Perspectives on the global economic meltdown- (Nov 28 2010)

[paramu]

Banking is the machine upon which the economy functions. Letters of credit, underwriting corporate borrowing (issuance of bonds), guaranting giant construction projects, short term construction loans, etc. You cna't have a dynamic, fluid, responsive economy with out the banking system and the credit it fosters.

How weak is this system when it needs $1T annually (as QE) to make it run? Even the talk of stopping QE tanks the market, the printer owner has come to the media and say that he has no plan to stop it any time soon. It looks good as long as the party goes, but the system is very very fragile.

[TSJones]

Banking is the machine upon which the economy functions. Letters of credit, underwriting corporate borrowing (issuance of bonds), guaranting giant construction projects, short term construction loans, etc. You cna't have a dynamic, fluid, responsive economy with out the banking system and the credit it fosters.

How weak is this system when it needs $1T annually (as QE) to make it run? Even the talk of stopping QE tanks the market, the printer owner has come to the media and say that he has no plan to stop it any time soon. It looks good as long as the party goes, but the system is very very fragile.

So what about this is bothering you? The QE3 is a finite program. It won't go on forever. Are you afraid the bank won't get its money back? How about the threat of inflation? Do you know what it took to get out the Great Depression back in the '30s? Tell us what you think is going to happen because of this largest recession sinvce the Great Depression. Neshant says the whole system is going to collapse. I think that is just wishful thinking. What do you think?

Have you read Taleb's "The Black Swan, The impact of the Highly Improbable"? I was introduced to this book by the retired Chief of the Austin TX City Fire Department when I took one of his business continuity/disaster recovery seminars.

[paramu]

When the crisis happened, I thought they would fix the system. But later when details came up, fraud among bankers and enforces, and the absence of true corrective steps, I don't see any attempt to fix the system. Start with arresting and putting in the jail those committed fraud. Prevent the people involved from ever entering the financial world or government positions. Break down the banks involved in any kind of rigging. Start couple of nationalized banks that will provide financial lubrication to the industry. Fraudulent entities are not needed. As long as there is only lip service, I will have to agree with Neshant.

[akashganga]

Dr. Doom uvacha.

Roubini Sees 2-Year Rally for Stocks, Bonds, Then Disaster http://www.moneynews.com/InvestingAnaly ... de=13567-1

The stock and bond markets can rise for another two years, as the Federal Reserve maintains its massive easing program, says New York University economist Nouriel Roubini.

But then the trouble begins. The Fed’s accommodative policy is sparking the same problems that led to the financial crisis in 2008, he said at the Milken Institute Global Conference in Los Angeles Monday, CNNMoney reports.

[Neshant]

Neshant,

How would this over valuing of gold proceed. Would it not create another bubble with human endeavor being diverted to find gold rather than productive activity...

In general its a bad thing that much of human effort & wealth gets tied up in gold. Ideally that money should have better purposes - as decided by the person who earned the wealth not some idiot central banker catering to his cronies of course. Unfortunately humans are such that they cannot be trusted. No sooner has the power of money been concentrated in the hands of a few, then begins cronyism & tyranny to enforce the cronyism.

Taxation in paper money has a specific purpose - to force people to earn in a monetary system which they cannot control. The tyranny comes from the threat of imprisonment, confiscation of wealth and other nastyness - a kind of slavery to a few sitting in an ivory tower.

I don't advocate forcing anyone to adhere to a gold standard any more than forcing people into the fraudlent paper money standard. People who earn the wealth should have the option to select the monetary system they wish to transact in i.e. competing private currencies. Anything less results in tyranny & cronyism.

That being said, the world has always defaulted to gold - not because governments/people want to but because they have to.

[vina]

Have you read Taleb's "The Black Swan, The impact of the Highly Improbable"? I was introduced to this book by the retired Chief of the Austin TX City Fire Department when I took one of his business continuity/disaster recovery seminars.

