tag:blogger.com,1999:blog-2121490237517462736.post7582052833572444771..comments2024-02-20T01:52:53.299-08:00Comments on Futronomics: contrarian analysis of global macro trends, commodities, currencies, equities: No Way OutMatt Stileshttp://www.blogger.com/profile/17977694389453612864noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-2121490237517462736.post-8565411853039280472010-01-10T08:36:07.381-08:002010-01-10T08:36:07.381-08:00Hello I'd love to congratulate you for such a...Hello I'd love to congratulate you for such a great made site! <br />Was thinking this is a nice way to introduce myself!<br /><br />Sincerely,<br />Monte Phil<br />if you're ever bored check out my site!<br />[url=http://www.partyopedia.com/baby-shower-party-supplies.html]baby shower Party Supplies[/url].Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2121490237517462736.post-91251398948794853022009-06-24T16:54:40.791-07:002009-06-24T16:54:40.791-07:00Latvia could - I repeat - COULD go down the road o...Latvia could - I repeat - COULD go down the road of hyperinflation. To do so Latvia needs - IMO - to do two simple things:<br />1. Devalue the currency called lat, which is - IMO - inevitable.<br />2. Keep printing money at unprecedented rates.<br /><br />The fact that Latvia has chosen to cut wages across the board suggests Latvia will not go down the (hyper-)inflation road. At least, the article doesn't have an indication that Latvia is doling out large wageincreases to its government workers. It seems the printing press in Latvia isn't making overtime as well.Willy2noreply@blogger.comtag:blogger.com,1999:blog-2121490237517462736.post-17377236379509965692009-06-21T18:06:24.609-07:002009-06-21T18:06:24.609-07:00Some of this stuff goes right by mem especially th...Some of this stuff goes right by mem especially the inflation/deflation part of a defaulting country like Argentina or Latvia. One thing I think is a wildcard would be the default of the US? I don't believe the US would be ever held in default, since it would be against the best interest of all the banking institutions of the world. One has to begin to understand these currencies are bank notes and really have very little to do with the countries that issue them, save the fact that the governments of such countries generally deal with them. <br /><br />Your mention of many of these countries possibly borrowing in dollars instead of their native countries. The reason is that you can't capitalize money when rates get into double digits and I would venture that history has shown a good supply of dollars, as you implicate. By this I mean that the front side of borrowing costs at rates that would be necessary to cover inflation that has historically occurred in these countries would necesitate sizable payments in the early years. If for instance, you had to borrow money at 20%, even if inflation was 20%, 16% of the balance would be due in a year (.20X (1-.2)). Early cashflow is just too taxing. <br /><br />The trap is that debt has gotten too big for the economy and additional debt does little but feed the appetite of money to make payment on debt. Plus, the debt owed banks isn't owed by those that the banks owe the proceeds of debt. So, the banks are insolvent and the money to recapitalize banks really has already disappeared. Even the socalled printing is nothing more than more liabilities. The funds don't come from the Fed for free, as one has to sell them bonds that have already been purchased and amount to a good portion of capital in the system. If they are just printed against unissued bonds, they still are owed back to the Fed at interest, meaning the additional money is insufficient to pay the debt to the Fed. <br /><br />Those that believe in hyperinflation need to realize that they might be right after being very wrong and if this is the case, most of them will have been liquidated. This discussion centers around the dollar and by the time the dollar became a secondary currency, the flow of credit provided by dollars will shift to another currency which will be totally insufficient to carry on world trade. There is no exit that will work.mannfm11https://www.blogger.com/profile/06507232690375884354noreply@blogger.comtag:blogger.com,1999:blog-2121490237517462736.post-76448828041686551672009-06-15T17:42:58.570-07:002009-06-15T17:42:58.570-07:00Namke,
You're right. I started the post as s...Namke,<br /><br />You're right. I started the post as simply pointing out AEP's Latvia article. In trying to explain its significance I got way carried away as wheels started turning in my mind. I will be following up on this as I think of it more thoroughly and get feedback from readers. <br /><br />It is certainly a line of thought deserving of its own thread - unless someone can give me a good reason why it is totally invalid.Matt Stileshttps://www.blogger.com/profile/17977694389453612864noreply@blogger.comtag:blogger.com,1999:blog-2121490237517462736.post-51370920525231537852009-06-15T17:38:46.423-07:002009-06-15T17:38:46.423-07:00Hi Matt;
