Embattled bank JPMorgan Chase, the recipient of $25 billion in TARP funds, is going ahead with a $138 million plan to buy two new luxury corporate jets and build "the premier corporate aircraft hangar on the eastern seaboard" to house them, ABC News has learned.
From the previous thread :
The only ones who think that the currency of a country which lead it's financial system into desaster and is now, via monetisation, ruining it's currency should be the world's reserve currency are (you guessed it) born and breed dopes.
My prediction : America soon will be kicked out of the G20 ! Hihi.
Why do I read multiple subtle digs at the US in this essay? Which is well written and makes sense to my limited brain
On the one hand??the monetary authorities can not simply focus on domestic goals without carrying out their international responsibilities??on the other hand??they cannot pursue different domestic and international objectives at the same time. They may either fail to adequately meet the demand of a growing global economy for liquidity as they tries to ease inflation pressures at home, or create excess liquidity in the global markets by overly stimulating domestic demand. The Triniffin Dilemma, i.e., the issuing countries of reserve currencies can not maintain the value of the reserve currencies while providing liquidity to the world, still exists.
Nemo says:
“That Chinese guy is just some random conspiracy-minded blogger, right?
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Yeah, he is called G20 and IMF.
Rob Dawg says: History never disappoints: Timothy Franz Geithner = George Brinton McClellan<br/><br/>Except McClellan was just a timid fool. Geithner is a damn traitor.
China is recommending an enhanced SDR (special drawing right) based on a larger basket of currencies. Keynes proposed the Bancor based on a basket of commodities back when the IMF was being created.
Although I disagree with many of Keynes ideas, a basket of commodities makes more sense to me than currencies. Go Keynes!
Werner,
It must suck having to have spent all that time learning English and find out your new masters won't speak it as well as you. It won't matter as long as they keep everything in order I guess.
reptillian says:
“Would this be an actual currency? That we could use to protect ourselves as individuals?
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Nahh, you keep your stinking dollars !
Well there goes my savings, since I have no idea what to invest as a value "safe haven"<br/><br/>Gold has worked for hundreds or thousands of years. Assuming that anything pother than food or bullets has "real" value when were done with this.
ova says:
“Werner, How's your Arabic?
~~~~~~~~~~~~~~~~~~~~~~~
Not as good as my english. But that may change !
(looking forward to a trip to Abu Dhabi.)
I feel like I've entered the twilight zone where the tinfoil hat stuff of the Amero/one currency from two/three years ago is now out in the financial press. How likely would a world currency have been with a non impaired U.S. credit system. Geez, from sci-fiction/no chance in hell to open discussion by China.
ova says:
“Werner, How's your Arabic?
~~~~~~~~~~~~~~~~~~~~~~~
Not as good as my english. But that may change !
(looking forward to a trip to Abu Dhabi.)
How about other countries not depend on some third party to manipulate their currency against? Nobody forced the Chinese to put all their trade surpluses back into USD starting back in 2004. If China had not been manipulating its currency, the global economic picture would be a lot different today. For instance, the yuan would be a lot higher, which would have negated a lot of the labor cost advantage which drove shifts of production to China. This is a big, self-serving nothingburger from the Chinese.
Can't you imagine Werner throwing a loose bolt into the door frame just to make the eventual American buyer go crazy wondering what's making that rattling sound?
It's pretty close to a nothingburger that's for sure: The parties calling for a change in currency regime are not considered any more trustworthy internationally than the US and, perhaps more to the point, they don't trust each other either. But the jawboning underlines a point I think the US's international creditors won't back down on IMHO and that is, if the US expects time and room to monetize it's debt it is not going to be allowed to give the international community a second haircut by threatening the bonds of big money center banks.
The basket of currencies idea has been around for decades, but nobody has pursued it seriously. You'd have to have a clearing house, and some way to agree on the value of the exchanged stuff in the basket. I can't see the major countries doing this, if there were a big advantage to each individual nation, it would already be in place.
The real meaning of this piece, it seems to me, is Chinese grumbling about getting tied to Treasuries. If the dollar goes down, our exports get cheaper and more competitive with the Chinese, while they still hold the bag. They're screwed, but there's not much they can do.
China is screwed? They have real growth, produce 10 times more engineers than the US every year and have a huge surplus. The US creates money out of thin air to try and paper over all its problems. When the rest of the world turns its back on the greenback then we will see in 5 years who is screwed.
You should read up on the Great Depression. But in this case replace US with Germany of the 1930s.
It was good enough 5000 years ago. No matter where you were in the world, all civilizations understood its intrinsic beauty and scarcity (the Pharoahs were buried with it, the Mayans had legends about it, Buddhas were made of them, and Europeans explored the globe for it). And Ben Bernanke can't print it.
I for one would not be crazy about handing our monetary system over to dentists and semiconductor manufacturers, let alone miners in corrupt african countries. Gold prices have been outstripping inflation for decades now, it's clearly becoming more scarce as more industrial uses for it are found; our currency would be constantly deflating using a gold standard.
Pharoahs also used to use 1000s of man-years of slave labor to build tall megaliths. The mayans had enormous deposits of gold, but it didn't save them from iron weapons.
I am not criticizing gold as a store of value, just as a monetary backing. Two different things.
It good times a worldwide currency union might work. In bad times, well we have the Euro. Will the Germans support the Spanish and Italians in order to the protect the Euro? We'll soon find out.
"You may or may not recall that Conjure said a few months ago that this was coming.
And it may come sooner than you think."
I don't think many Americans know what this means - i.e., they don't know what a reserve currency is - and of those that understand the concept, few appreciate just how big the impact such a shift would have on our standard of living.
ova says:
“Werner - you work for MB don't you!...
~~~~~~~~~~~~~~~~~~~~~~~
No, never did. You schould know that I am a) retired after b) working for an american company.
I'm sensing an acceleration in the rate of change, perhaps analogous to a chain reaction or phase state transition.
We may very well wake up soon to the news of a global run on the dollar. All fiat currencies are based on confidence, and right now the criminals in the U.S. government are hell bent on protecting their bankster cronies.
Can't you imagine Werner throwing a loose bolt into the door frame just to make the eventual American buyer go crazy wondering what's making that rattling sound?
ATM card and $19 in the
I can see him scratching little tiny hakenkreuz (swastikas) and giggling like a fool
RockyR says:
“"My prediction : America soon will be kicked out of the G20 ! Hihi."
Now THAT would be funny! I think people quickly forget just how much of the worlds' economy is driven by the US.
~~~~~~~~~~~~~~~~~~~~~~~
Gaahhhh. You obviously have not seen the recent Peter Schiff video (Jesse had the link : http://blog.mises.org/archives/009620.asp)
He compared America with a certain railway-car. Watch the video, it really is funny and insightfull.)
P.S. Have you ever seen an American really pay for what he buys ?
You know, real customers do pay you, Americans just pay you with (additional) credit.
The last thing the Chinese want is a run on the dollar. They're merely putting themselves at the head of the table going into G-20. Think about it: wouldn't 18 folks at that table LOVE a new currency regime? The Chinese want to take a look over the next hill, and signal to everyone that they're looking, but for now they'll help re-inflate this saggy-ass bubble.
“Who/what is conjure? Is it a reference to the movie "Three Days of Conjure"?
Conjure is a greek oil shipping tycoon who used to post here. Rumor is he bought an atoll in French Micronesia where he is awaiting the coming of the man in black.
Thanks, I think. So mp has just assumed the role of Conjure, or does he actually pass along information from Conjure, or it's all a joke, or... I did figure out that the "man in black" refers to Johnny Cash.
Sorry people if I offended anyone. I am just really freaking bitter, angry, and a touch worried about what is coming tonight. Well, maybe more than usual.
I'd be in favor of an international currency as long as it circulates so dumb fucks like me can hold it if they want something of relatively stable value. The Euro was/is a great idea and the MFbuck seems like an even better one.
The problem is that you need a mechanism that prevents or mitigates huge fluctuations of debt/inflation of individual national components in pursuit of national advantage (like the EU Central Bank is supposed to do, but doesn't do well). That's the fatal blow to a single currency.
On the other hand, a very few countries that control essential commodities and generate surpluses could actually impose such a system. Think OPEC plus China/Japan/Korea.
To replace the dollar one needs to replace Treasuries. The ultimate value of a currency is that the real value behind it is backed up by a country that has the sufficient taxing authority, sufficient enough that the market values the debt of the country that controls the currency. The liquidity of the debt market then makes the currency valuable. This has been a quite striking difference between the euro versus the currencies that are uniquely tied to one country, i.e. Yen and Dollar.
Essentially to have a new world currency we need a new country that issues debt that is more secure than the US. The only country that could do that is China, and they are still a long way off.
