Perspectives on the global economic changes

Austin · Post by **Austin** » 19 Nov 2016 14:02

Counter Point

Why Trumponomics Won't Drown Us In Debt

chanakyaa · Post by **chanakyaa** » 21 Nov 2016 06:22

Sure..once you look at the problem (i.e. debt) as a comparison (i.e. debt/GDP), and manipulate the denominator...problem magically goes away. Prices of all consumer products, local taxes keep going up...wayyyyyy beyond cooked-up-and-officially reported inflation number; but the inflation is low. ha

In the meantime, alleged low inflation is so enticing that Trump's advisor believes in the following.

http://www.marketwatch.com/story/bannon ... 2016-11-18

“The conservatives are going to go crazy. I’m the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Ship yards, iron works, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks.”
Steve Bannon

hanumadu · Post by **hanumadu** » 21 Nov 2016 06:59

chanakyaa wrote:Sure..once you look at the problem (i.e. debt) as a comparison (i.e. debt/GDP), and manipulate the denominator...problem magically goes away. Prices of all consumer products, local taxes keep going up...wayyyyyy beyond cooked-up-and-officially reported inflation number; but the inflation is low. ha

In the meantime, alleged low inflation is so enticing that Trump's advisor believes in the following.

http://www.marketwatch.com/story/bannon ... 2016-11-18
“The conservatives are going to go crazy. I’m the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Ship yards, iron works, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks.”
Steve Bannon

Basically more QE.

chanakyaa · Post by **chanakyaa** » 21 Nov 2016 07:45

Yes, but as always old wine in a new bottle (meaning new term instead of calling it a QE). The new term being socialized is "Infrastructure Bank" or trust or fund

Austin · Post by **Austin** » 21 Nov 2016 10:31

father of UnConventional Monetary Policy Allan Greenspan admits the same

Greenspan’s grim forecast for growth

Austin · Post by **Austin** » 21 Nov 2016 10:32

What Asia-Pacific trade pacts could replace the TPP?

http://www.scmp.com/news/china/diplomac ... eplace-tpp

panduranghari · Post by **panduranghari** » 21 Nov 2016 19:01

Multilateral trade pacts are dead. Bilateral ones are the future. Multilateral pacts are mainly for the benefit of a dominant currency. China hopes it will use yuan to supplant dollar in the multilateral pacts. Wont happen.

Austin · Post by **Austin** » 22 Nov 2016 09:44

panduranghari wrote:Multilateral trade pacts are dead. Bilateral ones are the future. Multilateral pacts are mainly for the benefit of a dominant currency. China hopes it will use yuan to supplant dollar in the multilateral pacts. Wont happen.

Atleast Trump agrees with you , He says he will get out of TPP and do more bilateral deals

http://www.bbc.com/news/world-us-canada-38059623

The six executive actions he would take on day one are:

issuing notice of withdrawing from TPP
cancelling restrictions on US energy production
cutting regulations on businesses
ordering a plan to combat cyber-attacks
investigating visa abuses that undercut American workers
imposing a five-year ban on people leaving government to become lobbyists

The president-elect has spent the last week starting to put together his new team

svinayak · Post by **svinayak** » 22 Nov 2016 11:06

panduranghari wrote:Multilateral trade pacts are dead. Bilateral ones are the future. Multilateral pacts are mainly for the benefit of a dominant currency. China hopes it will use yuan to supplant dollar in the multilateral pacts. Wont happen.

China will be in a big surprise

China was trying to keep out many countries from large trade agreements . India was impacted due to that

panduranghari · Post by **panduranghari** » 22 Nov 2016 13:22

Austin wrote:Atleast Trump agrees with you , He says he will get out of TPP and do more bilateral deals

Hmm may be I am one in the 'Basket of deplorables'.

svinayak wrote: China will be in a big surprise

China was trying to keep out many countries from large trade agreements . India was impacted due to that

SVinayak ji,
Chinese communist party IMO is US Deep state extension. All the noise made notwithstanding. They have been co-opted and will do everything by the play book from 1944.

Austin · Post by **Austin** » 22 Nov 2016 14:42

Brexit vote wiped $1.5tn off UK household wealth in 2016, says report

https://www.theguardian.com/business/20 ... CMP=twt_gu

Austin · Post by **Austin** » 22 Nov 2016 16:39

panduranghari wrote:Multilateral trade pacts are dead. Bilateral ones are the future. Multilateral pacts are mainly for the benefit of a dominant currency. China hopes it will use yuan to supplant dollar in the multilateral pacts. Wont happen.

