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With The US Irrelevant, As All Eyes Shift Elsewhere, What Are The Geopolitical Implications For Europe And Asia In A Post-QE2 World?
In the realm of unintended consequences, one of the side effects of QE2 is that going forward US economic data will be broadly ignored from a global macro standpoint: as bad economic data is masked by expectations of further Fed involvement, and further Fed inflation stimulation, while any actual improvement is misperceived as a one-time response from a liquidity kicker, the rest of the world will no longer have an anchored trade and thus FX view based on incremental data developments, be they good or bad, as an objective distinction is now impossible. What this means practically is still too early to determine, as the world has never existed in such an information limbo, but the closest approximation of the perversions to the very matrix of cause and effect is that the market now sells good news and buys bad news with impunity. This is a recipe for disaster. It also means that with the US economy irrelevant as an indicator of pretty much anything, decision-makers will be forced to look elsewhere for catalysts. BNP Paribas has done of the better summaries of precisely this sad state: "The Fed has acknowledged that there is substantial slack in the US economy indicating that it will take potentially years to bring the unemployment rate down to levels associated with full employment. Hence, a strong number will still leave the Fed committed to the USD600bln asset purchase it announced Wednesday. A weak labour market report will make the market assume that the Fed might have to do even more asset purchases. Hence it will not be US data disturbing the risk on trade, the trouble will likely come from Asia or Europe." What we believe this means, is that very soon the dynamics of globalized economics, and of stock markets, will be defined by the polar opposites of an emerging market bubble (Asia), and a developed economy, floundering deeper into fiscal austerity and borderline insolvency (Europe). Thus soon the ideological tug of war will be one of whether the Asian bubble implodes first, or whether it will be preceded by the failure of peripheral European countries.
At this point it is still too early to determine either way. However, the very surprising drop in the EURUSD on Friday, may be a harbinger of what we have been saying for a long time, namely that a Europe which can not feasibly sustain its core export economy with an FX threshold over 1.40, will be willing to sacrifice a peripheral country, while attempting to still retain the united currency. Of course, should that fail, Europe will always have the option to finally pull the plug on the EUR, put the Euroskeptics out of their misery, and end the experiment, thereby affording the European continent an equal footing in the terminal race to the bottom, albeit on a nation-state basis, and not on some artificial, and failed, experiment in fiscal, monetary and cultural cohesiveness.
Probably the most important hint that this has already started, is another nuance from the BNP FX Daiy Strategist November 5 edition, in which we read:
Russian sovereign wealth funds removing EMU peripheral bonds from their investment list was echoed by Norway's petroleum fund which is also considering cutting holdings of EMU's peripheral sovereign bonds.
We discussed the Russian breakaway from the EMU periphery before, however we had no idea that the recently staunchest supporter of Greece, Norway's sovereign wealth fund, is now essentially saying to throw them to the lions. This is a huge change in perception, and one that nobody in the mainstream media seems to have caught.
And possibly the most important implication is that the last savior of the European periphery is not the core, which it seems is more and more resigned to letting the PIIGS go (Germany and Norway), but, China of all places. China, which previously expressed an interest in becoming Greece's lender of last resort, is now becoming that for Portugal. Next up: Ireland, Italy, Spain? Somehow we get the feeling that in a few months, Europe's periphery will be demonizing Germany, and praising China, as the next step in the Chinese axial expansion is finally manifest.
Which begs the question: now that the Europe core has said enough to the experiment in keeping the peripheral zombies alive, why is China stepping in? Two possible explanations: 1) China is all too aware that decoupling is a myth, and will shoulder the burden of keeping the EUR alive on its own, even as the bulk of Europe may have well decided to drop the whole idea; 2) After recreating the axis with Russia, and being on very good terms with Germany, is China merely setting up the dilemma of aligning with the Eurocore or the Europeriphery. Surely, its overtures recently will sour its relations with Germany, even as it is perceived as a savior in the PIIGS nations. Or just maybe China is that stupid to believe that Portugal and Greece are viable enough on their own. We doubt it.
In other words, while the impact of QE2 on the stock market was immediate and palpable, and at this point the question is simply when does one fade the rally, the much greater impact on geopolitical axes of influences will only now start to be perceived, and it will involved both an ascendent China and a deteriorating Europe. Of course, since this also juxtaposes a massive bubble and an experiment where growth is merely a one return to FX rationality away, could we also be witnessing the upcoming inflection points in the global power sine wave, one where China's peak is about to occur, while Europe's nadir, and subsequent ascent is imminent? Even is that is the case, what does that mean for the US? Alas, that answer is infinitely more complex, although the one thing it most certainly is not, is the patently wrong explanation of events presented by America's central bankers, who, if anything, are luckily always wrong.
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If pro is opposite of con, then what is the opposite of progress?
Regress.
I don't see why the Chinese are bothering to "loan" money to Portugal, why not just buy the country outright? It would be chump change for the Chinese to pay off Portugal's debts and Annex them as "China on the Iberian Peninsula". LOL.