Ah.. But I introduced Taleb's books (Black Swan and also Fooled By Randomness) right here in BRF BEFORE the 2008 meltdown (during which I also correctly called the collapse of Lehman and Bear Stearns) and Taleb and his books became popular!

[Neshant]

Nicole Foss - on a number of topics.

Much like Robert Prechter, she believes a deflationary (not inflationary) collapse will occur. All commodities, stocks and real estate will see a massive price collapse. Gold included. The only safe place to be according to her is in US dollar cash.

Not cash in a bank account that has gone belly up with your funds Cyprus wise but cash literally in your hand. Everything will be on sale at the bottom of this deflationary crash and only those with very scarce physical cash will be able to buy it.

I'm playing it both ways - 30% in gold and 70% in cash. 30% of my net wealth in gold puts me way ahead of 99% of the world which owns no gold. (the proverbial 1%). But if the gold story does not pan out and she's right, the 70% of cash should serve me nicely at the bottom.

For all we know, beaver pelts may be the next form of money - not cash or gold. So stock up on beavers.

[Neshant]

632k for whites.

I would not have guessed its that high.

Is that figure accurate?

_________________________
Wealth Gap Among Races Has Widened Since Recession

The dollar value of that gap has grown, as well. By the most recent data, the average white family had about $632,000 in wealth, versus $98,000 for black families and $110,000 for Hispanic families.

http://finance.yahoo.com/news/wealth-ga ... 47890.html

[JwalaMukhi]

Average is useless number. Bill Gates, Waltons, larry page would slam dunk any michael jordan, kobe bryant numbers while computing average. What are the medians?

[JwalaMukhi]

What would be more telling is if the numbers are provided along racial lines in following format:

The medians for the top 10% bracket. (along racial lines)
The medians for the bottom 10% bracket. (along racial lines)
The medians for the rest. (along racial lines).

Just as gold hoarding is considered useless, the land hoardings also are equally bad. Bet most of the wealth contribution along the racial lines would be directly related to land hoardings and ancestral properties.

[ldev]

Therefore, both on a real vs real and nominal vs nominal basis, economic growth much outpaces oil consumption growth.

In this specific case of Indian oil imports vs GDP growth, what has been overlooked is Indian oil product exports. I believe, and you can look up the numbers, that petroleum and refined products are now the single largest export from India having overtaken gem and jewellery, the figure is somewhere in the $50-55 billion range. Reliance Industries alone exported $44 Billion of oil products last year primarily due to the expansion of their Jamnagar refinery, completed in 2008 from 625,000 bpd earlier to 1.24 million bpd now (it is the single largest refinery complex in the world). At the height of the Iraq war I believe that they were the largest supplier of fuel to the US armed forces in Iraq.

I do not know when the refinery complex was transferred into a SEZ but some of the oil import numbers could be skewed because a lot of that imported oil was refined and re-exported.

[TSJones]

I think a better indicator is electricity useage. I was listening to an analyst a few months ago about predicting the Chinese economy and he said electricity production was not growing as it should so he predicted a lower Chinese econ growth rate. It turns out he was absolutely right.

[akashganga]

Nicole Foss - on a number of topics.

Much like Robert Prechter, she believes a deflationary (not inflationary) collapse will occur. All commodities, stocks and real estate will see a massive price collapse. Gold included. The only safe place to be according to her is in US dollar cash.

Not cash in a bank account that has gone belly up with your funds Cyprus wise but cash literally in your hand. Everything will be on sale at the bottom of this deflationary crash and only those with very scarce physical cash will be able to buy it.

I'm playing it both ways - 30% in gold and 70% in cash. 30% of my net wealth in gold puts me way ahead of 99% of the world which owns no gold. (the proverbial 1%). But if the gold story does not pan out and she's right, the 70% of cash should serve me nicely at the bottom.

For all we know, beaver pelts may be the next form of money - not cash or gold. So stock up on beavers.

