patrick.net

Heraclitusstudent says

You think the dollar status is at risk? Look at the Yen, the Yuan, the Euro, the GBP, the Swiss Franc. The dollar is by far the best kid in town.

What is at risk - and should be at risk - is the low value of currencies of countries like China.

None of the currencies are backed by anything BUT the US has the largest outstanding obligations
other countries are making efforts to accumulate assets for reserves other than dollars

smaulgld says

None of the currencies are backed by anything BUT the US has the largest outstanding obligations

other countries are making efforts to accumulate assets for reserves other than dollars

Are you kidding?
Have you looked at Japan's debt?
Have you looked at the debts of European countries?

As for reserves: the whole point of accumulating them is not to store value, it's to devalue your currency against the dollar. This can't be achieved by buying gold.

You guys worry way too much about gov debt and consequently currency values. The problem of a country like Japan, is not to pay back its debt. The problem is to extract enough value from its working population to feed its retirees without sucking the financial blood out of young people.

You should think of the problem in these terms.

smaulgld says

It's hard to solve a problem when each successive "solution" pushes you closer to the cliff

Explain in what sense we are moving closer to a cliff.

smaulgld says

Housing should not drive the economy, but rather be reflective of the health of the economy-ie people have good jobs and can afford to buy houses.

Housing prices have reflected growing leverage in the 30yrs to 2007.
This trend may well have reversed already.
The river is not the same.

The weak economy today is not 'fake': it's a better reflection of economic realities than the strong economy of 2005 ever was.

Heraclitusstudent says

Now this unpayable credit has been replaced by new base money.

That is a very glib statement, that someday sooner than later will hand your ass to you.

Calling something base money does not mean shit. The fed is leverage 80 to one that is not a benchmark, it is an albatross around our neck.

indigenous says

Bubbabear says

The fed will protect its world reserve status.

What happens when the melt down starts?

Melt down? Fuses are lit every where!

indigenous says

Calling something base money does not mean shit. The fed is leverage 80 to one that is not a benchmark, it is an albatross around our neck.

Base money has a precise definition.

On the other hand saying the fed are leverage 80 to 1 doesn't mean shit when they have a printing press in their basement.

Heraclitusstudent says

On the other hand saying the fed are leverage 80 to 1 doesn't mean shit when they have a printing press in their basement.

You your self are saying the CDOs and other derivatives are now a part of base money. That is where the 80 to 1 leverage comes from.

indigenous says

You your self are saying the CDOs and other derivatives are now a part of base money. That is where the 80 to 1 leverage comes from.

Please explain further. Why do "leverage" come from the presence of CDO or treasury bonds?

Heraclitusstudent says

Please explain further. Why do "leverage" come from the presence of CDO or treasury bonds?

Because the FED has been buying the derivatives at the price GS and MS and others paid for them. By doing this they are saying that this is now the real value of these worthless derivatives which is maybe 40 times their actual value.

indigenous says

By doing this they are saying that this is now the real value of these worthless derivatives which is maybe 40 times their actual value.

And you think these assets can lose value?

The MBS they bought are guarantied by Fanny/Freddy, themselves backed by the government, itself backed by the fed printing press.

Explain how they can lose value.

Btw they can also avoid interest rates risks by holding those MBS to maturity. It's not like they need the money soon.

Heraclitusstudent says

indigenous says

By doing this they are saying that this is now the real value of these worthless derivatives which is maybe 40 times their actual value.

And you think these assets can lose value?

The MBS they bought are guarantied by Fanny/Freddy, themselves backed by the government, itself backed by the fed printing press.

Explain how they can lose value.

Btw they can also avoid interest rates risks by holding those MBS to maturity. It's not like they need the money soon.

They lose value if the dollar loses value or if the market demand for them diminishes.

Spain in "recovery" ! maybe they can start buying us treasuries
https://uk.finance.yahoo.com/news/spain-confirms-recovery-q1-gdp-090200160.html

Interesting explanation
https://www.youtube.com/watch?v=52zSqdBitKE

This guy has not understood how things are working.

First, he keeps saying printing money will create inflation and collapse the dollar. He never explains why we don't have inflation now. i.e. why don't wages increase as more money is printed. Until he reconciles his speech with this reality, he keeps missing the point and the fears he expresses never come to pass.

Second, his point about the fed forgiving the debt leaving no way to recoup the printed money is moot because the government could return the money from its taxes revenue. The entire point is moot. The fed don't need to forgive debt, because everything happens like this debt simply doesn't exist.

Heraclitusstudent says

First, he keeps saying printing money will create inflation and collapse the dollar.

Just because it hasn't yet does NOT mean that the potential is not there.

Heraclitusstudent says

Second, his point about the fed forgiving the debt leaving no way to recoup the printed money is moot because the government could return the money from its taxes revenue.

Ok so that will be 17 trillion now please followed by 60 to 150 trillion over the next few decades. Ok problem solved.

"Are Treasuries The Only Adult In The House?"

Heraclitusstudent says

The MBS they bought are guarantied by Fanny/Freddy, themselves backed by the government, itself backed by the fed printing press.