Anyhow, the outcome here is obvious, there is going to be a War to resolve who owes what to whom, and whoever wins gets to wipe the balance sheet clean, plus charge war reparations to the losers. This is how it always goes, just this time its a whole lot bigger.
RE
The United States is about irrelevant to the World as four engines are to a 747. The title of this piece is provocative in the extreme.
G-d bless America !
china assures continued military compettition, and provokes many countries to beef up their military capacity; including india, russia, japan, US, iran, etc.
the thought of china building its military is far more confrontational and provocative to russia and india. especially india, they see china as a direct threat to their territory, as will russia.
the idea of chinese military and regional ambition, like we're seeing now with the confrontations with japan, is perceived as a threat to current international border "agreements". if the US is collapsing, all these old claims to international territory will reemerge; we're already seeing it between russia/japan, japan/china, and soon it will be india/china and russia/china. we've seen how china feels about its territorial claims; they ram into vehicles even if they are in/over international waters. like it or not, china will become increasingly aggressive and, dare i say, arrogant as americans are. i predict the UK military will go back to their previous levels after the cut back, and we will see a type of conventional arms race in asia....
just having the threat of nukes aint enough; there needs to be a show of force that the geo political paradigm can see. and using nukes is pretty much off the table; the military precident is to not use them i.e. russia us cold war. but conventional arms its open season, no major country could justify using nukes if conventional forces would do the job.
especially with the US falling and other political powers like russia and china rising, theres alot less security in the world, and the makings of some big conflicts where the winner cannot be easily predicted.
I'm not worried about China or Russia. Those two countries have a lot of problems that you don't hear much about. Bad demographics and terrible environmental problems (both countries) are merely Exhibits A and B.
If we just stay cool about the rise of China (using professional diplomats), everything will work out fine. I do not mean that we have to abandon allies, we can help our friends arm-up, I have no problem with that.
thats a good argument, that bit about god blessing america. i can see now you are right. how could i have ever been so wrong? i forgot that god blesses america. that makes everything ok.
If pro is opposite of con, then what is the opposite of progress?
CONgress
Goood boy!
I'm glad to see that the Democrats PR-department is still functional.
Wall Street Crash / RMS Berengaria
http://www.youtube.com/watch?v=7pYaG0qfP2o
Bloomberg follies:
1.Bernanke Says Fed's Monetary Expansion Won't Spur `Super-Normal' Inflation
2.
`Hell Week' Ends With Central Banks Split on Recovery PoliciesA newspeak moment indeed.
Super-normal, it's the new normal.
ORI
http://aadivaahan.wordpress.com
Bloomberg follies:
1.Bernanke Says Fed's Monetary Expansion Won't Spur `Super-Normal' Inflation
2.
`Hell Week' Ends With Central Banks Split on Recovery PoliciesWhat a clusterfuck!
China has recognized that America is a lost cause. They realize, like Tyler pointed out, that decoupling at this point is a myth. China knows it needs foreign customers to create demand for its domestic manufacturing base. The only customer in town other than insolvent America is Europe (emerging markets won't be able to sustain demand in the coming years). So, China tries to keep Europe together as long as it can in order to prop up the Euro as much as possible (by buying Euro treasuries with excess Euro inflows to China). That way it can sell cheap Chinese goods to Europe for a few more years.
The Euro's high value relative to the dollar/remnibi peg (even a slight adjustment to the remnibi will mean its quite weak relative to the Euro) will ensure that Europe can purchase Chinese manufactured junk for the next few years. Meanwhile, Europe's economies will continue to contract (except maybe Germany's) and their own manufacturing will disappear to some extent like America's (although probably not as dramatically because their politicians will fight to maintain manufacturing).
I don't think China cares one way or the other about Euro core or periphery. All they care about is maintaining a strong Euro and healthy enough European markets to soak up excess Chinese manufacturing capacity. I don't think China is seeking European domination or anything along those lines. Europe doesn't have natural resources. China is better off trying to dominate the Middle East and Africa and using Europe as its customers.
China's policy is short sighted. They will run out of customers eventually and won't have anyone to trade with in a few years. This will lead to a demand collapse in China if it doesn't implode beforehand from inflation (the flood of all those strong Euros) in the coming year or two.
Every country suffers from a similar dilemma. Their policy makers are playing to win the next three-twelve months but neglect the future beyond that. It creates a prisoner's dilemma in which everyone acts in their short term interest, which ends up harming everyones long term health. But, long term policy coordination is impossible when you are dealing with the idiots running American monetary and fiscal policy...
There's even a name for it - Kicking The Can...
No reason why China can't play the same game as everyone else.
In fact what other game is there at this point?
And from their point to view it makes perfect sense, because they should be able to kick the Can further and longer than anyone else.
The trick is to be the last man standing. And at that point you get to decide/dictate how the game is played thereafter.
