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hotairmail

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Everything posted by hotairmail

  1. http://www.ft.com/cms/s/0/c64fd630-646d-11...00779fd18c.html The euro gave back early gains on Thursday, hitting a seven-week low against the dollar after Jean Claude Trichet, president of the European Central Bank, sounded a warning over growth. http://www.ft.com/cms/s/0/ea64818a-64bb-11...00779fd18c.html Europe has moved further along the road towards a recession than the US. The economic data of the past two weeks make that conclusion hard to avoid and Jean-Claude Trichet made no great attempt to deny it in his press conference on Thursday. The governor of the European Central Bank admitted that the data “point to a weakening of real GDP growth in mid-2008” and said directly that the bank no longer has a bias towards raising rates. He made obligatory commitments to fight inflation but the market drew the necessary conclusions; last month’s rate rise from the ECB was a “one-off” warning shot and there will be no more. You takes your pick
  2. http://www.h-l.co.uk/shares/shares-search-...-super-short-2x
  3. I've raised this before several times that this is not simply a Misean monetary phenomenon - a balance sheet recession as opposed to an inventory recession. It is fundamentally driven by over capacity of production leading to price deflation. Bootle should have called his book "The Birth of Deflation". The global imbalances that existed, still exist. China still does not want to 'spend' its hard earned dollars and allow debtors to pay off their debts in a sustainable way. No - they are still increasing their productive capacity, they still want to acquire resources and investments overseas to recycle their cash - removing the West's ability to pay its way in the world. In my view China is the America of the 1930's. They will have the mother of all depressions before they finally join the developed world. This is a very good article on the subject and other related memes by Simon Johnson. http://baselinescenario.com/2009/08/11/chi...sion/#more-4630 China Rising, Rent Seeking Version The usual concern about the US-China balance of economic and political power is couched in terms of our relative international payments positions. We’ve run a large current account deficit in recent years (imports above exports); they still have – by some measures – the largest current account surplus (exports above imports) even seen in a major country. They accumulate foreign assets, i.e., claims on other countries, such as the US. We issue a great deal of debt that is bought by foreigners, including China. There are some legitimate concerns in this framing of the problem - no country can increase its net foreign debt (relative to GDP) indefinitely without facing consequences. And the Obama administration, ever since the Geithner-Clinton flipflop on China’s exchange rate policy early in 2009, seems quite captivated by this way of thinking: Will they buy our debt? Can we control our budget deficit? What happens if China dumps its dollars?. The reason real to worry about China, however, has very little to do with external balances, China’s dollar holdings, or even capital flows. It’s about productivity and rent-seeking. China mostly invests in activities that raise productivity, raising the amount of goods and services that they can produce. This could be manufacturing or infrastructure or various kinds of services. Agriculture lags but continues to get some new investment. And of course they pour money into education. I’m not a fan of the Chinese way of organizing their economy or their society. They no doubt have weaknesses that will catch up with them eventually (including waves of overinvestment in some sectors), and there’s good reason to think they will be the center of a big new “Asia Century” Bubble that is just now starting to emerge. But contrast their pattern of investment in recent years with ours. What sector in our economy has expanded more than any other? Where should you work if you want both the highest wages on average, potentially very big bonuses, and quasi-retirement by age 40? Finance. Of course, we need finance and an important part of modern economic development involves intermediating savings and investment. The US did this well, with some bumps in the road, and built a system that worked through the 1960s or 1970s. But finance as a share of our activities (i.e., percent of GDP) has roughly doubled in the past 40 years. What has this really added in terms of productivity? The ATM and the credit card were great breakthroughs, but they are old. What has “financial innovation” brought us since the 1980s? One answer, of course, is “hedging strategies” that lower the cost of doing business for companies large and small. This is plausible, although not likely to be large relative to the economy - send me your favorite study on the cost of capital since 1990 (you choose the definition), and we can talk about whether this effect is significant, sustainable, or even sensible. Because financial innovation has mostly facilitated a big increase in finance. If a sector grows, pays more wages, and rises as a share of GDP, surely this is a good thing? Not necessarily – if this is a rent-seeking sector. Rent-seeking means effectively a tax extracted by one sector from the rest of the economy. We’re used to thinking of this as something that occurs through trade restrictions and the big breakthroughs in this area came from analysis of tariffs and quotas (Anne Krueger, Jagdish Bhagwati). If a tariff, for example, will make your life cushy, you will devote great resources to getting one established or increased – irrespective of the effects on the rest of the economy (call this strategy “let’s hammer the unprotected consumer”). Finance is rent-seeking. The sector has devoted great resources to tilting all playing fields in its direction. Consumers are taken advantage of; consumer protection is vehemently opposed. And great risks are taken, with the downside handed off to the government (and the consumers again, as taxpayers). This downside protection allows an overexpansion of debt-financed finance – reaching the preposterous levels seen in mid-2008 and now re-emerging. Finance in its modern American form is not productive. It is not conducive to further sustained economic growth. The GDP accruing from these activities is illusory – most of finance is simply a tax on what is done by more productive members of society and a diversion of talent away from genuinely productivity-enhancing activities. The rise of China does not necessarily imply slowdown or demise for the United States. But if they specialize in making things and we specialize in finance, they will eat our lunch. On an urgent basis, we need real consumer protection against predatory financial practices and an end to all forms of Too Big To Fail behavior – which is actually just the biggest, nastiest form of predation. This is our most pressing national and international strategic priority. By Simon Johnson
  4. hotairmail

