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larvidchr

^^
^
Thanks Panda Cant green you at the moment

Butterfly

they can't be a stampede out of the USD, as you say we are all in it, and the USD is still a major currency, no matter how silly the US government is

you are also forgetting that the US is an economic powerhouse and can swallow all kind of problems, very uncommon for a rich and large country, probably possible because of the 2 levels of economic societies that exists in this country, a bit like China. Something missing in most European countries.

Basically, they hold a gun to our head, so if you kill the horse while you are in the middle of the desert, it's game over.

Panda

Never say never, or "cant" for that matter.
Sure the US is an economic powerhouse. Its far from done. But a rapid decline in the value of the tradable value of the $US is certainly not out of the question as investors are jumpy and will move their cash where they think its safest.

The US government is quite obviously trying to engineer a devaluation in the $US at a slow regulated pace. That could get out of hand with some major bad news.
Panic does not respond to logic. And as we have seen, neither do the people managing the financial markets through out the world.

Milkman

A brief 3 minute summary on Quantitative Easing and the ratings.

Muadib

Following this topic with baited breath... The problem is where to put capital to prevent devaluation...

DrAndy

I think it is now the time to have no capital

all currencies will devalue, so the exchange rates will even up to what they already are but commodities will increase

buy lead and tin immediately

robuzo

If massive inflation (dollar-denominated) is on the way, wouldn't it be a good time to be getting into debt? In dollars, I mean.

Panda

Exactly what the US government is doing right now.

Butterfly

they are not investors, they are speculators, 2 different breeds of players

any evidence of that ? If Obama is trying to stimulate AD, that will boost import, and logically will put pressure on the USD, but it's hardly a government thing.

We already had the panic, it was in 2008. There is so much panic you can take in 1 year. This is over. Give it 2 or 3 years, and then maybe we could have another one, but we are done for now for at least another 18 months, probably more.

People don't manage financial markets, it's just a cahotic world where players with different ideas interact

Panda

^ Glad to hear its all over now.
For a while there I thought we were in the grip of the biggest world recession since the 1930s.

robuzo

And yet the Chinese keep on lending to the US, buying Treasuries, propping up the dollar and keeping their currency cheap (still essentially pegged to the dollar, although they claim the yuan is pegged to a "basket" of currencies, the makeup of which is undisclosed, naturally). When/if hyperinflation does kick in, all that debt will turn into huge losses for the PRC.

I recall the near-panic in the US in the late 1980's when it appeared the Japanese manufacturing/banking/zaitech juggernaut was inexorably fated to rule the world. Their civilization was older, tougher, smarter, we were no match; at least not until they tripped over their wee dicks and lost their asses (thanks to borrowing heavily against deliberately inflated real estate- the commodity that never loses value!- and buying stocks and more real estate with the proceeds). Nobody talks about Japan anymore- the country seems to be in a permanent malaise, still convinced of its inherent superiority but not entirely sure what went wrong and lacking the imagination to come up with a plan to fix the problem (that may not be a permanent state of affairs- historically when Japan transforms itself the change is sudden, rapid and thorough). Now it is the wise, industrious, disciplined, farsighted Chinese who are poised to eat the flabby, lazy Americans' lunch. The Chinese policy seems to be to maintain their overheated growth by feeding and milking the American cow until such time as other markets, domestic and foreign, have been developed sufficiently, whereupon the USA can be abandoned- I'm sure they dream of the day they can tell their overbearing, sanctimonious, hairy, smelly devil of a customer to fuck off. This, by the way, was the Japanese plan, too; once the Asian market was sufficiently developed (and in Japan's pocket, economically), they would be able to stop taking shit from the Americans, who wouldn't matter anymore (by the end of the '80's Japanese politicians and "thinkers" were no longer making a secret of their disdain for and resentment of America). Of course, amongst other things the Japanese didn't see China developing into a manufacturing powerhouse as resistant to large-scale imports of Japanese goods into China as Japan once was toward US goods (back when the US actually produced goods), while keen to export their cheap crap to Japan (Japan is awash in cheap Chinese products now). We'll see.

