Perspectives on the global economic changes

vishvak · Post by **vishvak** » 16 Oct 2013 21:01

The debt management can't be held on blame no? So there will have to be lot of expert literature around and about it but not on it.

Christopher Sidor · Post by **Christopher Sidor** » 16 Oct 2013 21:48

The American senate has a proposal which will lead to kicking the can down the road. The govt will be funded till mid jan 2014 and the debt ceiling would be raised till feb 2014. So Obama had to climb down and accept the governance by crisis, with the next one due in early 2014.

Off course this depends on the US House of Representatives actually accepting the US Senate proposal. Previously too US House of Representatives had rejected a Senate proposal leading to very nearly the US Economy derailing in 2008. They only accepted the Senate proposal when the FDIC insurance limit was raised to 2.5 lakh dollars and a few other changes. Will we see an encore? Or will the republicans keep their powder dry and hit next year or closer to the next US Presidential Elections?

Satya_anveshi · Post by **Satya_anveshi** » 16 Oct 2013 23:05

Since the last debt ceiling hoopla of 2011, Dow is up over 30% and S&P500 is up over 40%. Jai Ho!!

TSJones · Post by **TSJones** » 16 Oct 2013 23:08

Christopher Sidor wrote:The American senate has a proposal which will lead to kicking the can down the road. The govt will be funded till mid jan 2014 and the debt ceiling would be raised till feb 2014. So Obama had to climb down and accept the governance by crisis, with the next one due in early 2014.

Off course this depends on the US House of Representatives actually accepting the US Senate proposal. Previously too US House of Representatives had rejected a Senate proposal leading to very nearly the US Economy derailing in 2008. They only accepted the Senate proposal when the FDIC insurance limit was raised to 2.5 lakh dollars and a few other changes. Will we see an encore? Or will the republicans keep their powder dry and hit next year or closer to the next US Presidential Elections?

There is more to this than meets the eye. The only way the senate version will pass the House is with Democrats full approval and a few moderate Republicans. In other words, the Speaker will have to put the Senate version before the House in an up or down vote. That will doom his Speakership. The Republican caucus will not re-elect him as speaker following the 2014 election. So there is a lot of political horseplay going on behind the scenes. Boenher wants to stay in as speaker. He needs the Repubs caucus support in order to do that. However, the Repubs caucus almost all refuse to go along with any compromise (serious that is) that would see Obamacare continue as law. They have convinced themselves that trashing the global financial system is worth the effort. In fact, they relish it. Why? Because they think it will lead to small government w/o social policies.

Satya_anveshi · Post by **Satya_anveshi** » 16 Oct 2013 23:16

There is simply lack of debate on policy basics of which the big ticket item of Defense and defense related spending that eats out significant portion of budget and even bigger portion of tax revenues.

19% of the budget ($3.5T) and given the deficit spending in excess of $1T, it would constitute about 28% of tax revenues. With increasing Russian and Chinese calls to adher to the international law (as in UN), does US need to sustain that kind of defense spending going forward? Wwhere is any level of discussion around this? Instead what we hear is repeated threats on social security payments of poor folks who already paid into it.

TSJones · Post by **TSJones** » 16 Oct 2013 23:22

Satya_anveshi wrote:There is simply lack of debate on policy basics of which the big ticket item of Defense and defense related spending that eats out significant portion of budget and even bigger portion of tax revenues.

19% of the budget ($3.5T) and given the deficit spending in excess of $1T, it would constitute about 28% of tax revenues. With increasing Russian and Chinese calls to adher to the international law (as in UN), does US need to sustain that kind of defense spending going forward? Wwhere is any level of discussion around this? Instead what we hear is repeated threats on social security payments of poor folks who already paid into it.

This, does not register as a blip on their radar screens. It is social policies that greatly worry them and in their view, lead to the downfall of America. The world does not understand who these people are.

TSJones · Post by **TSJones** » 17 Oct 2013 03:07

It appears that Boehner is going to let the House vote on the Senate version of the bill once it is passed by the Senate. It will be a very close vote in the House when it gets there.

Satya_anveshi · Post by **Satya_anveshi** » 17 Oct 2013 03:29

This is from 2011 and see how almost similar the arguments were then (then meaning from Clinton's time to Obama2011 to Obama2013). Point is that it is all part of the playbook while the real work (or lack of) is someplace else. This is evident from the fact that republicans have not come up with a strategy to hold their ground in all these years.

