November 05, 2009
Who Cares About the Dollar?
by Axel Merk
Who cares about the dollar? It turns out quite a few do, except for those who could put it on a course to long-term recovery. First of all, you should care, as the purchasing power of your dollar savings is at risk when the dollar plunges versus other currencies. Let’s examine a couple of groups, what they have at stake and how influential they may be.
Those who care
Savers. That may well be you and me. Though we hear praise about the "recovery" in the equity markets, the dollar index is down more over the past year than the Dow Jones is up. That’s not a recovery, that’s an illusion. Oil is trading at around $80 a barrel – that’s not a reflection of economic strength, it’s a reflection of dollar weakness – and we have to pay for it, at the pump.
India. Why India? Because actions speak louder than words. While numerous governments have discussed diversifying out of the dollar, India has put its money where its mouth is – buying gold, the ultimate hard currency. India’s finance minister exchanged US$6.7 billion with 200 tons of gold (a lot! – about 8% of global gold production) because, in the finance minister’s words, "Europe collapsed and North America collapsed." You can’t get much clearer than that. The gold India bought came from the International Monetary Fund (IMF) which recently authorized the sale of 400 tons. China had been rumored to be the likely buyer, but wanted to absorb the gold at a discount. The fact that India stepped up to the plate and swooped up half the amount within just a few weeks at market rates shows the very real interest some central banks have in diversifying out of the U.S. dollar.
China. While China has not (yet) purchased IMF gold, China has been increasing its gold reserves, while deploying more of its newly acquired reserves in euro and yen. China is very sensitive to not rocking the markets; as a result, China has increased its gold reserves mostly by buying up domestic production as large-scale open market purchases may cause gold prices to spike. However, because the gold market is much smaller than the currency market, China’s gold reserves as a percentage of total reserves has actually been going down. China continues to be a contender for the remaining gold the IMF considers selling.
The reason China is concerned about the U.S. dollar is simple: in their own assessment, they may hold too much of the greenback. Why? Because China has on the one hand tried to keep a quasi-currency peg versus the U.S. dollar: when China exports goods, they receive dollars; to keep their own currency from rising, they keep the dollars rather than sell them to buy Chinese yuan. And, on the other hand, China has been hamstrung by the lack of liquidity, not just in the gold market, but also in the money markets outside of the U.S. dollar. While the currency market is the most liquid in the world (more liquid than the equity or bond markets), the U.S. continues to be the place of choice to deploy large amounts of cash. The eurozone’s liquidity is a distant second; and indeed, the eurozone is a primary beneficiary of China’s diversification strategy into a basket of currencies. The Chinese, too, have moved from talk to action; aside from the euro, the Japanese yen has been another beneficiary of China’s managed basket approach to its reserves.
Soon, China may no longer be able to prop up the dollar; it’s not so much that its massive reserves are beyond the point most would have dreamed possible, but their domestic money supply has been going through the roof as a result of a successful domestic stimulus package and the implicit stimulus created by subsidizing exports through a weak currency; the resulting inflationary pressures may be best tamed by allowing the yuan to float higher.
Europeans. Europeans care about the strong dollar. While European firms have extensive experience with volatile exchange rates and have learned to hedge their currency exposure, the strong euro is hindering a recovery – especially in Germany, an economy heavily dependent on exports. However, Europeans remember hyperinflation and stoically resist the temptations U.S. policy makers have fallen victim to. The European Central Bank (ECB) is foremost critical of exchange rate volatility while giving thinly veiled criticisms of U.S. policies, urging the U.S. to – and that is our interpretation – return to a path of sound monetary policy. While the ECB would not outright criticize U.S. policies, the ECB openly talks about how its support programs are inherently more flexible; the ECB also urges the U.S. to pursue a strong dollar policy.
In the U.S., the federal government can launch a trillion dollar stimulus package; similarly, the Treasury can inject hundreds of billions into ailing banks. Not so in Europe: fiscal stimuli have to come from regional governments; the same with bank bailouts: the money comes from regional pockets. As a result, the Eurozone cannot ramp up spending as quickly as the U.S. Similarly, in our assessment, the ECB’s support programs to the markets carry fewer inflationary risks than those of the Fed; the ECB programs keep banks alive (by providing liquidity on an unlimited basis), although they are slower to recapitalize. As a result, we may see lackluster growth, if any, in Europe, but it may well be with the backdrop of a much stronger currency. It’s a fallacy to assume that one always needs economic growth to su
November 06, 2009
Lousy Jobs, In Such Small Portions
Two dissatisfied customers comment about a restaurant. One says, "The food here is terrible." The other replies, "I know, and such small portions!" In many ways, they could be describing our current employment picture. Not only are the portions shrinking, but the jobs themselves are steadily losing quality.