Without a doubt. I don't blame China for their policy. Its the most rational thing for them to do if no international cooperation is going to be reached. But, it makes China look bad because they are basically sucking the life out of Western countries by flooding them with cheap liquidity and out-competing the western manufacturing bases. China has to do it from their perspective because they have domestic pressure to keep growing or they face an insurrection from their own people if growth stagnates.
Without policy coordination its a zero sum game. You lose, We win. Unfortunately, given the mismanagement of the global economy for the last 20 years it might be a zero sum game even if international leaders can agree to a rational plan.
Yip.
One word - Realpolitik
These arguements are just rediculous. Like they twisted our arms to relocate all our manufacturing to China over the last 20 years. We did it voluntarilly and now virtually most source components assembled in the US or anywhere else for that matter are made in China. So now that's their fault. 80% of their trade surplus are components of larger end items not finished goods. We did it to ourselves in hot persuit of multi-national profits and globalization.
Nobody mentioned why U.S. companies moved to China over the last 20 years. But your point of view fails to recognize that China is now a highly competitive in terms of cost effective production. Many European companies find themselves producing products in China as well. I don't think they have the same tax incentives to move to China but China has become so cost effective that they make the move.
I didn't refer to why our manufacturing went to China. Clearly, U.S. politicians created tax and trade policy that encouraged U.S. companies to use Chinese production. Many of the large companies pursued this route. But, there were plenty of U.S. companies that chose not to produce in China. Many of them shriveled and died. Others held on for as long as possible and then eventually moved production abroad in order to compete with competitors who already made the leap across the Pacific. And some are still around. I worked for a large airplane parts manufacturer that produced the majority of their parts in the U.S. (made with components from China like you pointed out).
At some point a lot of companies find that its a competitive disadvantage to continue production in the U.S.. They can't compete, in terms of pricing, with competitors who move abroad so they move abroad too. So in that sense, China doesn't twist our arms to move but pure business logic requires a move for many businesses.
The NIMBY 'tards, technology phobes, lawyerphiliacs, and union shills "helped" as well. People that conceive of and make things are engineers, scientists, technicians, and the like. The U.S. is sucked dry by lawyers, and various sorts of stars, the heroes of hollywood, high school, and the gridiron. Those people don't know how to do anything. The ultimate end result of this popularity contest is not going to be pretty. It isn't by suing each other and selling eachother services that we are going to eat or produce.
You got that right, sir! And the upper classes are the worst, with their feeble-minded kids being sent to tony schools and coddled like babies; these are our Wall St movers and shakers and our top politicians and government appointees.
There are a few "industrialized" nations that are doing nicely, Germany comes to mind. What are the difference between the two cultures? Most Americans would scorn their "Socialist Government" and public heath care, yet they appear to be weathering this global crisis better than the US, however it is still "early in the game".
My insight is that we (Americans) tend to write laws and set policy that are not "well grounded" in facts and reality. The basic eduction, (general knowledge and factual current events), of our voters is lacking and I believe it is systemic through out our society. There is no easy fix for this, we have lost two generations.
Over dinner the other night I was chatting with a VP of Finance (one of many) of a large US corp., when I mentioned the bank Mark to Market accounting slight of hand, he was dumbfound and did not believe me (I thought he was yanking my chain at first) but over the course of the evening it was apparent he honesty had no clue. To say I found this disconcerting was an understatement.
At another social event in early Sept I was chatting with a few attorneys from a large nation law firm and several very successful local business owners. They were not aware of what the fed was doing regarding QE, they were in total disbelief, one told me flat out that I must be mistaken.
Are other people on ZH seeing and expirencing situations like this, (I am not refering to the car mech down the road or the ER nurse, but successful, intelligent, college educated individuals) or am I just in an "isolated enclave of bumbling fools"?
> Are other people on ZH seeing and expirencing situations like this
Yes, well, it's chronic, isn't it?
All those safe-pairs-of-hands are on-message with the received wisdom, aligned and orthogonal to the 'conservative estimates' of the majority. You know - Morons.
Dunning–Kruger effect
There are of course rare exceptions - the unhappy, unhappy few ;)
i had the same experience this friday. my sis-inlaw is a senior attorney at a national law firm (handles SEC regs for broker-dealers),bro-inlaw went to wharton; they were completely unable to comprehend what QE2 was. they thought ben bernanke was instituting a fiscal stimulus at the direction of congress or the president. i tried to explain he was simply printing money, just adding to the money supply. i asked if the president could employ 600B without congressional approval or whether congress could do that without a presidential signature or overiding a veto. they appeared stunned.
"HE IS CREATING 600B FROM THIN AIR," they didn't believe me.
when the so-called ELITE are so painfully unaware, there is not much hope for this nation. i guarantee that if i asked them who won dancing with the stars, they would know instantly.
we are good at war. education and critical thinking, not so much.
I think you are very accurate in your assessment. I read Michael Pettis and I agree that China's long term interest lies with making the painful adjustment from an export focused economy to one with a domestic focus.
