Posted on 01/05/2009 5:59:19 PM PST by NECAWA
The Act of Rebalancing Is About To Get Real Nasty For Export-Model And Oil Exporter Countries …
My outlook for 2009 is this: The U.S. economy could get a lot uglier. But the pain of rebalancing will be even more severe in Europe, Asia, and Latin America. And it will hit those economies a whole lot harder than is now priced into the market. _
In short, the U.S. isn't recycling excess savings from China and oil exporters any longer because China's exports and oil prices have plummeted._
U.S. consumers are starting to save again. And this has reduced spending on products from developing countries._
Many pundits imply that this is very bad for the U.S. But these same commentators fail to mention this situation is much worse for economies dependent on creating wealth through exports.
(Excerpt) Read more at marketoracle.co.uk ...
I’m no expert, but how can someone be bullish on the dollar when they are printing them by the truckload while the basis of it’s value is heading in the other direction? I’m betting on inflation and a tanking dollar myself...it’s what the lesson of history predicts.
Ping for later reading!
I went to the article, but quit reading when they quoted Paulson, like he’s some kind of financial genius, when he has no friggin idea what he’s doing.
ping for later
Ohhhhh, don’t be so sure he’s a complete moron. He’s screwed us but he and his friends will liley come out okay.
Because the other currencies are in even worse shape?
Nobody ever seems to recognize that US real estate prices, while over-inflated during the last 10-15 years, are still priced WAY below those in most other industrialized countries.
IOW, we're in bad shape. They're in worse shape.
“I’m no expert, but how can someone be bullish on the dollar when they are printing them by the truckload while the basis of it’s value is heading in the other direction? I’m betting on inflation and a tanking dollar myself...it’s what the lesson of history predicts.”
It is. But, currencies are not absolutes, they exist relative to each others’ values. What you project is perfectly logical but is quite probably NOT going to happen because all the other currencies the dollar will be compared to (poss exception: Cana dollar) are far, far worse. In essence, the dollar is the least worst currency. Sometime off in the future, perhaps years, perhaps 1 year, the dollar may collapse from “overprinting”. But not now. IMO.
Okey dokey
You are basically telling me that I should expect the dollar to pull the world out of the slump because the dollar is sinking the slowest? Are you sure that’s sound logic?
What if the world is gravitating to the US dollar because they need SOMETHING to cling to, and the scum in DC are blowing it big time? Then what say you about the future?
For decades now, I’ve heard the MSM bemoaning the low savings rate of Americans. And its true—we don’t save enough and buy too much foreign crap. What no one says, however, is that the Global economy has adapted very well to this state of affairs. Now that the landscape may be changing, it will come as a great shock and another adaption must take place before we reach stability.
It’s a tough call right now whether we enter hyper inflation of a deflationary spiral. He’s betting on the latter rather than the former and thus his desire to be in the dollar.
meant to type “or” a deflationary spiral.
“You are basically telling me that I should expect the dollar to pull the world out of the slump because the dollar is sinking the slowest? Are you sure that’s sound logic?”
This is an exceptionally difficult and confusing time to invest, when assets look headed for deflation. Logically it [stronger dollar] is no sounder than the hyperinflation case, but future-prediction wise, I, most others I’ve read, and most importantly the bond market seem to believe that assets will deflate and inflation will be super low, which make it seem like the dollar will be gaining purchasing power = strengthening. It MAY NOT appear that way to a foreigner, but it will to a holder of USDs.
I’m not saying the USD will “pull the world out of anything”, but I am saying it’s sinking the slowest, and that the GBP, Yen, and Euro look like dirt. There is also reasonable expectation that those other countries will have to force their rates towards zero in order to get the economies going, and given that the US has already done so, there some piece of reasoning that we have bottomed and they will probably have to mimic us, follow us into a devaluation trough, if you will. This is my best sense for now and I’m not sure enough of it to want to beat anyone over the head with it. Hyperinflation is absolutely NOT indicated at present. Otherwise bonds would be utterly crashing and bondholders are considered pretty smart.
“What if the world is gravitating to the US dollar because they need SOMETHING to cling to, and the scum in DC are blowing it big time? Then what say you about the future?”
I’m not sure how I would quantify that, it’s kind of spiritual! I have no love for Paulson and Bernanke, I think what they are doing is cruddy. But it is the fishbowl we have to swim in for now and probably the forseeable future. Obviously, the financial system is under great strain and one cannot rule out a serious “dislocation”, meaning one day we wake up and the value(s) of virtually everything have drastically shifted overnight. But, I can’t say (and I doubt anyone else can say) whether that dislo will persist, get worse, or will immediately start to revert to something more in line with what we are used to. But I DO think that if the dollar collapses ala hyperinflation, other currencies will follow it down, as will the stock and bond markets. Gold might be relatively safe, but I’ve come to think that in a deflation, whatever outrageous gains you might think are available by holding gold will be equally available to those holding green cash.
Are you telling me that the US$ is sinking the slowest because the US rates are sinking the fastest? What happens when the rates can’t sink anymore and the ferreners wake up and sink their rates? Does the US$ start sinking the fastest since the US rates can’t do anymore sinking?
I sure hope this is way more complex than I make it sound. Otherwise I’d say we’re sunk. Sinking faster to sink the slowest sounds like a gimmick to me. Sure hope it works.
Bump for later.
Americans must prepare themselves for a massive collapse in the dollar as investors around the world dump their US assets, a former Bank of England policymaker has warned.
By Edmund Conway, Economics Editor
Last Updated: 6:32PM GMT 05 Jan 2009
The long-held assumption that US assets - particularly government bonds - are a safe haven will soon be overturned as investors lose their patience with the world's biggest economy, according to Willem Buiter.
Professor Buiter, a former Monetary Policy Committee member who is now at the London School of Economics, said this increasing disenchantment would result in an exodus of foreign cash from the US.
The warning comes despite the dollar having strengthened significantly against other major currencies, including sterling and the euro, after hitting historic lows last year. It will reignite fears about the currency's prospects, as well as sparking fears about the sustainability of President-Elect Barack Obama's mooted plans for a Keynesian-style increase in public spending to pull the US out of recession.
[snip]
Interest rates near zero across the G10 bloc will prevent a replay of the Great Depression, but they will not pull us quickly out of the doldrums, writes Ambrose Evans-Pritchard.
Last Updated: 7:02AM GMT 05 Jan 2009
Central banks will do whatever it takes to combat debt deflation. Even Frankfurt will join the rush to print money, buying every form of debt from mortgages to corporate bonds.
The Fed will follow the Bank of Japan in propping up stock markets. Puritans will grumble, but the surprise will be how it long takes for this stimulus to gain traction. We will learn the term "pushing on a string".
Western societies will feel the first shivers of raw fear as people twig that the authorities are not in control. Iceland's winter will set an awful example. Job losses will reach 1m a month in the US at the point of peak pain. Economists know this is a late-cycle effect – darkest before dawn – but the public will see it otherwise. This will be the phase that shakes society.
[snip]
Obama's America will shine. The country will reemerge as undisputed top dog, the only one with real demographic, scientific, and strategic depth. As first into the crisis, it will be the first to hit bottom. Those expecting the dollar to collapse will have to wait.
[snip]
"A three Trillion Dollar bailout and all I got was a $200.00 check and this tee shirt"
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