Basically, US is in a systemic fix - US constitutional stand on the having a "debt limit" (does not matter what it is) and its centrality to having symbolic role for the House. US President will spend the heck out of the system and House can't do jack about it but to approve and raise the limit. Getting rid of the limit will take away even that symbolic role and supreme court might even pitch in questioning the decision.

Repub decision to push it for 3 months is basically making Obama come back to them with hat in hand (and Obama promptly will act like he is huffing, puffing, and kicking a$$) when they will have to raise it yet again. show must go on!!!

TSJones · Post by **TSJones** » 17 Oct 2013 03:34

Satya_anveshi wrote:This is from 2011 and see how almost similar the arguments were then (then meaning from Clinton's time to Obama2011 to Obama2013). Point is that it is all part of the playbook while the real work (or lack of) is someplace else. This is evident from the fact that republicans have not come up with a strategy to hold their ground in all these years.

Basically, US is in a systemic fix - US constitutional stand on the having a "debt limit" (does not matter what it is) and its centrality to having symbolic role for the House. US President will spend the heck out of the system and House can't do jack about it but to approve and raise the limit. Getting rid of the limit will take away even that symbolic role and supreme court might even pitch in questioning the decision.

Repub decision to push it for 3 months is basically making Obama come back to them with hat in hand (and Obama promptly will act like he is huffing, puffing, and kicking a$$) when they will have to raise it yet again. show must go on!!!

Please do not forget that the sequester still continues. That's not going away. Much to the Dems grief. That still means cuts to everything but Medicare and Social Security. Even Defense gets cut.

Satya_anveshi · Post by **Satya_anveshi** » 17 Oct 2013 04:07

Sequestering is a joke in the context of bringing sanity in US spending and budget control - a mere $85B cuts when you are spending away more than $1T in deficit. You cut in 8 years what you spend away in excess of revenue in just one year at current rate.
Cut the defense budget into half, sell some assets and we are talking serious...all else is show that will end much more nastily.

added later:
Don't just go by the DoD line item in the budget as it grossly underestimates the total defense related spending. Here is a dated (2010) blog post highlighting various other depts bearing some of the defense costs. If you consider all these, the defense just eats out about half of all revenues. This is the level of spend you have in US currently and no one is even willing to talk about it.

Satya_anveshi · Post by **Satya_anveshi** » 17 Oct 2013 05:08

in Rahul Mehta speak: Please SMS you elected representative ordering him/her to cut the defense budget by 50%

Austin · Post by **Austin** » 17 Oct 2013 22:05

Max Keiser and Stacy Herbert, discuss the EBT ‘free lunch’ card chaos at Walmart when an ‘unlimited’ benefits glitch causes card holders to pile shopping carts high with ‘free’ goods, while on Wal-Street, the ‘free lunch’ card of Quantitative Easing has caused a similar misallocation of capital into property and toxic debt instruments. Finally, they discuss the world about to shut off America’s ‘free lunch’ card, otherwise known as the Exorbitant Privilege’ of having the world’s reserve currency. In the second half, Max interviews Alasdair Macleod of GoldMoney.com about the $640 million sell order of gold. They also discuss Alasdair’s new theory on money supply (FMQ) and his differences with Professor Fekete, a recent guest on the Keiser Report, regarding whether or not there is deflation.

Video ---> http://rt.com/shows/keiser-report/episo ... eiser-261/

TSJones · Post by **TSJones** » 18 Oct 2013 00:06

^^^^^Let's see if they can come up with a system that lets some countries export more than they buy to the detriment of their citizens. If they can find a monetary system that continually allows that, then good for them. Nobody has come up with anything yet for a global scale.

I know a system that is completely neutral, it is called the gold standard. Let's everybody get on that. Then we will see for how long China can continue to export without buying other countries manufactured goods and services. Now, what country or agency wants to guarantee the steady price of gold?

Maybe the UN?

TSJones · Post by **TSJones** » 18 Oct 2013 00:59

US budget deficit not as bad as originially thought:

http://finance.yahoo.com/blogs/the-exch ... 47158.html

panduranghari · Post by **panduranghari** » 18 Oct 2013 01:34

TSJones wrote:^^^^^Let's see if they can come up with a system that lets some countries export more than they buy to the detriment of their citizens. If they can find a monetary system that continually allows that, then good for them. Nobody has come up with anything yet for a global scale.