However, the leadership of China cannot adjust to this fact. As you hollow out your customer's economies, eventually they can't afford to buy.
Similarly, the US leadership cannot adjust to the fact that we cannot afford our military dominance or our domestic social programs.
If we trimmed our sails now in both areas, we could avoid the coming collapse. However, we have no leadership able to face, or even understand, the situation, much less lead the country toward effective adjustments.
When the current world economy collapses, something that works better will replace it. My question is how many of the current political systems will be able to weather the storm? How many countries will want to maintain their current regimes when they have failed so miserably?
I have no answers, only concerns.
Trimming the sails in the US voluntarily is impossible. There are simply too many Ponzi scheme is play here (with their cost overhead) to be competitive with the 'second and third' worlds. Everthing here simply costs too much. Compare food costs in Esatern Europe or any necessity, it costs far less. Even things such as cell phones (same tech) are adjusted to what the population can afford.
Americans are carrying a huge load without even knowing it.
A-hah.
Maybe they don't know it, but can feel it?
Which is why they seem to be on the edge of shooting it?
ORI
http://aadivaahan.wordpress.com
A-hah.
"Americans are carrying a huge load without even knowing it."
Maybe they don't know it, but can feel it?
Which is why they seem to be on the edge of shooting it?
ORI
http://aadivaahan.wordpress.com
It would appear that Nancy Pelosi will survive ... and will most certainly want to maintain the current regime.
What will "work better" will be tyranny worse than that of the Soviet Union, whether that be left or right oriented. The world is headed for feudalism with totalitarian governments. That's the natural outcome IMO.
I'm just not sure the Europeans have the same addiction to buying Chinese crap that the Americans do, but time may prove me wrong..
"I'm just not sure the Europeans have the same addiction to buying Chinese crap..."
I say again 80% of their trade surplus is from the manufacture of components of larger end items. The trinkets that only Americans are so fond of are a small sliver of their economy. Our large multi-nationals outsourced all our component manufacturing to China. Find me a resistor made in the US. An alternator. A relay switch. A 110V power supply. You people should really do some study.
Don't know why you got junked as you are 100% correct. At present there are no alternate domestic sources of supply at equivalent or even reasonable cost.
The US has lived well by printing dollars, borrowing from the poor, blowing sequential bubbles, avoiding structural reform and accepting the benefits of low cost Chinese imports many of which are brought in by US MNCs.
I wish I could foretell the end game; but I suspect it shall be very messy.
I'm not so sure that is China's main goal here. While I wouldn't discount it, I also see their opportunity to buy influence. We're in a competition for resources, and China just might end up with enough influence to have Europe shut up when they need them to.
I'm not sure I'd expect China to do anything else. Trading one set of worthless bonds for another, and gain influence to boot is a serious win for the Chinese.
Time will tell on this one. But both points are something to watch out for, and see how it plays out.
europeans wont buy chinas junk like americans do. europeans can buy quality, 'euro-domestic' goods -because, unlike the US, they HAVE manufacturing. if china relies on europe to replace the US, they are in for a rude awakening.
a good example is cars. europeans will drive mercedes and other "domestic" manufacturers... not some cheap chinese import.
"a good example is cars. europeans will drive mercedes and other "domestic" manufacturers... not some cheap chinese import."
=================================
We all said exactly the same thing 40 years ago, about Japanese cars.
Then look what happened.
Maybe the problem is that we are in an inexorable, irreversible downward spiral.
Downward being the key word.
Everything is headed down. Lower. LCD anyone? Lowest common denominator I mean!
Soon, people wil buy what they can afford and it won't be much.
MEanwhile, the better way is blowing in the wind.
ORI
http://aadivaahan.wordpress.com
Interesting outlook what could happen in 2011 ff. I also guess that the euro zone will return to spotlight soon. We may well see EURUSD near parity within the next 12 months, with a little help from China.
My Word Is My Bond, A Documentary on the Chicago Board of Trade
http://www.youtube.com/watch?v=HFyk8byc9vA
removed
Tyler, excellent as always.
Sadly, I fear that the impact on the USA begins exactly where your essay ends, ie, the GeoStrategic level. The impact, will be on the military capacity & [non-existent] military "supremacy" of the United States, ie exposing that falacy. Very dangerous, for an empire to decline and fall possessing nukes and with such absolutely incompetent leadership, especially at the Military & Strategic level.
"Very dangerous, for an empire to decline and fall possessing nukes and with such absolutely incompetent leadership, especially at the Military & Strategic level."
Add to that tectonic, weather & bioweapons.
Go ahead, take a look at what's happening right now in the Tropical Atlantic. This man made weather manipulation is really bad:
http://www.ssd.noaa.gov/goes/east/tatl/loop-wv.html
Allow time to load...
Here is the other side of the coin.
