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Nowhere Man
Joined: 08 Feb 2004
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 Posted: Wed Jul 30, 2008 6:43 pm Post subject: ... |
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Asia (meaning mostly China and Japan) does prop up the dollar to stimulate American demand for their exports. The US dollar is dramatically overvalued due to this.
In addition, China is keeping the Yuan low to keep costs down and spur exports. The Japanese carry-trade functioned for years in a similar manner. Around 1.2$trillion were dumped into global markets with the yen carry trade. |
Since the Yuan is pegged to the dollar, I'm not sure the above makes sense.
Yes, the yuan is low, but the dollar is low as well. As such,a rising dollar would actually be a bad thing for the US. IOW, the dollar isn't overvalued.
If it were, then waeguks in Korea could rest easy. My take: the US economy is in bad times. In a game of currency chicken with China, the dollar has been undervalued for about five years. There is but little hope for it to rise at time that a rise will not be beneficial.
A rising dollar would hurt the US and Korea, no?
And while we're here, let's make this about you. Didn't thepeel (in between rapture about the muslim menace) say he wasn't worried about all of this?
Is that why you changed accounts? |
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RJjr
Joined: 17 Aug 2006
Location: Turning on a Lamp
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| Posted: Fri Aug 01, 2008 5:48 am Post subject: |
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The dollar will start buying more house and more boat. It'll start buying a LOT more junk on Craigslist that Americans are desperate to sell to pay their mortgage. But the dollar will fall hard against the yuan, gold, Courvoisier, and anything else traded globally.
I don't think Americans are as wealthy as we like to believe. There's a negative savings rate and more and more are losing homes and cars from being broke and unable to pay debts. We've become the deadbeat borrowers of the world. If you have loaned money to an American, good luck getting your money back.
The US financial system is in major trouble and housing prices haven't come close to hitting their lows. As disturbing as this chart is: http://bp1.blogger.com/_nSTO-vZpSgc/SJHojTLl25I/AAAAAAAAC_s/W2IH2gET5UY/s1600-h/non-borrowed-reserves.png just wait until housing prices fall a lot further (and they will) and there's a mass exodus from upside down mortgages.
As anecdotal evidence of how bad things are getting, I was in Knoxville the other day filling up at a gas station. An SUV was at the pump in front of mine. Just as I started pumping, this chunky 35ish lady came up to me and was asking me for money to fill up her vehicle. Since she was driving a gas-guzzling SUV, there was a part of me that wanted to callously tell her to just buy a fuel-efficient vehicle. But I noticed a soccer ball sticker or magnet on the back of her SUV and I have a soft heart for ladies. Her SUV's windows were tinted, so I didn't know if she had kids with her, or if she was on her way to pick up kids from soccer practice or what, but I didn't want her or her kids to be stranded, so I tried to be as generous as a greedy bastard like me can be and told her I would buy her a gallon or two, but that I couldn't pay for her tank of gas. She then asked me what she could do to change my mind and then offered me a blow job if I would pay for a tank of gas. Usually, I'm not one to turn down a blow job, but it would've cost a fortune to fill up that SUV. I just told her I was pretty much broke too, but handed her a $5 bill. In all my life, I've never even had a crackhead-type ever try to barter a blow job for gas money, but things are getting so bad that soccer moms are starting to? |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Fri Aug 01, 2008 8:04 am Post subject: |
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| mindmetoo wrote: |
| mises wrote: |
| When China lends the US money, largely it goes to consumption, not investment. |
Says who? And what's the difference?
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| It now takes the United States 6$ of borrowed money to create 1$ of GDP growth. That's one hell of an efficient economy. |
Says who?
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| The United States imports significantly more than it exports in dollar terms. About 60billion a month. |
That's current account. Which is balanced by the capital account. It takes in far more investment than it sends out. So again we come back to this: China sends us very useful stuff at a great price that makes us more efficient and comfortable. In return we give them slips of paper. Those slips of paper they bring back and exchange for static things like property and buildings.
Again, who is the loser in this arrangement? America has had a trade deficit for decades and decades. In all that time, Americans have grown richer and more comfortable and more efficient. Odd that, no? |
Consumption and investment are very different. And anyways, I don't know what you are trying to disagree with me about.
http://www.iht.com/articles/2008/06/24/business/col25.php
Anyways, I don't disagree in your description of the system being overall very good for the United States. I said as much earlier in the thread. I think it is coming to an end and this will have some very serious consequences for the United States. Some good, mostly bad.