I do not know what will "cause" the dollars fall.WW1 was blamed on the actions of gavrilo prinzip and his little .32.At some point there will be a shock,perhaps minor and everyone will notice that the emperor has genital warts.A lot of people would call Bretton Woods the cause,it does not really matter.We know it is coming,and probably soon.My guess? sometime before Michael Jackson announce he is having Dick Cheney's Love child.
Also, (I am anonymous above, just learning that i have to leave my name too) if the euros ever combined their fiscal policy with the euro, then they could also do it. However, we could never have a world currency unless we had a world fiscal policy coordinator.
Well, the Euro is in worse shape than the dollar. Eurozone banks made subprime loans to eastern European debtors in euros, but the borrowers earn the cash to pay back those loans in their own currencies, then trade them in for euros to make their payments. These same Eastern countries are experiencing falling currencies, and shrinking gdp. So defaults are likely to be greater than in the US. The euro is going to implode before the dollar. Yes, someday the dollar will weaken, but not until the pound and the euro get hammered.
In addition, why would nations/entities other than the US give up the ability to devalue their currency in an economic pinch. One of Europe's big problems now is that weak countries like Spain and Italy can't devalue to make their output more competitive. We've seen currency intervention from Asian countries since this crisis began to try to support their export sectors. I don't see Japan buying off on giving up the BoJ's control over that country's currency.
If China is serious about exiting the dollar, there's nothing stopping them. They could switch into euros. Of course, the dollar would plummet and so would China's holdings of dollars. There's no big block trade they can execute to offload their dollars.
my one world currency is USO. sucks that its still paper, but at least when the bond vigilantes in the Middle East start stirring, I'm somewhat hedged.
"Essentially to have a new world currency we need a new country that issues debt that is more secure than the US. The only country that could do that is China, and they are still a long way off."
What does china even do but exchange worthless plastic crap for worthless dollars? Seriously.... if the US goes down who is going to buy their crap?
All hail Nemo!! Not only a Perl wizard, but a finance whiz as well. When a Nobel prize-winning economist links your post and compliments it, you can officially consider yourself a whiz. Congrats...
I'm with you Yalt, I've often thought that the U.S. looks very similar to 30's Britain/U.K. (net importer, high debt from WWI, advanced industrial base, forced to devalue pound) while China looks like the U.S. did (net exporter, industrial powerhouse, little fiscal debt).
"The authorities have a clear strategy to address the challenges they face. They have already adjusted the exchange rate and put in place tight fiscal and wage policies. The measures already taken and announced are strong and, with resolute implementation, will be sufficient to restore stability. Together with planned structural reforms in key areas, these measures should help return the economy to a higher growth path by 2010-11."
from The Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System. recommendations:
The global imbalances which played an important role in this crisis can only be
addressed if there is a better way of dealing with international economic risks facing countries than the current system of accumulating international reserves. Indeed, the magnitude of this crisis and the inadequacy of international responses may motivate even further accumulations. Inappropriate responses by some international economic institutions in previous economic crises have contributed to the problem, making reforms of the kind described here all the more essential. To resolve this problem a new Global Reserve System—what may be viewed as a greatly expanded SDR, with regular or cyclically adjusted emissions calibrated to the size of reserve accumulations—could contribute to global stability, economic strength, and global equity. Currently, poor countries are lending to the rich reserve countries at low interest rates. The dangers of a single-country reserve system have long been recognized, as the accumulation of debt undermines confidence and stability. But a two (or three) country reserve system, to which the world seems to be moving, may be equally unstable. The new Global Reserve System is feasible, non-inflationary, and could be easily implemented, including in ways which mitigate the difficulties caused by asymmetric adjustment between surplus and deficit countries.
Thanks. I asked this earlier but you may have missed it...
I am curious whether Conjure has any updates on his "bond crash clock strikes midnight" call. If the yields never spike because the Fed keeps them down, does that count?
It's hard to believe that shareholders and management of regional and smaller banks that are not about to be taken over by the FDIC are not outraged by this plan. I would think that the phones of Congresspeople are ringing with angry bank presidents complaining. The reps and senators are more likely to listen to these calls than the ones from the regular citizen; as these are likely campaign contributors.
"It's hard to believe that shareholders and management of regional and smaller banks that are not about to be taken over by the FDIC are not outraged by this plan. I would think that the phones of Congresspeople are ringing with angry bank presidents complaining. The reps and senators are more likely to listen to these calls than the ones from the regular citizen; as these are likely campaign contributors."
I think it likely that the contributors are "in plan" and less likely to call.
Anonymous says:
Today, 02:07:49
“hmmm, how will they accomplish this? precious metal backed world currency perhaps????
~~~~~~~~~~~~~~~~~~~~~~~~~
Very very very very good idea !
Basel too - I bought into USO as MY reserve currency as well. Since then oil is up from $48 to $52, and USO is down 25%. Fucking contango ate me alive. There's gotta be a better way...
I would be curious to hear Michael Pettis' view on this pronouncement. He's usually pretty insightful on Chinese politics and the economy. China Financial Markets
The russians might be the most recent example of an empire declining... and that was relatively peaceful considering the potential calamity that could have occurred...
I dont know if the romans really went down with a whimper.... then again some would say they just moved east and lasted another 1000 years
Well that's one way to avoid a war. But the US will not agree to a level playing field, they cannot. Its a good thing the IMF is not a level playing field.
Thanks for the kind words and well-wishing. Seriously, it is making me all nervous and self-conscious about all of my half-informed speculative rants...
Which is stupid I guess, because the whole point of the pseudonym was to be able to say whatever came into my head.
All hail Nemo!! Not only a Perl wizard, but a finance whiz as well. When a Nobel prize-winning economist links your post and compliments it<br/><br/>No offense intended to Nemo, but it is only Krugman. He's capable of being quite the moron, see http://liberative.blogspot.com/2008/08/mythical-soc
I for one would not be crazy about handing our monetary system over to dentists and semiconductor manufacturers, let alone miners in corrupt african countries. Gold prices have been outstripping inflation for decades now,
I did my own calculation last week, using the bank of Canada inflation calculator, between last cycle's '80s high and 2009. That inflationary adjusted price today would be $1,600's/oz based on a straight line 3.4% inflation.
"Most Americans also don't realize that the major international blocs have been planning to abandon the US dollar as an international currency for several years. The Euro is one example, but the Asian and Arab regions have their own schemes underway."
Quantitative Easing has led the Chinese to call for a new reserve currency. The US will respond with threats of repudiation. China has already used as much of their dollar reserves as possible buying real assets, including gold. Seems they have been preparing for this contingency.
China might be the first in line on the dollar panic selling express. I feel this avalanche has started roaring down the mountain. Kinda sucks being at the bottom.
"If things didn't end badly then they would never end." It is rare for the champ to bow out at the height of their power. Usually they'll defend their title until someone younger, stronger and full of surprises knock the champ down and takes the title. Cycles.
Dick Morris says Obama wants this latest Toxic Bailout plan to fail so he can nationalize all the Banks that have received TARP Funds from the Federal Government!!
Obama to Nationalize 90% of all U.S. by late summer!!
Nemo, I got a chuckle out of the guy commenting on your blog who said it wasn't a problem that all we're getting out of this scheme is a market value for a put option plus a security, when what we really want is a market value for the toxic securities alone, because "we can just use Black Scholes" to back out the premium for the option.
So...we don't have enough information and trading is far too thin to allow us to know what the market value of the underlying is, but that won't cause a problem when we try to determine a volatility to plug into B-S because...because...I suppose because we can just pull any number out of our ass that will give us the answer we want and there certainly won't be any data available to suggest it isn't correct.
One of the frustrations of being a teaching assistant was the student who just plugged the available numbers into some formula he'd memorized, though he had no idea where the formula had come from and whether or not it actually applied to the situation at hand. Now I know what happened to those guys after they graduated (from some other department than mine, I hope)--they've been making million on WS drawing bonuses based on mark-to-formula profits.
(Really! Black-Scholes??? The solution to a diffusion problem? Because, obviously, the prices of these toxic securities are just executing the random walk we can expect in a perfect market of perfectly-informed participants trading absolutely transparent commodities.)
"Dick Morris says Obama wants this latest Toxic Bailout plan to fail so he can nationalize all the Banks that have received TARP Funds... by late summer"
That is a brilliant strategy. With the national debt then hovering at about $15T, we will be in a perfect position to absorb the costs of nationalization.
I dont know if the romans really went down with a whimper.... then again some would say they just moved east and lasted another 1000 years
Have you noticed the occurence of British/Scottish/Irish accents around you lately? They've been withdrawing (east), I've been posting various UK articles and comments for a reason.
Suppose Timothy Geithner announced a new program that would tax every family $10,000 dollars and give the money to Wall Street banks and hedge funds. (Any resemblance between this hypothetical program and real world programs is purely coincidental.)