'Don't Panic, Stocks are Safe!'
http://www.youtube.com/watch?v=MTCKxye9_so
What I find so frustrating is that no leader, of an country, will ever stand up and speak honestly about the situation.
I am sure that Churchill's explanation of Great Britain's horrible situation in 1940 helped citizen's deal with their plight better than if he had passed off Dunkirk as a great victory (it was a great example of responding to a crushing defeat but it was not a "victory" in any sense.)
We, in the US, and throughout the developed world, have to understand that we have had suffered our Blitzkrieg and now must learn to adjust to a world where we will be less prosperous, have fewer opportunities and where we need to measure our success in other ways than the number of toys we own.
My question is: Will we ever have adult leadership that explains that life has changed forever and our lifestyle is going to, by some measures, revert to that of our grandparents.
The misguided (read, stupid) efforts of Obama and Bernanke to recreate an economy that is gone forever are going to hurt, not help, us. Even that scoundrel Roosevelt did a better job of helping Americans face up to their plight than the pathetic excuses for leaders we have today.
Only if half the world is locked behind a new Iron Curtain and the other half is bombed back into the Stone Age (as after WWII) can America go back to its economic ascendancy.
This is not to say that America cannot be a prosperous, successful country but we must align our lifestyle, our military presence in the world, and our rhetoric to the reality that we are cannot, in the foreseeable future afford to project power or live it up as we have for so long. Our citizens need to take responsibility for their own lives because the government is broke and will only get more broke. The money is gone, the lifestyle has to change, get over it.
We need to face facts and begin to struggle up the mountain we thought we were already (permanently) at the summit of. Life is never easy long term. We had an easy period. We are going into a tough period. We need to get used to it and get back to work.
Great comment.
Carter tried that on domestic energy supplies (talking to the country as an adult) and Perot on National Debt and NAFTA.
The problem with democracy is if you talk to the nation as an adult, you lose the election because there is always someone craven enough to tell people what they want to hear to win an election other than what exist in the real world.
Not really a partisan anymore. Both the GOP and DNC are equally guilty of telling people what they want to here.
DNC won't cut spending, GOP won't raise taxes. Both are needed to deal with the debt.
Excellent point.
My dear american people
As your president it falls upon me to expose the banks, myself and many other handmaidens of the elite as having robbed you of your energy resources and hell, we even stole your future and sold your kids future as well. We are not yet done fleecing you, dont worry you will never know what happened.
Right. Eric place holder where are your balls?
How Dare You expose the Elite who will pick our pockets again. The FED has no money. They just print it. Then they give it to the elite who stole your investments and robbed their own banks backed by you. The printing robs the value of your savings. Then they will buy what you must sell on the cheap. Only to rent or let you buy it back later at a higher price. Example, buy this house for $250,000. Recession, go bankrupt and sell it back for 135,000. Now you can rent it for 1,000 or buy it for 175,000. This goes on every day. Oh, the FED will monetize, (printing or QE3), the balance the bank lost on the insured mortgage. Rinse and Repeat. Amazing, some think it is about parties. The parties only determine who gets more free hand outs. How can you go to war and not tax the people. You can't. If the war is unfunded the FED must print the full cost. Back to square one. Printing robs your value of your savings. Rinse and Repeat. Who wins, those who front run the next act. Say, the CB's like Godman Shafts , JPissonMorgan & Shittygroup.
Color is not of a person, agendas always flourish within the bodies of color.
Atomizer -11/6/2010 Quote
FDR Economic Recovery Plan, 1933/10/23
http://www.youtube.com/watch?v=PXY7TkrPPzI
-a +e
You couldn't make it up! :-)
Take a cleaver to your delusions!
I mean if all the doom was at all real that is talked about on here then places like npr would bring it up.
LMAO!!!! Uhhh, that's a good one! hahahahaha! Thanks Real, that was hysterical.
Just to name a few negative consequences: 1. Savers lose a significant portion of their planned retirement income; 2. Debasing the currency by printing money means your are stealing the stored/saved value of citizen's savings; 3. Commodity inflation rises the cost of living without improving wages, further squeezing the middle and lower classes; 4 artificially holding interest rates low props up housing prices which favors one class of citizens over others, and lengthens the time to price discovery; 5. Massive interventions in the bond market further weaken the long-term health of capital markets (market participants don't know how price is being discovered now); and 6. As corporate margins decrease from higher input prices that means wages and employment will be squeezed - creating a negative feedback loop. I've got more - shall I go on? QE is a gift to the bankers from the savers - without their consent.
Great list, now add this one: Hey Real, are you reading? What happens when all that debt faces a rising interest rate? It's low now, what happens when they decide to let it run, ala Volcker, to 10 or 12%? On 14-22 trillion dollars?
We are concerned, because we see a narrowing list of choices for investment, saving and wealth creation. Rather than focus on the negative, open your mind and learn...
"What happens when all that debt faces a rising interest rate?"
