Why the death of the dollar is greatly exaggerated.

[Martinghoul]

I have heard a similar argument to yours, xenix...

I think it's in one of the blurbs from a strategist somewhere. Idea is to look at (non-financial) corporate profitability vs unemployment momentum (i.e. the change in the unemployment rate). History suggests that peaks of unemployment would normally be followed by peaks of corporate profitability.

The author then makes a point that's similar to yours, saying that efficiency gains from cost cutting during the downturn lead to higher profits that eventually translate into surging investment, as companies prepare for the upturn. The only issue I see with this argument is the fact that US corps, like the US consumers, still face the need to pay down a massive overhang of debt. As a result, the efficiency gains and increased profits that may very well be real wouldn't necessarily translate into investment and expansion.

 

[Anaconda]

Quote from xenix:

Actually, elements of Keynes' theories have been a part of our economic policy since at least FDR. If you really believe what you posted, then you have a very jaundiced view modern macro-economic theory. One which is shared by many people, but jaundiced nonetheless.

Keynes theory was created to justify endless debt creation by the governments. It's nonsense. If you cannot recognize, you're just deluding yourself.
My view is realism and obviously, unlike you, I have done much more research into the actual government stimulus and how it is going to play out. The fact is that the funding does not exist and has to be printed out of thin air. Just like Keynes suggests.

Also, the printing money bit would be monetary policy rather than fiscal (aka Keynesian) policy.

Where is the government getting the additional money to spend? It certainly is not from tax revenue.

The programs you mentioned are part of the current monetary policy of the Fed and Treasury so I think I already covered that.

Fine, let's focus on ARRA American Recovery and Reinvestment Act of 2009. I can see you have not read it, so maybe you should. Why don't you point out exactly where your theory of Keynesian economics works to reverse the recession and make everything all better.

 

[xenix]

Fine, let's focus on ARRA American Recovery and Reinvestment Act of 2009. I can see you have not read it, so maybe you should. Why don't you point out exactly where your theory of Keynesian economics works to reverse the recession and make everything all better. [/B]

It's called the multiplier effect. Why don't you look that up and get back to me.

No one doubts that the stimulus program is an inefficient beast ladened with govt pork. The current status of the money multiplier is also unfortunate. My point is that as you get money into the hands of real people, that will change.

If you want to beat up on JMK's theories, knock yourself out. I'm not a Keynesian.

 

[Anaconda]

Quote from xenix:

It's called the multiplier effect. Why don't you look that up and get back to me.

No one doubts that the stimulus program is an inefficient beast ladened with govt pork. The current status of the money multiplier is also unfortunate. My point is that as you get money into the hands of real people, that will change.

If you want to beat up on JMK's theories, knock yourself out. I'm not a Keynesian.

Bottom line, you have not even read a synopsis of the stimulus bill. You know, it's not that complicated, wikipedia has a decent summary of it.

So why don't you explain how the multiplier effect (another line of Keynesian bullshit) is going to work wonder for us all. I would like to see you put this in perspective. Please do not avoid the fact that this is all printed money, not tax surplus or revenues, hence inflation.

Also, are you suggesting that simply printing a bunch of money and giving it to the people will solve the recession?

 

[Greenrush Drew]

Example of a counter cyclical industry?

Quote from pitz:

Growth will only start happening again when newspapers' classified ads are chock full of advertisements, "Wanted: Manufacturing Electrical Design Engineer, $200k starting salary + relocation + stock bonus. New grads welcome to apply".

Until then, its fluff. Seriously, follow the labour market. The economy cannot and will not start to revive itself until the US engineering workforce is back to work, designing new products, building new factories, and creating a sustainable base of production (for export).

Consumerism is dead. Long live engineers and factory workers! Bankers and consumers will *not* be leading this recovery, so to look towards the health of those sectors would be, IMHO, dumb. As the economy picks up steam, the bond market will progressively be increasingly devastated as inflation will be very difficult to stop. The best place to be positioned is in countercyclical industries right now, probably moreso as an employee, than as an investor.

 

[trefoil]

The reason why you can have large stimulus and the Fed at 0 today is of course that the only place where credit is expanding is in DC.
Which is classic Keynes. He gets used & abused for all kinds of inappropriate situations. The one thing his theory said was really really simple: save for a rainy day, spend it when it rains.
It's raining.
The actions the Fed and the Feds have taken so far haven't moved the dial yet. MZM, the broadest measure of actual liquidity in the economy, is actually going down:

<img src="http://i31.tinypic.com/301fzht.jpg/>

The year over year rate of change in MZM is showing a distinct downtrend:

<img src="http://i27.tinypic.com/oac9k4.jpg"/>

This confirms the signals the broadest measure of global liquidity there is, gold, is giving out: it's been sideways since peaking last year. That's telling you that all that money being pumped out worldwide has yet to make a net difference. When gold starts to move, you'll know the actions the Feds and other governments around the world have taken to arrest this are finally having an effect.
If the US Fed doesn't start raising rates and generally removing liquidity when that starts to happen, you can start to be concerned, about both the dollar and inflation. Until then, there's not a lot to worry about.

