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Old 05-29-2014, 02:27 PM   #41
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The IMF acts as the world's central bank and uses the SDR, which may replace the dollar as the reserve currency eventually. It's based on a basket of currencies including the dollar. China has been increasing its gold holdings to increase its influence with the IMF. You know how those with agendas love to take advantage of a crisis...
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Old 05-29-2014, 03:50 PM   #42
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China, Russia and Brazil want to stop using the US Dollar as the world's reserve currency, so a financial crisis that results in loss of confidence in the dollar could trigger that. Who knows? We may end up back on the gold standard or using a new world currency through the IMF as the new reserve currency.
Gold prices have been repressed by the world"s central banks for years. To go back on the gold standard it would have to be priced five or six times higher than it is now. I'm not predicting it will happen, just that it is a possibility in a crisis.
Yeah, right. Haven't you heard the expression "When the US sneezes, the rest of the world catches a cold"? In other words - in a financial crisis, the dollar becomes the "safe haven" currency. Just look at 2008 to see this effect. Russia and Brazil haven't a leg to stand on, no matter what they might "want". The Yuan? We'll see, but they export so much to the US that they are forced to hold huge amounts of US currency.

It will be decades before some other currency becomes the safe haven in a financial crisis - which are always global, BTW.

Gold prices were repressed in 2011, 2012? I don't think so. Gold prices have dropped because the anticipated inflation from two years ago didn't materialize, and global deflation looks more likely. And we got past the Euro/Greece crisis plus Congress stepped back from the defaulting brink.
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Old 05-29-2014, 04:05 PM   #43
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Of course they do. It's in their interest to do so. But it's not really in the interest of anyone else at this point...
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Old 05-29-2014, 05:20 PM   #44
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Yeah, right. Haven't you heard the expression "When the US sneezes, the rest of the world catches a cold"? In other words - in a financial crisis, the dollar becomes the "safe haven" currency. Just look at 2008 to see this effect. Russia and Brazil haven't a leg to stand on, no matter what they might "want". The Yuan? We'll see, but they export so much to the US that they are forced to hold huge amounts of US currency.



It will be decades before some other currency becomes the safe haven in a financial crisis - which are always global, BTW.



Gold prices were repressed in 2011, 2012? I don't think so. Gold prices have dropped because the anticipated inflation from two years ago didn't materialize, and global deflation looks more likely. And we got past the Euro/Greece crisis plus Congress stepped back from the defaulting brink.

No one has said that China or Russia's currency would become the world's reserve currency. But that doesn't mean they don't have influence in the IMF. Don't presume to know what China will or won't do to achieve their objectives. None of this could happen unless the world loses confidence in the dollar, so it wouldn't be the "safe haven" that it has been in the past. The US has a high debt/GDP ratio with entitlements sending it even higher on the horizon. The crisis in Greece was minuscule compared to where we're headed. The 2008 crisis was only fixed with a band-aid because all the bad private debt was simply taken on by the government and hasn't gone away. There is potential for the IMF SDR to become the world's reserve currency and was used to help with the recent crisis in Europe. The dollar may remain the reserve currency but we may end up back on the gold standard. Nobody can know for certain what will happen, but the future will likely be a rocky one.
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Old 05-29-2014, 07:05 PM   #45
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What influence does the IMF have on global economies? They are there to help the little guy.

Never say never, but the US returning to the gold standard in my lifetime seems pretty close to it.
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Old 05-29-2014, 07:51 PM   #46
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Those interested in the economy and how it may affect their money, their lifestyle and their retirement should weigh a lot of various information and opinions so they can make educated decisions about their personal finances. That is what I do. I like thinking outside the box. As I posted previously, deflation/inflation is cyclic and economic trends change. When I first came to this forum, I posted about deflation which was not yet part of the accepted mantra. On this topic, I have posted an article about inflation, which is now being reintroduced to the financial collective consciousness.
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Everyone is interested in the economy and how it will affect their money, lifestyle and retirement. But what I fail to understand is how weighing a lot of various information and opinions will help. And where is "outside the box" anyway? Will any of this change my AA or WR? All I can see this is taking time away from living and enjoying life to worry about things over which I have no control. Sorry, I just don't see the point in thinking or worrying about this at all.
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Old 05-30-2014, 11:28 AM   #47
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China, Russia and Brazil want to stop using the US Dollar as the world's reserve currency...

How sweet, China has a Russian bride...
or maybe "bride" is too polite a term.

Russia will be raped of its natural resources...
China and Russian oligarchs will profit.

What does Brazil get out of the deal ?


.
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Old 05-30-2014, 12:06 PM   #48
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For someone else to become a reserve currency they need two things: 1) one of the largest economy in the world 2) the desire to be a net importer. Right now only the US fits that description and China is actively fighting the second requirement. In the next 50 years only China or India could possibly challenge the US as the reserve currency.

But so what? The US doesn't need reserve currency status at all. It would get along just fine without it. It's nice to have because they are sending us cars, tvs, and ipods and all we send them are bits of paper (obviously they don't get physical paper, most of the dollars just exist on bank ledgers). If some other currency takes over as reserve currency then that would just mean the US would import less, export more and produce more goods domestically. This would actually be a benefit to the domestic economy resulting in more jobs and more domestic growth.

