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What do you do?
This is an attempt to harness the ZH brain trust, an invitation to exchange views and refine understanding
You used to be a run-of-the-mill fund manager, but you've been managing funds for the Communist Party of Angina for the past ten years. On your advice, your boss decided to buy a shitload of US Treasuries to keep his exports competitive. That worked out ravishingly, but now he's faced with a major headache. If you can't find a solution to it, you'll be required to make a voluntary donation of both your kidneys to members of the party.
The US economy is in the shitter and someone's hand is on the flush-lever. Angina's holdings of US Dollars - some estimate them to be between 1tn and 2tn - will soon become worthless as the sadomasochistic bastard holding the lever laughs and yanks it. You're tasked with salvaging as much value out of Angina's holdings as you possibly can.
You tried buying Australian minerals, but some shitheaded Party factotum thought it wise to piss the Aussies off by arresting one of their own. Now they won't return your phone calls.
You could buy a boatload of American companies, but what good will that do? You make everything for them anyway. So why dump a lot of money in buying the front office and secretarial staff? You can hire those jokers cheap after their economy's destroyed.
Any rational move you make will move markets. Make the wrong move and that hand on the lever might just end up being yours. So ... what do you do, assuming that you aren't suicidal or masochistic?
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I would call Geithner up and yell at him for a bit. Then I would propose a masterplan involving
1) Fed printing money to inflate equity and commodity bubble
2) Stopping the presses and letting the bubble burst as Main street starves
3) Selling all the treasuries to non-nuke wielding subjects during the resulting flight to "safety"
4) US then inflating their way out of the debt while continuing to trade with Angina using manipulated $/Anginian Currency rate
Sounds like they listened to you. See how influential Zero Hedge is?
Announce that Angina is emabarking on the most ambitious project since the moon landing. A ten year commitment of $1-2 trillion to develope a nuclear fusion power plant. It is a win-win. If they succeed they have basically free and clean energy for eternity. If they fail, they will still benifit for decades from innovation accociated with the project along with having the world's smartest, most creative minds on the payroll for a decade.
Remembering that your currency is pegged to the US dollar and that, taking into account terms of trade between Angina and the USA, your motherlode of US holdings only loses value if you allow the currency peg to become stressed or break.
So you participate in good-ol' competitive devaluation, printing money like hell to blow up some local bubbles in direct proportion to the bubbles being deflated in the States.
Don't worry, you have 1 billion peons to rely upon and they've only just started out in McLife(TM). There's plenty of absorptive capacity there for all that surplus production capacity that the US no longer needs, and seeing as US dollars won't be flowing in to fund it all now, better print local currency to represent all the freshly minted McStuff just waiting to be consumed by a bunch of Comrade McPeons.
Hell, if the Peons aren't getting into the spirit of things fast enough then just, hand the money out for free and mandate that it has to be spent within six months on Anginan-made goods. That oughta kick start things and put the deflation genie back into the bottle. You WILL become consumers little peons, or else we'll chop your limbs off, now GO BUY A PLASMA TV!
Meanwhile, roll out of long term US Treasuries into shorter terms (in preparation for ditching them entirely), set up international trades outside of the USD, and stockpile metals at bargain prices as a reliable store of value, not to mention being useful for future production.
Decouple and what could possibly go wrong! What's that you say? We're going to blow ourselves up by emulating the Western model of injecting money through establishing new loans through the financial sector, hence falling into the same Ponzi trap that the Western world is in? Huh? What? No....really? Damn.
- Mediocritas
From the being expose to the shadows of the Commnunist Party of Sunny Caribean Sugar & Tobacco. And understanding that a PARTY can force its members & underlings to the river & even drink some of the water -but it can't stop no matter how much it tries to repress or how harsh it is - it can not stop them from spitting, peeing, or crapping in the water when you are not looking.
I would say problem is not that the markets are watching me & I'm holding what could possibly be worthless stuff & and I might have a little comrade come after me for kidney donation.
The problem is that my sunny Party of Angina & my possibly defaulting counterparty across the ocean which are presently run by the Corporate Boomer Party of America with its Northeast & Southern Divisions - both have a very limited timeline left because both are generational bound parties that as their ruling generation get older & soon to be replaced will create a new maelstrom as the younger generation that will replace them will see how they have been screwed.
So that the new generation is very likely to go legal & illegally very medieval with a response that could range from active Logan's Run approach to an inactive dropping out/defunding response.
So my problem is how do I resurrect & channel the fake LOVE, PEACE in other humans that was very prevalent in my Arrogant Spoiled Bratty Boomer Generation when my ass was on the line when they were going to send me away to fight or we had a cultural revolution -remember that one... after everything I said & did for the last 30 yrs when my ass was not on the line was bull. But I need to resurrect the LOVE before the next generation wakes up & puts us in a one way trip to 6 feet under with some acid/pot & propofol while listening to the beatles with a nice bullet.
How do I resurrect that love, when my whole boomer generation has become an arrogant corrupted cesspool. After all the Angina Party of the East & the Corporate Party of the West are in the same boat...
We both BS our way into the present situation, Angina Party put forth prosperity after a little violence 20yrs ago. While Corporate Party just hoodwink its way again with HOPE...
Didn't realize you were here Alan Ginsburg!
Salutations, Most Honorable Anginan Kommisar of Capitalist Currencies!
Are those US Treasury bonds and greenbacks causing chest pains? Go for the sure thing: a Greater Fool strategy. Who's the proven Greatest Fool? The US taxpayer/'investor', of course.
1. Trigger a flight to safety. Provide the investing public with a few milliseconds of non-rose-colored-glasses-filtered reality. How?
a. Big fat donation to ZeroHedge.
b. Jam CNBC satellite signals for a few days.
Voila! Panic.
2. Offload every last US (and UK) security and dollar for Australian dollars.
3. Buy perpetual agricultural land use rights in Antarctica from the Aussies - it should be prime banana-plantation territory in a few decades.
Hail the Glorious Future of Anginadom. Comrade Ubu.
Call up China and remind them that "He who panics first, panics best."
Establish a trading agreement for raw materials priced in Yuan in exchange for not dumping the treasuries.
You continue buying African commodity producers. Then if worst comes to worst, you accept a 50% hair-cut on your holdings in exchange for keeping the export machine working
Buy Taiwan and get the 7th fleet for free
I would propose an attempt to dress up the national image a bit, make it a little sexier, perhaps a merger with the state of VA and subsequent name change.
This may not solve your problem, but it might take everyone's eye off the ball long enough for you to escape.
Australia has bet the farm on these Anginans and if they dont pony up, little old Aus is properly fooked
I would not assume that they are not suicidal or masochistic, so I would leave every option, bizarre and otherwise, on the table.
Unless I am mistaken, those are the same Anginans who had a Cultural Revolution, a Great Leap Forward, and who pretty much laid stagnant from the time of the embrace of Buddhism/Confucianism until circa 1990. That suggests masochism or something similar is part of the national character, and recent history is the aberration.
Maybe that $1-2 trillion will serve as a nice nest egg for CP members fleeing a wild mob. More likely, I do not think Anginans have any more of a clue than Bernanke on how this whole thing might turn out, nor what to do other than continue to throw money at the same targets they have been throwing money at for some time, and hoping.
Anginans are renowned for their patience. They will wait. As long as possible. Time is of greater benefit to them than 1-2 trillion.
4,000 years of patience.
Funny though, they will soon all be driving cars on super highways while soon we will all be riding
bicycles.