We would expect the stock of Wall Street banks and other financial sector firms to rally based on the anticipation of higher profits. Is this good for the economy? It's not in any obvious way. After all, we can always tax people more to raise profits for Wall Street, but that doesn't help the economy.
Reporters should remember this when assessing Wall Street's response to the plan proposed by Geithner for buying bad assets from banks. The larger the subsidy, the better the news for Wall Street. It's not clear that most of the public should be happy about seeing more of their tax dollars going to Wall Street.
DIPing to China says:
Today, 9:56:32 PM
“Brinkmanship."
Brinkmanship maybe. Its not Russian brinkmanship, which is how we come to know the word. This is the turning point. In '44 -46 the US came to the 'rescue' of Sterling, as the global currency base, a right they won in a war with Spain and the Dutch. This time round China will reach for the right to control the global currency base, but only reach after they have the situation in hand. Like now.
Son of mp just brought this interesting bit of intelligence to my attention. It was posted on a machinist board this evening. It starts off talking about the price of aluminum scrap and ends up talking about ALCOA.
Enjoy.
"It came down to .12/lb about 3 monts back here in Florida. It was at a high of .66/lb last summer. I have been holding onto the solids for some time now but I am running out of room and am going to have to let them go at .25/lb soon."
"My raw material prices have dropped considerably for a contract I have in house which means a couple extra bucks in the bank on that job."
"My scrapper doesn't know how much longer they can hold on. Apparently, Alcoa is in to them for close to 100k and can't pay until the big three get their bailout and pay Alcoa. That's the story I'm getting at least. (They pay me cash when they pick up so I'm covered)"
"It amazes me that it takes such a small chain for the auto industry collapse to affect a couple man shop in Florida!"
Son of mp just brought this interesting bit of intelligence to my attention. It was posted on a machinist board this evening. It starts off talking about the price of aluminum scrap and ends up talking about ALCOA.
Enjoy.
mp - I just won a contract for a company to produce formed parts for a large aerospace 'tier one' to Boeing & Airbus... we originally quoted our local metal warehouse 'supplier'... the tier one said no dice and hooked us up with ALCOA direct as they buy TONS from them. The local metal service center about had a coronary - they are sitting on a warehouse FULL of metal bought at super high mid-2008 prices and NO ONE will touch it. If they sell at current low prices they file BK... the other option is to hold off and hope they can sell it for what they paid (won't happen).
Salvage ops are in the same jam but reverse - bought from scrappers & machine shops at high price & the smelters won't pay that - it is happening everywhere simultaneously.
I'm a rank amateur compared to a lot of people on this site, but I sensed this time was coming a long time ago. Three years ago I wondered what was going to happen when all the HELOC money ran out. Now I am wondering what will happen when everyone finally loses faith in the system. I have a terrible feeling everything could easily collapse into chaos shortly.
Felix Salmon links to a post by Nemo offering a numerical example of the subsidy provided by the “Geithner put.” I like it — because it’s almost identical to my own example. That’s not a criticism, by the way: the natural way to think about these things is in fact in terms of simple two-state numerical examples.
"we have $100 Trillion in US $ and they're going to be work about 10 Renminbi per trillion in a couple of years, so we want to try trading them for something worthwhile"
"Dark Ages on the horizon?" The Dark Ages would've been a hell of a lot more interesting with an Internet. The Inquisition website alone would have been fascinating enough to make up for the Plague.
London Banker some months back mentioned that there were a lot of behind the scenes moves afoot in the direction of abandoning the dollar as reserve. I remember someone saying that the G20 summit in Nov with Bush would produce no results (the guests in DC would just be polite, but that in the corridors the deal-making would speed up).
I wonder if we are seeing more of that process unfold now. The problem with these sorts of things is that they rapidly spin out of control and get, as they say, "disorderly".
Not too late for a bond crash.
Just remember... the 1930s gave us FDR.. but the 1930s gave europe hitler.
don't think it can't happen here if this spins out of control
Yup - that is always the real worry... econ problem spills over into really serious socio-political nightmare. The former is only money the latter is lives.
"But they have all the money and manufacturing (!!!)"
Unfortunately for them we could cut off virtually all raw-materials and energy sources that come from outside their country in a heartbeat.... bomb every pipeline.. sink every ship.
I just don't see a shooting war happening.. china wouldn't have a prayer of anything buy grinding us down defensively....
All those trillions we sent to the pentagon weren't totally wasted.. ... people don't realize just how far ahead the US and UK are in sub tech
I also post comments to an irc channel as they appear on haloscan. Click for a web irc interface: Mibbit IRC client widget (Or join the irc server directly: irc.realize.org:9996 #calculatedrisk)
CRbot would now like to sing a little song for all his fans, and it goes something like this:
Benny... Benny... give me your answer... do. I'm.. half CRAZY... all for the love... of you. It won't be a ... stylish marriage. I can't... AFFORD... ANYTHING TO EAT... MUCH LESS A FRACKIN CARRIAGE!!! But you'll look sweet... --BOT SO HUNGRY!-- upon the seat... Of a HOOPAJOOPS built for two... families.
I'm sorry Ben, I can't let you do that...
Rally mode + Printing Press == does not compute... does not-- com--- com... puttttrrrrhgh.
Congratulations Nemo. Even my wife knows about Krugman and was relaying his commentary on late afternoon NPR.
You do have a well thought out site.
After checking in tonight, I see that the practical effects of this will change tomorrow's to-do list. So with G 20 meeting in early April, look for the setup more and more in the coming two weeks.
I'm going to be doing an Adult Church Class on what's going on and what all of this means. Based upon the SDR discussion, I can visualize the response of some who see it as one world currency...(FWIW, I don't).
"Since the statement by the FOMC neglected to specify whether the purchase would be of fresh Treasuries, the possibility cannot be ruled out that the Federal Reserve intends to purchase Treasuries that have already been issued. And in that case there is the possibility that the Federal Reserve has promised to purchase a part of China's holdings of U.S. Treasuries in return for assurances that China would not precipitate a premature destruction of the USD."
In establishing a new currency, or new world order, same thing, The Three big piles of chips at the table are 1) production capacity (Asia) 2) energy reserves OPEC/Russia/Canada/Ve. 3) The Segmented Market Control (divided between EU/USA). What am i missing? To simplify..
"to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.
Superbasket of commodities, paper currencies too until they wither and die. No need for central banks. Open source number system available to anyone with broadband anywhere in the world. Backed by the full faith and credit of every honest businessperson in the world. I've been through this before.
So after reading Nemo's post, then the latest plan has the FDIC insurance fund taking the hit on the toxic assets in a creative way, thereby avoiding taking over the banks in the usual FDIC way. Does this mean the toxic banks with the toxic assets can continue on their merry little way making the same mistakes or whatever you call it-again. It would seem the good banks who always pay more than their fair share then do not get the opportunity to take over the toxic bank, like what happens on Friday Happy Hour at the FDIC. It would seem that the smaller community banks with the more traditional loan portfolios are getting the short end of the stick here. Maybe it will work. Of course ultimately the taxpayer may have to bail out the FDIC since the toxic asset losses in the possible low trillions might make the FDIC insurance fund insolvent.
One last thing before this thread dies... I find the Chinese 'threats' interesting... NOTHING is stopping them from selling some of their USD assets and buying other currencies in the basket... they can do it today. Why don't they? Because they know it slams their US focused export sector more than it already is.
Until the Chinese decide they no longer want the US as their consumer of last resort they can't do squat except buy more USD assets. That holds true EVEN IF there is another reserve currency... if they want to continue to run huge surpluses with the US then they have to find ways to sterilize those USDs they have 'earned'. If they don't the imbalance pushes the RMB higher relative to the USD... It is one or the other.
It blows my mind that any article covering this topic fails to mention that first and foremost. FT should know better.
One last last thing - forget about 'world currency standars' - stop pegging and let the forex work. If you want include gold & silver - not as another stupid pegged standard but as 'neutral floating currency' with the others. Let them all float.
It also blows my mind that people who claim to be 'pro-market' want gov'ts to set some 'standard' or 'peg' for their currency vs. some fixed unit of a commodity. Let them float - this is one place where market discipline & arbitrage would work wonders.
The conflicts coming out of China are more interesting. It's a sign of factional division - either they support the dollar or don't. But 2 contradictory statements in one day point to disarray in the government.
[i]Until the Chinese decide they no longer want the US as their consumer of last resort they can't do squat except buy more USD assets.[/i]
Dryfly, maybe you can explain this to me. I don't get why our consumption of Chinese goods is so valuable to the Chinese if we can't pay for it.
It would be like if I owned a business, and my main customer was in financial trouble. They are getting behind on their bills, and I insist that they pay me before they order more from me. The customer threatens to take their business elsewhere. Does this upset me? No! They can't pay, so they are no longer a good customer. If I keep doing business with them, my business will weaken as well.