Why not , whats the harm using Yuan if that supplant dollar , The world does not want Euro or USD to be the only currency of trade and then subject to sanctions

panduranghari · Post by **panduranghari** » 22 Nov 2016 20:18

Exactly Austin. You got it.

The world does not want Euro or USD to be the only currency of trade and then subject to sanctions

World needs their own national currencies. No need for anyone to be coerced to use dollar or yuan.

Reminds me of Prcol Harum's Lighter shade of pale lyrics;

We skipped the light fandango
Turned cartwheels 'cross the floor
I was feeling kinda seasick
But the crowd called out for more
The room was humming harder
As the ceiling flew away
When we called out for another drink
The waiter brought a tray

The solution is right in front of our eyes, yet we choose to overlook it.

svinayak · Post by **svinayak** » 22 Nov 2016 21:26

panduranghari wrote:
svinayak wrote: China will be in a big surprise

China was trying to keep out many countries from large trade agreements . India was impacted due to that
SVinayak ji,
Chinese communist party IMO is US Deep state extension. All the noise made notwithstanding. They have been co-opted and will do everything by the play book from 1944.

This is true but China cannot be got into the international system unless there is political transformation.
They have been working on change transformation with China.

Now they are working on China to
1. To make China politically transparent and also financially connected to global system.
2. To make China more military support western objectives

Austin · Post by **Austin** » 22 Nov 2016 23:34

Dollar’s Decline Will Be the “Wild Card” Play of 2017

pankajs · Post by **pankajs** » 23 Nov 2016 01:46

There is a saying in Hindi that translates to "The one-eyed is the king amongst the blind".

China devalues wrt USD, Japs try to devalue wrt USD, and the lesser said of the Pound and the Euro the better.

So who is the King Hanji?

Prem · Post by **Prem** » 23 Nov 2016 02:07

Austin wrote:Brexit vote wiped $1.5tn off UK household wealth in 2016, says report

https://www.theguardian.com/business/20 ... CMP=twt_gu

UQ was trying to artificially maintain GDP higher than India . 1.2 Trillion Pounds is 45% of the last stated GDP.

Austin · Post by **Austin** » 23 Nov 2016 08:49

Warning to Trump on Economy

Stockman: I see a 'fiscal blood bath' ahead
http://finance.yahoo.com/video/stockman ... 00919.html

Bart S · Post by **Bart S** » 23 Nov 2016 13:27

Prem wrote:
Austin wrote:Brexit vote wiped $1.5tn off UK household wealth in 2016, says report

https://www.theguardian.com/business/20 ... CMP=twt_gu
UQ was trying to artificially maintain GDP higher than India . 1.2 Trillion Pounds is 45% of the last stated GDP.

They are talking about the net worth of individuals, not the GDP. Might be inter-related, but two separate things.

panduranghari · Post by **panduranghari** » 24 Nov 2016 19:15

I expect India to join SDR soon. India's vote share is 2.64 %. If at the next IMF meeting if our vote share is increased, I would think that would be 'join SDR' positive. War on Black money is perhaps also to get rupee ready for this. I am obviously speculating but based on;

https://www.imf.org/External/AM/2016/im ... ng/ind.pdf

Arun Jaitley wrote:The IMF membership needs to remember that it was their collective legal obligation to complete the 15th Review in 2015, apart from the fact that frequent and excessive delays in completing or implementing the General Reviews of Quotas erode the credibility and legitimacy of the organization. We hope that in future the IMF will show more determination and focus in working toward completing the 15th Review, including agreement on a new quota formula as a basis for realignment of quota shares to likely result in an increased share of emerging market and developing countries as a whole. We expect that the new deadlines that will be set will be honored and adhered to in letter and in spirit.

Austin · Post by **Austin** » 24 Nov 2016 22:48

I am now kind of inclined to believe Jim Rickards that they will bump up IMF SDR as global currency in the next crisis.

Keeping fingers cross into India entry to SDR , For China too it was long waiting not easy one , They are probably better off throwing Useless Economy like UK and Japan out of SDR

pankajs · Post by **pankajs** » 25 Nov 2016 00:32

Just read yesterday where this gent (an economist IIRC) had written than Dollar is currency backing all other currencies. I think he is right in that MOST currency pegs including the Chinese Yuan is to the dollar and NOT any other currency. Most of the most important currency crosses involve the dollar at one end. Oil to Gold and most things in between are quoted in dollars. I haven't checked this but one must try to find out the base/quote/strike currency underpinning trillions of dollars worth of derivatives and Debt and my *guess* is that here too the dollar would emerge as the king.