It is hard to see deflationary collapse with democratic president, helicopter bernake running fed, and economists like Krugman advising printing unlimited amount of money. These people will even take extreme measures like giving printed thousands of dollars of cash to individual citizens of the US. For extreme deflation of the type Robert Prechter advocates to happen we will have to wait at least till 2017 when new president of US takes over and if a tea party type becomes next president. My 2 cents.

[ramana]

Its possible that new crash will be induced ito coincide with 2016 elections in US.

Vina, Taleb has new book "Anti Fragility" on how to make things robust.


Also you did predict the Lehman-Bear Stearns crash.
And described the sub-prime crisis as primary that would take down the whole banking sector as a secondary.

[Suraj]

ldev: yes I know. That's why I specifically mentioned net oil volume; Jamnagar et al distort numbers otherwise.

[Prem]

http://www.businessinsider.com/albert-e ... oom-2013-5
The Party Is Over, The US Is Just One Recession Away From Japan-Style Doom
Here's your happy thought of the day from SocGen strategist Albert Edwards:

Over the last 15 years most investors have refused to contemplate that events in the West are playing out in a similar fashion to Japan in the 1990s. But the latest inflation data out of both the US and eurozone should ram home the fact that we are now only one short recession away from Japanese-style outright deflation. Similarly, investors refuse to believe that equities can fall in an environment of rampant QE. They are wrong.Basically, we're so close to deflation, that all it will take is another downturn, and we'll be toast.

[TSJones]

You guys might find this interesting:

http://www.foreignpolicy.com/articles/2 ... obel_prize

India won't let Walmart set up shop so its just a thought.

[svinayak]

THere is nothing called you guys here in BRF. There are other forums you can go find different opinions.

Walmart can have a small shop in India.

[Neshant]

they already have - they are in partnership with Bharati and have many hundreds of small stores in India.

but Walmart does not want to be in a partnership with Bharati.

they want to setup their own brand only - to create the kind of retail monopoly they have in the west.

Walmart is responsible for something like 15% of US deficit. They manufacture nothing in the US and it all comes from China. The goods are paid for in USD which the US govt prints up for nothing - so its no sweat. But for India, the Walmart model would be a disaster.

Much better to have many small & mid sized stores from different brand retailers each competing against the other. e.g. 711 type stores. It promtes price competition instead of monopoly for one thing. And second these smaller brands are not powerful enough to squeeze local farmers into subsistance the way Walmart would.

[Abhijeet]

Walmart has a few stores at most in India as far as I know, probably less than a dozen. Certainly not hundreds. They are also "cash and carry" stores which means they are simply an easy way for your friendly neighborhood small retailer to buy all his stuff in one place and add even less value than he already does. They are not open to the general public.

I've been doing some shopping from walmart recently (I know, how gauche), and there are an increasing number of items that are made in the USA. So they will make things in the US when it makes sense.

In any case, India simply lacks the manufacturing capability to produce many things that stores like Walmart sell. Better for the Indian consumer that they be imported from china or somewhere else that has functioning infrastructure than doing without while we catch up. We know how that import substitution experiment turned out.

India has plenty of small stores -- literally millions. They are mostly unprofessionally run, undercapitalized, and have no supply chain control to speak of -- so their supply side strategy is simply to dump into their store whatever came over on the latest boat from China. India is flooded with low quality Chinese goods that haven't gone through basic quality control, sold at extraordinary prices in some cases ( I've posted before about a children's kitchen set we bought) -- but Indians buy them anyway, because the Indian alternatives are worse.

The improvements in the Indian shopping scene in the last few years have all been because of organized retail -- big bazaar, croma, lifestyle etc offline, and flipkart online (not to suggest that any of these are perfect). They at least give you somewhat predictable quality and standard policies.

People who imagine some kinder, gentler alternative to large chain stores existing in India have probably not lived there in a very long time.

[Neshant]

Importing a ton of junk from china is not to the benefit of India unless its paid for in rupees.

