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Perspectives on the global economic changes

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panduranghari
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Re: Perspectives on the global economic changes

Postby panduranghari » 10 Apr 2018 19:24

yensoy wrote:
Read the entire post and please let me know if something there doesn't add up. I thought I explained it.

US is "good for the money". Chinese debt? I'm not sure how that will play out...


There was no evidence of your statement in the earlier post. Hence I had to ask.

US government debt is 21 trillion.

Current US entitlement liabilities are just upwards of 100 trillion.

US dollar is backed by oil. The deficit spending as oil is priced in dollar allowed the government to expand its entitlement programs. The south east asian crisis of 1997 happened due to balance of payment problems. China decided they wont face this so they built a 3 trillion FOREX reserves. By 2022 (revision from 2025) even by the most conservative estimates, US will spend all its tax receipts to fund entitlements. No money left for defense, infrastructure, aid etc. They can only do one thing which they have religiously done since 1950's. Expand the balance sheet and raise the debt ceiling every year- its like extend and pretend nothing is wrong. China cannot sell 3 trillion Treasuries as the yield curve has already inverted and it will make everything worse.

So how is US- good for the money? It seems like a hope driven statement than factual evidence based claim.

yensoy
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Re: Perspectives on the global economic changes

Postby yensoy » 10 Apr 2018 22:26

panduranghari wrote:US dollar is backed by oil.

That is plain wrong. US is a huge and highly diversified economy. It is the thought leader in just about everything there is - technology, medicine, arts, education... It is a provider of security (which translates into arms sales as well as a captive market for treasury bonds). It still has a massive agricultural sector.

panduranghari wrote:The south east asian crisis of 1997 happened due to balance of payment problems. China decided they wont face this so they built a 3 trillion FOREX reserves.

SE Asian crisis was because of massive short-term debt in local currencies provided by foreign banks, who when these local currencies strengthened, decided to not renew the debts. Financing collapsed, bringing down with it capital intensive investments and sectors.

China is collecting Forex because they have no other option to prevent the Yuan from rising as a consequence of being a mercantilist export powerhouse. Well they had some options like outbound investments (CPEC/OBOR being one variant) but with the souring of deals and reversals of company finances such as HNA, ODI is not so hot anymore.

panduranghari wrote:By 2022 (revision from 2025) even by the most conservative estimates, US will spend all its tax receipts to fund entitlements. No money left for defense, infrastructure, aid etc.

You seriously believe they will let this happen? There will be tighter cost controls on medicare, there will be additional taxes and of course some balance sheet expansion/stealth dollar devaluation. In other words, nothing new.

panduranghari wrote:So how is US- good for the money? It seems like a hope driven statement than factual evidence based claim.

Even with all the facts/opinions that you have put forth, the US continues to be the top destination for immigrants, especially educated/rich persons from countries including China. There is something to be said about rule of law and due process, about care for the environment, about a meritocracy, a society which is deeply religious yet very forward thinking in many ways, and what is at heart a welfare oriented state looking for its citizens first and foremost.

You write off the US at your own peril.

panduranghari
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Re: Perspectives on the global economic changes

Postby panduranghari » 11 Apr 2018 18:14

I am not writing US off. I am stating some facts which I can back with data.

yensoy wrote:That is plain wrong. US is a huge and highly diversified economy. It is the thought leader in just about everything there is - technology, medicine, arts, education... It is a provider of security (which translates into arms sales as well as a captive market for treasury bonds). It still has a massive agricultural sector.


Everything US does has the basis on oil. Why did Kissinger-Adams do a petro dollar deal with Saudi Arabia? Did you know every calorie of food produced is US has 10 calories of oil in it. Did arm sales happen with a need to recycle petro dollars or did they happen because suddenly Saudi Arabia was threated by its neighbours who were even poorer than India is 1970's? Treasury bills are derivatives, derivatives which are based on the dollar and the whole edifice rested until 15 Aug 1971 on Gold, from 1971 to 2008 on Oil and from 2008 to today rests on the PhD. economists credibility who work for the federal reserve.

yensoy wrote:SE Asian crisis was because of massive short-term debt in local currencies provided by foreign banks, who when these local currencies strengthened, decided to not renew the debts. Financing collapsed, bringing down with it capital intensive investments and sectors.

China is collecting Forex because they have no other option to prevent the Yuan from rising as a consequence of being a mercantilist export powerhouse. Well they had some options like outbound investments (CPEC/OBOR being one variant) but with the souring of deals and reversals of company finances such as HNA, ODI is not so hot anymore.


Massive short term debt in local currencies in SE Asia caused a run on the currencies. This made the government wake up and they stepped in. Using forex reserves stymied the problem for a short term but after than they had to devalue. Except South Korea all the tiger economies devalued. The reason SoKo did not because the government asked the common people to turn in their gold voluntarily. That prevented the won from depreciating.
China has officially stopped collecting dollars i.e. dollar denominated holdings mostly T Bills. Lets say China allows its currency to rise, with depreciating USD the consequences for their 50 year plan are very poor. Though I do agree that Yuan appreciation is the main deterrent for stopping more dollar accumulation.

yensoy wrote:You seriously believe they will let this happen? There will be tighter cost controls on medicare, there will be additional taxes and of course some balance sheet expansion/stealth dollar devaluation. In other words, nothing new.

