Archive for the ‘Dollar’ Category


Keynes and Hayek, the Great Debate (Part 1): Nicholas Wapshott – Bloomberg

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If you still don’t get it with regards to the US Deficit, here is an illustration to make it sink in…:

 Get it now?


this is how we got here (courtesy of Richard Russell):

Private and public debt surged during the period from 1971 to today increasing by $50 trillion. During the same period GDP in the US rose from $1.1 trillion to $16 trillion today. Figure the ratio of debt to GDP at about 3 to 1. In other words, it’s taken about $3 trillion in additional debt to produce each additional $1 trillion in GDP.

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MasterMetals: How much gold is traded every day?

“…the volume of gold traded in London is ten times what is implied by the clearing statistics: 10.9bn ounces of gold, worth $15,200bn, changed hands in the first quarter of this year, according to the LBMA’s estimate.

“…That is 125 times the annual output of the world’s gold mines – and twice the quantity of gold that has ever been mined.

“…The 10.9bn figure compares to 1.2bn ounces of gold trades that were cleared – in other words, only a tenth of gold traded on the London market is cleared. About 1.2bn ounces were traded in the form of Comex futures in the same period.

“…The vast majority of the trading – roughly 90 per cent – was in the spot market, rather than forwards, options or swaps.
“…the $240bn average daily turnover in the London bullion market is higher than the global daily turnover of any currency pair except for the dollar/euro, dollar/yen, dollar/sterling and dollar/Aussie dollar, according to the most recent Bank for International Settlements survey

The dollar/Swiss franc, that other great safe haven trade, is worth a mere $168bn a day.”

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According to the Big Mac Index from The Economist, the answer would be no…

 The wages of China bashing

Sep 7th 2011, 18:07 by R.A. | WASHINGTON
YESTERDAY, Mitt Romney, Republican candidate for the presidential nomination, released his plan to invigorate the American economy. It’s mostly a collection of Republican orthodoxy, with one notable exception: Mr Romney declared his intention to get tough with China and push for a revaluation of the yuan against the dollar. The Obama has been reluctant to apply heavy pressure on China toward this end, despite populist criticism of the yuan’s valuation from the left and the right. In that sense, the policy seems like a useful political weapon. As a means to boost the economy, however, its potency has significantly deteriorated.
Kevin Drum wisely points to our Bic Mac index in showing that the yuan may no longer be heavily undervalued.

That’s hardly the final word on the matter, but two trends have contributed to a meaningful shift in China’s terms of trade. One is change in the nominal dollar-yuan exchange rate. Since China resumed a managed appreciation in June of last year, the yuan has risen over 6% against the dollar.

The other is growth in Chinese labour costs. Mary Amiti and Mark Choi note that manufacturing sector unit labour costs in China likely rose by over 4% in 2010, contributing to a sharp rise in Chinese import prices in America. Meanwhile, yesterday’s Financial Times pointed out that rising Chinese wages are already leading some manufacturers to move production outside of China:

Last week, Jonathan Anderson, a UBS economist, released a report after crunching the numbers of the US and European Union’s import data for the first half of 2011. He found China’s light manufacturing share is starting to decline from more than 50 per cent to about 48 per cent. The beneficiaries include Bangladesh (up 19 per cent in exports to the US) and Vietnam (16 per cent). The first half of 2011 “looks a pretty convincing turning point”, says Mr Anderson of a shift in labour-intensive manufacturing to south-east Asia. India and the Philippines, by contrast, which should be “natural destinations” for labour-intensive investment, appear to be sitting out the action, he says.

More yuan appreciation would in many cases simply accelerate the relocatin of labour-intensive manufacturing to other countries. It might also lead to more internal adjustments in China to raise domestic consumption, but as Michael Pettis frequently points out, the exchange rate is hardly the only tool China uses to encourage investment-led growth.
Mr Romney’s China talk might be good politics, but America’s economy will need much more than a floating yuan to get back to full employment.

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>below are some excerpts from Jim Rogers interview:

Dollar will be debased; gold and silver to hit new highs

Chinese economy:

There is some overheating and inflation

setback in urban, coastal real estate is under way

China has been overbuilding ever since I have been visiting. There is at least eventual demand for much of it, but that does not preclude some bankruptcies in the future.

Europe:

I think we are getting closer and closer to the point where someone in Europe is going to have to take some losses, whether it's the banks or the countries, but somebody has to acknowledge that they are bankrupt.

Following is an interview that The Daily Bell had with Jim Rogers:

Jim Rogers: Dollar will be debased; gold and silver to hit new highs
05 April 2011 | http://www.commodityonline.com

Daily Bell: We've interviewed you before. Thanks for spending some time with us once again. Let's jump right in. What do you think of the Chinese economy these days?