Dollar, as things stand now, is the foundation of the world trade/order. Others have begun chipping at the edges but Barring any catastrophe US will steadily weaken but last longer at the top than most folks think.

Now coming to the SDR, U.S. dollar 41.73 percent of the SDR basket followed by Euro @ 30.93 percent, Chinese renminbi @ 10.92 percent, Japanese yen @ 8.33 percent and Pound sterling 8.09 percent.

An interesting line that caught my attention.
https://www.imf.org/en/About/Factsheets ... ncy-Basket

The calculation was made on the basis of the average exchange rates for these currencies over the three months ending on that date, in a manner that ensures that the value of the SDR in terms of the U.S. dollar will be the same on September 30, 2016 under the current and revised valuation baskets.

My *guess*, before I read the IMF memo, on what makes a country and especially its currency important is its role in international trade. China had to be included after it became the largest trading nation on earth. Where is India on the list of trading superpowers? That should gives us a clue as to when we can expect the INR to be part of the SDR basket.

Again, going back to the IMF link posted before

The current criteria for inclusion were adopted by the Board in 2000. They establish that the SDR basket comprises the currencies that are issued by members or monetary unions whose exports had the largest value over a five-year period, and have been determined by the IMF to be "freely usable".

The export criterion, which acts as a “gateway,” aims to ensure that currencies that qualify for the basket are those issued by members or monetary unions that play a central role in the global economy. This criterion has been part of the SDR methodology since the 1970s.

My sense is that we are far off from being part of the SDR.

Miracle can happen and the world order as we know is might change tomorrow or the criteria might change but as a prudent person I wouldn't bet on it.

Austin · Post by **Austin** » 25 Nov 2016 08:29

The currency value of the SDR is determined by summing the values in U.S. dollars, based on market exchange rates, of a basket of major currencies (the U.S. dollar, Euro, Japanese yen, pound sterling and the Chinese renminbi). The SDR currency value is calculated daily (except on IMF holidays or whenever the IMF is closed for business) and the valuation basket is reviewed and adjusted every five years.

The value of SDR is based on basket of currency but its value is put out in USD.

It similar to saying India Forex value is put out in USD but it has gold/usd/euro etc

Austin · Post by **Austin** » 25 Nov 2016 09:24

American home ownership declining at a rate that’s projected to return levels to the 1950s

http://schiffgold.com/key-gold-news/dec ... 50s-rates/

Austin · Post by **Austin** » 25 Nov 2016 09:42

Trumped Up Irrational Exuberance Continues

panduranghari · Post by **panduranghari** » 25 Nov 2016 13:50

pankajs wrote:Just read yesterday where this gent (an economist IIRC) had written than Dollar is currency backing all other currencies. I think he is right in that MOST currency pegs including the Chinese Yuan is to the dollar and NOT any other currency. Most of the most important currency crosses involve the dollar at one end. Oil to Gold and most things in between are quoted in dollars. I haven't checked this but one must try to find out the base/quote/strike currency underpinning trillions of dollars worth of derivatives and Debt and my *guess* is that here too the dollar would emerge as the king.

Dollar, as things stand now, is the foundation of the world trade/order. Others have begun chipping at the edges but Barring any catastrophe US will steadily weaken but last longer at the top than most folks think.

Does anyone really hold dollars (or any other Fiat currency)?

It is important to understand that few persons or governments hold US dollars or Pounds or Euros or Rupees! Look at any investment portfolio and what you will find "are assets denominated in US$(for example)". This sounds simple, but it is not. You have heard the phrase, "money is moving into real estate, land, oil, stocks or bonds". It is an incorrect metaphor. It does not explain things well.

All modern digital currencies do not go into an investment, they move THROUGH it. The US unit is only an exchange medium to acquire assets valued in dollars. US government bonds are the usual holding. No Central Bank holds any currency! They hold the bonds of that currency. The major problem today, is that digital currencies have erased the currency denominations of all government/nation debt holdings! Even though a debt is marked as Euros, Dollars, YEN, they are in "real time" / "marked to the market" and cross valued in all currencies! No currency asset, held by CBs today are valued in the light of a single issuing country, rather "all currencies are locked together". To lose one large national currency, is to lose the entire structure as we know it!

However, there is an alternative. Gold! It is the only medium that currencies do not "move through". It is the only Money that cannot be valued by currencies. It is gold that denominates currency. It is to say "gold moves through paper currencies". Gold can be used to revalue any asset, and not be destroyed in the process!