Trying to start with a few of the questi...Hi Matt;<br /><br />Trying to start with a few of the questions:<br /><br />Main point - there is a way out of all of this for all of them. But I won't talk about that right now.<br /><br />First : about currency pegs - they are only necessary because there is no friction free *and properly capitalized* global trading unit right now. Russia and China will soon by buying SDR bonds. This is world history. The problem : last I checked, the purchasing power of a currency was not factored into the currency allocation of an SDR. This, in my opinion, could lead to a global situation worse than the current credit crisis. They are counting paper-printing skills instead of purchasing power deltas.<br /><br />In fact, Matt, this is the heart of the matter. The GDP percentage (used for the SDRs) is crazy. You need to use both percentage of world GDP and purchasing power as deltas.<br /><br />So, are currency pegs good? I would say - yes but only if your currency is properly collateralized (recourse). You ask about currency pegs but I think in terms of *managed* currency pegs. Why? Look at Austria and Latvia. Somebody wasn't doing their job. The currency relationship wasn't managed. A managed currency peg can kick speculators right where it hurts (whether they want to play upside or downside). Stability compliments of the big boys.<br /><br />Which, I think, brings me to your main worry(?) - proper capitalization of a global currency.<br /><br />The IMF has gold but nothing else. In other words, they can't tax anybody on Earth. Which makes the SDRs useful only to the extent in which they are collaterized by gold, oil or other commodities.<br /><br />The contributor nations can raise taxes but that doesn't help the IMF<br /><br />So, question number 2 (which you don't explicitly mention) : will the world go barter?<br /><br />This is an awesome question. Because barter is outside of taxation.<br /><br />To answer your question : so far, only weapons (and I mean billion dollar deals) are in the barter zone.<br /><br />But to answer your question : both Canada and Germany are fighting for an exit strategy for the global 'race to the bottom' money printing going on right now. Both Canada and Germany know that (if there is no exit strategy) that large segments of the Canadian economy will go barter (oil, wheat, water, lumber) and that large segments of Germany's economy will go barter (don't ask) and that will destroy their tax base. Not to mention what it means to completely corrupt little countries (rape comes to mind).<br /><br />So, life is short. Just a few thoughts. Thank you for this great blog post today! I'm not kidding - time is not on anybody's side right now - show no mercy to the scumbags. Just my opinion.Namke von Federleinhttp://emsjuwel.comnoreply@blogger.comtag:blogger.com,1999:blog-2121490237517462736.post-20134114586644313502009-06-15T15:54:59.069-07:002009-06-15T15:54:59.069-07:00Hi Matt;
You're on a rampage :-) Jesse over a...Hi Matt;<br /><br />You're on a rampage :-) Jesse over at Jesse's Cafe Americain is feeling ennui.<br /><br />A brilliant blog post (in my opinion) but I just want to start with a little 'style check' question.<br /><br />Could you explicitly list and number your key questions at the end of the blog? I think that this might make it easier for people to discuss them.<br /><br />In the meantime (no promises) I will try and deconstruct your post into what I perceive to be the key questions.<br /><br />Not saying that I will have the time (I'm traveling right now) - but I would prefer a new blog post with the key questions from this one listed and numbered.<br /><br />After all, get the question right and you already have 90% of the answer. You know me, I like to joke around. Not kidding here.<br /><br />Thanks - in my opinion, this blog post achieves some heavy lifting! Time is not on anybody's side right now.Namke von Federleinhttp://emsjuwel.comnoreply@blogger.comtag:blogger.com,1999:blog-2121490237517462736.post-71642492811616439702009-06-15T14:04:18.700-07:002009-06-15T14:04:18.700-07:00Roger,
Yes. I actually struggled to classify Ja...Roger, <br /><br />Yes. I actually struggled to classify Japan for the same reasons. <br /><br />There is, of course, no easy classification for any of these countries - even the little ones. Each one is different in its own unique way. Savings rates are tricky. What is the "natural" savings rate? Is it too high in Japan, or is it appropriate considering their ancient population? <br /><br />Each question begets another...Matt Stileshttps://www.blogger.com/profile/17977694389453612864noreply@blogger.comtag:blogger.com,1999:blog-2121490237517462736.post-45547650174630748792009-06-15T11:52:27.694-07:002009-06-15T11:52:27.694-07:00Hi Matt,
Nice assessments you made there on the i...Hi Matt,<br /><br />Nice assessments you made there on the imperial debtor/creditor classifications there. <br /><br />However, I kind of doubt about your classification of Japan as merely a creditor nation. Perhaps Japan is more of an "imperial creditor" nation. <br /><br />Due to the lengthy extra-low interest rates, perhaps the yen has been borrowed more (relative to the size of its economy) than the dollar to finance stuff.<br /><br />Furthermore, regarding currency strengths... shouldn't levels of accumulated savings play an important role here? Japan has accumulated savings of around 15 trillion USD (w/ current dollar-yen of around 100). As we all know, there are those carry trade things which has been done for a very long time. And it's been done against many, incl USD & US treasuries. The US does not have that enormous pool of savings.<br /><br />So, with these in mind:<br />1. high levels of accumulated savings.<br />2. the abundant amount of debts issued in yen. <br /><br />shouldn't the yen be the strongest currency during deflationary times?Roger Jaremanoreply@blogger.com