:D I do find this naive. If it was politically possible to control the prices of medicare, if it was politically viable to increase taxes then why has it not happened yet? Yes that resort to the only thing that they can do - devalue through inflation.

yensoy wrote:Even with all the facts/opinions that you have put forth, the US continues to be the top destination for immigrants, especially educated/rich persons from countries including China. There is something to be said about rule of law and due process, about care for the environment, about a meritocracy, a society which is deeply religious yet very forward thinking in many ways, and what is at heart a welfare oriented state looking for its citizens first and foremost.


I do not disagree. However its the narrative. Once its broken it needs effort to be restablished. As social creatures, we respond to narratives. And the 2008 crash was the wake up call, what happens next is the final denouement.

TIFWIW.

KrishnaK
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Re: Perspectives on the global economic changes

Postby KrishnaK » 12 Apr 2018 04:27

panduranghari wrote:I am not writing US off. I am stating some facts which I can back with data.
Everything US does has the basis on oil. Why did Kissinger-Adams do a petro dollar deal with Saudi Arabia? Did you know every calorie of food produced is US has 10 calories of oil in it. Did arm sales happen with a need to recycle petro dollars or did they happen because suddenly Saudi Arabia was threated by its neighbours who were even poorer than India is 1970's? Treasury bills are derivatives, derivatives which are based on the dollar and the whole edifice rested until 15 Aug 1971 on Gold, from 1971 to 2008 on Oil and from 2008 to today rests on the PhD. economists credibility who work for the federal reserve.
That's your opinion, not fact. And a kooky one at that.

panduranghari
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Re: Perspectives on the global economic changes

Postby panduranghari » 12 Apr 2018 13:39

Krishna K you are well known for your snide remarks. I won’t respond to your flame bait.

Why do you waste your time?

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Re: Perspectives on the global economic changes

Postby Austin » 15 Apr 2018 12:00

Former Reagan White House Budget Director David Stockman sees deflation, depression and financial Armageddon. Stockman says, “In the bond market, I don’t know any other way to describe it. . . . It’s uncharted territory, and we have never been here before. . . . The house of cards is so shaky and so fragile right now that there is the risk of the proverbial black swan event. We don’t see something coming. It shocks the system. It triggers a panic, and the panic soon envelops itself and descends into some sort of doom loop. That could very easily happen.”

Stockman says, “Gold and silver are the only safe investments to have . . . you can’t be safe in the stock market, and you can’t be safe in the bond market.”


Austin
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Re: Perspectives on the global economic changes

Postby Austin » 16 Apr 2018 19:54

Donald J. Trump
‏Verified account @realDonaldTrump
2h2 hours ago

Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!



Jim Rickards
‏ @JamesGRickards
38m38 minutes ago

Jim Rickards Retweeted Anirudh Garg

Interesting. Technically it's not true; China has been propping up their currency, not devaluing. But, if Trump takes that view, we'll see currency wars and trade wars bleeding into each other as they historically do.

yensoy
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Re: Perspectives on the global economic changes

Postby yensoy » 17 Apr 2018 05:12

And now we are back to square one:

https://www.bloomberg.com/news/articles/2018-04-16/china-boosts-its-u-s-treasuries-holdings-by-most-in-six-months

China Boosts Its U.S. Treasuries Holdings by Most in Six Months

Austin
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Re: Perspectives on the global economic changes

Postby Austin » 17 Apr 2018 21:29

Austin wrote:Donald J. Trump
‏Verified account @realDonaldTrump
2h2 hours ago

Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!



Jim Rickards
‏ @JamesGRickards
38m38 minutes ago

Jim Rickards Retweeted Anirudh Garg

Interesting. Technically it's not true; China has been propping up their currency, not devaluing. But, if Trump takes that view, we'll see currency wars and trade wars bleeding into each other as they historically do.


China, along with Japan, South Korea, Germany, Switzerland and India, were placed on the Treasury's monitoring list, meaning they satisfied some but not all of the criteria that would have qualified them to be designated as currency manipulators.


So even India is in the esteemed list of US Treasury I wonder why , India does not deliberately devaluates its currency , A stronger Rupee is good for India

Russia does not devaluate its currency , its currency is not tightly pegged against USD/Euro but is free floating and depending on Oil Price its either strengthens or weakens hope Donald knows that

panduranghari
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Re: Perspectives on the global economic changes

Postby panduranghari » 18 Apr 2018 18:34

Astrology of finance presents;

Image

panduranghari
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Re: Perspectives on the global economic changes

Postby panduranghari » 19 Apr 2018 18:03

Todays edition of doom ***** presented by courtsey of Saxo Bank & Mish by me.

Link

Read the whole post. Its worth it. Some snippets.