Which goes back to the original question, if the Fed who is buying up to 90% of the newly issued Treasuries stops, who will buy them?

smaulgld says

Which goes back to the original question, if the Fed who is buying up to 90% of the newly issued Treasuries stops, who will buy them?

As I said, the volume of new bonds to buy is much smaller than it was.
And there is a lot more cash available in private hands to buy them.

Retirees need to buy bonds to secure their portfolios.
Banks need to buy sovereign bonds to meet their capital requirements.

Capital simply has no other place to go. There is just too much of it.

Heraclitusstudent says

As I said, the volume of new bonds to buy is much smaller than it was.

And there is a lot more cash available in private hands to buy them.

Retirees need to buy bonds to secure their portfolios.

Banks need to buy sovereign bonds to meet their capital requirements.

The deficit still needs to be funded and the Fed has been doing it 60-90%) at great low rates.

Unless retirees are forced to buy bonds they won't buy them at no the no yield rate they are at today.

Higher rates would be a disaster for the US government as the deficit would explode as borrowing costs would rise.

Private capital right now is NOT going towards US bonds it is going to the stock market, real estate and other asset classes

dunno what they do. The probably..... buy more gold!!!!

edvard2 says

dunno what they do. The probably..... buy more gold!!!!

No I don't think so. If the SDR thing becomes a possibility maybe or if the money that has been printed starts creating inflation maybe.

But most likely it will just be more of the same, which means gold doesn't make sense.

edvard2 says

dunno what they do. The probably..... buy more gold!!!!

edvard2 says

dunno what they do. The probably..... buy more gold!!!!

That doesn't help.

Oh, but it does. gold is the answer to everything. I heard it on the radio.

edvard2 says

Oh, but it does. gold is the answer to everything. I heard it on the radio.

You need to turn off the Limbaugh and Levin

smaulgld says

You need to turn off the Limbaugh and Levin

Many Austrians as well

indigenous says

smaulgld says

You need to turn off the Limbaugh and Levin

Many Austrians as well

Gold is just another asset class. I don't understand all the emotion on both sides- there is a significant anti gold crowd(there is no anti sugar or coton crowd) and a gold bug crowd that thinks all would be well if the government were on a gold standard.

Gold has its place as a commodity hard asset ( as does oil, real estate, silver, uranium, etc) but it doesn't deserve the scorn or adoration that it receives.

smaulgld says

I don't understand all the emotion on both sides

Having gold equates to survival, people get emotional about survival.

smaulgld says

all would be well if the government were on a gold standard.

It prevents the unavoidable failure of fiat money. How is that not true?

indigenous says

all would be well if the government were on a gold standard.

It prevents the unavoidable failure of fiat money. How is that not true?

If government is issuing dollars based on a gold standard they could still easily abuse it by
-overstating the amount of gold they claim to have
-leasing it without any one knowing
-lowering the ratio of the gold to dollar

There are all kinds of tricks that can be played with a gold standard
The only gold standard that would "work" would be if gold were universally used as money -it's not. It is an asset only.

A gold standard also removes from the population a commodity that could otherwise be used for jewelry, industry etc as governments would have to hoard it and vault it, which would make whatever the government didn't hoard much more expensive

Ok, so what is the better alternative?

smaulgld says

Unless retirees are forced to buy bonds they won't buy them at no the no yield rate they are at today.

Higher rates would be a disaster for the US government as the deficit would explode as borrowing costs would rise.

Higher rates would kill growth, as there is still too much leverage. Killing growth would send the rates back down (as we see happening now).

This negative feedback ensures rates cannot jump up.

indigenous says

If the SDR thing becomes a possibility

You guys are soooo desperate to find something that could go wrong.

I said it above: Countries accumulating reserves are doing so to support the dollar relative to their currencies.

Buying SDR would just send this thing up until no one wants it. It would not lower a currency relative to the dollar. In addition the IMF is more or less controlled by the US. They will not undermine the reserve status of the dollar.

Heraclitusstudent says

In addition the IMF is more or less controlled by the US.

That is what is important to remember- any IMF move would be dollar positive-

indigenous says

Ok, so what is the better alternative?

elimination of legal tender laws and let each country and individual use what they like-inevitably the best currencies will be the most used, not the ones that are forced upon us

smaulgld says

edvard2 says

Oh, but it does. gold is the answer to everything. I heard it on the radio.

You need to turn off the Limbaugh and Levin

I refuse. everyone knows that they tell nuttin' but the truth and the rest is made by the liberal media.

smaulgld says

elimination of legal tender laws and let each country and individual use what they like-inevitably the best currencies will be the most used, not the ones that are forced upon us

IOW gold and silver

indigenous says

smaulgld says

elimination of legal tender laws and let each country and individual use what they like-inevitably the best currencies will be the most used, not the ones that are forced upon us

IOW gold and silver

My guess would be people would chose those, digitized version, crytpos and government ones deemed to have sound fiscal policies

http://finance.yahoo.com/blogs/daily-ticker/want-to-balance-the-budget--go-back-to-the-gold-standard--kwasi-kwarteng-124616670.html?l=1

This is a great article explaining the current mercantilist situation we have today. Also read the comments below the article. Pettis really knows this stuff
cold.

http://globaleconomicanalysis.blogspot.com/2011/07/hugo-salinas-price-and-michael-pettis.html