How is this any different than the US and the Chinese? There is no way that we can pay our debt with honor. Our options are default or inflation. How is it in their best interests to keep propping us up?
Sara R says:
"me. I don't get why our consumption of Chinese goods is so valuable to the Chinese if we can't pay for it"
Effectively it's a job creation and stability scheme for the Chinese population. 'Everyone' has a job, 'everyone' is employed making and exporting !! The fact the money to pay for it all it loaned to the client is a subsidy to produce. Now in the long term it gets interesting, is this a strategic goal of the Chinese communist party ? After the net importers become fully dependant client states of the exporter, what happens then ?
Dryfly, maybe you can explain this to me. I don't get why our consumption of Chinese goods is so valuable to the Chinese if we can't pay for it.
Jobs - they have [or had & will maybe have again] something like 300-400 MILLION low skilled rural workers who need better standards of living... the only way they get there is through cash money jobs [not the collective farms they used to work]... so the Chinese gov't [CCP] have done everything possible to make that happen & the export trade was the way they did it [fastest bang for buck].
The apparatchiks were never concerned about making money on the dollar assets they bought - they just needed to cycle the dollars back in such a way they didn't cause inflation internally in China OR increase the value of their currency - either or both would strangle off the export trade.
To them it was all about jobs. A political decision NOT a purely economic one. That is where US investors misunderstand Chinese motives - they can't GROK that concept.
It just seems awfully convenient for Americans to think that Chinese don't really want to consume their own goods. Perhaps it is true; I certainly don't have an insider's view of China. Unless the Chinese have some religious conviction that their own people should be productive but not enjoy the fruit of their labor, I don't see how this situation can last much longer.
So, we know that the war starts with a battle to control the global monetary system, a battle that is never-ending. Control global trade. The latest version of the Bank of England for this century is about to be Shanghai, and they have a cultural advantage for world governance, politeness.
GREAT! That means international finance Jewry can rule undisputed over the world economy very benevolently and in a just fashion as they have in the past 200 years.
That Chinese guy is just some random conspiracy-minded blogger, right?
This comment thread has been HALO-IZED by CRbot.
http://realize.org/cr/halokit.php?halourl=http://www.haloscan.com/comments/calculatedrisk/6059403382475416990
Embattled bank JPMorgan Chase, the recipient of $25 billion in TARP funds, is going ahead with a $138 million plan to buy two new luxury corporate jets and build "the premier corporate aircraft hangar on the eastern seaboard" to house them, ABC News has learned.
JPMorgan Chase To Spend Millions on New Jets and Luxury Airport Hangar - ABC News
Tom Stone writes:
How do I find private messages?
Tom Stone
Try your spam filter - on whatever you used for an email address to post comments
Um...this strikes me as not good.
unwinding the twin helix of dollar and military hegemony sure is going to be fun. it'd be like going through cheap credit withdrawal.
From the previous thread :
The only ones who think that the currency of a country which lead it's financial system into desaster and is now, via monetisation, ruining it's currency should be the world's reserve currency are (you guessed it) born and breed dopes.
My prediction : America soon will be kicked out of the G20 ! Hihi.
just a short message to Ben.
Bretton Woods: ChiCom Edition
What would we call this new currency? IMFeros? IMFnars? IMFmarks? IMFuans? IMFminbi?
Would this be an actual currency? That we could use to protect ourselves as individuals?
From the essay:
Why do I read multiple subtle digs at the US in this essay? Which is well written and makes sense to my limited brain
On the one hand??the monetary authorities can not simply focus on domestic goals without carrying out their international responsibilities??on the other hand??they cannot pursue different domestic and international objectives at the same time. They may either fail to adequately meet the demand of a growing global economy for liquidity as they tries to ease inflation pressures at home, or create excess liquidity in the global markets by overly stimulating domestic demand. The Triniffin Dilemma, i.e., the issuing countries of reserve currencies can not maintain the value of the reserve currencies while providing liquidity to the world, still exists.
Well there goes my savings, since I have no idea what to invest as a value "safe haven"
Gold!!!
Werner, How's your Arabic?
Dude has clearly been rereading "Dollar Crisis", Richard Duncan's 2003 book.
That was the first time I'd seen the IMF's SDRs suggested as an alternative global reserve.
Nemo says:
“That Chinese guy is just some random conspiracy-minded blogger, right?
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Yeah, he is called G20 and IMF.
"What would we call this new currency? IMFeros? IMFnars? IMFmarks? IMFuans? IMFminbi?"
IMFossible Dream.
Rob Dawg says: History never disappoints: Timothy Franz Geithner = George Brinton McClellan<br/><br/>Except McClellan was just a timid fool. Geithner is a damn traitor.
The young napolean was also better looking and a confident public speaker albeit a narcissistic fool.
We could call the expanded IMF SDRs... Loonies!
China is recommending an enhanced SDR (special drawing right) based on a larger basket of currencies. Keynes proposed the Bancor based on a basket of commodities back when the IMF was being created.
Although I disagree with many of Keynes ideas, a basket of commodities makes more sense to me than currencies. Go Keynes!
Werner,
It must suck having to have spent all that time learning English and find out your new masters won't speak it as well as you. It won't matter as long as they keep everything in order I guess.
reptillian says:
“Would this be an actual currency? That we could use to protect ourselves as individuals?
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Nahh, you keep your stinking dollars !
ups, meant sinking dollars, hihi.
Well there goes my savings, since I have no idea what to invest as a value "safe haven"<br/><br/>Gold has worked for hundreds or thousands of years. Assuming that anything pother than food or bullets has "real" value when were done with this.
ova says:
“Werner, How's your Arabic?
~~~~~~~~~~~~~~~~~~~~~~~
Not as good as my english. But that may change !
(looking forward to a trip to Abu Dhabi.)
So one world currency right? Right....
I feel like I've entered the twilight zone where the tinfoil hat stuff of the Amero/one currency from two/three years ago is now out in the financial press. How likely would a world currency have been with a non impaired U.S. credit system. Geez, from sci-fiction/no chance in hell to open discussion by China.
I thought maybe they would keep accepting trillions of dollars. Geez, I was gonna phone that guy to see if he would accept my paper.
ova says:
“Werner, How's your Arabic?
~~~~~~~~~~~~~~~~~~~~~~~
Not as good as my english. But that may change !
(looking forward to a trip to Abu Dhabi.)
What you pimpin this trip?
How about other countries not depend on some third party to manipulate their currency against? Nobody forced the Chinese to put all their trade surpluses back into USD starting back in 2004. If China had not been manipulating its currency, the global economic picture would be a lot different today. For instance, the yuan would be a lot higher, which would have negated a lot of the labor cost advantage which drove shifts of production to China. This is a big, self-serving nothingburger from the Chinese.
Big and self serving,but not a nothingburger.
Werner - you work for MB don't you!
EvilHenryPaulson says:
“We could call the expanded IMF SDRs... Loonies!
~~~~~~~~~~~~~~~~~~~~~~
Would still be better than US-dollars.
You missed the joke
It's nickname would be fitting for a currency managed by the IMF
"Werner - you work for MB don't you!"
Can't you imagine Werner throwing a loose bolt into the door frame just to make the eventual American buyer go crazy wondering what's making that rattling sound?
ova says:
What you pimpin this trip?
~~~~~~~~~~~~~~~~~~~~~~~~
Sorry, can't understand your american slang.
CR- "This is just a suggestion for the long term ..."
You may or may not recall that Conjure said a few months ago that this was coming.
And it may come sooner than you think.
"My prediction : America soon will be kicked out of the G20 ! Hihi."
Now THAT would be funny! I think people quickly forget just how much of the worlds' economy is driven by the US.
It's pretty close to a nothingburger that's for sure: The parties calling for a change in currency regime are not considered any more trustworthy internationally than the US and, perhaps more to the point, they don't trust each other either. But the jawboning underlines a point I think the US's international creditors won't back down on IMHO and that is, if the US expects time and room to monetize it's debt it is not going to be allowed to give the international community a second haircut by threatening the bonds of big money center banks.
The basket of currencies idea has been around for decades, but nobody has pursued it seriously. You'd have to have a clearing house, and some way to agree on the value of the exchanged stuff in the basket. I can't see the major countries doing this, if there were a big advantage to each individual nation, it would already be in place.
The real meaning of this piece, it seems to me, is Chinese grumbling about getting tied to Treasuries. If the dollar goes down, our exports get cheaper and more competitive with the Chinese, while they still hold the bag. They're screwed, but there's not much they can do.
China is screwed? They have real growth, produce 10 times more engineers than the US every year and have a huge surplus. The US creates money out of thin air to try and paper over all its problems. When the rest of the world turns its back on the greenback then we will see in 5 years who is screwed.
