Two Articles on the Economy and Possible Future

[tabs]

Originally Posted by Black968

The US Dollar has been the go to currency for the last 70 years and should continue for the next 70 years. The Euro has tried to take the title, but no dice. Ever since capitalist societies have gone away from the gold standard (Sold off all of their Gold), the USD is King. If the USD fails to be the go to currency (virtually impossible IMHO) there will be BIG Trouble. Printing Money is a bad idea though.

As stated the USD has been a rock of Gibraltar for over 200 years. The reserve currency since the end of WW2, replacing the British Pound. It is with much chagrin in the world that the US is being irresponsible in running so much debt and now having to prop up the US economy with the monetary policy of infusing liquidity into the system.

The only reason why US Treasuries and the USD remain so popular in the world is their safe haven status as everybody in the world is more afraid of their own shaky economies and currencies.

However there are limits as to how much liquidity the FED can infuse into the system as it debases the value of the USD. This is why the FED instituted the TAPER at the risk of having the economy falter. FED policy now is geared to maintaining a stable USD at the risk of having the US economy go into recession. Secondly the US economy is not providing enough of tax revenue to cover expenditures thus endlessly having to increase debt. Thus the US is burning the candle at both ends and it is just a matter of time before either fiscal or monetary policy blows up.

[jyl]

The US has relied too much on monetary policy (the Fed). Other than the $1TR emergency stimulus/spending program launched during the recession, fiscal policy (Congress) has been at best non-existent and at worst counterproductive. About two years ago, the Fed largely reached the limit of its ability to stimulate the economy. I see no sign that Congress is ready to step up.

[93nav]

If you believe ANY of the Chinese numbers I have a bridge to sell you. Cash only.

Originally Posted by cabmando

I've read a lot about China's economic crisis where their economy only grew by 6.9%. I wish the US economy was in such bad shape.

[jyl]

This is a blog I've read for a long time, concerning China's financial markets.

Michael Pettis' CHINA FINANCIAL MARKETS | Global imbalances and the Chinese economy

Referring to Chinese growth: "While it is hard to know what numbers to trust, most independent estimates already range from 1% to under 5%"

Here is a link to a post from last July, that I don't want to take the time to retype here. More concerned about China than Greece

Re-reading it, I think I was cavalier (aka "wrong") in using the term "modest". The problem is that, when the US economy is growing 1-2%, even a modest impact from China could make that 0-1%, and the US stock market perceives a heckuva difference between the two . . .

Then add oil at $30, and the increasingly negative impact of low oil prices on the US economy. That, by the way, is the downside of becoming almost self sufficient in oil (in 2015, the US imported about 25% of its oil, vs 60-65% in 2007). When we imported most of our oil, low oil prices had a net positive effect on the US economy (large positive effect vs small negative effect). When we produce most of our own oil in the US, low oil prices have a net neutral effect - or a net negative effect, if oil industry debt is excessive.

[JeremyD]

Don;t click on the website above

[Rtrorkt]

Originally Posted by Aurel

That is why I think Donald trump is the most qualified to manage this country, because he is not in the van so to speak. He is not bought by any corporation, and actually knows how businesses run. And the polls say the same.

A very big problem I see in the US political system is the role private corporations are allowed to play into it, via lobbying. This results in completely screwing up the people, and destroying the middle class. Tax loopholes result in mega corporations like Google or Apple paying no income tax, by sheltering all their gains offshore. Even worse, some corporations were bailed out with taxpayers money, and when given a sweet deal of only 5% income tax to bring back foreign funds and create jobs in the US, first thing they do is lay off people and buy back shares to make their own stock go up and fill up the pockets of the executives. This revolting situation will continue as long as the political class is bought by them, while things could be much improved if their fair share of taxes could be collected.

You can't be serious. The Trumpster, who has filed for bankruptcy, failed in his Atlantic City investments, bankrolled by his racist dad, and just an all around buffoon is your choice to lead? Frankly I don't like the lot of the D or R, but Trump? As a country we will be beyond the laughing stock, or we will be best buddies with my favorite guy Putin. Get real. There is not a person running who can engender any level of confidence they get it. But blowhard Trump, and his original sychophant Cruz are the worst.

[Rich76_911s]

Originally Posted by JeremyD

Don;t click on the website above

Yup looks like Pettis' blog may have been hacked again. Step one to avoid hacking; don't say anything negative about China.

[jyl]

Originally Posted by Rich76_911s

Yup looks like Pettis' blog may have been hacked again. Step one to avoid hacking; don't say anything negative about China.

How can you tell?

I have wondered how long Pettis will be allowed to keep writing. He lives in China and teaches in a university there.

[Rich76_911s]

Norton blocks me from going to the site saying:
"web attack: Mass injection website 19"

I hadn't had that problem before, but maybe it's on my end. I'm far far away from being a computer genius.

[jyl]

I wonder if that is a false alarm.

https://wordpress.org/support/topic/web-attack-mass-injection-website-19

Anyway, I'm reading the site on my Mac and we'll see what, if anything, happens.

[tabs]

The question MRM doesn't address is who steps up to replace that lost 25% worth of US exports to China if the rest of the world is tapped out? The answer is no one.

The magic number for the FED balance sheet is 7T USD on the balance sheet before it goes bang.

[Porsche-O-Phile]

Presupposing that the "rest of the world is tapped out" is a real stretch. If you go back to what MRM said (and I really value his posts and find them to be among the highest caliber on this board - always thoughtful, rational and even entertaining at times):

Originally Posted by MRM

...Multinationals based in the US and Europe now sell into four large markets that they depend on for revenue: North America (the US), which remains the largest single market; the EU, South America (especially Brazil) and APAC, meaning China. If China turns out to be a huge Ponzi scheme, US international companies, and all companies that support that market, will see a reduction in demand of at least 20-25%, similar to the Asian Contagion of the 1990s. This can be partly offset by increased efforts in the other three pillars of international commerce, but the loss of sales and profitability will be a significant drag on corporate earnings, which means a loss of revenue, tax base and jobs.