 

[EMRGLOBAL]

Not sure about the death of the dollar but for an extended weak dollar, very weak, could be the cause.

1. Weaker dollar makes US manufactures exports far more attractive and will increase production.

2. Tell China, who is spending 17 Billion on buying up Oil production as we speak, that the dollar isn't gona get real weak.
In fact, I bet that China is not only trying to corner the oil market and prepare for the upcoming run up....but they know they can't dump the dollar when Inflation hits....so they are hedging their "DEBT" carrying dollars.

But what do I know....I'm not CNBC,....YAHWWWN

 

[ASusilovic]

Quote from EMRGLOBAL:

Not sure about the death of the dollar but for an extended weak dollar, very weak, could be the cause.

1. Weaker dollar makes US manufactures exports far more attractive and will increase production.

2. Tell China, who is spending 17 Billion on buying up Oil production as we speak, that the dollar isn't gona get real weak.
In fact, I bet that China is not only trying to corner the oil market and prepare for the upcoming run up....but they know they can't dump the dollar when Inflation hits....so they are hedging their "DEBT" carrying dollars.

But what do I know....I'm not CNBC,....YAHWWWN

Oh the Chinese like very much to invest into real assets - even the pig farmers and housewives there :

Copper, nickel and other base metals stockpiled by speculative Chinese investors including pig farmers may be sold when “market sentiment turns,” said Scotia Capital Inc.

...

Housewives in Wenzhou may have stockpiled metals as “they just have too much cash on hand,” Eramet’s Deng said.

The People’s Bank of China scrapped lending quotas in November, triggering a record 7.73 trillion yuan of new loans this year. M2, the broadest measure of money supply, rose 28.4 percent in July from a year earlier.

Metal traders have reported incidents when “a rich man walked into our office and asked us what had been the lowest and highest prices of nickel,” Scotia’s Liu wrote. “After telling him those prices, he said the current price was low and he placed an order.”

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ae8qY8FcYJa4

Now, you really do not need to know about Keynesian Economics to predict what's going to happen with copper and nickel prices, or ?

Reminds me of this story :

Japanese Housewives Desperate After Currency Scheme Collapses

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aGeeh4B_CLSE

 

[pitz]

Metal traders have reported incidents when “a rich man walked into our office and asked us what had been the lowest and highest prices of nickel,” Scotia’s Liu wrote. “After telling him those prices, he said the current price was low and he placed an order.”

Now, you really do not need to know about Keynesian Economics to predict what's going to happen with copper and nickel prices, or ?

"rich man" doing that = trend just getting started.

Poor taxicab driver bragging how he's going to strike it rich by hoarding metals = signal that its almost over.

The commodities have momentum. No denying that.

Hey now, housing prices didn't even make any sense in 2000, relative to fundamentals, and look what happened there?

 

[xenix]

Quote from trefoil:

The reason why you can have large stimulus and the Fed at 0 today is of course that the only place where credit is expanding is in DC.
Which is classic Keynes. He gets used & abused for all kinds of inappropriate situations. The one thing his theory said was really really simple: save for a rainy day, spend it when it rains.
It's raining.
The actions the Fed and the Feds have taken so far haven't moved the dial yet. MZM, the broadest measure of actual liquidity in the economy, is actually going down:

Thank you. I love how some people get a trading account and a subscription to the WSJ and suddenly think that they have a PhD in economics. Yeah. I got your PhD right here. To which they then respond that they know more than any PhD.

Uh huh.

I rest my case.

Quote from trefoil:The year over year rate of change in MZM is showing a distinct downtrend:

This confirms the signals the broadest measure of global liquidity there is, gold, is giving out: it's been sideways since peaking last year. That's telling you that all that money being pumped out worldwide has yet to make a net difference. When gold starts to move, you'll know the actions the Feds and other governments around the world have taken to arrest this are finally having an effect.
If the US Fed doesn't start raising rates and generally removing liquidity when that starts to happen, you can start to be concerned, about both the dollar and inflation. Until then, there's not a lot to worry about.

Exactly. That's also what the velocity number is telling us. Does anyone think that the basic rules of algebra have changed and that a fractional reserve banking system no longer creates money (i.e., velocity really is 1 or less)?

Wake the fuck up. That money is sitting on bank balance sheets and isn't getting spent at all - EVER - let alone multiple times. But as soon as banks find a way to lend that money out with a reasonably good prospect of getting it all back, watch out. The only reason banks haven't already pushed more money out the door is uncertainty - and that is gradually dissipating.

Quote from pitz:

"rich man" doing that = trend just getting started.

Poor taxicab driver bragging how he's going to strike it rich by hoarding metals = signal that its almost over.

The commodities have momentum. No denying that.

Hey now, housing prices didn't even make any sense in 2000, relative to fundamentals, and look what happened there?

So true. If I could only get the timing right I wouldn't be posting shit here. Or hell. Maybe would just for yucks.