That might well be the Fed's end game. It would kill two birds with one stone so to speak, (a) instantly destroying the "full faith and credit" of the U.S. government, and (b) making the dollar worthless in spite of higher interest rates ...BB's other (stated) goal.
Look, it's really simple. The solution to excessive debt is not more debt. That trick never works. That's sort of like taking out a loan to pay off your Credit Card. Meanwhile, you're still spending like a drunken sailor.
In the U.S.'s case, the spending is to fund the greatest looting of a Treasury in history. Sorry, taking on more debt just doesn't solve the problem.
bernanke has a secret casino where he can lose his debt! Everyone should have a special majic money box
Yes, and here in lies another problem with printing. Some say there is no inflation and question the term Hyperinflation. Yes hyperinflation is real. We are told that we must pay CEO's hyperinflated wages in order to hold their special talents. Please, board member A votes to raise the wage and all members follow suit. Next company, board member B, CEO, who just got his wage increased votes to raise board member A's wages. 12 Board members, rinse and repeat. This robs the company profits. Now, how do we rob the investors, stock options. Nobody on any board should be allowed to have stock options. But they do and with Ben printing their next pay raise, they are cashing out as fast as they can. Front running the FED and your investments. But no, there is no hyperinflated wages or benefits. LOL Just thieves stealing Benny's money any way they can imagine.
Better at spelling anyway... :-0
With US in terminal decline, and with a population largely unaware of all things outside their ultra-small loci (50 states be damned), corporate media can be used to showcase any sovereign that disagrees with Fed action as an enemy..a two-step into war. maybe a couple steps before that..full blown currency war, trade war. can it be that simple? nah, i'm throwing this napkin into the fireplace.
REAL, you are right. our IQ's are generally higher than yours. so shut the fuck up, and listen for a while longer, and you may be able to answer your own questions. I wish I was clever enough, to delude myself, but the truth is just too fucking obvious. (sorry about the profanity) not!
Put the lid on the paint and step away from the fumes...
30 years as contractor came to an end this year. get REAL and change your way as the world is changing all around you.
Now i grow a garden and prepare for a delivery and repair business after the fall. Bicycle delivery, perhaps a clearing house connection for my town as regards barter. In any case it will be interesting for those of us who survive to live it.
The contractor way of life requires much fuel. Oil at 87 now, i figure 110.00 by xmas lots of us will quit driving .
Seeing the reality clearly is far harsher than living with the faerie queen and the unicorns.
And watching the economic ship throttles (Ben's unicorn powered press)get pushed to flank speed as we steer for the rocks sucks.Just what kind of miracle would be needed to pay our future obligations?
The debt that needs paid off is the definition of sovereign default, and the longer these tools push it the more stone age our future.
Having just read all the comments it's less than encouraging to see that none of you got the point. The point is that after QE2 our statistics are now so fatally flawed they will be discounted as inputs into macro economic models and world and sector GDP will increasing rely on numbers from outside the US. Didn't see one comment addressing that assertion.
Seeing that over the past year capital has been fleeing the US to developing countries, wasn't that occuring anyway?
It's a shame that nothing is done about that, since those developing countries are quite easily & cheaply corrupted.
The basic theme you present has already occurred vis-a-vis 4X, with the USD having lost its status as a global reserve currency many months ago. You may call it a harbinger or whatever you like as it regards the on-going bond market but I, for one, am not at all surprised by the scenario you see unfolding. For me, it is status quo.
The real disruptor in global markets is going to happen when the world realises just how big a pile their in, panicks and reverts back to the greenback as the safest bet.
The Fed knows that a "anti-run" on the USD would have disastrous consequences for the nascent stability they want so desperately to uphold. They will say or do anything to promote risk-tolerance.
Orly
Although as you have pointed out earlier, a USD run up is inevitable.
That will be quite a trade.
Ooohhh...and I got numbers...
Watch for a retrace back to the 38.2% Fibonacci level at about 86 over the next three weeks or so.
Keep in mind these things about the x/JPY crosses:
Watch the H4 charts for these Pinocchio candles mid-week and stay nimble. After the Fibo line is touched, watch for a reversal back to current levels at around 80, which would complete the double-diamond bottoming formation. After that, look out world...one way or the other.
Something has got to give.
Olexsandra
Are you still negative on gold or will it go up with the $?
I believe that gold is in a bubble right now and is acting like another ramped-up-on-risk asset. Any rise in the dollar would assume that there is more fear coming back into the market. It would make sense, then, that the price of gold would rise further if the previous rise were due to fear of inflation or even monetary collapse.
I don't believe that the price of gold has risen secondary to fear. It has risen on speculative money and therefore, the price will collapse with the advent of the post-liquidity injection correction. Coming soon.
Fear may put some support under the price declines so that would be interesting to watch.
Orly i disagree, oh the dollar may bounce, but the metals are insurance and only the fools and bullian banks will sell now. And even thats not a for sure especially with the comex on the edge of default. I check harveyorgan and max who today is highligthing jim willie in a utube vid. maybe you oughta take a gander young lady.