If walmart agrees to source 40% of its finished good from India for its stores, then hey why not. Walmart et al with their deep pockets could put up the investment monies to build the manufacturing infrastructure.

Otherwise India may as well import the junk from china itself, why the need for walmart. Importing a ton of sh@t is not some specialized skill.

[Neshant]

[Abhijeet]

If walmart agrees to source 40% of its finished good from India for its stores, then hey why not. Walmart et al with their deep pockets could put up the investment monies to build the manufacturing infrastructure.

Otherwise India may as well import the junk from china itself, why the need for walmart. Importing a ton of sh@t is not some specialized skill.

There is already a local sourcing clause in the FDI regulations. And while it would be nice if a private company could simply come in and fix India's dysfunctional infrastructure, it's unrealistic. Power plants and roads are the job of the government in most countries except failed states.

It actually does take a lot of skill to efficiently import "shit" at high scale, or perform any of the other activities that modern retailers do. Companies like Walmart are at the forefront of leveraging technology to gain supply chain efficiencies, and we need more companies like them in India. I'm sure other Indian organized retailers are no laggards about using technology, but the romanticized small retailers certainly are.

[Theo_Fidel]

For all the SS doomsayers, here are some numbers to chew on. 2.4% of payroll is what it would take for the next 75 years.

Alicia Munnell: Yes. Half. Right. So that's 1.2 percent more from you and 1.2 from the employer. Now think about that number. We recently had a payroll tax cut of two percentage points and I couldn't even tell. And then they raised it again by those same two percentage points and again I couldn't tell. I think some low earners felt it, but there wasn't jubilation when it happened and it wasn't cataclysmic when it went back. From the employee's perspective, the change that we're talking about is half of what we just went through in terms of this payroll tax cut and then increase.

And that's if you say I'm going to solve this whole problem just by raising the payroll tax. If you do anything else -- raise the taxable wage base or do any number of things -- the amount you need to raise from the payroll tax becomes smaller. I think that's a more sensible way to think about Social Security's finances than this $200 zillion trillion dollar shortfall.

[Prem]

The Oil and Gold Booms Are Over
http://www.bloomberg.com/news/2013-05-0 ... -over.html