You should read up on the Great Depression. But in this case replace US with Germany of the 1930s.
I find myself missing the lookback comment about channeled commentation...
mp, ya'mean the love we once new is now at an end?
gold, gold, gold
It was good enough 5000 years ago. No matter where you were in the world, all civilizations understood its intrinsic beauty and scarcity (the Pharoahs were buried with it, the Mayans had legends about it, Buddhas were made of them, and Europeans explored the globe for it). And Ben Bernanke can't print it.
> gold, gold, gold
I for one would not be crazy about handing our monetary system over to dentists and semiconductor manufacturers, let alone miners in corrupt african countries. Gold prices have been outstripping inflation for decades now, it's clearly becoming more scarce as more industrial uses for it are found; our currency would be constantly deflating using a gold standard.
Pharoahs also used to use 1000s of man-years of slave labor to build tall megaliths. The mayans had enormous deposits of gold, but it didn't save them from iron weapons.
I am not criticizing gold as a store of value, just as a monetary backing. Two different things.
There is a big ocean between here and there.
It good times a worldwide currency union might work. In bad times, well we have the Euro. Will the Germans support the Spanish and Italians in order to the protect the Euro? We'll soon find out.
"They're screwed, but there's not much they can do."
Like hell they are. They're in the drivers seat now.
"You may or may not recall that Conjure said a few months ago that this was coming.
And it may come sooner than you think."
I don't think many Americans know what this means - i.e., they don't know what a reserve currency is - and of those that understand the concept, few appreciate just how big the impact such a shift would have on our standard of living.
The Latest from Ritholz:
7% Market Gains
damn chinese
we let them loan us a couple trillion to keep our greed alive
and where is the gratitude?
damn chinese
we let them loan us a couple trillion to keep our greed alive and where is the gratitude?
LOL +1
ova says:
“Werner - you work for MB don't you!...
~~~~~~~~~~~~~~~~~~~~~~~
No, never did. You schould know that I am a) retired after b) working for an american company.
I'm sensing an acceleration in the rate of change, perhaps analogous to a chain reaction or phase state transition.
We may very well wake up soon to the news of a global run on the dollar. All fiat currencies are based on confidence, and right now the criminals in the U.S. government are hell bent on protecting their bankster cronies.
Can't you imagine Werner throwing a loose bolt into the door frame just to make the eventual American buyer go crazy wondering what's making that rattling sound?
ATM card and $19 in the
I can see him scratching little tiny hakenkreuz (swastikas) and giggling like a fool
"Big and self serving,but not a nothingburger."
The dollar will fall someday. In your estimation, what will precipitate that event?
"What would we call this new currency? IMFeros? IMFnars? IMFmarks? IMFuans? IMFminbi?"
How about MF Dollars, or MoFo Dollars colloqially?
Werner is not the pimp...
Werner,
Really? Why so bitter then?
Senate push over AIG bonuses appears to lose steam
UPDATE 1-Senate push over AIG bonuses appears to lose steam
| Reuters
That's the corrupt bunch of bastards I know and love.
Werner, If you got past the juvenile bitterness you would be someone who probably is worth listening to.
I thought I saw an announcement this morning that the Chinese had faith and confidence in the U.S., and were going to continue buying Treasuries?
Was that a line just for today's pump job?
YouTube - Willie Nelson - Me and Paul (At The Backyard Show 2008)
just wanted to pay one for me and Paul, Willie still owes the IRS.
RockyR says:
“"My prediction : America soon will be kicked out of the G20 ! Hihi."
Now THAT would be funny! I think people quickly forget just how much of the worlds' economy is driven by the US.
~~~~~~~~~~~~~~~~~~~~~~~
Gaahhhh. You obviously have not seen the recent Peter Schiff video (Jesse had the link : http://blog.mises.org/archives/009620.asp)
He compared America with a certain railway-car. Watch the video, it really is funny and insightfull.)
P.S. Have you ever seen an American really pay for what he buys ?
You know, real customers do pay you, Americans just pay you with (additional) credit.
omg. Nemo is referenced in the NYTimes by Krugman.
"Nemo is referenced in the NYTimes by Krugman."
What the? Perhaps there is a future after all... I hope and pray that Timmy gets worked selling this to the House.
You should read up on the Great Depression. But in this case replace US with Germany of the 1930s.
We don't have any good bratwurst either. Or potatoe pancakes. So I guess we can't be Germany. You think maybe we can be Ireland?
Who/what is conjure? Is it a reference to the movie "Three Days of Conjure"?
emo- meant that as a compliment. came out wrong, long day.
Woo Hoo! Go Nemo!!!! He is one of my favorite commenters over here.
Holy crap, Krugman linked
to my blog.
Now I feel embarrassed by my various unhinged rants...
And my DSL line is kind of pinned.
The last thing the Chinese want is a run on the dollar. They're merely putting themselves at the head of the table going into G-20. Think about it: wouldn't 18 folks at that table LOVE a new currency regime? The Chinese want to take a look over the next hill, and signal to everyone that they're looking, but for now they'll help re-inflate this saggy-ass bubble.
Yeah, here it is; are these Chinese petulant school girls or something? Make up your mind, girls.
China to Keep Buying Treasuries, Top Official Says (Update1) - Bloomberg.com
You should read up on the Great Depression. But in this case replace US with Germany of the 1930s.
The parallels to 1930s Germany escape me. 1930s UK, on the other hand....
mark says:
“Who/what is conjure? Is it a reference to the movie "Three Days of Conjure"?
Conjure is a greek oil shipping tycoon who used to post here. Rumor is he bought an atoll in French Micronesia where he is awaiting the coming of the man in black.
Thanks, I think. So mp has just assumed the role of Conjure, or does he actually pass along information from Conjure, or it's all a joke, or... I did figure out that the "man in black" refers to Johnny Cash.
Sorry people if I offended anyone. I am just really freaking bitter, angry, and a touch worried about what is coming tonight. Well, maybe more than usual.
I'd be in favor of an international currency as long as it circulates so dumb fucks like me can hold it if they want something of relatively stable value. The Euro was/is a great idea and the MFbuck seems like an even better one.
The problem is that you need a mechanism that prevents or mitigates huge fluctuations of debt/inflation of individual national components in pursuit of national advantage (like the EU Central Bank is supposed to do, but doesn't do well). That's the fatal blow to a single currency.
On the other hand, a very few countries that control essential commodities and generate surpluses could actually impose such a system. Think OPEC plus China/Japan/Korea.
To replace the dollar one needs to replace Treasuries. The ultimate value of a currency is that the real value behind it is backed up by a country that has the sufficient taxing authority, sufficient enough that the market values the debt of the country that controls the currency. The liquidity of the debt market then makes the currency valuable. This has been a quite striking difference between the euro versus the currencies that are uniquely tied to one country, i.e. Yen and Dollar.
Essentially to have a new world currency we need a new country that issues debt that is more secure than the US. The only country that could do that is China, and they are still a long way off.
I hope he referenced your post AND mentioned you're always first.
I do not know what will "cause" the dollars fall.WW1 was blamed on the actions of gavrilo prinzip and his little .32.At some point there will be a shock,perhaps minor and everyone will notice that the emperor has genital warts.A lot of people would call Bretton Woods the cause,it does not really matter.We know it is coming,and probably soon.My guess? sometime before Michael Jackson announce he is having Dick Cheney's Love child.
hmmm, how will they accomplish this? precious metal backed world currency perhaps????
The US Dollar is backed by a fleet of ohio class submarines.... and the saudis..... and don't think people don't know that
Also, (I am anonymous above, just learning that i have to leave my name too) if the euros ever combined their fiscal policy with the euro, then they could also do it. However, we could never have a world currency unless we had a world fiscal policy coordinator.
Well, the Euro is in worse shape than the dollar. Eurozone banks made subprime loans to eastern European debtors in euros, but the borrowers earn the cash to pay back those loans in their own currencies, then trade them in for euros to make their payments. These same Eastern countries are experiencing falling currencies, and shrinking gdp. So defaults are likely to be greater than in the US. The euro is going to implode before the dollar. Yes, someday the dollar will weaken, but not until the pound and the euro get hammered.
In addition, why would nations/entities other than the US give up the ability to devalue their currency in an economic pinch. One of Europe's big problems now is that weak countries like Spain and Italy can't devalue to make their output more competitive. We've seen currency intervention from Asian countries since this crisis began to try to support their export sectors. I don't see Japan buying off on giving up the BoJ's control over that country's currency.
If China is serious about exiting the dollar, there's nothing stopping them. They could switch into euros. Of course, the dollar would plummet and so would China's holdings of dollars. There's no big block trade they can execute to offload their dollars.
my one world currency is USO. sucks that its still paper, but at least when the bond vigilantes in the Middle East start stirring, I'm somewhat hedged.
