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Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: SouthFloridaGuy who wrote (46021)	11/30/2008 1:06:09 PM
From: koan	Respond to of 149317

Well, if you are right about the dollar staying strong and interest rates staying down, we will probably be Ok and turn this depression around. I just do not understand the whole thing that well.

To: SouthFloridaGuy who wrote (46021)	11/30/2008 1:28:19 PM
From: gregor_us	5 Recommendations Read Replies (2) \| Respond to of 149317

I've gone back to my post WW2 Britain model for the US, which will see the US lose reserve currency status along with its demotion from its claim to Empire. There does not have to be a reserve currency, per se, imo. Central banks around the world can simply move to a basket or a mix. And if central banks want to use a notional fixed basket they can do that too. (33% EUR/JPY/USD each for example) I agree that the US is a very unique culture and that we have a built in imperative which demands that we orient ourselves towards the future. So, we are both tenacious and resilient, because we have less to protect in terms of our history. Often, when older countries get into trouble, they are hampered by their own history and become entangled in trying to protect traditions. Although the current nationalisations here in the US appear to be against our free-market traditions, I would argue that the US is at bottom practical and will simply do anything that works. This is why all political orientations in the US are superficial and function as political opiates. There are no core principles to being a Democrat or Republican and history shows both parties have done more 180's on supposed core principles than you can count. So, I think the US does OK because of its resiliency. However, I think the USD is about to be more Yen-like as an expansionary funding currency for the world, than as a store of value. What the US cannot afford at this time is to have a strong currency as the last thing we need is purchasing power. I think we need to sell, and sell through a weak currency and keep the earnings at home. I just find the condition of our total aggregate debt and the idea we will maintain reserve currency status as basically incompatible. Beside, I think the loss of reserve status is already underway, as Central Banks around the world diversify. In addition, just about every country in the world including the Eurozone is going to be floating more govt debt--so there will be lots of supply to choose from. I don't think the EU is in as much trouble as the UK. The problems with the UK are, as an example, more confirmation that the epicenter of the world's current problems are very much in the Anglo world. I'm negative on GBP and USD, and positive on EUR, AUD, and the RMB. I would not touch US Treasuries or UK Gilts. German Bunds/Schatz and Canadian Govt Bonds look good to me. I think we could see the Anglo-US axis experience stagflation while the EU experiences deflation. However, I am now totally against the Deflation thesis which has had all of 5 months to bask in its glory. It's about to end before it ever gets started. The gold equities are telling us so. (btw I do not invest in these and have not for years, but I use them as canaries). The FED has gone fro Q.E. to near-classical monetization in less than 4 weeks. Also, the aggregate announced global fiscal stimulus packages are now north of 2 trillion (China 600B, Europe 300B, US will do at least 700B, and then myriad countries from Japan, to Australia and even EU countries will do their own in addition to EU/Brussels). I have seen some pretty good economic work that suggests that this global synchronized fiscal stimulus could work its way towards adding 4 ppts to global GDP--byt the time we are out one year. And consider, it's going to get laid down on top of ZIRP in both Japan and the US, and dropped interest rates all around the world. I expect Copper, Gold, Steel, and Grains to make enormous rebounds next year. The world will look back on 2H 2008 and will see nothing more that a 6 month counter-trend move to global inflation which remains the trend of the decade and the primary force. If we think of inflation as partly a man made monster, it has just been fed several trillion pounds of fresh meat to make sure it maintains. Finally, the President elect has directly and clearly stated in his radio address 2+ weeks ago that deflation must be prevented as it makes the debt all the worse. It's rare to hear such theoretical clarity from a politician. But there is no doubt that Buffet, Volker, Rubin, Reich, Geithner, Tyson have made the situation very plain: reflate, or die because the aggregate debt will crush you. As far as I can tell, the cognoscenti are preparing right now for a very strong inflation globally inside of one year, and maybe even hyperinflation. I don't see hyperinflation yet. But, I do see that the USD is going back down next year, and the expansion of US Treasury supply will continue at levels that truly, call into question the notion of structural limits. I frankly don't see how we can continue unless we get other central banks to start monetizing our debt, and I suspect we will monetize as well. (Bernanke got some extra bang for his buck when he monetized the GSE's last week because the convexity trade meant mortgage lenders had to buy treasuries to protect against the coming wave of refninancings). Nice little operation Ben did there, but he won't be able to pull those kinds of moves forever. G