The wreckage caused by China’s great, juddering slowdown continues to spread far beyond the country’s shores. Although most commodities enjoyed a bounce on May 3, after better-than-expected U.S. employment data, the plunge in their prices over the past few months suggests the past decade’s rally is truly broken.For those of us not in the mining industry, this is actually good news -- one of the best signs yet that the global economy is returning to normal.China’s voracious demand for every conceivable raw material -- oil, steel, soybeans, gold, to name a few -- once seemed to spell a future of endlessly rising commodity prices and falling living standards in developed nations. This was a Malthusian vision of scarcity: Rising demand from the growing economies of the emerging world would couple with shrinking supplies to drive up the prices of natural resources. Gas prices would never come back down; gold would cost thousands of dollars an ounce.The response, for many international investors, was to bet big on China. Because it is hard to buy directly into China, many instead bought into the commodities that were being sucked into the gaping maw of the country’s economy: oil from Russia, iron ore from Australia and so on.
The China-commodity connection was born. Financial entrepreneurs started exchange-traded funds, which allowed individual investors to trade commodities, including silver and gold, as if they were stocks.
Supercycle Started
For the first time, U.S. pension funds started to allocate a share of their holdings to commodities. Even the Federal Reserve got involved, inadvertently, by printing so much money that a good portion of it wound up fueling speculative bets on China and the big emerging markets, often using commodities as a proxy.Prices went parabolic. From 2000 to 2011, copper prices rose 450 percent, oil prices 365 percent, and gold prices more than 500 percent to a high of more than $1,900 an ounce. There was talk of oil hitting $200 a barrel, and gold reaching $10,000 an ounce. It was a wild time, all predicated on the idea that the rise of China had set off a commodity “supercycle” that could keep prices high indefinitely.
Commodity prices, such as that of gold, tend to rise when faith in the financial system is in decline and usually fall when confidence is high. In this they resemble the politician of whom Winston Churchill once said: “He has all the virtues I dislike and none of the vices I admire.”High commodity prices enrich a class whose corrupting influence is legend, and whose chief skill is the ability to secure the right political contacts. Meanwhile, high commodity prices, particularly for oil, squeeze the poor and the middle class, and act as a brake on growth in the industrial world. During the 2000s, the U.S. fretted over the rise of corrupt oil tycoons and unstable dictators in nasty petro-states, and rightly so.
That’s why falling commodity prices -- both gold and copper are still down more than 10 percent this year despite the latest bounce -- are good news. The China-commodity connection is breaking. After three straight decades of ultrafast growth, China’s inevitable slowdown has let air out of the bubble: Since the peak in April 2011, the broadest available measure of commodity prices has fallen 16 percent. In recent months, money has started flowing out of exchange-traded funds for most commodities.The Malthusian specter of rising demand and shrinking supply has been replaced by a new realization that, for most commodities, demand is flat and supply is rising fast. Oil demand in developed nations has been stable since 1995, because high oil prices have inspired conservation efforts in countries such as Japan and the U.S.
Flattening Demand
Now, as emerging nations begin to embrace energy efficiency as well -- China is working hard on electric cars, for instance, despite continuing to build dozens of coal plants -- global demand might flatten out this decade. The debate over “peak oil” scenarios may shift from the threat of dwindling supply to the threat of peaking demand.Certainly, the world is no longer terrified of running out of important commodities. High prices have drawn investment to copper mines, aluminum smelters and other basic sources of supply. In the past decade, the amount of capital invested in the energy and materials sector, which includes most nonfarm commodities, has risen 600 percent, compared with an average increase of 200 percent in other sectors.The much-discussed boom in U.S. shale-gas production is only one result of this spending: Since 2001, China has increased output of industrial metals by striking multiples, from about 140 percent for iron-ore commodities to 775 percent for nickel.
This is part of the normal cycle of the world economy, not a supercycle. Commodity-price booms restrain demand, while attracting money and innovation to increase supply, which leads to a bust. For the last 200 years, the average price of commodities has followed this predictable cycle: one decade up, often sharply, followed by two decades down, with the result that real prices haven’t risen since 1800. There are exceptions to the rule. Some commodities, including oil and copper, have gained somewhat in real terms. But gold has just retained its value. The price today (about $1,500 an ounce) is roughly the same as in 1980, when adjusted for inflation.If the historical pattern holds, we are now entering a long period of falling commodity prices, which could last two decades. That is good for importers such as the U.S., as was the case in the 1980s and 1990s when commodity prices were falling. The current fall in retail gasoline prices should increase the purchasing power of the American consumer and offset the fiscal drag from the government sequestration cuts.Meanwhile, the nations that have reveled in the commodity boom of recent years are likely to face a disheartening return to the mundane ordeals of normal life. Buddhist monks have a phrase for it: “After the ecstasy, the laundry.”

(Ruchir Sharma is the author of “Breakout Nations” and the head of emerging markets and global macro at Morgan Stanley Investment Management. The opinions expressed are his own.)
Ruchir.Sharma@morganstanley.com.

[TSJones]

If walmart agrees to source 40% of its finished good from India for its stores, then hey why not. Walmart et al with their deep pockets could put up the investment monies to build the manufacturing infrastructure.

Otherwise India may as well import the junk from china itself, why the need for walmart. Importing a ton of sh@t is not some specialized skill.

There is already a local sourcing clause in the FDI regulations. And while it would be nice if a private company could simply come in and fix India's dysfunctional infrastructure, it's unrealistic. Power plants and roads are the job of the government in most countries except failed states.

It actually does take a lot of skill to efficiently import "shit" at high scale, or perform any of the other activities that modern retailers do. Companies like Walmart are at the forefront of leveraging technology to gain supply chain efficiencies, and we need more companies like them in India. I'm sure other Indian organized retailers are no laggards about using technology, but the romanticized small retailers certainly are.