    GOLD

    You can't have a nice debate on this forum anymore. I think I'll leave. Dr Bubb - please can you delete my i.d. Thankyou.
  5. hotairmail

    GOLD

    I have changed it to help you.
  6. hotairmail

    GOLD

    I consider liquidity to be infinite not because there exists an infintely large number of notes - but where there is more money (in all its forms) than there is worthwhile investments. This can occur in a variety of ways. Regardless of how it comes about, how does that money (in all its forms) stop becoming worthless, especially if you are getting to the point where it actually costs to hold anything including cash? On the surface this looks to be very similar to a deflationary scenario - except there exists a surfeit of money (in all its forms) as opposed to a shortage. It is a situation where demand is more than met by supply in everything. This may be triggered by very low wage costs, very high profits leading to excess supply and depressed demand eventually.
  7. hotairmail

    GOLD

    My point is let's consider a world where liquidity is infinite and that cpi remains low because of low labour costs. Yields tend to zero and rates remain v. low. But no hyperinflation potentially even in this sort of situation which is supposed to provide the conditions for such.
  8. hotairmail

    GOLD

    In a hyper inflation of assets as yields tend to zero, where would you put your money? Why would you invest? This was the sort of situation faced by Japan which lead to the carry trade. What happens when carry trade options also tend to zero? So you will have had some sort of hyperinflation - i.e. it's already happened but it's difficult for us to see it because we've lived with it and it's been up so close. Pension crises as costs rise as bond yields fall, Equitable going bust because they can't meet 3% return a year in low inflation environment, endowments failing to pay off mortgages, btl's with negative yields. With even more loose money flooding the system, yields could fall even more - witness stock market rises. Even as cpi remains relatively benign. What you then have is lots of cash around but no worthwhile home. What happens then?
  9. hotairmail

    A Christian "Disneyland" in China ?