I know a system that is completely neutral, it is called the gold standard. Let's everybody get on that. Then we will see for how long China can continue to export without buying other countries manufactured goods and services. Now, what country or agency wants to guarantee the steady price of gold?

Maybe the UN?

Gold standard is not neutral. Gold standard is deflationary. Gresham law- bad money drives out good money.

TSJ I got one question for you. How can the world resolve Triffin Dilemma?

TSJones · Post by **TSJones** » 18 Oct 2013 02:45

^^^^^Find some country that is willing to be completely transparent, open up their economy to everyone regardless of nationality or political persuasion, allowed untampered ownership of its coporations and land, have relatively easy or unrestricted immigration, oh, the list goes on! Then bingo, you will have a new reserve currency. No problemo. You will have taken America's sandwich out of its mouth and eaten it.

Now, who wishes for their country to volunteer?

Gold standard is not neutral. Gold standard is deflationary. Gresham law- bad money drives out good money.

Yes, deflationary, however it would not be an "American" reserve currency, thus my point.

Neshant · Post by **Neshant** » 18 Oct 2013 08:30

can't vouch for her credibility but apparently she's an ex-World Bank employee - fired for being a whistle blower apparently.

Austin · Post by **Austin** » 18 Oct 2013 08:32

They can perhaps use a combination of IMF SDR and Gold as some sort of reserve currency for the future ...... as to who will manage it perhaps WB or IMF or some other body that involved international financial institution.

This is not about China export or import issue here but about the larger issue of stability of Global Economy and a acceptable notion of Reserve Currency.

The only reason $ exist as reserve currency is due to TINA factor but that factor will remain unless some one does something about it.

Neshant · Post by **Neshant** » 18 Oct 2013 08:36

^^^
The guy who wrote the book "The Creature from Jeckyll Island" predicted the collapse of national fiat currency.

He also predicted that nearing its collapse, there would be a move to setup an international (largely fiat based) currency - which would turn out to be just as worthless.

I'm sure once the national fiat currency proves to be toilet paper, there will be no takers for any more paper regimes no matter how well its dressed up & packaged. People would have lost their life savings and won't be in the mood for any more paper claims to wealth that evaporate into thin air.

Claiming that some currency is backed by gold will not convince anyone of anything. A person has to be able to walk into a bank and exchange that paper currency for gold on demand - and anonymously. The moment that is possible, the entire world is automatically on a gold standard. It makes no difference if the currency is partially backed by gold or entirely backed by gold because all currencies automatically become a measure of a portion of gold.

A currency that is supposedly backed by gold but cannot be exchanged for the physical metal (like gold ETF) is automatically suspect. In a crisis, the market will test the theory of whether the gold etf actually represents real gold or is just a proxy for it by selling off the ETF and buying the physical.

Austin · Post by **Austin** » 18 Oct 2013 09:19

Neshant wrote:^^^A currency that is supposedly backed by gold but cannot be exchanged for the physical metal (like gold ETF) is automatically suspect. In a crisis, the market will test the theory of whether the gold etf actually represents real gold or is just a proxy for it by selling off the ETF and buying the physical.

I am some how suspicious of the Gold ETF or the paper gold investement we have in the Indian market , every big player are into it and it is always sold as better then keeping physical gold in ur bank and faster liquidity.

I suspect these paper gold are not really backed by real gold for most part and it is based on stastics that not every one will exchange it for real gold ( they say you can always trade the paper gold for real gold if required ) and is like some sort of ponzi scheme.

Better to buy real gold and keep it it could be short time headache but it will be a safe bet.

Austin · Post by **Austin** » 18 Oct 2013 09:19

US debt default: Russia's experience holds a lesson (+video)

TSJones · Post by **TSJones** » 18 Oct 2013 11:44

US money market funds had largest one week outflow: $43 billion

http://finance.yahoo.com/news/u-based-m ... 24219.html

I know I was sweating about my money market fund.

panduranghari · Post by **panduranghari** » 18 Oct 2013 14:10

TSJones wrote:^^^^^Find some country that is willing to be completely transparent, open up their economy to everyone regardless of nationality or political persuasion, allowed untampered ownership of its coporations and land, have relatively easy or unrestricted immigration, oh, the list goes on! Then bingo, you will have a new reserve currency. No problemo. You will have taken America's sandwich out of its mouth and eaten it. Now, who wishes for their country to volunteer?