In times of plenty, people say one thing about physical gold, but in time of change they do the opposite. History has shown that when paper assets start to be revalued downward by gold i.e. gold rises in currency terms , it's physical supply dries up! People and governments "HOLD" the real physical and trade the paper, even gold paper.

Just because the gold market has/is acting strange, does not mean it will stay that way.

SDR or not, the ultimate asset is gold. The neo Keynesian apparatchiks at all the central banks can say and do what they want. But they wont be able to control the nature wrath. 2008 was the primer, 2017(?) might be the final denouement. India join SDR does not give us any advantage. That they may join is just an observation.

TSJones · Post by **TSJones** » 26 Nov 2016 05:41

while gold is a store of value, its value can vary greatly in times of scarcity. if oil becomes scarce (unlikely) then it will take more gold to buy it. thus, inflation.

one of the reasons for a cash currency is that it is easier to handle than gold and governments can control it better.

while nobody may like government control it really depends on whose ox is being gored.

also there is a limit to digital currency in the fact that if there is too much of it in the economy, then inflation results.

yensoy · Post by **yensoy** » 26 Nov 2016 07:57

panduranghari wrote:Does anyone really hold dollars (or any other Fiat currency)?

Back in my childhood we used to play this birthday game "passing the parcel", and I'm sure kids these days also play it when the wi-fi is switched off. The participants sit in a circle, with a box or stuffed toy being passed from hand to hand while music is being played by an organizer not privy to the location of this object. The organizer abruptly switches off the music and the one with the object is booted out etc. I'm sure you know it...

While ephemeral, dollars are actually held by people, companies and entities, as dollars in bank accounts or cash. It is true that it's a medium of exchange, but the amount of exchange is some (large) factor of the dollars in circulation, and at some point in time someone has the money in their books. When supply of this money is disrupted, it can disrupt the underlying values of the investments due to seizing of the markets.

The same thing has happened in demonetization - markets both legal and illegal are affected (the former will recover quickly as more money is replaced, the latter will take time because that money is either confiscated or will be replaced very slowly via banks).

So yes, dollars are actually held and any policy affecting them affects the overall economy quite a bit.

yensoy · Post by **yensoy** » 26 Nov 2016 08:01

panduranghari wrote:I expect India to join SDR soon. India's vote share is 2.64 %. If at the next IMF meeting if our vote share is increased, I would think that would be 'join SDR' positive. War on Black money is perhaps also to get rupee ready for this. I am obviously speculating but based on;
https://www.imf.org/External/AM/2016/im ... ng/ind.pdf

Vote share doesn't directly translate to currency joining SDR. There are requirements of the currency itself, which include free convertibility and limited intervention. This is not in India's interests at this point in our development because it limits the government's hand in what it can and cannot do, and what transactions it will and will not allow. Besides as someone pointed out, it's our trade share as a global percentage which will make this exercise relevant, and on that front we are nowhere. Maybe in 20 years...

yensoy · Post by **yensoy** » 26 Nov 2016 08:04

One special thing with the USD is this: Whenever there is any economic shock, or even political uncertainty in a country, it's currency goes down.

But there is an exception, and that is the USD. When there is economic shock or political uncertainty in the US, the USD goes up. This is called flight to safety, USD being the epitome of safety and everything else relatively unsafe. As long as this holds true, US isn't going anywhere and USD will continue to be king.
------------------------------------------

So today we have INR, CNY and a bunch of other currencies losing value to USD in light of the unknowns with Trump administration. How come Pak rupee is still holding steady?

TSJones · Post by **TSJones** » 26 Nov 2016 08:25

How come Pak rupee is still holding steady?

because it is a financial parasite of the US?

Austin · Post by **Austin** » 26 Nov 2016 10:42

Kurgman argues Lost Jobs in US are due to Automation and it would never come back and that service sector is future of work

Krugman on US Manufacturing: No Policy ‘Will Bring Back Those Lost Jobs’

Read more: https://en.ria.ru/us/201611261047859469 ... ring-jobs/

Austin · Post by **Austin** » 26 Nov 2016 11:14

Jim Rickards

TSJones · Post by **TSJones** » 26 Nov 2016 12:57

if a gold standard was not satisfactory a 100 years ago why would it be satisfactory now?

crickets chirping........

Neshant · Post by **Neshant** » 27 Nov 2016 02:16

Not satisfactory for whom? Banksters perhaps. They were not able to steal the output of the productive economy via financial chicanery.

