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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: stockman_scott who wrote (160172)	4/7/2005 11:22:12 AM
From: michael97123	Respond to of 281500

Ok Scott, "in your view" what the hell is he saying? Actually there is a lot of good common sense intelligence in that article but he contradicts himslelf throughout the piece. What were your takeaways that caused you to post it?

To: stockman_scott who wrote (160172)	4/7/2005 11:11:50 PM
From: neolib	Respond to of 281500

Thanks for the link. Some interesting comments in that article. Asia and America have the economic equivalent of MAD (‘mutually assured destruction’), in my view. Like peace during the Cold War, this equilibrium, while unstable, may prove long-lasting. An interesting analogy, although I think perhaps its closer to two drunks hanging onto each other for stability. Its an inherently unstable situation, but it will last a bit longer as it is in both sides mutual interest to stay standing. However, the Asians are not a single economic entity, and the first to bolt from the dollar for their reserves stands to gain. The institutional bias for pushing up oil prices is quite strong. Most global financial institutions have built up oil trading desks lately, and commodity funds are receiving strong inflows. This was the CA energy crisis core issue. People focused on the visible and ideological issues such as tight capacity and environmental stumbling blocks to expanding capacity, but most utterly failed to realise that a flawed financial environment (market free for all in the middle, regulated consumer prices for end consumption) allowed the Enron scams to develop and prosper. More to the point, there exists a very strong private, governmental & institutional bias for asset inflation in general. While the Fed may seek to suppress the inflation of goods and services that are consumed, we all hope that certain items which we chose to call assets, inflate at a steady pace. Oil is a very interesting example to consider in this context. It is a consumable product, therefore it falls in the category which we don't want to inflate. However, it has a finite, non-renewable supply (although it is potentially replaceable) so one should expect the remaining supplies value to inflate nicely as the supplies dwindle. If I held oil reserves, I would certainly consider them assets, and hope they would appreciate with time. Furthermore, if I held significant assets, I would work to achieve that goal as well. The dollar weakness has reallocated growth from Europe and Japan to the dollar block -- the US, China and other emerging economies. But China must deal with it's dollar reserves sometime.