of U.S. government bonds."

Hu's comments came at a briefing Monday ahead of the Group of 20 financial summit in Britain scheduled for early next month. The G-20 nations represent 85 percent of the world's gross domestic product.

China has an estimated $2 trillion in foreign reserves and is the United States' largest creditor, having bought more than $1 trillion of its debt.

Chinese Premier Wen Jiabao expressed similar concerns about the state of the U.S. economy and President Barack Obama's economic plan earlier this month.

"We have loaned a huge amount of money to the United States," Wen said at a news conference in Beijing on March 13. "Of course, we are concerned about the safety of our assets. To be honest, I'm a little bit worried. I would like for you [a western reporter] to call on the United States to honor its word and stay a credible nation and ensure the safety of Chinese assets."

Washington is spending trillions of dollars in an attempt to shore up the the U.S. economy, including a stimulus package, bailouts of top U.S. industries and the purchase of billions of dollars in bad bank assets.

The programs could undermine the dollar, making China's investments less valuable. But a stronger U.S. economy could override those concerns.

http://edition.cnn.com/2009/WORLD/as....us/index.html

[badsekktor]

hmmmm this is insane! china will buy more US debt? ano kaya iniisip ng mga ito?

[badsekktor]

hmmmm this is insane! china will buy more US debt? ano kaya iniisip ng mga ito?

[uls]

China's thinking:

for now, there is no way Chinese domestic demand can replace US demand for their products

China's 2-digit growth was fuelled by US consumers

So for now, China has resigned to the fact that their economy will depend on US recovery

So they continue to buy US govt debt to help the US recover

If they boycott US debt, they risk the failure of US recovery

[tidus1203]

And besides uls point. Where are you going to put that much money anyway? Only UST is liquid enough to absorb that much liquidity anyway...

[uls]

yep

if you have more than a trillion dollars, and you're gonna lend it to someone, it might as well be the AAA-rated USG

pwede din ipautang konte sa Pinas (a few hundred million)

pang gawa ng national broadband or commuter rail

hehe

[tidus1203]

AAA my a$$. Besides credit agencies (which rate if the issuer can pay) we should also have value agencies (which rate if the issue will retain its value after maturity, in other words its purchasing power)...

[tidus1203]

As I type this, Ben Bernanke and Tim Geithner is testifying to the House Financial Services Committee. Ito ang American Idol ko. Hay ang GEEK ko talaga

[tidus1203]

As I type this, Ben Bernanke and Tim Geithner is testifying to the House Financial Services Committee. Ito ang American Idol ko. Hay ang GEEK ko talaga

[tidus1203]

As I type this, Ben Bernanke and Tim Geithner is testifying to the House Financial Services Committee. Ito ang American Idol ko. Hay ang GEEK ko talaga

[uls]

hahaha

ako din geek

basta starring si Ben Bernanke, pinapanood ko

[tidus1203]

Interesting question put up by Rep. Michele Bachmann of Minessota, Tinanong nya si Bernanke and Geithner if they support China and Russia's call for an international reserve currency. And both genetlemen said YES! Pero mas convincing yung YES ni Geither si Bernanke parang mahina...