Gold standard is not neutral. Gold standard is deflationary. Gresham law- bad money drives out good money.
Yes, deflationary, however it would not be an "American" reserve currency, thus my point.

How can it not be an American reserve currency? Isnt the whole idea of a currency on gold standard the permit for the country whose currency is on the reserve, print when ever they wish.

Who would be willing to own the poisoned idea of having their currency backed by gold?

USA- Tried and failed
UK- too small and too insignificant in the long term
Europe - they already have the Euro
China- they do not have enough transparency to get global use of it and too many local conflicts to even find use locally

Middle East as a single block - perhaps with backing of the oil. But Sunny- Shite differences in the weather is too much.

So gold standard is not possible ever again. Do you agree??

panduranghari · Post by **panduranghari** » 18 Oct 2013 14:12

Austin wrote:They can perhaps use a combination of IMF SDR and Gold as some sort of reserve currency for the future ...... as to who will manage it perhaps WB or IMF or some other body that involved international financial institution.

This is not about China export or import issue here but about the larger issue of stability of Global Economy and a acceptable notion of Reserve Currency.

The only reason $ exist as reserve currency is due to TINA factor but that factor will remain unless some one does something about it.

Come on now Austin. Think this thing through.
So often in commentaries of this sort that propose a “solution”, the author is strangely obsessed with the notion of replacing the dollar (as a reserve currency unit) with simply another institutional emission of similar ilk (such as currencies of other nations, SDRs, bancors and whatnot). Their avoidance of any meaningful discussion of the most obvious remedy is almost pathological in the extreme. To be sure, we don’t need to invent any manner of universal reserve currency to fill the role of a unit of account because that role is already served in a fully functional capacity for any given country by its own monetary unit.

What IS desperately needed, however, is a universally respected reserve asset capable of filling our current void with a reliable presence that serves as a store of value. And far from needing to be conjured or created by complex international committees, that asset is already in existence and held in goodly store by central bankers and prudent individuals around the world — it’s known as gold. From amid the ruins of a chaotic financial crisis that was brought about by its own complexity, a degree of sanity will prevail, and gold as a freely floating asset will arise in stature as THE important element of global monetary reserves. The floating aspect is the vital evolutionary improvement over all previous structural monetary failures which tried to use a gold standard at a fixed price (i.e., unit of account) perversely joined to the very elastic money supply of any given country’s banking system.

panduranghari · Post by **panduranghari** » 18 Oct 2013 14:16

Austin wrote:
Neshant wrote:^^^A currency that is supposedly backed by gold but cannot be exchanged for the physical metal (like gold ETF) is automatically suspect. In a crisis, the market will test the theory of whether the gold etf actually represents real gold or is just a proxy for it by selling off the ETF and buying the physical.
I am some how suspicious of the Gold ETF or the paper gold investement we have in the Indian market , every big player are into it and it is always sold as better then keeping physical gold in ur bank and faster liquidity.

I suspect these paper gold are not really backed by real gold for most part and it is based on stastics that not every one will exchange it for real gold ( they say you can always trade the paper gold for real gold if required ) and is like some sort of ponzi scheme.

Better to buy real gold and keep it it could be short time headache but it will be a safe bet.

Have you heard of the GLD puke indicator. When ever GLD pukes its the best time to buy physical gold. Its worked for me well for over 3 odd years since I discovered it.

GLD puke Indicator

link

TSJones · Post by **TSJones** » 18 Oct 2013 14:43

How can it not be an American reserve currency? Isnt the whole idea of a currency on gold standard the permit for the country whose currency is on the reserve, print when ever they wish.

mmmm, no. The idea of a gold standard is that the currency of whatever country or agency that prints it will always buy an ounce of gold at a uniform set price. That means in time of war, famine, havoc, technology changes, etc., the currency will always buy an ounce of gold at the set price. Regardless of circumstances. In effect, the price of gold is always guaranteed. If you can't buy gold on the open market at the set price, then the country or agency that issues and prints the gold standard currency must sell it to you at the specified price. Period, end of story.