It was quite satisfactory for anyone doing productive work in the economy - which I suspect is why the latter part of the 19th century saw the fastest economic growth ever. Such folks got to keep the fruits of their labor without the fraud of money printing (aka inflating aka counterfeiting), being forced to pay for banker bailouts & bonuses, being forced to pay for politicians promises through vote buying, not having to lose wealth due to gaming of the markets by goldman sachs types to profit themselves at the vast majority's expense which is merely let off with small fines today, taxation to pay for the above fraud and other wealth confiscation schemes.

In short, anyone who does no productive work in society (i.e. the banking & financial "industry") but rather can only survive through rent seeking will be worse off in a monetary system where people who earn the wealth with the sweat off their brow get to keep that wealth.

disha · Post by **disha** » 27 Nov 2016 06:32

Austin wrote:Kurgman argues Lost Jobs in US are due to Automation and it would never come back and that service sector is future of work

Krugman on US Manufacturing: No Policy ‘Will Bring Back Those Lost Jobs’

Read more: https://en.ria.ru/us/201611261047859469 ... ring-jobs/

Krugman is on thin ice. One can also argue that lost jobs are due to the collapse of the MIC after the end of the cold war OR due to the stability of population OR no newer markets are being exploited.

For example., how can one have 5% YOY growth in say Refrigerators, Washing Machines and Dryers and Dish washers? Let us say 125 million households are in US and each of them has 1 of the item above. And let us say there are 3 manufacturer of each of the above. How can all three have 5% YoY growth? Unless of course 6 million households are added every year.

Automation does not eliminate the jobs. It means the production has gone up for the same manual resource or becoming efficient (productivity gain). But is not so efficient that it will replace the entire growth. In fact it does not even replace the manpower needed to maintain the replacement levels. Also automation requires manpower to create the machine that builds the machine. So there is a shift in labour. Should it not create more jobs? And again productivity gains should measure the changes caused by automation.

It is just easy to build fear over automation. There might be a kernel of truth in that., but not the entire truth.

panduranghari · Post by **panduranghari** » 27 Nov 2016 20:46

yensoy wrote: So yes, dollars are actually held and any policy affecting them affects the overall economy quite a bit.

I am afraid that is not accurate saar. Please pull out any prospectus for any investment. To make it easy use USA as the example as most prospecti are available online. Anything will do- money market funds, hedge funds, mutual funds, etc. Anything. And if you read the print it will say dollars are not held but bonds are. Its true for the apparently very liquid money market funds too. They invest in 30 day paper. Even futures contracts are settled in dollar terms but no dollars are paid out. The Eurodollar market - the biggest oversea dollar market out there - also does not hold currency. They hold bonds.

To claim otherwise if being disingenuous.

FRN is not held that commonly and unless there is evidence provided to the contrary, I would until then be in very clear disagreement with your opinion.

panduranghari · Post by **panduranghari** » 27 Nov 2016 20:48

TSJones wrote:if a gold standard was not satisfactory a 100 years ago why would it be satisfactory now?

crickets chirping........

Absolutely. Gold standard is the last hurrah of the statists.

panduranghari · Post by **panduranghari** » 27 Nov 2016 20:55

yensoy wrote: Vote share doesn't directly translate to currency joining SDR. There are requirements of the currency itself, which include free convertibility and limited intervention. This is not in India's interests at this point in our development because it limits the government's hand in what it can and cannot do, and what transactions it will and will not allow. Besides as someone pointed out, it's our trade share as a global percentage which will make this exercise relevant, and on that front we are nowhere. Maybe in 20 years...

Indeed. VOte share does not translate into the currency joining SDR. But it is a way towards it. For the IMF to make constitutional amendments, the
minimum vote share needed is 15%. The only country having more than 15% is US at 16%.

BRICS at the moment are at 12%. And the possibility of rising the vote share raises the possibility of changing the constitution. Jaitley has alluded to this in his speech. At least I read it that way.

Demonetisation of certain currencies to decrease cash economy coupled by complete demonetisation and removal of gold from taxation, would be the next obvious steps. If these steps are taken, it would be a net positive move IMO towards the eventual expansion of the SDR system. The collaboration of GOI with MMTC-PAMP was initially to get Indian gold for IMF. It fell flat on its face because we booted out Rajan. IMF has not choice. Better have us inside the tent pissing out than the other way round. Its a win for the USA too. It keeps them from expanding their balance sheet to fund the fiscal profligacy.

Of course time will tell.

TSJones · Post by **TSJones** » 28 Nov 2016 02:30

What is M2?

Search Results
M2 is a measure of the money supply that includes all elements of M1 as well as "near money." M1 includes cash and checking deposits, while near money refers to savings deposits, money market securities, mutual funds and other time deposits.