The US Dollar is backed by a fleet of ohio class submarines.... and the saudis..... and don't think people don't know that
If fear of us nuking them is what is keeping them civil then we are not worth squat as a country, a people, or an ideal
"If fear of us nuking them is what is keeping them civil then we are not worth squat as a country, a people, or an ideal"
New to the party, Nova?
I hear your fear. I got that deep, gut wrenching fear today for some reason. Hopefully it was a fluke. I sold, anyway.
"Essentially to have a new world currency we need a new country that issues debt that is more secure than the US. The only country that could do that is China, and they are still a long way off."
What does china even do but exchange worthless plastic crap for worthless dollars? Seriously.... if the US goes down who is going to buy their crap?
The plans are being worked up as we speak on Rob Dawg's now-secret blog. What schemes are they plotting? What...?
ova- "Conjure is a greek oil shipping tycoon ..."
Please. Conjure is a Scot. You should know better.
"If fear of us nuking them is what is keeping them civil then we are not worth squat as a country, a people, or an ideal"
Can't find anything to argue with there... but remember we are the only people on earth who have ever nuked anyone... and we did it twice.
Why do you think we spend so much money on defense?
As an aside you'll know they are serious about cutting spending when defense (by far the biggest waste area by a country mile) is put on the table
mp,
wow, i thought you were...er..gone...
Dolla no good.
Buy dolla, half houl lata, hungly again.
Conjure is a Scot. You should know better.
Here's Scotland. Here's Greece. And here's the bloody sea!
I posted earlier today on remarks made by one of Zhou's deputies.
"Hu’s on First — Did the Vice Governor Really Commit China to Buying More US Treasuries?"
Nemo says:
“Holy crap, Krugman linked to my blog.
~~~~~~~~~~~~~~~~~~~~~~
Your first step to a Nobel Prize ?
I root for you.
All hail Nemo!! Not only a Perl wizard, but a finance whiz as well. When a Nobel prize-winning economist links your post and compliments it, you can officially consider yourself a whiz. Congrats...
Congrats Nemo, nice job number crunching.
I'm with you Yalt, I've often thought that the U.S. looks very similar to 30's Britain/U.K. (net importer, high debt from WWI, advanced industrial base, forced to devalue pound) while China looks like the U.S. did (net exporter, industrial powerhouse, little fiscal debt).
Great Depression in the United Kingdom - Wikipedia, the free encyclopedia
"unwinding the twin helix of dollar and military hegemony sure is going to be fun. it'd be like going through cheap credit withdrawal."
We all win if we cease being a military empire.
That's the long term.
In the short term, empires kick like hell when they're going down.
"In the short term, empires kick like hell when they're going down."
I kind of though the go down with a whimper. i.e. Romans and Britain.
Are we to the point where every action by the FED creates an opposite reaction negating the FED's effectiveness ?
How do I know Conjure is a Scot? First, he told me. Second, every year he puts on his kilt for Burns Day.
That how I know Conjure is a Scot.
"The authorities have a clear strategy to address the challenges they face. They have already adjusted the exchange rate and put in place tight fiscal and wage policies. The measures already taken and announced are strong and, with resolute implementation, will be sufficient to restore stability. Together with planned structural reforms in key areas, these measures should help return the economy to a higher growth path by 2010-11."
Welcome to 1984.
Nemo, well done!
Conjure sends his regards.
from The Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System. recommendations:
Commission on Financial Reforms - President of the 63rd Session of the UN General Assembly
addressed if there is a better way of dealing with international economic risks facing countries than the current system of accumulating international reserves. Indeed, the magnitude of this crisis and the inadequacy of international responses may motivate even further accumulations. Inappropriate responses by some international economic institutions in previous economic crises have contributed to the problem, making reforms of the kind described here all the more essential. To resolve this problem a new Global Reserve System—what may be viewed as a greatly expanded SDR, with regular or cyclically adjusted emissions calibrated to the size of reserve accumulations—could contribute to global stability, economic strength, and global equity. Currently, poor countries are lending to the rich reserve countries at low interest rates. The dangers of a single-country reserve system have long been recognized, as the accumulation of debt undermines confidence and stability. But a two (or three) country reserve system, to which the world seems to be moving, may be equally unstable. The new Global Reserve System is feasible, non-inflationary, and could be easily implemented, including in ways which mitigate the difficulties caused by asymmetric adjustment between surplus and deficit countries.
Conjure must have lost all his money shorting USTs so now he's back to spew his self proclaimed "sage" advice....
Yeah, that's pretty incredible Nemo. I'm impressed. I couldn't think of anything pithy to say without gushing, so I tried to refrain...
congrats!
Hey mp --
Thanks. I asked this earlier but you may have missed it...
I am curious whether Conjure has any updates on his "bond crash clock strikes midnight" call. If the yields never spike because the Fed keeps them down, does that count?
CR- The original proposal was made by Russia a week ago.
Russia wants to start debate on new reserve currency at G20 | Top Russian news and analysis online | 'RIA Novosti' newswire
It was discussed on this site.
Now China expressed its support of this idea.
I would not be surprised if Brazil were for it too.
India is in a more delicate position as it really needs the US support vs. Pakistan.
That anonymous at 9:23 was me
Sorry
It's hard to believe that shareholders and management of regional and smaller banks that are not about to be taken over by the FDIC are not outraged by this plan. I would think that the phones of Congresspeople are ringing with angry bank presidents complaining. The reps and senators are more likely to listen to these calls than the ones from the regular citizen; as these are likely campaign contributors.
"It's hard to believe that shareholders and management of regional and smaller banks that are not about to be taken over by the FDIC are not outraged by this plan. I would think that the phones of Congresspeople are ringing with angry bank presidents complaining. The reps and senators are more likely to listen to these calls than the ones from the regular citizen; as these are likely campaign contributors."
I think it likely that the contributors are "in plan" and less likely to call.
Nothin' beats an expert.
Right?
Anonymous says:
Today, 02:07:49
“hmmm, how will they accomplish this? precious metal backed world currency perhaps????
~~~~~~~~~~~~~~~~~~~~~~~~~
Very very very very good idea !
Basel too - I bought into USO as MY reserve currency as well. Since then oil is up from $48 to $52, and USO is down 25%. Fucking contango ate me alive. There's gotta be a better way...
@Nemo
Conjure and I are still convinced the long end will collapse but, sure, Treasury intervention doesn't help.
We still think it will happen. Regardless.
Conjure and I are still convinced the long end will collapse but, sure, Treasury intervention doesn't help
Updating yesterday's post - long bond yield
Jan 02, 2009 2.83%
March 02, 2009 3.64%
March 23, 2009 3.69%
So much for the Fed's decision to buy bonds
I would be curious to hear Michael Pettis' view on this pronouncement. He's usually pretty insightful on Chinese politics and the economy. China Financial Markets
The russians might be the most recent example of an empire declining... and that was relatively peaceful considering the potential calamity that could have occurred...
I dont know if the romans really went down with a whimper.... then again some would say they just moved east and lasted another 1000 years
Yeah... but Constantinople is not exactly Rome though is it? Dark ages on the horizon?
Or just MFers.
Well that's one way to avoid a war. But the US will not agree to a level playing field, they cannot. Its a good thing the IMF is not a level playing field.
Don't comment much, but CONGRATS NEMO, that's got to be a great feeling to be linked by Krugman...
darwin1858 &al. --
Thanks for the kind words and well-wishing. Seriously, it is making me all nervous and self-conscious about all of my half-informed speculative rants...
Which is stupid I guess, because the whole point of the pseudonym was to be able to say whatever came into my head.
All hail Nemo!! Not only a Perl wizard, but a finance whiz as well. When a Nobel prize-winning economist links your post and compliments it<br/><br/>No offense intended to Nemo, but it is only Krugman. He's capable of being quite the moron, see http://liberative.blogspot.com/2008/08/mythical-soc
FFDIC was right. It really is FFDIC.
All hail Nemo!! Not only a Perl wizard, but a finance whiz as well. When a Nobel prize-winning economist links your post and compliments it<br/><br/>No offense intended to Nemo, but it is only Krugman. See http://liberative.blogspot.com/2008/08/mythical-social-security-crisis.html
"No offense intended to Nemo, but it is only Krugman."
ONLY!?!?
New currency name? InternationalMotherFuckerBuckeroos? FUBARoos for short....
The Latest from Yves:
China Calls for New Reserve Currency
sorry about the double post - first got mangled.
I have been touting the idea of the one-world currency as our only solution for months.
everyone thought I was nuts.
........ok
Not to brag, but it's been my handle here for close to a year, ever since Broward dismissed the idea
:-P
I guess the Chinese don't believe in "a fool with a plan" theory.