Did you read the RJE piece? |
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mindmetoo
Joined: 02 Feb 2004
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| Posted: Fri Aug 01, 2008 9:40 am Post subject: |
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| mises wrote: |
| mindmetoo wrote: |
| mises wrote: |
| When China lends the US money, largely it goes to consumption, not investment. |
Says who? And what's the difference?
| Quote: |
| It now takes the United States 6$ of borrowed money to create 1$ of GDP growth. That's one hell of an efficient economy. |
Says who?
| Quote: |
| The United States imports significantly more than it exports in dollar terms. About 60billion a month. |
That's current account. Which is balanced by the capital account. It takes in far more investment than it sends out. So again we come back to this: China sends us very useful stuff at a great price that makes us more efficient and comfortable. In return we give them slips of paper. Those slips of paper they bring back and exchange for static things like property and buildings.
Again, who is the loser in this arrangement? America has had a trade deficit for decades and decades. In all that time, Americans have grown richer and more comfortable and more efficient. Odd that, no? |
Consumption and investment are very different. And anyways, I don't know what you are trying to disagree with me about.
http://www.iht.com/articles/2008/06/24/business/col25.php
Anyways, I don't disagree in your description of the system being overall very good for the United States. I said as much earlier in the thread. I think it is coming to an end and this will have some very serious consequences for the United States. Some good, mostly bad.
Did you read the RJE piece? |
I don't disagree there can be a difference between consumption and investment. But I want to know your definition. Where in that IHT article does it state Chinese loans to the USA are for consumption?
What do you find compelling about the RJE piece? |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Fri Aug 01, 2008 9:52 am Post subject: |
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My definition?
You dispute that America has been on a consumption binge financed by the Chinese? That's a pretty standard position these days. Or that the loans are "for" consumption? The loans are for whatever Americans chose to do.
The RJE piece, if accurate, speaks to a period of very high inflation in the United States and the end to the consumption binge. If it is accurate, which I believe it is, much is about to change. The American dominated global system is dependent upon dollar hegemony. |
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mindmetoo
Joined: 02 Feb 2004
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| Posted: Fri Aug 01, 2008 10:54 am Post subject: |
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| mises wrote: |
| You dispute that America has been on a consumption binge financed by the Chinese? |
Yes.
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| That's a pretty standard position these days. |
Then it should be trivial to back it up with research.
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| The RJE piece, if accurate, speaks to a period of very high inflation in the United States and the end to the consumption binge. |
Time will tell but I've heard this prediction in the 1970s, the 1980s, the 1990s, and the 2000s now. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Fri Aug 01, 2008 12:21 pm Post subject: |
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Some trivial research. NYU Stern ok?
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Continued reserve accumulation by Asian � and other � central banks, in turn, allows the US to continue to rely on domestic demand to drive its growth, and to run the resulting large current account deficits.
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http://pages.stern.nyu.edu/~nroubini/papers/BW2-Unraveling-Roubini-Setser.pdf
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But I don't think Americans much care about the "sorry state of capitalism". For Americans, it is more about the ends "lifestyle" than it is about the means "economics" or how to best achieve it. In a commentary I wrote a few months ago I referred to "borrowed consumption" becoming the new "opium of the masses." As incomes and savings peaked in the 1970s Americans increasingly became dependant on rising asset prices and increased debt to further fuel their ever-growing consumption habits. As a result, consumption rose from being 60% of the economy to over 70% today.
Savings has also dropped from 8% to zero (or negative, depending on how you measure). Other countries have been complicit in this unsustainable economic scheme by agreeing to buy US debt, thus underpinning the US currency, keeping US interest rate low, and allowing their own economies to grow through production and exports. But this relationship is reversing (or at the very least has stalled) and Americans who have been living "la vita leveraged" and just beginning to enter a painful period of a decreasing asset prices, higher costs of credit, and higher costs for essential goods. |
http://www.istockanalyst.com/article/viewarticle+articleid_2463255&title=Thats_How_a_Hangover_is.html
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So China continues to park the bulk of its reserve in U.S. Treasury bills, the bonds in which creditors hold most of America's huge public debt. China now owns some $330 billion worth, second only to Japan's $640 billion. Thus China fuels American consumption, not the emergence of a Chinese consumer market that could drive long-term growth.
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http://www.msnbc.msn.com/id/14535192/site/newsweek/print/1/displaymode/1098/
The United States is able to expand the supply of money and stimulate aggregate demand without feeling the inflationary effects of an increased money supply. This can only continue as long as foreign states are willing to accumulate $ as a means to encourage American consumer demand. The RJE piece I linked to makes the argument that foreign nations are less willing to do so now. It could be the case that the US is able to convince foreign governments to continue the system and that would preserve the arrangement for now.