So the answer is in his post - basically if China goes away then multinational corporations look to the US, Europe and South America. The US is basically flat, the Eurozone is basically flat or in a slight decline and South America has potential. I'd say parts of Asia (particularly India) are ripe for growth if they can get their schyte together and continue on the path of acting like a country rather than a collection of tribes still held back by regional / tribal xenophobia and superstition (the Presidency of Kocheril Raman Narayanan, a Dalit certainly helped with this but they've got a long way to go). I'd say India's star is rising and over the next 20-30 years they're poised to be a real player - one that hopefully won't make the same mistakes as China.

So I concur with MRM that things are flat and the era of wild, orgiastic, debt-fueled consumptionism is at an end. For one, I don't lament this. Change always comes through difficulty. Many people will have to find new places and new roles / jobs in an economy that will demand different things than in the past. Many industries / jobs are frankly well past their time and need to go extinct so that the talent they suck out of the available pool of people and resources can be directed into things that will move us collectively forward. Emerging technologies like nanotechnology, bioengineering, alternative energy, sustainable agriculture and hydrological engineering are likely to benefit from this. As always, the people that can stay focused, stay positive and tap the areas that are likely to be in demand will thrive. Those that only know how to run a plastics plant or hawk overpriced junk probably will have a harder time. Collectively this is not a bad thing for the cause of human advancement but it will come at the price of some difficulty for some people - yes there's going to be overall economic malaise ahead but out of it will (hopefully) come a realignment / retasking of the labor force which will enable the next growth cycle. That's what we need to keep our collective eyes on and prepare for.

[tabs]

From the time that I was very young I listened to the stories that the old people told about their lives. From that I could see through their eyes the times that they lived through.

I happen to agree that MRM's posts are thoughtful and as such are top notch. However Mr POP the world is satiated with consumer goods and debt. With a now slackening of demand the exporting nations are facing having populations of idle hands. The end result will be a deep and protracked global recession which will reach into every corner.

People who put their faith in science and technology as being a saving grace under estimate what creatures of habit human beings are.

[Porsche-O-Phile]

You missed my point - people don't need more stuff (we've saturated the world with enough China-made rubber dog poo) we need better resources, technology and infrastructure to meet the demands and expectations of a modern world. That's opportunity. It's new markets. Internet-based technologies are flourishing. As I mentioned before there's still lots of room for growth in biotech, genetics, medicine, better food and water management, nanotch, electronics, etc...

Just because people aren't consuming as many disposable geegaws is hardly the end of days - it means shifting foci and DIFFERENT demand, not NO demand. I think the world is simply waking up somewhat and maybe starting to realize what matters and demand it - better and more reliable ways of life, stability, etc. clean water, food, energy, medical care - stuff like that.

I think people tied into those areas are going to be just fine. Walmart employees and derivatives traders? Probably not so much. Boo hoo.

[tabs]

Originally Posted by Porsche-O-Phile

You missed my point - people don't need more stuff (we've saturated the world with enough China-made rubber dog poo) we need better resources, technology and infrastructure to meet the demands and expectations of a modern world. That's opportunity. It's new markets. Internet-based technologies are flourishing. As I mentioned before there's still lots of room for growth in biotech, genetics, medicine, better food and water management, nanotch, electronics, etc...

Just because people aren't consuming as many disposable geegaws is hardly the end of days - it means shifting foci and DIFFERENT demand, not NO demand. I think the world is simply waking up somewhat and maybe starting to realize what matters and demand it - better and more reliable ways of life, stability, etc. clean water, food, energy, medical care - stuff like that.

I think people tied into those areas are going to be just fine. Walmart employees and derivatives traders? Probably not so much. Boo hoo.

U can have all the demand in the world but if you don't have the money or credit to pay for it then u can't buy it. There in lies the problem. There is too much industrial capacity which was built largely on consumer credit. Now that the consumers* resources are tapped out he can't buy anything. The Great Post WW2 Prosperity Bubble is deflating.

While MRM's posts are laudatory it is quite maddening that his epiphany would come at the hands of second and third rate intellects respectively. Especially after the light was shining in his face all along. Perhaps it was just a matter of not being ready to accept the truth of the matter. For what betrays most intellects is ones own emotionally based biases.

* Ones definition of "consumer" includes public institutions such as governments as well.

[wdfifteen]

Originally Posted by Porsche-O-Phile

Many industries / jobs are frankly well past their time and need to go extinct ...

Which industries/jobs are these?

[tabs]

Originally Posted by wdfifteen

Which industries/jobs are these?

Buggy Whips.

[vash]

Originally Posted by Tobra

That, and they write in English.

it's difficult to type when the other hand is patting yourself on the back..

[tabs]

Originally Posted by vash

it's difficult to type when the other hand is patting yourself on the back..

I couldn't tell you what they are doing with the other hand, but in my case it certainly isn't patting myself on the back.

[jyl]

The problem with both the bearish and bullish oracles is that timing is important and they tend to be permanently in one camp or the other. Being bearish in 2009 was a terrible mistake, being bullish in 2015 is turning out to be. I have not memorized all of tabs' "calls" and sometimes they are not expressed all that succinctly, but he has not been a perma bull or a perma bear, which is good, and there's no question in my mind that his posts (and some others, e.g. MRM's) are worth reading and considering carefully.