America no longer does that nor will it ever do that again. Thus, it is not American, It will be some other agency if it ever occurs. Good luck finding one.

Austin · Post by **Austin** » 18 Oct 2013 17:03

panduranghari wrote:Come on now Austin. Think this thing through.
So often in commentaries of this sort that propose a “solution”, the author is strangely obsessed with the notion of replacing the dollar (as a reserve currency unit) with simply another institutional emission of similar ilk (such as currencies of other nations, SDRs, bancors and whatnot). Their avoidance of any meaningful discussion of the most obvious remedy is almost pathological in the extreme. To be sure, we don’t need to invent any manner of universal reserve currency to fill the role of a unit of account because that role is already served in a fully functional capacity for any given country by its own monetary unit.

Agree the idea to replace $$ is to bring in more stability to the status of reserve currency so that is not tied to political situation ( eg Debt Ceiling ) or Printing Money backed by nothing i.e unlimited money by just raising the ceiling.

What IS desperately needed, however, is a universally respected reserve asset capable of filling our current void with a reliable presence that serves as a store of value. And far from needing to be conjured or created by complex international committees, that asset is already in existence and held in goodly store by central bankers and prudent individuals around the world — it’s known as gold. From amid the ruins of a chaotic financial crisis that was brought about by its own complexity, a degree of sanity will prevail, and gold as a freely floating asset will arise in stature as THE important element of global monetary reserves. The floating aspect is the vital evolutionary improvement over all previous structural monetary failures which tried to use a gold standard at a fixed price (i.e., unit of account) perversely joined to the very elastic money supply of any given country’s banking system.

But then to be backed up Gold wont it limit the amount of currency in circulation ? Surely the gold available now is far far lower then the currency in circulation , So Gold alone cannot be the only asset one can back their currency with there should be combination of something says Gold , SDR , Natural Resource like Oil ?

BTW what is wrong with Euro regaining far greater status as reserve currency then it is now ? Surely they are in crises like USD but does Euro has better long term sustainability ?

Also what is wrong with Yuan as reserve currency other then they are chinese and we dont like them and they are not democratic ........ if Chinese Economy attains the 2nd or 1st largest economy status then they are bound to raise the Yuan as reserve currency ......after all there are so many currency other then $$ and Euro , like Australian or Canadian or UK pound that are convertible so why cant Chinese currency enjoy the same status.

TSJones · Post by **TSJones** » 18 Oct 2013 19:29

^^^^There is nothing wrong with the renminbi becoming a reserve currency. In fact, I whole heartedly endorse such an idea.

The problem is, if they do, they won't be able to export the way they currently do. So the renminbi will not be a reserve currency.

If they ever do decide to even come up to same qualifications of the Yen, it's going to shake them up. Just like it did to Japan.

Austin · Post by **Austin** » 18 Oct 2013 22:21

Well no one expect China to perpetually live on export , Even the Chinese officially have mentioned that they would drive growth via internal consumption as well ....so Renminbi not becoming reserve currency because export is an hindrance is a moot point in medium term.

Who knows when they become reserve currency they may shake the USD and Euro .... but as you said you will welcome and endorse the idea of Renminbi as reserve currency

Theo_Fidel · Post by **Theo_Fidel** » 18 Oct 2013 23:20

Reminbi is the paper currency that has been printed the most over the past 20 years or so. There is 2-3 times as much renminbi as there are dollars sloshing around per some recent reports. If necessary Panda will print more. The CPI inflation in china is much higher than USA.

TSJones · Post by **TSJones** » 18 Oct 2013 23:27

Theo_Fidel wrote:Reminbi is the paper currency that has been printed the most over the past 20 years or so. There is 2-3 times as much renminbi as there are dollars sloshing around per some recent reports. If necessary Panda will print more. The CPI inflation in china is much higher than USA.