The 70's had high inflation which Volker tackled by dramatically raising interest rates for a good chunk of the 80's. He was an excellent Fed Chairman. The 90's had the NASDAQ bubble which was fairly quickly followed by the housing bubble which was very quickly followed by the current commodity bubble.
The mistake or simplification I made was by only referring to Chinese reserves. |
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mindmetoo
Joined: 02 Feb 2004
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| Posted: Fri Aug 01, 2008 1:34 pm Post subject: |
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| mises wrote: |
Some trivial research. NYU Stern ok?
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Continued reserve accumulation by Asian � and other � central banks, in turn, allows the US to continue to rely on domestic demand to drive its growth, and to run the resulting large current account deficits.
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And this is bad how? |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Fri Aug 01, 2008 7:33 pm Post subject: |
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| mindmetoo wrote: |
| mises wrote: |
Some trivial research. NYU Stern ok?
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Continued reserve accumulation by Asian � and other � central banks, in turn, allows the US to continue to rely on domestic demand to drive its growth, and to run the resulting large current account deficits.
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And this is bad how? |
I've said twice in this thread that it is likely beneficial.
Anyways, you now accept that foreign central banks have financed the American consumption binge? |
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mindmetoo
Joined: 02 Feb 2004
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| Posted: Sat Aug 02, 2008 4:21 am Post subject: |
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| mises wrote: |
| mindmetoo wrote: |
| mises wrote: |
Some trivial research. NYU Stern ok?
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Continued reserve accumulation by Asian � and other � central banks, in turn, allows the US to continue to rely on domestic demand to drive its growth, and to run the resulting large current account deficits.
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And this is bad how? |
I've said twice in this thread that it is likely beneficial.
Anyways, you now accept that foreign central banks have financed the American consumption binge? |
I accept foreign banks finance American credit needs. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Aug 07, 2008 8:58 am Post subject: |
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Needs? It isn't American needs they support but their own exporting needs.
Anyways, so, MM2, in the middle of the worst financial crises since the Great Depression, you see no problem in the system of maintained imbalances that caused it? |
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joshuahirtle27
Joined: 23 Mar 2008
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| Posted: Sat Aug 09, 2008 10:47 pm Post subject: Re: 11 reasons America's a new socialist economy |
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| Bryan wrote: |
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| 3. Fed and U.S. Treasury adopted Enron accounting tricks |
Fed and US treasury shouldn't exist under capitalism. Capitalism is a system without government intervention inflating the monetary system. People would use an objective value for their currency--like gold backed currency.
I agree with you completely there. The money should be backed by more than the paper it's printed on and someone's word.
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| 10. Free-market health care failing 47,000,000 Americans |
US does not have free market health care, it's health care system is heavily intervened by the government, with regulatory agencies and government precription drug plans, medicaid, etc distorting the market with billions in taxpayer dollars. The health care sector is at least 50% government socialized in the US, and that is the cause of all of it's problems.
So would it be better of more or less of the bill was paid for by the government. In Canada people are free to see whatever doctor they want or are closest to. If a Nova Scotian is in Manitoba they can still go to the hospital because it's paid for through taxes. Socialism is NOT communism in case anyone doesn't know the difference.
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My Comments in BOLD. [/b] |
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mindmetoo
Joined: 02 Feb 2004
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| Posted: Sun Aug 10, 2008 6:03 am Post subject: |
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| mises wrote: |
Needs? It isn't American needs they support but their own exporting needs.
Anyways, so, MM2, in the middle of the worst financial crises since the Great Depression, you see no problem in the system of maintained imbalances that caused it? |
Every decade we have the worst financial crisis since the Great Depression. And the market corrects itself. I see no reason to doubt it won't happen again.
Look. Planes crash. Markets crash. When both crash, we examine why and put in steps to avoid such in future. You'll notice planes and markets crash a lot less today. But it will happen in the future. But less, and not as worse. |
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chellovek
Joined: 29 Feb 2008
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| Posted: Thu Aug 14, 2008 8:43 pm Post subject: |
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| 11 reasons why......don't be so stupid. American isn't a Socialist economy. |
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mithridates
Joined: 03 Mar 2003
Location: President's office, Korean Space Agency
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| Posted: Thu Nov 13, 2008 9:19 pm Post subject: |
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| I remember this thread. The fundamentals of the economy are strong. |
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