Jim Rogers: There is some overheating and inflation, which they are wisely trying to cool – especially in urban, coastal real estate. They have huge reserves so will suffer less than others in any coming downturn.

Daily Bell: Is price inflation more or less of a problem?

Jim Rogers: More. At least they acknowledge inflation and are attacking it. Some countries still try denying there is inflation worldwide. The US is even pouring gasoline on these inflationary trends with more money printing instead of trying to extinguish the problem.

Daily Bell: Is China headed for a setback as you suggested last time we spoke?

Jim Rogers: Did I say a setback or a setback in real estate speculation? I think you will find it was the latter. Yes, the setback in urban, coastal real estate is under way.

Daily Bell: They are allowing the yuan to float upward. Good move?

Jim Rogers: Yes, but I would make it freely convertible faster than they are.

Daily Bell: Will that squeeze price inflation?

Jim Rogers: It will help.

Daily Bell: Why so many empty cities and malls in China? Does the government have plans to move rural folk into cities en masse?

Jim Rogers: That is a bit exaggerated. China has been overbuilding ever since I have been visiting. There is at least eventual demand for much of it, but that does not preclude some bankruptcies in the future.

Daily Bell: Is such centralized planning good for the economy?

Jim Rogers: No. Centralized planning is rarely, if ever, good for the economy. But the kind of construction you are describing is at the provincial level – not the national level.

Daily Bell: The Chinese government is worried about unrest given what is occurring in the Middle East. Should they be?

Jim Rogers: We all should be. There is going to be more social unrest worldwide including the US. More governments will fall. More countries will fail.

Daily Bell: Are they still on track to be the world's biggest economy over the next decade?

Jim Rogers: Perhaps not that soon, but eventually.

Daily Bell: Any thoughts on Japan? Why haven't they been able to get the economy moving after 30 years? Will the earthquake finally jump-start the economy or is that an erroneous application of the broken-windows fallacy?

Jim Rogers: It has been 20 years. They refused to let people fail and go bankrupt. They constantly propped up zombie companies. The earthquake will help some sectors for a while, but there are serious demographic and debt problems down the road.

Daily Bell: The Japanese were going to buy PIGS bonds. What will happen now? Does that only leave China?

Jim Rogers: Obviously the Japanese have other things on their mind right now. I think we are getting closer and closer to the point where someone in Europe is going to have to take some losses, whether it's the banks or the countries, but somebody has to acknowledge that they are bankrupt. The thing that the world needs is for somebody to acknowledge reality and start taking haircuts.

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Venezuela Inflation reading via The Devils Excrement:

Island Canuck inflation Index closes at 59.7% in 2010The MasterBlog

Island Canuck inflation Index closes at 59.7% in 2010

moctavio | January 23, 2011 at 9:26 am | Categories: Uncategorized | URL: http://wp.me/ppwPU-35e

Our friend and reader Island Canuck sent me a while back his final numbers for inflation in 2010. Recall that at the end of June the expat sent us his numbers and inflation was running at a 30% clip for the first half of the year. Well, despite the fact that there was no devaluation in the second half of 2010, his food and beverage index essentially doubled in 2010 as you can see in the table below. Note that most vegetables had triple digit increases in the year (They are mostly produced locally). Note also that things that are not available had small increases. Any insights by readers are welcome.


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No Gold Or Silver Bubble Says Sprott’s John Embry
Source: zero hedge

 26 October 2010 


On one hand, one has professional stock bubble top-tickers (of the variety that would benefit from some error-checking)-cum-amateur precious metal pundits claiming that the gold bubble is unmistakable. On the other, there are those who have made hundreds of millions of dollars for their investors actually investing in precious metals, such as in this case Sprott’s John Embry, who states that there is no bubble in either gold or silver. “Jim Rogers, who is one of the world’s leading authorities on commodities, dealt with the bubble issue recently by recounting an interesting anecdote. While addressing a group of high-end money managers, he inquired as to how many of them held gold or silver in their accounts, and remarkably, 75% replied they had never owned either precious metal. When gold is trading at several multiples of the current price at some point in the future, you can be assured that every single person at a similar gathering would be long and then discussion of a bubble might be legitimate. In my considered, opinion we are many years and thousands of dollars away in price from that debate.” Whom does one believe? That’s obviously rhetorical. Amusingly, Embry takes a stab at the Financial Times, which he dubs a conduit for the establishment: “The FT has been speaking much less disparagingly about gold recently. The paper consistently denigrated gold and its change in tone might be instructive.” Of course, a variety of second-rate media outlets are more than happy to step in and fill the “goldbug” bashing void in the FT’s absence.

Full recent thoughts from Embry (pdf):

 

Embry Oct22

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