My youngest son married a Philippina. She operates a small grocery store (acutally two of them) near the bus terminal/transportation center of a small Philippine town. Everything is broken down into small quantities from snacks to bulk items (rice). So people can buy as little as they need. She does OK. Some days she takes in up to $450 in revenue. About 10% of that is profit. So it ain't no Walmart or Costco. But for the Philippines it's a living. I am trying to get them to start a general ledger on a PC. I also want them to get an optical code scanner so it would be easier to track everything that is sold. I think they are listening to me but we're talking about maybe a $1000? investment so she is cautious. But the convenience thing and small amounts is definitely working for her. Her customers just don't have a lot of money to spend *at any one time* but they always have a few pesos.

[TSJones]

The Oil and Gold Booms Are Over
http://www.bloomberg.com/news/2013-05-0 ... -over.html

The wreckage caused by China’s great, juddering slowdown continues to spread far beyond the country’s shores. Although most commodities enjoyed a bounce on May 3, after better-than-expected U.S. employment data, the plunge in their prices over the past few months suggests the past decade’s rally is truly broken.For those of us not in the mining industry, this is actually good news -- one of the best signs yet that the global economy is returning to normal.China’s voracious demand for every conceivable raw material -- oil, steel, soybeans, gold, to name a few -- once seemed to spell a future of endlessly rising commodity prices and falling living standards in developed nations. This was a Malthusian vision of scarcity: Rising demand from the growing economies of the emerging world would couple with shrinking supplies to drive up the prices of natural resources. Gas prices would never come back down; gold would cost thousands of dollars an ounce.The response, for many international investors, was to bet big on China. Because it is hard to buy directly into China, many instead bought into the commodities that were being sucked into the gaping maw of the country’s economy: oil from Russia, iron ore from Australia and so on.
The China-commodity connection was born. Financial entrepreneurs started exchange-traded funds, which allowed individual investors to trade commodities, including silver and gold, as if they were stocks.
Supercycle Started
For the first time, U.S. pension funds started to allocate a share of their holdings to commodities. Even the Federal Reserve got involved, inadvertently, by printing so much money that a good portion of it wound up fueling speculative bets on China and the big emerging markets, often using commodities as a proxy.Prices went parabolic. From 2000 to 2011, copper prices rose 450 percent, oil prices 365 percent, and gold prices more than 500 percent to a high of more than $1,900 an ounce. There was talk of oil hitting $200 a barrel, and gold reaching $10,000 an ounce. It was a wild time, all predicated on the idea that the rise of China had set off a commodity “supercycle” that could keep prices high indefinitely.
Commodity prices, such as that of gold, tend to rise when faith in the financial system is in decline and usually fall when confidence is high. In this they resemble the politician of whom Winston Churchill once said: “He has all the virtues I dislike and none of the vices I admire.”High commodity prices enrich a class whose corrupting influence is legend, and whose chief skill is the ability to secure the right political contacts. Meanwhile, high commodity prices, particularly for oil, squeeze the poor and the middle class, and act as a brake on growth in the industrial world. During the 2000s, the U.S. fretted over the rise of corrupt oil tycoons and unstable dictators in nasty petro-states, and rightly so.
That’s why falling commodity prices -- both gold and copper are still down more than 10 percent this year despite the latest bounce -- are good news. The China-commodity connection is breaking. After three straight decades of ultrafast growth, China’s inevitable slowdown has let air out of the bubble: Since the peak in April 2011, the broadest available measure of commodity prices has fallen 16 percent. In recent months, money has started flowing out of exchange-traded funds for most commodities.The Malthusian specter of rising demand and shrinking supply has been replaced by a new realization that, for most commodities, demand is flat and supply is rising fast. Oil demand in developed nations has been stable since 1995, because high oil prices have inspired conservation efforts in countries such as Japan and the U.S.
Flattening Demand
Now, as emerging nations begin to embrace energy efficiency as well -- China is working hard on electric cars, for instance, despite continuing to build dozens of coal plants -- global demand might flatten out this decade. The debate over “peak oil” scenarios may shift from the threat of dwindling supply to the threat of peaking demand.Certainly, the world is no longer terrified of running out of important commodities. High prices have drawn investment to copper mines, aluminum smelters and other basic sources of supply. In the past decade, the amount of capital invested in the energy and materials sector, which includes most nonfarm commodities, has risen 600 percent, compared with an average increase of 200 percent in other sectors.The much-discussed boom in U.S. shale-gas production is only one result of this spending: Since 2001, China has increased output of industrial metals by striking multiples, from about 140 percent for iron-ore commodities to 775 percent for nickel.
This is part of the normal cycle of the world economy, not a supercycle. Commodity-price booms restrain demand, while attracting money and innovation to increase supply, which leads to a bust. For the last 200 years, the average price of commodities has followed this predictable cycle: one decade up, often sharply, followed by two decades down, with the result that real prices haven’t risen since 1800. There are exceptions to the rule. Some commodities, including oil and copper, have gained somewhat in real terms. But gold has just retained its value. The price today (about $1,500 an ounce) is roughly the same as in 1980, when adjusted for inflation.If the historical pattern holds, we are now entering a long period of falling commodity prices, which could last two decades. That is good for importers such as the U.S., as was the case in the 1980s and 1990s when commodity prices were falling. The current fall in retail gasoline prices should increase the purchasing power of the American consumer and offset the fiscal drag from the government sequestration cuts.Meanwhile, the nations that have reveled in the commodity boom of recent years are likely to face a disheartening return to the mundane ordeals of normal life. Buddhist monks have a phrase for it: “After the ecstasy, the laundry.”