None of this would have a big effect on retirement planning as a whole but it may have negative effects on some industries or geographic investment markets so diversify, diversify, diversify.
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Old 05-30-2014, 03:49 PM   #49
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The thought that the Yuan will replace the dollar is preposterous to me. Most people that bring up the strengthing Chinese economy as a reason also cite the fact that the US economy/dollar is being propped up by supportive fiscal policies (the mythical "printing money"). Meanwhile, those folks ignore the fact that no other currency or economy in the world is as artificially inflated as the Chinese right now.

In the 90s, Japan was going to supplant the US.
In the 00s, it was the Euro.

Through two different recent global economic "crises" of varying proportions (not even going back 20 years, mind you!), the US has remained stalwart. It won't always be that way, but I am betting that it will be for as long as it matters to my personal finances. The people that are telling everyone differently have a vested interest in you believing so.
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Old 06-04-2014, 08:48 AM   #50
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My main concern, having more to do with past FRB policy, as well as fiscal policy, is that "we" have pumped up the economy by running huge deficits and using "inaccurate" monetary policy, so actually allowing the economy to find an equilibrium free from fiscal and monetary shenanigans will be difficult, assuming anyone actually tries. We've painted ourselves into a corner...

Lots of unknowns for a very small fish like me, so other than a passing interest in economics, I stick to my knitting with low-cost index funds, and an allocation I think/hope I can live with through thick/thin and also which will provide a reasonable SWR.
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Old 06-04-2014, 10:00 AM   #51
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My main concern, having more to do with past FRB policy, as well as fiscal policy, is that "we" have pumped up the economy by running huge deficits and using "inaccurate" monetary policy, so actually allowing the economy to find an equilibrium free from fiscal and monetary shenanigans will be difficult, assuming anyone actually tries. We've painted ourselves into a corner...

Yes, the global governments don't have a very good history of manipulating economies with long term success. The post WWI policies led to depression, currency wars and eventually WWII. The Great Society led to more currency wars and high inflation. Who knows what the latest spending sprees, interest rate repression and money printing will result in? It's not going to be pretty.
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Old 06-04-2014, 10:29 AM   #52
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It's not going to be pretty.
Likely not, but we may very well muddle through, which is a long way from "ideal".

A sustained glide path that gradually lowers the deficits, then the debt, is what I would suggest, not that anyone listens to me. But we are not good at long-term planning, when there's an election around every corner...
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Old 06-04-2014, 11:24 AM   #53
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I should probably go some Alcoa stock after reading this thread.

It always perplexes me why people get worked up about this sort of thing. If it is going to happen, you cannot change it and more than you can alter the tax code or repeal the laws of gravity. A well designed portfolio should have exposure to things that will benefit from a higher inflation level, lower USD, etc. So I have chosen to leave my 30 year fixed rate mortgage outstanding as a rate/inflation hedge. I own non-USD denominated stocks and bonds. I make sure to have some commodity producer equities in my portfolio, etc. But I am not planning on piling into physical gold, tinfoil, shotgun shells, or MREs with 90% of my portfolio. I don't feel the need to own a survivalist compound. And so on. And I don't spend a lot of time worrying about this nonsense.
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Old 06-04-2014, 12:26 PM   #54
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I should probably go some Alcoa stock after reading this thread.

It always perplexes me why people get worked up about this sort of thing. If it is going to happen, you cannot change it and more than you can alter the tax code or repeal the laws of gravity. A well designed portfolio should have exposure to things that will benefit from a higher inflation level, lower USD, etc. So I have chosen to leave my 30 year fixed rate mortgage outstanding as a rate/inflation hedge. I own non-USD denominated stocks and bonds. I make sure to have some commodity producer equities in my portfolio, etc. But I am not planning on piling into physical gold, tinfoil, shotgun shells, or MREs with 90% of my portfolio. I don't feel the need to own a survivalist compound. And so on. And I don't spend a lot of time worrying about this nonsense.

I'm not sure where you get the survivalist perspective. You must be reading a lot more into this thread than the rest of us.
My concerns come from our government's inability to learn from history or to understand the future unintended consequences of its actions. If you study the global policies and actions that led to the Great Depression, as well as those leading to the inflation of the 70s and early 80s, you will see there is trouble ahead. If you look into the structural changes in the economy that have occurred since the 2008 crisis, we are likely headed to a much more serious financial crisis within the next decade. The preparedness is to hold stocks in companies producing needed goods and services, and companies that will have pricing power to increase prices. Avoid companies reliant on discretionary spending. Owning hard assets is a good hedge. Bonds or any debt may be a bad investment if things get to the point of large defaults or even just large interest rate hikes. Cash is king during a deflationary period, but be ready to invest when inflation kicks in.
Or you can be complacent and think nothing will happen except the good times rolling on forever...like they thought in 1929.
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Old 06-04-2014, 12:56 PM   #55
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I'm not sure where you get the survivalist perspective. You must be reading a lot more into this thread than the rest of us.
My concerns come from our government's inability to learn from history or to understand the future unintended consequences of its actions. If you study the global policies and actions that led to the Great Depression, as well as those leading to the inflation of the 70s and early 80s, you will see there is trouble ahead. If you look into the structural changes in the economy that have occurred since the 2008 crisis, we are likely headed to a much more serious financial crisis within the next decade. The preparedness is to hold stocks in companies producing needed goods and services, and companies that will have pricing power to increase prices. Avoid companies reliant on discretionary spending. Owning hard assets is a good hedge. Bonds or any debt may be a bad investment if things get to the point of large defaults or even just large interest rate hikes. Cash is king during a deflationary period, but be ready to invest when inflation kicks in.
Or you can be complacent and think nothing will happen except the good times rolling on forever...like they thought in 1929.