Yeah and if they make it fully convertible like the yen then they are going to get roughed up a bit. Either way.

panduranghari · Post by **panduranghari** » 19 Oct 2013 02:32

Austin wrote:
panduranghari wrote:Come on now Austin. Think this thing through.
So often in commentaries of this sort that propose a “solution”, the author is strangely obsessed with the notion of replacing the dollar (as a reserve currency unit) with simply another institutional emission of similar ilk (such as currencies of other nations, SDRs, bancors and whatnot). Their avoidance of any meaningful discussion of the most obvious remedy is almost pathological in the extreme. To be sure, we don’t need to invent any manner of universal reserve currency to fill the role of a unit of account because that role is already served in a fully functional capacity for any given country by its own monetary unit.
Agree the idea to replace $$ is to bring in more stability to the status of reserve currency so that is not tied to political situation ( eg Debt Ceiling ) or Printing Money backed by nothing i.e unlimited money by just raising the ceiling.
What IS desperately needed, however, is a universally respected reserve asset capable of filling our current void with a reliable presence that serves as a store of value. And far from needing to be conjured or created by complex international committees, that asset is already in existence and held in goodly store by central bankers and prudent individuals around the world — it’s known as gold. From amid the ruins of a chaotic financial crisis that was brought about by its own complexity, a degree of sanity will prevail, and gold as a freely floating asset will arise in stature as THE important element of global monetary reserves. The floating aspect is the vital evolutionary improvement over all previous structural monetary failures which tried to use a gold standard at a fixed price (i.e., unit of account) perversely joined to the very elastic money supply of any given country’s banking system.

Some quotes

“…I want to make it equally clear that this nation will maintain the dollar as good as gold, freely interchangeable with gold at $35 an ounce, the foundation-stone of the free world’s trade and payments system.”
-John F. Kennedy, July 18, 1963

“That we stand ready to use our gold to meet our international obligations–down to the last bar of gold, if that be necessary–should be crystal clear to all.”
-William McChesney Martin, Jr. (Federal Reserve Chairman) December 9, 1963

Lesson: When someone says you can exchange paper for precious metals – make the swap before they change the rules.

Austin wrote: But then to be backed up Gold wont it limit the amount of currency in circulation ? Surely the gold available now is far far lower then the currency in circulation , So Gold alone cannot be the only asset one can back their currency with there should be combination of something says Gold , SDR , Natural Resource like Oil ?

Let's get out of the 'backed by gold' thought process. I will try to explain.

Middle Eastern currency will be backed by oil
Pan Asian currency will be backed by labour
American currency -amero- backed by intellectual capital

Does As.ia respect American intellectual property? Yes but not as much as they do not mind pirated stuff if it's cheaper.
Does ME respect Asian labour force? Not as much as we prefer.
Does America respect ME oil? More than our imagination.

With just 3 examples we can at least agree that the resources are valued differently by different subjects. This subjective valuation will differ with regions, times and ethnicities. However, there is one good whose valuation transcends time and regions and ethnicities. You know what that is. It's value is unchanged.

Value is different from price. Price can be quoted but true value can only be guessed.

With increase in amenities, the prices of amenities have reduced but the value is unknown until it's in demand. Higher demand= higher value and vice versa. On the contrary, currently high demand= low price however that's not true vice versa.

Austin wrote:BTW what is wrong with Euro regaining far greater status as reserve currency then it is now ? Surely they are in crises like USD but does Euro has better long term sustainability ?

Euro is different from USD by being trans national and by allowing price of gold to float.

Total 100= currency 85+ gold 15

Gold price rises, so 15 buys more currency, the ECB sells gold to keep total at 100. If currency falls in price, 15 gold buys more currency. Instead of printing more currency, they buy more gold to keep total 100. Too simplistic but unless you read the consolidated financial statement of ECB and how the mark to market their gold every 3 months without fail since 1999 gives them a lot of credibility. Washington agreement also gives them a lot of credibility. Google Washington agreement and see why Britain sold gold at rock bottom price in 1999.

Austin wrote:Also what is wrong with Yuan as reserve currency other then they are chinese and we dont like them and they are not democratic ........ if Chinese Economy attains the 2nd or 1st largest economy status then they are bound to raise the Yuan as reserve currency ......after all there are so many currency other then $$ and Euro , like Australian or Canadian or UK pound that are convertible so why cant Chinese currency enjoy the same status

Triffins dilemma.

TSJones · Post by **TSJones** » 19 Oct 2013 04:13

I want to make it equally clear that this nation will maintain the dollar as good as gold, freely interchangeable with gold at $35 an ounce, the foundation-stone of the free world’s trade and payments system.”
-John F. Kennedy, July 18, 1963

“That we stand ready to use our gold to meet our international obligations–down to the last bar of gold, if that be necessary–should be crystal clear to all.”
-William McChesney Martin, Jr. (Federal Reserve Chairman) December 9, 1963

Lesson: When someone says you can exchange paper for precious metals – make the swap before they change the rules.