""What would we call this new currency? IMFeros? IMFnars? IMFmarks? IMFuans? IMFminbi?"
IMFers?"
How about MFers?
Nemo - Can I have your autograph?
mp - he also complains about the "cool winds in the hot brush" after he dons his kilt
goldbug says:
Today, 8:58:36 PM
“> gold, gold, gold
I for one would not be crazy about handing our monetary system over to dentists and semiconductor manufacturers, let alone miners in corrupt african countries. Gold prices have been outstripping inflation for decades now,
I did my own calculation last week, using the bank of Canada inflation calculator, between last cycle's '80s high and 2009. That inflationary adjusted price today would be $1,600's/oz based on a straight line 3.4% inflation.
or IMFU?
Australia isn't keen on the global currency basket idea:
Geithner Says Australia’s Rudd Is ‘A+’ on Rescue (Update1) - Bloomberg.com
"I have been touting the idea of the one-world currency as our only solution for months"
The plan has been in process for several years along several fronts. From Sept, 2006 -
http://www.realmeme.com/roller/page/realmeme/?entry=real_estate_bubble
"Most Americans also don't realize that the major international blocs have been planning to abandon the US dollar as an international currency for several years. The Euro is one example, but the Asian and Arab regions have their own schemes underway."
Brinkmanship.
Quantitative Easing has led the Chinese to call for a new reserve currency. The US will respond with threats of repudiation. China has already used as much of their dollar reserves as possible buying real assets, including gold. Seems they have been preparing for this contingency.
China might be the first in line on the dollar panic selling express. I feel this avalanche has started roaring down the mountain. Kinda sucks being at the bottom.
"If things didn't end badly then they would never end." It is rare for the champ to bow out at the height of their power. Usually they'll defend their title until someone younger, stronger and full of surprises knock the champ down and takes the title. Cycles.
Seriously, it is making me all nervous and self-conscious about all of my half-informed speculative rants...
As well you should. Next time you're on Charlie Rose we're all going to sneer and laugh at him sucking up to you.
I'm sure nemo on Charlie Rose would be good, very good, but it couldn't top when Conjure was on the show and forgot to keep his knees together.
TickerForum Error - Unauthorized Request
Time to buy gold ?
Dick Morris says Obama wants this latest Toxic Bailout plan to fail so he can nationalize all the Banks that have received TARP Funds from the Federal Government!!
Obama to Nationalize 90% of all U.S. by late summer!!
Nemo, I got a chuckle out of the guy commenting on your blog who said it wasn't a problem that all we're getting out of this scheme is a market value for a put option plus a security, when what we really want is a market value for the toxic securities alone, because "we can just use Black Scholes" to back out the premium for the option.
So...we don't have enough information and trading is far too thin to allow us to know what the market value of the underlying is, but that won't cause a problem when we try to determine a volatility to plug into B-S because...because...I suppose because we can just pull any number out of our ass that will give us the answer we want and there certainly won't be any data available to suggest it isn't correct.
One of the frustrations of being a teaching assistant was the student who just plugged the available numbers into some formula he'd memorized, though he had no idea where the formula had come from and whether or not it actually applied to the situation at hand. Now I know what happened to those guys after they graduated (from some other department than mine, I hope)--they've been making million on WS drawing bonuses based on mark-to-formula profits.
(Really! Black-Scholes??? The solution to a diffusion problem? Because, obviously, the prices of these toxic securities are just executing the random walk we can expect in a perfect market of perfectly-informed participants trading absolutely transparent commodities.)
"Dick Morris says Obama wants this latest Toxic Bailout plan to fail so he can nationalize all the Banks that have received TARP Funds... by late summer"
That is a brilliant strategy. With the national debt then hovering at about $15T, we will be in a perfect position to absorb the costs of nationalization.
This is not about finance. It's about politics.
"Usually they'll defend their title until someone younger, stronger and full of surprises knock the champ down and takes the title."
As we saw with the Opening Ceremonies in Beijing. Everyone watching on the teevee saw them claim the 21st Century as their own. It was obvious.
Nemo, you know even Santelli toned down his rants after he got quoted.
Good work.
I dont know if the romans really went down with a whimper.... then again some would say they just moved east and lasted another 1000 years
Have you noticed the occurence of British/Scottish/Irish accents around you lately? They've been withdrawing (east), I've been posting various UK articles and comments for a reason.
emo:
Tell us all, "What is money?"
talk yer book bitch..
https://self-evident.org/
Wall Street and the Economy
Suppose Timothy Geithner announced a new program that would tax every family $10,000 dollars and give the money to Wall Street banks and hedge funds. (Any resemblance between this hypothetical program and real world programs is purely coincidental.)
We would expect the stock of Wall Street banks and other financial sector firms to rally based on the anticipation of higher profits. Is this good for the economy? It's not in any obvious way. After all, we can always tax people more to raise profits for Wall Street, but that doesn't help the economy.
Reporters should remember this when assessing Wall Street's response to the plan proposed by Geithner for buying bad assets from banks. The larger the subsidy, the better the news for Wall Street. It's not clear that most of the public should be happy about seeing more of their tax dollars going to Wall Street.
--Dean Baker
DIPing to China says:
Today, 9:56:32 PM
“Brinkmanship."
Brinkmanship maybe. Its not Russian brinkmanship, which is how we come to know the word. This is the turning point. In '44 -46 the US came to the 'rescue' of Sterling, as the global currency base, a right they won in a war with Spain and the Dutch. This time round China will reach for the right to control the global currency base, but only reach after they have the situation in hand. Like now.
a right they (England) won in a war with Spain and the Dutch.
OT
Son of mp just brought this interesting bit of intelligence to my attention. It was posted on a machinist board this evening. It starts off talking about the price of aluminum scrap and ends up talking about ALCOA.
Enjoy.
"It came down to .12/lb about 3 monts back here in Florida. It was at a high of .66/lb last summer. I have been holding onto the solids for some time now but I am running out of room and am going to have to let them go at .25/lb soon."
"My raw material prices have dropped considerably for a contract I have in house which means a couple extra bucks in the bank on that job."
"My scrapper doesn't know how much longer they can hold on. Apparently, Alcoa is in to them for close to 100k and can't pay until the big three get their bailout and pay Alcoa. That's the story I'm getting at least. (They pay me cash when they pick up so I'm covered)"
"It amazes me that it takes such a small chain for the auto industry collapse to affect a couple man shop in Florida!"
OT
Son of mp just brought this interesting bit of intelligence to my attention. It was posted on a machinist board this evening. It starts off talking about the price of aluminum scrap and ends up talking about ALCOA.
Enjoy.
mp - I just won a contract for a company to produce formed parts for a large aerospace 'tier one' to Boeing & Airbus... we originally quoted our local metal warehouse 'supplier'... the tier one said no dice and hooked us up with ALCOA direct as they buy TONS from them. The local metal service center about had a coronary - they are sitting on a warehouse FULL of metal bought at super high mid-2008 prices and NO ONE will touch it. If they sell at current low prices they file BK... the other option is to hold off and hope they can sell it for what they paid (won't happen).
Salvage ops are in the same jam but reverse - bought from scrappers & machine shops at high price & the smelters won't pay that - it is happening everywhere simultaneously.
Enjoy indeed.
China is screwed? They have real growth, produce 10 times more engineers
The problem with China is that there are too many peeoples living there to share the physical productivity of their land.
Canada and China are aboot the same size yet China has 40X the peeps. That's where the grinding poverty comes from.
Nemo is a pseudonym? I just imagined you were a little Japanese guy, almost anime-like....
I'm a rank amateur compared to a lot of people on this site, but I sensed this time was coming a long time ago. Three years ago I wondered what was going to happen when all the HELOC money ran out. Now I am wondering what will happen when everyone finally loses faith in the system. I have a terrible feeling everything could easily collapse into chaos shortly.
March 23, 2009, 8:46 pm
Great minds …
Felix Salmon links to a post by Nemo offering a numerical example of the subsidy provided by the “Geithner put.” I like it — because it’s almost identical to my own example. That’s not a criticism, by the way: the natural way to think about these things is in fact in terms of simple two-state numerical examples.
linked
"we have $100 Trillion in US $ and they're going to be work about 10 Renminbi per trillion in a couple of years, so we want to try trading them for something worthwhile"
"Dark Ages on the horizon?" The Dark Ages would've been a hell of a lot more interesting with an Internet. The Inquisition website alone would have been fascinating enough to make up for the Plague.
London Banker some months back mentioned that there were a lot of behind the scenes moves afoot in the direction of abandoning the dollar as reserve. I remember someone saying that the G20 summit in Nov with Bush would produce no results (the guests in DC would just be polite, but that in the corridors the deal-making would speed up).