    There is a very good programme on BBC4 right now called "The History of Christianity". One episode focusing on the Eastern church...orthodox churches tracked the establishment of churches all the way to China but these had subsequently been converted into Buddhist Temples. I recommend watching it - particularly the episode on the Orthodox church. http://www.bbc.co.uk/iplayer/episode/b00nx...pire_to_Empire/
  10. I'm starting to worry about a world where yields tend to zero - and unlike in Japan, there is no yield chasing possible via a carry trade. What do you do with your money then? EDIT: Methinkshe:I was quoting an economic adviser at the Fed - Mishkin. Read in the ft. http://www.ft.com/cms/s/0/98e7c192-cd5f-11...144feabdc0.html You might need a registration. It is also here and elsewhere.... http://www.businessinsider.com/henry-blodg...armless-2009-11
  11. Because it was 'good news'. Different from dollar strengthening on 'bad news' or 'risk aversion'. Fed spoke about raising rates only when unemployment began to fall. The market believes that point might be a bit nearer now after the non farm payrolls today. No guarantee the market will stay that way of course. Good piece by Jack's Wrap last night as to what to look for wrt the reaction to the employment numbers... http://www.swingtradeonline.com/jackswrap/
  12. Non hybrid seeds means you can reuse year after year. http://www.seedfest.co.uk/
  13. hotairmail

    HYPERINFLATION

    That's because the 'bids' disappear or appear with the new info.
  14. hotairmail

    HYPERINFLATION

    I don't agree with that on its own. I think of money and prices the same as any market. You've seen an auction - it is only when bids are made that prices move. This is where the impact of the velocity of money comes in....it is only when money is being spent, i.e. it is moving, it has velocity, it is 'bidding' for something can it affect prices. Obviously, it is also true, that if there exists an abundance of money, that the impact of people's intention to bid can be multiplied. That is why in the paper by Mervyn King in 2002 I posted above that there is little short term correlation between money and prices; but that over the longer term the link becomes increasingly evident. EDIT: re-reading your post's last line, it doesn't seem we are disagreeing.
  15. hotairmail

    HYPERINFLATION

    http://www.bankofengland.co.uk/publication...in/qb020203.pdf
  16. hotairmail

    HYPERINFLATION

    Hmmmm2
  17. hotairmail

    HYPERINFLATION

    Who do you think is stalking you pray?
  18. hotairmail

    HYPERINFLATION

    If two people pick up your quote before you edit it, I suggest that is pretty conclusive.
  19. hotairmail

    HYPERINFLATION

    Goldfinger has never done anyone any harm. Please stop trying to pick fights with people.
  20. Of course how you read what I said, would determine for you what I said. How about translating ..."if you read" into "if you were to read", it would give you an entirely different meaning and you would realise I was not the one being presumptuous. It was by way of a recommended read. No need to apologise. I don't think by quoting the BBC in this instance that I am a fool - unless you are able to prove otherwise.
  21. If you read Plato's Republic you would find Sparta described as a Timarchy...from the BBC Timocracy Timocracy, the government of a Timarchy and the form practised in Sparta, is similar in some respects to Soviet Communism. In the Timarchy, no person is allowed to have personal possessions and the lower classes work exclusively for the benefit of the upper classes.
  22. hotairmail

    GOLD

    Faber... http://www.ritholtz.com/blog/2009/11/faber...ntly-over-1000/ “We will not see less than the $1,000 level again,” Faber said at a conference today in London. “Central banks are all the same. They are printers. Gold is maybe cheaper today than in 2001, given the interest rates. You have to own physical gold.” China will keep buying resources including gold, he said.
  23. hotairmail

    Barrattt - The Swan Dive !

    I don't want to rain on anyone's parade - but doesn't that also mean that now could be a great time to buy builders' shares? (even if they will collapse later) EDIT: Great chart by the way Spline - thanks. EDIT2: As you can see it simply has rather a lot of Beta versus FTSE. (and just to point out - that would mean a correlation between housing transactions and ftse - is that right?)
  24. hotairmail

    Dollar may be done here - Be careful

    What is really annoying they are always in the future and when they don't happen, it's straight onto the next one.
  25. hotairmail

    Dollar may be done here - Be careful

    I'd be very interested on what you have to say too. Not just out of curiosity but genuine interest.
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