Well yes, but in this case you had until August 15, 1971 when the US stopped the dollar convertibility to gold.

paramu · Post by **paramu** » 19 Oct 2013 07:57

China, EU agree to 45 bln Euro currency swap

Strong euro messing with ECB's policy

Austin · Post by **Austin** » 19 Oct 2013 10:30

Thanks for the explanation panduranghari.

Just thought that Reserve Currency Future should be country neutral so that whims and fancies or policies of any specific county does not affect the credibility of Reserve Currency .....IMF SDR is one thing but its really small percentage , how about Basket of currency from few countries

Here is an old article from Examiner
http://www.examiner.com/article/will-th ... e-currency

the G-20 group of wealthy nations authorized the issuance of $250 billion dollars worth of an alternative currency called "Special Drawing Rights". Special Drawing Rights (SDR), are a currency issued by the International Monetary Fund, an inernational organization which provides aid to countries which are struggling financially.

Russia also backs making the SDR the world's reserve currency, and that Russia wants the SDR to be pegged to a basket of yuans, rubles and gold (currently, the SDR is pegged to four currencies: the dollar, yen, euro and sterling).

Indeed, the head of the China's central bank wrote recently:

Though the super-sovereign reserve currency has long since been proposed, yet no substantive progress has been achieved to date. Back in the 1940s, Keynes had already proposed to introduce an international currency unit named "Bancor", based on the value of 30 representative commodities. Unfortunately, the proposal was not accepted. The collapse of the Bretton Woods system, which was based on the White approach, indicates that the Keynesian approach may have been more farsighted. The IMF also created the SDR in 1969, when the defects of the Bretton Woods system initially emerged, to mitigate the inherent risks sovereign reserve currencies caused. Yet, the role of the SDR has not been put into full play due to limitations on its allocation and the scope of its uses. However, it serves as the light in the tunnel for the reform of the international monetary system.

Austin · Post by **Austin** » 19 Oct 2013 10:53

Russian Government Approves 2014-2016 Budget

How do some countries like Russia plan and approve 3 years budget based on predicted income and expenditure ....while say in India budget is a yearly affair ? Is there any pro and cons of annual budget versus 2-3 years budget planning ?

Christopher Sidor · Post by **Christopher Sidor** » 19 Oct 2013 11:47

Fault Lines Fracture Rebalanced World Economy: Cutting Research. Bloomberg 17-Oct-2013

From the article

the countries experiencing the biggest improvements in their current accounts did so not because of the targeted export growth, but because of fewer imports. In Spain, for example, the current account -- the broadest measure of trade because it includes investment -- improved 8.9 percentage points as a share of GDP between 2007 and 2012. While exports rose an annual average 2 percent over that period, they were outpaced by a 3 percent decline in imports.
....
....
Current account disparities endure, albeit at lower levels. While the aggregate surplus of emerging markets is down from $676 billion in 2008, it remains at $300 billion this year. The deficit of advanced countries fell to $50 billion from $479 billion.
....
....
Two of the poorest major U.S. trade partners, Mexico and China, increased their importance as import sources and even more as destinations of exports, economist Alexander Monge-Naranjo wrote in a study published last month. By contrast, Canada, Japan, Germany, the U.K. and France lost some of their importance as providers and purchasers of goods.
....
....
The goods purchased by lower income groups have tended to experience faster price increases than the goods purchased by higher income groups
...
This has meant that almost universally across developed economies the economic downturn meant that it was more expensive to be poor than to be higher-income, and as a result inflation inequality persisted.

Demand destruction to the fore.

Neshant · Post by **Neshant** » 19 Oct 2013 12:20

Interesting document from 1914

This is, in brief, the answer to the question why capital shows so marked a tendency to export itself abroad. On the one hand, capital accumulates in a civilised country so fast that the standard of living of the working classes, and their demands as consumers, do not keep pace with it. On the other hand it seeks abroad for labour which can be even more easily and ruthlessly exploited than that of Western lands. These are the two economic roots of Imperialism.