I wonder if we are seeing more of that process unfold now. The problem with these sorts of things is that they rapidly spin out of control and get, as they say, "disorderly".
Not too late for a bond crash.
Geithner should give a trillion dollars to the Chinese so that they can buy US treasury. That should help improve confidence.
chaos shortly-it's before
Excuse me, chaos shortly-it's before
I meant to say: It's happened before, so what? Ride it out.
Salmon, Krugman and Nemo
the beginning of a great relationship...
or perhaps an enterprise in the seafood sector???
..........no more options.......Sino-Aemrican war in 2010...........
Jay D. says
"Sino-Aemrican war in 2010"
But they have all the money and manufacturing (!!!)
Well, all you cash hoarders, might as well buy a nice big house.
Just remember... the 1930s gave us FDR.. but the 1930s gave europe hitler.
don't think it can't happen here if this spins out of control
Just remember... the 1930s gave us FDR.. but the 1930s gave europe hitler.
don't think it can't happen here if this spins out of control
Yup - that is always the real worry... econ problem spills over into really serious socio-political nightmare. The former is only money the latter is lives.
"But they have all the money and manufacturing (!!!)"
Unfortunately for them we could cut off virtually all raw-materials and energy sources that come from outside their country in a heartbeat.... bomb every pipeline.. sink every ship.
I just don't see a shooting war happening.. china wouldn't have a prayer of anything buy grinding us down defensively....
All those trillions we sent to the pentagon weren't totally wasted.. ... people don't realize just how far ahead the US and UK are in sub tech
This little dying banana reublic empire has about three more years and it's gonna be toast.
just remember... the 1930s gave us FDR.. but the 1930s gave europe hitler.
don't think it can't happen here if this spins out of control
relax... it's different this time
"Well, all you cash hoarders, might as well buy a nice big house."
If you have all cash for a house why would you buy when mortgages are low? Better to buy when mortgage rates are 15%.
New Thread: Goolsbee Responds to Krugman
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Congratulations Nemo. Even my wife knows about Krugman and was relaying his commentary on late afternoon NPR.
You do have a well thought out site.
After checking in tonight, I see that the practical effects of this will change tomorrow's to-do list. So with G 20 meeting in early April, look for the setup more and more in the coming two weeks.
I'm going to be doing an Adult Church Class on what's going on and what all of this means. Based upon the SDR discussion, I can visualize the response of some who see it as one world currency...(FWIW, I don't).
Godspeed folks.
From Seeking Alpha :
(The Dollar Is Dead -- Seeking Alpha
Hmm, interesting :
"Since the statement by the FOMC neglected to specify whether the purchase would be of fresh Treasuries, the possibility cannot be ruled out that the Federal Reserve intends to purchase Treasuries that have already been issued. And in that case there is the possibility that the Federal Reserve has promised to purchase a part of China's holdings of U.S. Treasuries in return for assurances that China would not precipitate a premature destruction of the USD."
Interesting.
In establishing a new currency, or new world order, same thing, The Three big piles of chips at the table are 1) production capacity (Asia) 2) energy reserves OPEC/Russia/Canada/Ve. 3) The Segmented Market Control (divided between EU/USA). What am i missing? To simplify..
"to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.
Superbasket of commodities, paper currencies too until they wither and die. No need for central banks. Open source number system available to anyone with broadband anywhere in the world. Backed by the full faith and credit of every honest businessperson in the world. I've been through this before.
As we saw with the Opening Ceremonies in Beijing. Everyone watching on the teevee saw them claim the 21st Century as their own. It was obvious.
Reminds me of a discussion I had with a friend at the time:
him: "They had all these people doing the drums in perfect rhythm"
me: "yeah, they're big on that - because they shoot anybody who makes a mistake."
him: "they had like 10,000"
me: "So they started out with 20,000?"
him: "Then they had all these guys in little boxes"
me: "that's something else they got lots of, too"
him: "!!!!!"
So after reading Nemo's post, then the latest plan has the FDIC insurance fund taking the hit on the toxic assets in a creative way, thereby avoiding taking over the banks in the usual FDIC way. Does this mean the toxic banks with the toxic assets can continue on their merry little way making the same mistakes or whatever you call it-again. It would seem the good banks who always pay more than their fair share then do not get the opportunity to take over the toxic bank, like what happens on Friday Happy Hour at the FDIC. It would seem that the smaller community banks with the more traditional loan portfolios are getting the short end of the stick here. Maybe it will work. Of course ultimately the taxpayer may have to bail out the FDIC since the toxic asset losses in the possible low trillions might make the FDIC insurance fund insolvent.
https://self-evident.org/?p=502
One last thing before this thread dies... I find the Chinese 'threats' interesting... NOTHING is stopping them from selling some of their USD assets and buying other currencies in the basket... they can do it today. Why don't they? Because they know it slams their US focused export sector more than it already is.
Until the Chinese decide they no longer want the US as their consumer of last resort they can't do squat except buy more USD assets. That holds true EVEN IF there is another reserve currency... if they want to continue to run huge surpluses with the US then they have to find ways to sterilize those USDs they have 'earned'. If they don't the imbalance pushes the RMB higher relative to the USD... It is one or the other.
It blows my mind that any article covering this topic fails to mention that first and foremost. FT should know better.
"If fear of us nuking them is what is keeping them civil then we are not worth squat as a country, a people, or an ideal"
Bullshit. You use what you got. If they think we "might" be crazy - that's called an advantage.
One last last thing - forget about 'world currency standars' - stop pegging and let the forex work. If you want include gold & silver - not as another stupid pegged standard but as 'neutral floating currency' with the others. Let them all float.
It also blows my mind that people who claim to be 'pro-market' want gov'ts to set some 'standard' or 'peg' for their currency vs. some fixed unit of a commodity. Let them float - this is one place where market discipline & arbitrage would work wonders.
[/end rant]
WTF. Why don't they buy gold or actually buy the basket of currencies that they would base the international currency on?
See how well the Euro is working....or not working, perhaps.
The conflicts coming out of China are more interesting. It's a sign of factional division - either they support the dollar or don't. But 2 contradictory statements in one day point to disarray in the government.
[i]Until the Chinese decide they no longer want the US as their consumer of last resort they can't do squat except buy more USD assets.[/i]
Dryfly, maybe you can explain this to me. I don't get why our consumption of Chinese goods is so valuable to the Chinese if we can't pay for it.
It would be like if I owned a business, and my main customer was in financial trouble. They are getting behind on their bills, and I insist that they pay me before they order more from me. The customer threatens to take their business elsewhere. Does this upset me? No! They can't pay, so they are no longer a good customer. If I keep doing business with them, my business will weaken as well.
How is this any different than the US and the Chinese? There is no way that we can pay our debt with honor. Our options are default or inflation. How is it in their best interests to keep propping us up?
Sara R says:
"me. I don't get why our consumption of Chinese goods is so valuable to the Chinese if we can't pay for it"
Effectively it's a job creation and stability scheme for the Chinese population. 'Everyone' has a job, 'everyone' is employed making and exporting !! The fact the money to pay for it all it loaned to the client is a subsidy to produce. Now in the long term it gets interesting, is this a strategic goal of the Chinese communist party ? After the net importers become fully dependant client states of the exporter, what happens then ?
Dryfly, maybe you can explain this to me. I don't get why our consumption of Chinese goods is so valuable to the Chinese if we can't pay for it.
Jobs - they have [or had & will maybe have again] something like 300-400 MILLION low skilled rural workers who need better standards of living... the only way they get there is through cash money jobs [not the collective farms they used to work]... so the Chinese gov't [CCP] have done everything possible to make that happen & the export trade was the way they did it [fastest bang for buck].
The apparatchiks were never concerned about making money on the dollar assets they bought - they just needed to cycle the dollars back in such a way they didn't cause inflation internally in China OR increase the value of their currency - either or both would strangle off the export trade.
To them it was all about jobs. A political decision NOT a purely economic one. That is where US investors misunderstand Chinese motives - they can't GROK that concept.
It just seems awfully convenient for Americans to think that Chinese don't really want to consume their own goods. Perhaps it is true; I certainly don't have an insider's view of China. Unless the Chinese have some religious conviction that their own people should be productive but not enjoy the fruit of their labor, I don't see how this situation can last much longer.
How many Military industrial complexes are there? Pakistan is one...
So, we know that the war starts with a battle to control the global monetary system, a battle that is never-ending. Control global trade. The latest version of the Bank of England for this century is about to be Shanghai, and they have a cultural advantage for world governance, politeness.
China is really beginning to assert its growing power on the world stage. This is just another step to becoming a superpower.
China Calls for New Reserve Currency
China Calls for New Reserve Currency | plan B economics
A global currency?
GREAT! That means international finance Jewry can rule undisputed over the world economy very benevolently and in a just fashion as they have in the past 200 years.