Rolling US Economy Into The Shitbin Thread

Has anyone mentioned the Planey Money podcast from NPR? They spun the show off of a recent Mortgage crisis episode of This American Life. New episodes during the week; good mix of news, interviews and whatnots.

http://www.npr.org/blogs/money/

I'd also recommend Peter Schiff's Wall Street Unspun. Him and the other Euro Pac guys are very bearish, calling for a huge run on the dollar (which obviously has yet to happen) and for China to bounceback quickly even with the US economy tanking (I'm skeptical of how this could work). Weekly shows updated on Wednesday night.

http://www.europac.net/radioshow.asp

Schiff is often good and has been broadly correct over the last six or seven years, but has he overstated the decoupling scenario? and 'emerging markets'? and overestimated the ability of non-US economies?..looking at whats happening to the rand, real, pound, won, euro etc? Still seems the US has major leeway with currency that the others dont have

China is the interesting one, I still think China has a major demographic timebomb on its hands.

Or is Schiff right - and the dollar (temporary bubble) will follow others down after acting as safe haven?

If my understanding of currency trading is correct, it would be impossible for all currencies to devalue against all other currencies. There must be winners and losers. Monetary policy, overall money supply, economic and political strength are generally the major market movers for currency.

Right now the US dollar is moving up more on perceived political(& military) strength than any other factor. There are too many unknowns in the market for traders to quantify the other factors with any confidence that is my guess, at least.

China doesn't have the track record they need to be a safe haven, yet.

Isn't it partly that some of the others (won, pound, rand) are falling due to their own malstructure and exposure

As for a winner, isn't that the yen?

Its pretty interesting right now seeing which way it'll turn next - it seems that no matter how bad a state the US is in plenty other countries are not only in a worse state still but have US problems on top of that also. Eastern Europe is looking really bad and isn't it the EU and the Swiss that have the most exposure to that?

Presumably we're about to see another round of cuts in the EU and UK - both to continue slides against dollar?

TSX down another 8% today.

http://www.cnn.com/2008/LIVING/wayoflife/10/28/foreclosed.home/index.html?iref=mpstoryview

Hey look, not all of humanity sucks ass.

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jesus

LOLSWAGEN

"My Other Car's A Porsche!"

Currency moves in recent weeks have more to do with unwinding carry trade positions than currencies finding new levels based on fiscal and monetary policy changes, that is happening but the unwinding is the bigger effect. I don't doubt that the new stable exchange ranges will be different to what they were 6 months ago but I don't think it is an easy business to know what they will be.

I am thinking that £1=$1.65 might be about right for the rate next year rising towards the end. Given I am going to be borrowing in $ to fund education I would like it around 1.35 for whenever I come home to visit and about 2.5 if/when I start working again back here.

Agreed it is significantly carry trades unwinding (feel sorry for those eastern europeans that borrowed yen) - but also think the realization came late Europe was in more trouble than US. As for where they'll be in 6-12 months time its not an easy business at all. In hindsight the recent dollar strength should have been predictable (was easy to get swayed by the inflationary aspects of the bailouts and emergency cuts and not see that the others would follow and have less leeway to do it, and that also the inflationary consequences wouldn't be overnight) - even if longer term prognosis for the dollar not so good.

To me it seems this is where Schiff (but not Roubini) has gone off course (other than predicting decoupling way too early, underestimating credit issues outside the US and being too bullish on a China that is too reliant on construction and has an imminent demographic issue). The printing presses may well lead to a massively inflationary future for the US but it looks more like a deflationary stage prior to that (18-24 months?). But predicting timescales is another matter. Once it turns it could be extremely rapid (I guess this would be when the treasuries bubble ends?)

BOJ to halve rates?

isn't the strength of the dollar just due to investors literally having no idea what is safe to buy with what assets they have remaining?

More like dollar funds investing overseas having to liquidate their foreign assets and having to buy dollars to make their balance sheets look less ropey due to losses in the dollar assets plus the carry trade, i.e. borrowing cheaply in dollars and yen (low interest rates) to invest in high interest rate countries (pounds, eastern europe, euro).

incidentally I can't remember whether it was up thread but kondratieff asked mean about why gold was weak. My opinion is that since gold is priced in jewellery demand and panic, the panic is highest before the reality of the crash so gold was at the top a month or so ago when uncertainty about the economy was at it's highest. Plus jewelery demand is way down because of the economy and people have to liquidate non-liquid assets to cover liabilities.

It wasn't me because Gold is only weak if you bought it in dollars or yen. In any other currency it hasn't lost value

Also actual price of gold is distoried because of growing gap between paper gold and actual gold. paper gold is just a 'promise to pay'

And the leveraged with their ETFs will surely get shaken out the tree the same as the leveraged with anything else

dollar funds investing overseas having to liquidate their foreign assets and having to buy dollars to make their balance sheets look less ropey due to losses in the dollar assets

i don't really get this - it sounds circular

It is.