Image

End of a Cycle Like No Other - Steen Jakobsen - CIO


Please explain to me how a 35-year-old can be less optimistic about the future than a 55-year-old! It defies logic, nature, and reasoning. It is a case of young people feeling the pain of the present economic reality: it’s hard to find a decent job and or even interview for a job when you need a PhD to start with. The young are increasingly indebted by education costs and priced out of getting onto the house ownership ladder.
<snip>
Equity Burnout - Peter Garnry - Head of Equity Strategy


Image
<snip>
Dollar is a Time Bomb and the Fuse is Burning Faster - John Hardy - Head of FX Strategy


When the Fed tightened policy starting in late 2013, the supply of printed US dollars started drying up and the USD exchange rate went increasingly vertical. Many forget just how bad a year 2015 actually was for global asset prices, particularly in emerging markets, and it was the lucky timing of the European Central Bank’s extreme QE starting in early 2015 and China’s eventual massive stimulus starting later that year that likely kept the world from dipping into recession.

But now, most of the policy punch bowls around the world have been removed or are nearly empty. China’s growth priorities are changing to priorities centred on the standard of living for everyone, as well as environmental policy, and Beijing also faces the onerous task of addressing its own credit bubble.

The Fed, meanwhile, continues to tighten policy and supposedly intends to shrink its balance sheet at an accelerating pace. Elsewhere, the ECB has promised to cease expanding its asset purchases entirely by late this year. Only the Bank of Japan continues to drag its heels, though it has also tapered its rate of asset purchases over the past year.

The removal of global policy stimulus has naturally come about as the world economy finally managed a couple of quarters of synchronised growth in 2017. But our view is that this growth is tenuous and very late-cycle, particularly in China and the US, as the credit cycle has already turned. And the next challenges for markets are just around the corner.

<snip>

Last September, the Bank for International Settlements estimated that there was a net $25 trillion in USD-denominated debts and derivatives in the offshore financial system. The world can ill afford another USD funding mishap, one that has already partially been set in motion by Trump’s corporate tax cuts, which are encouraging US corporations to repatriate hundreds of billions of USD from outside the US and draining liquidity from the offshore USD system.

<snip>

Image

In a highly leveraged economy like the US, credit is a key determinant of growth. Lower credit generation is expected to translate into lower demand and lower private investment in the coming quarters. There is a high 0.70 correlation (out of one) between US credit impulse and private fixed investment and a significant 0.60 correlation between credit impulse and final domestic demand.

<snip>

These indicators suggest that the US is at the end of the business cycle – which is not much of a surprise – and hint that recession is just around the corner and Trump’s economic policy does not seem able to avert it.

Image

Even unconventional indicators are sending warning signs. Product sales by paper and paperboard mills, which reflect the evolution of sales and therefore give a signal about the future evolution of production, have been falling since the beginning of the year. Although this indicator is certainly less reliable than in the past due to the digitalisation of the economy, there is still an obvious correlation with the economic cycle.

<snip>

Image

US consumer confidence has returned to a high level but households’ financial situation remains gloomy. Household debt is at a new record of $13 trillion and the most fragile households are starting to face serious difficulties due to higher interest rates and tightening credit conditions.

Even though we agree that history does not always repeat itself, it is interesting to note that historically, such levels of consumer confidence have been followed by recession and a lost decade. This is too much of a coincidence, is it not?

Delinquencies have increased considerably over the past few months, especially in subprime auto loans where serious delinquencies have reached ‘Lehman moment’ proportions, as well as in credit cards.

<snip>

Commodities Go There Separate Ways - Ole Hanson - Head of Commodities Strategy


Image

Gold is one of a few metals that has managed to hold onto a positive return this year. However, after several failed attempts to break through the $20 band of resistance above $1,355/oz, many investors have for now adopted a wait-and-see approach.

panduranghari
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Re: Perspectives on the global economic changes

Postby panduranghari » 19 Apr 2018 18:08

Technically speaking the longer gold is bottled up beneath this resistance level of $1355/oz, the faster the move once it does break out.

Austin
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Re: Perspectives on the global economic changes

Postby Austin » 20 Apr 2018 11:01

Pandu good read indeed from Saxo link
As the US runs a large current account deficit, it will have to fund that deficit with foreign capital – likely at a far lower USD value. Providing added urgency to the search for an alternative to the USD is the need to devalue the world’s stock of USD-denominated debt – which has only increased by leaps and bounds in the offshore USD system that got global finances in such a pickle back in 2008-09.

Last September, the Bank for International Settlements estimated that there was a net $25 trillion in USD-denominated debts and derivatives in the offshore financial system. The world can ill afford another USD funding mishap, one that has already partially been set in motion by Trump’s corporate tax cuts, which are encouraging US corporations to repatriate hundreds of billions of USD from outside the US and draining liquidity from the offshore USD system.

panduranghari
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Re: Perspectives on the global economic changes

Postby panduranghari » 21 Apr 2018 14:07

Thanks Austin.

Mish talk is a good website to peruse. He is a self declared deflationist but otherwise I agree with everything else he writes.

Listen to this. Real treat to listen to 3 different perspectives but same conclusion.

https://www.macrovoices.com/394-bassman ... ion-review


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