To complete our survey of the motives of "real politics," it is necessary to glance at two powerful but secondary interests which Imperialism calls into action as it develops. There is first of all the social pressure due to the fact that Imperialism makes careers for "younger sons." Distant possessions have to be administered, and native levies must be officered. Even in James Mill's time---and few men knew India better---this was so obvious that he defined the empire as a system of out-door relief for the upper classes.

A peer may hope for anything from a viceroy's almost regal glory to the decent splendours that attend the governor of some minor colony. The posts in the Army and the Civil Services have long been so numerous that they are opened to the sons of the prosperous middle classes. 1 To these people India and Egypt have acquired at last a real meaning---they are the places where a son, a brother, or at the least a cousin, is "doing well."

Every demand for self-government in India or Egypt is a blow at the vested interests of that comfortable family in Kensington or Yorkshire. Every revolt threatens, it may be, the life of their nearest and dearest. There must be tens of thousands of families, all relatively wealthy, influential and well educated, to whom the sudden ending of the Empire would mean financial ruin and social extinction. The larger the Empire grows, the more numerous are the posts which it has to offer.

The well-known facts about India supply some measure of this enormous force, half-social, half-economic, which makes for Imperialism. The annual drain of wealth from India, the indirect tribute which it pays to the ruling class at home, is believed to amount to about thirty millions sterling, consisting of the interest on capital sunk in India or lent to India, of pensions paid to ex-Anglo-Indians now resident at home, and of remittances sent home by Anglo-Indians resident in India.

This sum is, of course, in great part a payment for real services rendered by Englishmen to India, but the rate of remuneration is high, and the services are sometimes such as Indians do not desire and often such as natives could more cheaply perform. It differs from similar payments made to capitalists, officials and officers at home chiefly in this, that it is spent not in India but in a foreign country.

In that sense it is a tribute, a sum of wealth annually withdrawn from India and spent for the advantage of Englishmen in England. When Imperialists argue that our rule is providentially necessary to India, it is well to remember that their judgment on such a point is biassed by the fact that our rule in India is profitable to ourselves.

Enquire why it is that, despite the eulogies on the martial virtues and the proved loyalty of Sikhs and Moslems, native Indians are not allowed to hold commissions in the Indian army above subaltern rank, and the only candid answer will be that the closing of these posts to the young men of the English upper and middle classes would not be tolerated by public opinion at home. The same influences have restricted the efforts made by reforming viceroys to admit a larger proportion of Indians to the Civil Service. The real obstacle to their employment in its higher branches is not so much the supposed weakness of Indian character, as the interest of the educated class in England.

Austin · Post by **Austin** » 19 Oct 2013 12:43

US debt hits 17 trillion dollars - Treasury Department

The US debt jumped above 17 trillion dollars for the first time in history, the Treasury Department said Friday. The debt at the end of business Thursday, after Congress lifted the debt limit, was 17.075 trillion dollars.

On Wednesday, the debt was 16.7 trillion dollars - a figure held steady by Treasury Secretary Jacob Lew as he used extraordinary measures to keep it under that mandated limit since May.

After weeks of stalemate and a government shutdown, Congress agreed on Wednesday to lift the debt limit until February 7, when the battle will resume again unless Republicans and Democrats come to an agreement before then.

The manoeuvres that Lew had undertaken since May meant there was immediate need to replenish various pension funds and other sources he had borrowed from, explaining the huge jump in the debt.

panduranghari · Post by **panduranghari** » 19 Oct 2013 14:15

TSJones wrote:
I want to make it equally clear that this nation will maintain the dollar as good as gold, freely interchangeable with gold at $35 an ounce, the foundation-stone of the free world’s trade and payments system.”
-John F. Kennedy, July 18, 1963

“That we stand ready to use our gold to meet our international obligations–down to the last bar of gold, if that be necessary–should be crystal clear to all.”
-William McChesney Martin, Jr. (Federal Reserve Chairman) December 9, 1963

Lesson: When someone says you can exchange paper for precious metals – make the swap before they change the rules.
Well yes, but in this case you had until August 15, 1971 when the US stopped the dollar convertibility to gold.

It's applicable today as well. Fiat currencies are toast, just because the common masses watching X factor American idol etc does not know does not make it better.

Do you see the world as it is?
OR
Do you see the world as you like to see it?