You know your stuff on currencies, but as to PM holders, theres a mood to hold, this being not the time to profit so much as to protect what one has.
Many have called a bubble in gold and time made fools of them.
That is why I would be curious to see what a correction in the price of gold would look like. I wonder what the measure would be of people actually holding PMs versus how many speculators are now holding who would sell at the first sign of an Imperial cruiser.
If the dollar started to really ramp up, it would be because of a return to the USD as a safe-haven currency but now we hear that gold is a currency itself- but it hasn't traded like that over the past months. It has traded like a risk asset like the SPX and the USD has traded the opposite way.
Compare a chart of gold versus a chart of the AUDUSD, the commodity currency, and note the striking similarities in the patterns. The Ozzie dollar is rising because the Australian government just raised interest rates (for the last time and may reverse trend at their next meeting...), so the Japanese have been buying up AUD for the carry trade. As goes the Ozzie dollar, so goes gold.
All these currency pairs are riding at extreme levels and some correction is necessary if they are to move higher- gold included. This may be a temporary top in gold or it could be a long-term top in gold. The ones holding the bag will tell us if there is real fear or speculative excesses.
We'll see.
:D
It would be helpful to attach the pair I was speaking of, eh? Ha!
USDJPY to about 86, then watch for an equal and opposite (double-diamond...) retracement to 80. After that, it is off to the races, either up or down.
USDCHF first stop will be to about 0.97 before taking a breather to move higher.
The beginning of the week is likely to see gains for risk assets, so you may see the USDCHF retrace to about 0.956 before resuming higher. The AUDUSD may bounce his poor head again off the the Fibonacci level at 1.075 (that number is simply unbelievable to me...). By Tuesday morning, the exuberance and ebullience will have begun to fade.
Watch the H4 charts for the turns (edit: specifically the AUDJPY pair...). Best of luck trading!
:D
Hahaha :-D
Ahhh, that's a good one.
OK, I'll take the short end on that...
"...Clownbucks as the safest bet", hahaha...
No worries Paul. We can use China's stats ...
That is probably because none of us find it be new information. I for one have adopted this point of view for the last year. I think Tiberius made more interesting assertions that were worth discussing, but again- much of this we already knew.
Thankfully, you're here to keep us on the path to financial wisdom. See, we know we can take it easy knowing you will pull our asses out of the fire. I guess we took you for granted...sorry...
Paul, are you performing some type of reading comprehension test here? Are you the SAT procter? Your assertion is something ZH has been addressing for months. It wasn't just QEII that made the world lose faith in the U.S. economic statistics. Maybe you didn't see what you wanted because its been discussed ad naseum here on ZH and its been accepted as fact on ZH for a long time.
Big game of RISK with currency calculus.
We still have the petrodollar and the security system.
Neocons want to use it. Wait till the 2012 primaries. WashPo is openly discussing starting a war for the economy.
David Broder. Iran. Israel. Neocons. They're all coming back. They're in the tea party now.
Hopefully Ron Paul will make this tea party divide clear to the rank and file tea party so they don't blow up the world on accident by supporting someone who's been making his coin in Israel.
You would need 2,000,000 ground troops to occupy Iran. Unlike Iraq, we don't have the luxuary of 15 years of bombing in reprisals for security council violations and the people in charge there have made adequate plans for an invasion and unlike Sadam, I don't think they would have the hesitancy to unleash chemical weapons on the US, seeing the current leader thinks he is an integral figure in an end times prophecy.
An invasion of Iran would make the Iraqi resistance look like a picnic.
To hell with occupation. Sterilize it. Make it unihabitable. One Trident submarine could take out the Middle East in about half an hour. Osama Bin Laden neutered most of our military with his asymetric warefare. The MSM has neutered the rest. Our boys and girls in uniform spill their blood to protect the opium trade and oil companies. The sheeple watch the ignorant politicians tell lie after lie and give tacit approval. WTF!
I'm sorry macholatte, but you're an idiot.
Nuking countries at random and on a whim is such a stupendously STUPID suggestion, you are banished to the naughty corner. Don't come out until... hmmm, actually - never.
I think you mean "repugnant" or "immoral" rather than "stupid", right? Back in the days of Ghengis Khan you either joined up with his tribe, wholeheartedly, or you and your tribe found themselves with their heads hacked off. Problem solved. Not to our modern tastes, I'll give you, but problem solved.
I usually bring out the "Glaze the ME" card (somewhat tongue-in-cheek) when talking with pro-Israeli folk who decline to compromise with the Palestinians. I suggest to them that there is a name for fighting a war forever without seeking to win (or, better, making peace) - losing!
It brings the point home - either propose the glazing option (and reveal yourself as a nazi) or resign yourself to losing.
Actually, no.
I mean stupid.
Because if all the other nuclear armed countries around the world start to see the United States as a Nuclear armed loose cannon that has no intelligent control of itself, then from self preservation motives they will unite to remove that threat.
