haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Well, I think that is a completely safe assumption.I read it as saying that foreign holders of US Dollar denominated debt would be hurt by a devaluation.
Ha
Well, I think that is a completely safe assumption.I read it as saying that foreign holders of US Dollar denominated debt would be hurt by a devaluation.
I got the big time itch around 3:45 to buy into this market. With my terrible skill at market timing I view this as a warning sign. Stick to the AA, stick to the AA, turn off the TV....In answer to the OP: I don't know, but the Dow is up 178 points and it's only lunchtime.
Exactly the point. The investment question of the century is if and when this occurs... Get this correct and you will be able to coin money.
The biggest losers are holders of debt, especially public debt. This would currently be China and Japan, followed by resource producing countries, mainly petroleum.
Everyone in the world sees and knows this, and expects it as well. If it is orderly, most will not be particularly happy but will suck it up and learn to live with it.
I got the big time itch around 3:45 to buy into this market. With my terrible skill at market timing I view this as a warning sign. Stick to the AA, stick to the AA, turn off the TV....
When was the last time those guys had a hit song?You can wait a few days - the price is way outside the Bollinger Bands.
Stop it Dex, you're killing me. Are you going to try and time this thing again.
I'm sure it will change at some point, but guessing when has, historically, been an exercise in futility.
That didn't take long. Central Bankers are heard on Bernanke's "beggar-thy-neighbor" policy as they consider responses:
FT.com / Global Economy - Backlash against Fed
Not just an exercise in futility, depending on your portfolio decisions a costly monetary one.
Still, I think the pressures may be finally approaching escape velocity. As you point out they have been building for decades. That having been said, I am certainly not ready to bet against the $/yuan peg yet...
Correct - and thanks.I read it as saying that foreign holders of US Dollar denominated debt would be hurt by a devaluation.
The only specific complaints in the article are from the Central Bank heads of Brazil and Thailand. Their view is not representative of anything other than their own concerns despite the headline.That didn't take long. Central Bankers are heard on Bernanke's "beggar-thy-neighbor" policy as they consider responses:
FT.com / Global Economy - Backlash against Fed
[/FONT]Yves at Naked Capitalism has a pretty good summary of the discussion of QE II. Worth a read for those that are trying to understand likely impact.
[/FONT]The unfortunate conclusion is that QE2 will be of limited success in sustaining high growth and job creation in the US, and will complicate life for many other countries. With domestic outcomes again falling short of policy expectations, it is just a matter of time until the Fed will be expected to do even more. And this means Wednesdays QE2 announcement is unlikely to be the end of unusual Fed policy activism.
[FONT="]Mr. El-Erians points are, as usual, are articulate and legitimate, as are his recommendations. What the US needs is not monetary policy but credible fiscal action and reformed consumer behaviour. Consumers are showing signs of this reform as seen in the improving savings rate and declining consumer debt. Still, BOT is quite negative. There is no real credibility on the fiscal front. Those that complain about Fed actions should redirect their frustration toward the political leadership, where corrective policy is not yet visible.[/FONT][FONT="]The Fed would be well advised to prepare for this possibility from now. In doing so, it should insist that any further use of its balance sheet be subject to two overriding conditions.[/FONT]
[FONT="]First, rather than constitute yet another solo effort, the use of the Feds balance sheet should be one component of a more holistic US policy approach that addresses both demand and structural reform issues; and second, that such a policy response be accompanied by correlated, if not co-ordinated, actions in other countries. Without that, the Fed risks finding itself crossing the delicate line that separates a courageous policy approach from a counterproductive one. [/FONT]
If the Fed is successful, yes. If the US economy stays weak and falls into chronic deflation, though, a more likely outcome is like Japan, with an ever increasing supply of money driving yields lower still.It follows that if one expects the USD to continue to devaule, one should not invest in USD debt. Absent continued manipulation, a reduced demand for USD debt should logically lead to higher interest rates which reduces the market value of debt instruments (especially longer maturities) so investors will get hit twice.
This is an excellent point. Countries like Brazil complain bitterly about the US$ rate but the deval of the Real vs Yuanl rate hurts them badly, and they are reluctant to complain against China for fear of reprisal.Just wanted to say again this was a really great exchange. I read through it just now and wanted to add one point I didn't see come up. It was mentioned in the Charlie Rose interview with Stiglitz and Berner and it involves those countries that peg their currencies to the USD (in particular China). Under such an policy/ arrangment, a weaker dollar advantage transfers to any economy pegging its currency to the dollar.
It seems a point of particular signficance to an export economy.
The only specific complaints in the article are from the Central Bank heads of Brazil and Thailand. Their view is not representative of anything other than their own concerns despite the headline.
Brazil’s worry is quite legitimate and representative of many developing countries (sans China). Their economies are fragile and capital markets small, which makes it very hard to deal with large currency movements and major changes in value. Their domestic demand is still quite dependent on external trade so exchange sensitivity is very high and they do not have effective tools to deal with resulting inflation.
Brazil has been here many times now – and each time their economy and currency has collapsed. Every adult in the country knows this and remembers that pain. Same with Mexico, Argentina, and many Asian economies. Clearly, the leadership in these countries is not yet convinced their economies can deal with this.
If the Fed is successful, yes. If the US economy stays weak and falls into chronic deflation, though, a more likely outcome is like Japan, with an ever increasing supply of money driving yields lower still.
Very true, although there are a number of (IMHO) very significant differences between Japan and the US inculding the enterprise/compeititive culture, the much greater speed with which the US deals with economic failures, the general openness of the US economy, the net population growth/immigration etc etc. I'd like to believe that the US will do a much better job of dealing with a deflationary problem than Japan but who knows?
I think the next downturn - I don't know the cause or what it will look like - will begin to change people's minds, because it will increase people's uncertainties and fears. All of which will increase the deflationary pressures as people get conservative.
.....
Also, the issues people discuss now - wealth distribution, social programs for the needy - will be worse and the large federal deficit will hand tie the gov't ability to address them. Add higher taxes and VAT in the future and you can see why the recovery will be muted and deflation/slow growth could be with us for awhile.