Basically people with dollars invest in a fund. The fund goes converts dollars to say pounds, pushing up the price of pounds, to invest in a Kazakh mining company listed in London. Suddely the bottom drops out of the market and people need to cash out of the fund, the fund needs to pay in dollars so the fund has to sell it's foreign asset and buy dollars forcing the price of dollars up.

http://i37.tinypic.com/2qvte2b.jpg

<a href=http://wonkette.com/403920/jesus-people-pray-that-false-idol-will-save-gods-economy>;WORSHIP THE BRAZEN BULL!</a>

http://www.forbes.com/home/2008/10/29/stagnation-recession-deflation-oped-cx_nr_1030roubini.html

How does (prolonged) deflation occur in a debtor nation?

Also right now whats happening inside and outside the US seems highly divergent. Deflationary scenarios across Europe more difficult to see

really fantastic little piece from the bbc about the past and future of the dollar as the world's reserve currency -

http://speechification.com/2008/10/27/analysis-the-dollar-and-dominance/

there's a curious gap of a minute or so in the middle but nothing actually seems to be missing. i'd be interested to know what the hedz here make of it

http://blog.makezine.com/hellonnnn.jpg

we still gonna die

http://dealbreaker.com/2008/10/wtf-just-happened-to-charlie-g.php

So, okay. The "Closing Bell" team of Dylan Ratigan and Melissa Lee just cut to Charlie Gasparino who supposedly was going to give us some information on "turmoil" at Merrill Lynch. Those of you watching, though, know that didn't happen. We don't have a clip-- someone, anyone, for the love of No Sleeves and his BoFlex, send it to us now-- but paraphrasing, I shit you not, it went like this:

Ratigan: Charlie, what have you got?
Gasparino: What have I got? That's almost Zen-like.
Ratigan: Yeah...so give us the story.
Gasparino: What have I got? What have I got? What have I got?
Lee: Charlie, just tell us!
Gasparino: What have I got?
Ratigan: Charlie, we've got limited time.
Gasparino: What have I got? What I got is shoot for the capitalism.
Ratigan: 'Shoot for the capitalism'? What?
Gasparino: What have I got?
Ratigan: Okay, not really sure what just happened there.

clip

lol

How does (prolonged) deflation occur in a debtor nation?

If I read Roubini's argument correctly, it will occur because the world will continue to loan to the debtor nation (in this casse, the USA), as if it were a sound credit risk, no matter how massive the debt becomes. The USA will not be able to monetize the debt, because the markets will swiftly build inflation hedges into credit contracts, nullifying the monetization.

This assumes that the USA will not sink into insolvency under the debt burden, forcing a repudiation of its Treasury debt obligations, but rather it will accept the discipline of higher taxes in order to remain solvent.

Currently, this seems a liklier assumption than the USA's repudiation of debt, but personally I wouldn't stake my life on it. We've all been fed such a load of rubbish about taxes and economics by the Republicans that five or ten ot twenty years down the road the US population could end up overruling fiscal sense and demanding tax relief, even in the face of fiscal ruin.

Won't any prolonged deflation/disinflation period in the US turn all other western debtor nations into mini-Icelands? Massive inflation and potential currency collapses across Europe?

A lot of the dollar collapse theories seem to be based on its cessation as a reserve currency, but this seems an idea that only makes sense if decoupling were to have happened. The credibility of the euro is surely badly damaged - and there feels a lot more to crawl out the woodwork for the euro yet.

Still think any deflation is likely to be a transitory stage (and any turn towards inflation could be violent and extreme) but I'm still sitting on the fence as far as the US is concerned re (de/in)flation (could stay like this anywhere between 24 hours and 24 months?). As far as Europe goes I don't see how deflation can happen and I don't see how anyone would want any of their currencies

I think the euro remains attractive because of the disorder behind it. There is a diversity of direction and regulation behind it which seems to result in it hedging against itself. Think of the diversity of different fiscal and regulatory regimes within the euro zone. I think some of the attraction of the euro in the last year or so has been that although it is unlikely to surge like some of the more unified economies such as the US, Japan or the UK neither is there likely to be a big run on the economy like there has been in these countries. I can see the euro being the reserve currency of refuge in troubled times because of its structural weaknesses.

you would both do well to listen to that radio show i posted; it would disabuse you of the idea that the euro will become the world's reserve currency (mainly because europe doesn't want that role)

I don't have that idea. Right now I think it is more likely that the Euro will disappear than become a reserver currency

im psyched this thread has settled into a nice doomsday type atmosphere

ah sorry K - i misread your "stuff crawling out of the woodwork" sentence

http://i36.tinypic.com/28jec6v.jpg

Dow no like "socialism"?

jobs no like "socialism"

dow is down almost 5% right now tho

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RIDE THAT PONY

slim_pickens.jpg

we gonna die

lol u guys have JOBS

:-/