(Ruchir Sharma is the author of “Breakout Nations” and the head of emerging markets and global macro at Morgan Stanley Investment Management. The opinions expressed are his own.)
Ruchir.Sharma@morganstanley.com.

I hope this person is right because China was buying everything is sight especially in a country like the Philippines. So hopefully things will calm down on commodities. I would like to see some jobs return to the US but I think I that is merely wishful thinking. We're only beginning to see robotic production of goods and services occuring and the 3D printer technology starting to take hold. Maybe not so good for human employment but we will be swamped with goods and services.

[Theo_Fidel]

It actually does take a lot of skill to efficiently import "shit" at high scale, or perform any of the other activities that modern retailers do. Companies like Walmart are at the forefront of leveraging technology to gain supply chain efficiencies, and we need more companies like them in India. I'm sure other Indian organized retailers are no laggards about using technology, but the romanticized small retailers certainly are.

Getting efficient at importing $hit, without first getting even more efficient at exporting Shit, is a sure ticket to economic disaster for a low productive economy like India. It did not work in Mexico or SA and will not work here either. All that will happen is that Wal-mart will use the 'china price' to drive local manufacturers out of business. At the moment Wal-Mart is nothing more than another arm of the Panda overlords.

[RoyG]

Again, SS is dependent on job growth and the economy recovering. With inflation and the bond bubble this is an impossibility.

[TSJones]

There are still great waves of technological dislocation awaiting their turn. Automated manufacturing may make where a product is manufactured irrelavent. You will probably see this hit first in the clothing manufacturing area. There simply won't be any cost advantage in using Bangledeshi slave laborers locked up inside dangerous buildings. Other areas will eventually follow.

And despite what you may think Mexico is starting to see some labor improvements. The campesinos are getting scarce and their birth rate is falling. The Mexican GDP per person is $6288 for 2011 and is 51% of the world's average.

[TSJones]

Again, SS is dependent on job growth and the economy recovering. With inflation and the bond bubble this is an impossibility.

What inflation?