They will all, simultaneously, terminate the US with Prejudice.
Do some deeper reading - The "nuclear threat" has never been about nations having Nukes, it has always been about Nutbars having Nukes. The US does not want to be seen as a Nuclear-Nutbar, that pathway leads to oblivion
Ohh and btw, things have changed a bit since the Great Khanate - Nukes make a difference.
Russia and China have problems of their own with muslim extremists. A couple of friendly phone calls and, who knows...
"Sure its a friendly call. Listen, if it wasn't friendly you probably wouldn't have got it"
Meh. We've got 14 Million on foodstamps, over 5 Million unemployed. Scrounging up 2 Million will be easy.
And I hate to point out that, if they don't come back, well, that works out well for TPTB too.
"We've got 14 Million on foodstamps . . ."
===================================
I think you mean 14 PER CENT. You've got over 40 million people on foodstamps. It's a real growth industry.
You are correct; please pardon my lysdexia. Thanks for the correction.
They wouldn't invade - they may not have learnt much, but they learnt that much from Iraq.
They'd just bomb military and defence infrastructure - you know, oil refineries, power plants, airports, water treatment, bridges, roads, hospitals, kindergartens, that kind of stuff.
Both Europe and The U.S. are currently locked into an economic death spiral. America's problem boils down to a bigger government than the country can afford attached at the hip to a small group of hugely powerful financial institutions that are (so far) officially incapable of failure. Europe's problem is somewhat more complicated but basically comes down to socialist idealism at lager heads with demographic reality.
The most likely outcomes for Europe and America remain bleak but I still give the US of A an edge in terms of it's ability to morph into some sort of new, reasonably liberal and commercial friendly state down the road after TSHTF. But before ??...not so much.
When ZeroHedge starts focusing most of it's content on what's happening in Asia and Europe (and not Wall St.) you'll know the gig is up stateside...but not before that.
See below...
Looks to me ZH is Wall St-centric. I read ZH to see what's going on from the Wall St. perspective. The Euro/Sino/Indian Tylers will need to create their own ZH site, if it does not already exist, to focus on what is happening daily in the new finacial circus.
Consider what it means that, with QE, only the US will have any fiscal or monetary policy room left. The US has now put the final nail in the coffin of Keynesian economics. Any country that wants to disagree with US economic policy will have to move in the direction of a centrally managed economy. Step by step, it will be forced to lock down every part of its economy and close itself off to the world market.
BTW I don't see much hope for the euro over any time horizon...
Did the banks ever pay back the bail out money from before, or is that more media spin for the masses? I keep hearing this quoted to me by my colleagues and it drives me insane, I always reply, well if they paid the last lot back why the need for QE2?
Nope, they didn't pay it back, just some of it, and the rest of it payed with shell games and shenanigans to report on NBC. Here is a piece of the sordid puzzle.
http://www.thepoliticalclass.com/2010/04/gm-did-not-repay-loan-it-borrow...
And tarp was only about 1/20th of the backstops, free gambling liquidity, and trades of junk for cash that the media and your friends don't talk about.
A good analysis of the current situtation. However, imagine if China is not rational (in our sense of the word) regarding the role of economic power in an overall strategic conflict with the West. What would happen if China did two things simultaneously: stopped purchasing US securities and secondly, dumped dollar holdings. Perhaps in their estimation the loss of bad debt would be less costly than a long term "cold war" but with even greater results. The rare earth episode is more revealing than one might guess.
Isn't that now inevitable at some point?
Infact isn't that starting to happen already... (buying up Euro debt with US dollars). Europeans pay off their Dollar debts with that cash and all that fiat money comes flooding home to roost. And adds to the printed QE1/2/3 money bonfire. I see a really big fire in the future.
forget about europe, watch china and russia!
My long term indicators continue to warn of USD strength and EURO weakness.
http://stockmarket618.wordpress.com
the us just does not produce that many high tech goods anymore as it did 10, 20, 30 years ago. in pursuit of quick money many intelligent people in the us started working in the financial industry... and we know how that played out.
to change that it will take a decade or two, and only if the right policies by firms and the government are implemented. but most important is that the people in the us change their minds about what is really important to them. is it a huge suv, the house with 10 bed rooms? no. it is education and with that the ability to reflect on your own. look at public opinion on important topics. compared to europe where we find a growing tendency to extreme decisions and opinions in the us this happens on a much larger scale. in the end, this will lead to wrong and worst decision making.
i am from germany and i travelled many european countries as well as the us. i wont say im an expert but the us has far bigger problems than europe. we have our piggs, true. but overall european societies are today more stable and homogenues (wealth distribution, income, education, social benefits), companies and sovereigns as well as households are on average far less leveraged and most important: europeans are on average far better educated!!! that is not that the us hasnt many many brilliant people but 200m that do not even know how the us looks on a worldmap are a truly staggering problem.