I suspect that decoupling from US markets and US$ "hegemony" is going to turn out a lot more complicated and painful than anticipated. There just isn't any alternative at the moment, and China has not taken any meaningful steps to making it possible by developing a large-scale domestic market. Empowerment of the Chinese consumer economically will necessarily be accompanied by greater political power, and I don't think Beijing really wants to find itself dealing with a population that feels empowered to take a greater role in creating policy (i.e., eventually demanding the creation of new political parties, greater local autonomy, etc.) I don't think the current economic "marriage" between the US and China is really good for the people of either country, but nor do I think either side is ready for a divorce- and of the two, China would likely in the medium to long-term suffer the most were it to occur. Not that the US isn't in deep shit, too, but it will be a long time (if ever) before China will be a position to tell the Americans to go take a great leap downward.

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露武蔵

Butterfly

now you are being silly, since when a recession is a panic ? or are you just showing off your ignorance in economics matters ?

Butterfly

truer words couldn't be spoken,

exactly,

robuzo

I think this is the proper thread for this post. . .Paul Krugman in today's NYT says not to worry about inflation:
The Big Inflation Scare
http://www.nytimes.com/2009/05/29/op...29krugman.html
(Excerpt follows)
. . .if prices aren’t rising, why the inflation worries? Some claim that the Federal Reserve is printing lots of money, which must be inflationary, while others claim that budget deficits will eventually force the U.S. government to inflate away its debt.

The first story is just wrong. The second could be right, but isn’t.

Now, it’s true that the Fed has taken unprecedented actions lately. More specifically, it has been buying lots of debt both from the government and from the private sector, and paying for these purchases by crediting banks with extra reserves. And in ordinary times, this would be highly inflationary: banks, flush with reserves, would increase loans, which would drive up demand, which would push up prices.

But these aren’t ordinary times. Banks aren’t lending out their extra reserves. They’re just sitting on them — in effect, they’re sending the money right back to the Fed. So the Fed isn’t really printing money after all.

Still, don’t such actions have to be inflationary sooner or later? No. The Bank of Japan, faced with economic difficulties not too different from those we face today, purchased debt on a huge scale between 1997 and 2003. What happened to consumer prices? They fell.

All in all, much of the current inflation discussion calls to mind what happened during the early years of the Great Depression when many influential people were warning about inflation even as prices plunged. As the British economist Ralph Hawtrey wrote, “Fantastic fears of inflation were expressed. That was to cry, Fire, Fire in Noah’s Flood.” And he went on, “It is after depression and unemployment have subsided that inflation becomes dangerous.”

Panda

Do you recognize this quote?

"We already had the panic, it was in 2008. There is so much panic you can take in 1 year. This is over. Give it 2 or 3 years, and then maybe we could have another one, but we are done for now for at least another 18 months, probably more."

passengers

^Come on Panda, you know that Butterfly-world is stuck in mid-2007 right now. You will have to wait a couple of years for him to reach this point in time.

robuzo

I don't recognize it. Was it George W Bush? Sounds daft enough to be him, but he has been lying low in 2009. Some other comedian?

Butterfly

Now you are beyond silly, you can't even read properly

I will try it again very slow, just for you

The panic has passed, maybe another one in 2 or 3 years over something else (there is always something to worry about), but in the meantime we will suffer a recession. A recession is not a financial panic. Do you understand what the word panic means ?

Panda

Inflation can occur when economies overheat in boom times when everyone has money and competition for things increases. Governments increase the interest rates then to slow down the demand for money and thus the economy.

Inflation can also occur when commodities become scarce, which again drives up competition and thus the price of things. EG: Zimbabwe.

The common denominator there between the two is an imbalance between the supply of goods and money. Either too much money or too few goods will cause inflation. Both together is a disaster.

Right now the world (and USA) has plenty of goods but not enough money, hence the drop in prices and the lowering of interest rates to get things going.

But the clincher here for USA is that their economy has been based on debt rather than productivity and by creating all this new money to improve domestic productivity, it will increase foreign debt even more. Somewhere down the line the credit has got to run out. The tradable value of the $US will plummet and imports will go up markedly in price for Americans. Without a domestic source of cheap goods combined with a flood of paper money on the market, inflation is assured as too much money chases too few goods.

Its nothing the US economy cant pull out of eventually. But its going to mean a lot of pain for a lot of people for a long time.

Panda

Your logic really cracks me up sometimes.