Um, ok. That seems like a lot of hand wringing about a grocery list of stuff you have no control over. How is that working out for you?
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Old 06-04-2014, 01:23 PM   #56
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Um, ok. That seems like a lot of hand wringing about a grocery list of stuff you have no control over. How is that working out for you?

So you don't have control over how your investments are allocated? How's that working out for you?
I thought this was a forum to share ideas. Why the attitude? There are more and more people who are realizing this economy is headed for a world of hurt. When or how bad no one knows. But one thing I'm sure of is it won't always be a bull market. If you don't want to listen to any thoughts other than those that agree with yours, that's your option. But there's no reason to put down other ideas with your uneducated perspective of "you have no control over."
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Old 06-04-2014, 01:39 PM   #57
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So you don't have control over how your investments are allocated?
I believe that was exactly the point: we DO control our asset allocations, our expenses, and, to a lesser extent, our incomes. We have less/no control over macroeconomic events, etc.
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Old 06-04-2014, 01:51 PM   #58
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So you don't have control over how your investments are allocated? How's that working out for you?
I thought this was a forum to share ideas. Why the attitude? There are more and more people who are realizing this economy is headed for a world of hurt. When or how bad no one knows. But one thing I'm sure of is it won't always be a bull market. If you don't want to listen to any thoughts other than those that agree with yours, that's your option. But there's no reason to put down other ideas with your uneducated perspective of "you have no control over."
Thank you, but I am plenty educated. Perhaps overeducated, in fact.

Of course I have control over my investments. Did you see all the things I listed that I do to hedge against unpleasant outcomes? But that is about all I can do. The Fed Chairman, President, head of the IMF, Mr. Putin, the Elders of Zion, etc. unaccountably do not take my calls.

In the meantime, I would guess that we get a parade of the tinfoil brigade here roughly weekly. They always have some pet dire scenario and they always get upset when I either poke fun at them or point out that we are along for the ride no matte what we do or believe. After 11(?) years on this forum, you will excuse me if I get a little tired of the same old fearmongering every week.

I know how to hunt, fish, camp, hike, brew beer, bake bread, grind flour, forage, etc. I live a generally low cost llifestyle in a part of the country that is not disaster prone. I heat my home a lot with free firewood in the winter. I have a stash of shelf stable food, shotshells, aluminum foil, TP, etc. There is little or nothing else I can do to insulate myself from the lumps and bumps that may emerge. In the meantime, I would rather spend my time enjoying life and spending time with my family. I worked hard to get to this point, and I intend to enjoy the hell out of it.
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Old 06-04-2014, 02:01 PM   #59
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I have no idea what the future holds for us but I think it is a mistake to underestimate policy makers and especially the Fed. Some pretty smart people working on this stuff. My look at history shows lots of growth with periodic disruptions and there's no reason that should change.

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A well designed portfolio should have exposure to things that will benefit from a higher inflation level, lower USD, etc. So I have chosen to leave my 30 year fixed rate mortgage outstanding as a rate/inflation hedge. I own non-USD denominated stocks and bonds. I make sure to have some commodity producer equities in my portfolio, etc.
Pretty good advice IMHO.
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Old 06-04-2014, 02:23 PM   #60
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I have no idea what the future holds for us but I think it is a mistake to underestimate policy makers and especially the Fed. Some pretty smart people working on this stuff. My look at history shows lots of growth with periodic disruptions and there's no reason that should change.



Pretty good advice IMHO.
The smart people you refer to have made many mistakes that have led to the various financial crises in our history. One major issue is they tend to look more at past data rather than future indicators. Historically it has not been a smooth ride, though I will concede that growth over the long term has been robust. But as retirees, we don't necessarily have the time we used to in able to recover. Should another crisis occur, many in our situation will find ourselves unprepared by relying on the "model" asset allocations of large bond holdings and index funds that contain stocks of all industries, including highly leveraged companies. The periodic disruptions we've seen in our history have had severe effects on many individuals, which often gets lost as time moves on. There is a complacent attitude here and just because the so-called doomsayers haven't been right yet, doesn't mean there is no trouble on the horizon.
Why shouldn't people be able to discuss alternative thoughts and strategies without being put down by others? Seems to me people are just denying anything could ever go wrong, and to me that is unrealistic.
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