[Prem]

http://www.reuters.com/article/2013/05/ ... 3H20130502

BOJ says monetary base soars to record on new QE scheme

(Reuters) - Japan's monetary base soared to a record in April, the Bank of Japan said on Thursday, as the central bank's more aggressive quantitative easing program boosts the amount of money flowing through the economy.
The BOJ unveiled a radical overhaul of monetary policy on April 4 by shifting its policy target to the monetary base from short-term interest rates.The central bank aims to roughly double the monetary base over two years by increasing purchases of government debt to end 15 years of nagging deflation. The monetary base is currency in circulation and commercial banks' deposits at the BOJ.
In April, the average monetary base was a record 149.6 trillion yen ($1.54 trillion), up 23.1 percent from the same period a year earlier, the BOJ said in a statement.
At the end of April, the monetary base stood at 155.3 trillion yen, which was also a record high, central bank data showed.Under its new quantitative and qualitative monetary easing, the BOJ expects the monetary base to reach 200 trillion yen at the end of this year and then rise to 270 trillion yen at the end of 2014. ($1 = 97.3450 Japanese yen)

[RoyG]

Again, SS is dependent on job growth and the economy recovering. With inflation and the bond bubble this is an impossibility.

What inflation?

Look at the price of commodities today and compare them to 15 years ago.

[arnab]

Look at the price of commodities today and compare them to 15 years ago.

Over the last 15 years, global population has risen by over 1 billion and China embarked on a major construction spree. For e.g. demand for iron ore by China increased from around 70 mn tons in 2000 to 450 mn tons in 2008. Maybe, just maybe the interaction of demand and supply had to do with the rise in prices of commodities?

[akashganga]

Look at the price of commodities today and compare them to 15 years ago.

Over the last 15 years, global population has risen by over 1 billion and China embarked on a major construction spree. For e.g. demand for iron ore by China increased from around 70 mn tons in 2000 to 450 mn tons in 2008. Maybe, just maybe the interaction of demand and supply had to do with the rise in prices of commodities?

Increased demand may have played some role in increased commodity prices. But the major portion of the commodity price increase is due to US fed printing too much money, and the printed money ending in the hands of speculators of all asset classes including commodities. See how gold prices are being manipulated by ETF GLD with just 1 percent of actual gold holdings. The actual consumers of gold mostly indian families do not have much of a say. The same is true of other commodities, and food prices. My 2 cents.

[TSJones]

That kind of inflation will not endanger social security which was originally asserted.

Also the banking system has the increased money issued by the Fed but it has not loaned it out yet. Thus, not that much inflation recently.

http://seekingalpha.com/article/226821- ... foreboding

[Patni]

From my reading of current situation it seems that US fed's QE 4 program is focused on keeping real intrest rates in negatives for general public or transfer of wealth from producers and savers to debt taking spenders of others money! The banks geting more and more money in the book and not lending out with retail rates less then 7% to 8% in first world (10% to 11% in India) means they are only covering for crazy over extentions and still trying to wash away the toxic super leaveraged securiteis. Sooner or later this version of ponzi scheme will also unreval!

[Theo_Fidel]

^^^
That is a little confusing.
The main problem is savers, and this includes the entire private sector including corporates have something like $5Trillion stashed away as cash in bank accounts that they are refusing to invest or spend. This means the system is now punishing these folks for their fear. To be perfectly honest this fear is real esp. so soon after 2008 and corporates are skittish about new investment. So Fed keeps trying to get folks to spend this money and end the liquidity crisis. The system is awash with money that no one wants to spend or lend or borrow. That is the main problem.

[TSJones]

No only that the US goveernment has cut back spending. Congress was facing a fight sometime this summer on increasing the debt limit for the US government. That has now been pushed back to sometime in October. True, it is a minor point but it *does* have an effect on business perception. And right now, perception is everything.

The slow down in the government debt increase will have other ramifications because regardless of economic philosphy, US Treasury debt is refuge of choice not only for the US banking system but for the rest of the world.

[shyam]

No inflation?



Big Mac Index Shows Official CPI Underreports Inflation