Today’s release of the October jobs report showed the loss of another 190,000 jobs had pushed the official unemployment rate to 10.2%, only the second time since the Great Depression that unemployment was quoted in double digits (factoring in workers who had given up job hunting altogether or have settled for part-time work would push that rate to 17.5%). That didn’t stop Wall Street pundits from trying to fashion a silk purse of this sow’s ear. The ‘green shoots’ crowd focused on the slowing pace of job losses, the nascent economic ‘recovery’ (even if it is jobless), and the projected improvement in 2010. No mention was even made of the quality of what few jobs were being created.
The analysts completely ignored the continued trend of replacing goods-producing jobs with those jobs that require production from other sources. For example, we lost 61,000 manufacturing jobs last month, but added 45,000 jobs in education and health services. In particular, the addition of health workers is nothing to celebrate. Just as a family’s economic position is not improved by higher medical bills, the country as a whole does not benefit from increased health-care spending. Until this trend reverses, our unbalanced economy will not regain its stability, a real recovery will never take hold, and the overall job outlook will get much bleaker.
By spending trillions of dollars of borrowed money, President Obama hopes to engineer a recovery and create jobs. However, he has only succeeded in digging America into an even deeper hole than the one he inherited from his predecessor. He believes that if we can simply push up spending to levels seen during the "good times," then those favorable economic conditions will return. The reality, of course, was that those good years came with a heavy price-tag that we have barely begun to pay.
In a press conference today, the President claimed that the latest extension of unemployment benefits will not only help the unemployed, but the overall economy as recipients spend the money. If spending government-granted money really were a benefit to the economy, why not simply increase the amounts endlessly? Why limit the benefits to the unemployed? Let’s make this recovery a real barn burner: send out million-dollar checks to everyone! Of course, what Obama and his economic advisors do not understand is that money spent by recipients of unemployment benefits is money not spent or invested by taxpayers. It’s a transfer of wealth, not a creation on new wealth.
In addition, policymakers are also struggling with diminishing returns on ultra-low interest rates. No matter how much monetary alcohol the Fed tries to pour down consumers’ throats, the swill simply will not go down anymore. Consumers have already had enough and are trying to sober up – by refusing to spend irrationally. The excess liquidity simply weakens the dollar and spills over into other pools, such as goods prices, money metals, commodities, and investment assets.
During the boom, we spent money we did not have to buy things we did not produce and could not afford. As a result, we are now deeply in debt and must sharply reduce our spending to replenish our savings. By focusing solely on consumer spending, the Administration is neglecting the capital investments necessary to improve our infrastructure and productive capacity.
To generate legitimate economic growth and meaningful jobs, we must reverse the trends that brought us down. Consumers may have led us into this recession, but they can’t lead us out.
The ro
"Consumer debt drops for record 8th straight month
WASHINGTON (MarketWatch) – Outstanding consumer debt fell at a 7.2% annual rate in September, the eighth consecutive decline, the Federal Reserve reported Friday. Consumer credit fell by $14.8 billion to $2.46 trillion in September, down 4.7% compared with a year ago. Outstanding credit can fall if consumers pay off balances, or if lenders write off bad loans. The decline in September was led by another huge drop in revolving debt, such as credit cards, which fell $9.9 billion to $889 billion, or a 13.3% annual rate. Nonrevolving debt — such as auto loans, student loans and other personal loans — fell $4.9 billion to $1.57 trillion, or a 3.7% annual rate."
Na ovoj temi koja je kratko trajala i sad je možemo slobodno zatvoriti jer depresije nema samo pojedinci imaju porblema s promjenama raspoloženje pa misle da su u depresiji .,
moramo podvući crtu i jednostavno sumirati.
NEMOŽE se protiv TRENDA!
Zaboravio sam kako se onaj kolega zove ima puno nickova, ma neznam, sam znam da je sviro sviro da se ukeširo!
[lol]
Da ne objašnjavam puno pogledajte ove analize pa zaključite čemu ova tema:
http://www.forbes.com/forbes/2009/1116/opinions-great-depression-economy-on-my-mind.html
http://www.youtube.com/watch?v=rAG-LGnSyHQ
http://www.youtube.com/watch?v=Q5nhQ-iC66A
http://www.youtube.com/watch?v=S9AvguPF7XA
http://www.youtube.com/watch?v=3fDGfMriRQI
Ako je tko u US pa da skoči na seminar i ispriča što se pričalo:
I svakako pogledati The Secret of OZ kada ga objave:
Evo gospodo da se malo zamislite, popis država sa najvećom vjerojatnošću ili postotkom da će bankrotirati prema istraživanju časopisa Forbes.
Kao što možete vidjeti odlično smo plasirani na visokom mjestu
Finland 1.5
Norway 1.3
[wink]
Kolega plavi Bravo, još jedan put ste nadmašili samog sebe!
Depresija se svakako može pobjediti promišljanjima a ima i mjesta za mistiku pa preporučam:
evo da i moderatori imaju kaj za radit subotom