Peter Schiff was on Fast Money and was hammered by the pundits. They wanted him to give them a date on when the collaspe will come. Everyone knows that nobody can predict the time. They were trying to make him look bad and discredit him and his predictions, I feel. I have not heard them ask Bernanke or Obama the exact date that the economy will be back to normal.
Listen to Peter, as I feel he and the others like him (Celente, Zell, etc) are on the right track.
Monday, March 7, 2011
Sunday, March 6, 2011
China "Attacks The Dollar"
Well, this is kind of like a sequel to the last post about what Sam Zell was saying. I will highlight some key points.
In a surprising turn of events, today's biggest piece of news received a mere two paragraph blurb on Reuters, and was thoroughly ignored by the broader media. An announcement appeared shortly after midnight on the website of the People's Bank of China.
The statement, google translated as "Pragmatic and pioneering spirit to promote cross-border renminbi business cum on monitoring and analysis to a new level"...
Reuters provides a simple translation and summary of the announcement: "China hopes to allow all exporters and importers to settle their cross-border trades in the yuan by this year, the central bank said on Wednesday, as part of plans to grow the currency's international role. In a statement on its website www.pbc.gov.cn, the central bank said it would respond to overseas demand for the yuan to be used as a reserve currency. It added it would also allow the yuan to flow back into China more easily." To all those who claim that China is perfectly happy with the status quo, in which it is willing to peg the Renmibni to the Dollar in perpetuity, this may come as a rather unpleasant surprise, as it indicates that suddenly China is far more vocal about its intention to convert its currency to reserve status, and in the process make the dollar even more insignificant.
International Business Times provides further insight:
This is all part of China’s plan for the internationalization of its currency, which may, in the decades to come, threaten the global ‘market share’ of other currencies like the US dollar.
Previously, China also announced that bilateral trades with Russia and Malaysia will begin to be conducted with the yuan and the ruble and ringgit, respectively.
Other moves on the part of China to internationalize its currency include allowing foreign companies to issue yuan-denominated bonds and relaxing rules for foreign financial institutions to access the yuan.
Aside from the efforts of the Chinese government, fundamentals also point to the increasing international popularity of the Chinese currency.
China is already the leading trade partner with Australia and Japan. It’s also the leading or a large trade partner with many of its smaller neighbors. The purpose of having foreign currencies is to conduct foreign trade and investment, so the yuan is expected to become a more attractive currency for China’s trade partners, espeically as the government continues to relax restrictions.
The reason for this dramatic move may be found in what Stephen Roach wrote a few days ago in Project Syndicate:
In early March, China’s National People’s Congress will approve its 12th Five-Year Plan. This Plan is likely to go down in history as one of China’s boldest strategic initiatives.
In essence, it will change the character of China’s economic model – moving from the export- and investment-led structure of the past 30 years toward a pattern of growth that is driven increasingly by Chinese consumers. This shift will have profound implications for China, the rest of Asia, and the broader global economy.
Like the Fifth Five-Year Plan, which set the stage for the “reforms and opening up” of the late 1970’s, and the Ninth Five-Year Plan, which triggered the marketization of state-owned enterprises in the mid-1990’s, the upcoming Plan will force China to rethink the core value propositions of its economy. Premier Wen Jiabao laid the groundwork four years ago, when he first articulated the paradox of the “Four ‘Uns’” – an economy whose strength on the surface masked a structure that was increasingly “unstable, unbalanced, uncoordinated, and ultimately unsustainable.”
The Great Recession of 2008-2009 suggests that China can no longer afford to treat the Four Uns as theoretical conjecture. The post-crisis era is likely to be characterized by lasting aftershocks in the developed world – undermining the external demand upon which China has long relied. That leaves China’s government with little choice other than to turn to internal demand and tackle the Four Uns head on.
The 12th Five-Year Plan will do precisely that, focusing on major pro-consumption initiatives. China will begin to wean itself from the manufacturing model that has underpinned export- and investment-led growth. While the manufacturing approach served China well for 30 years, its dependence on capital-intensive, labor-saving productivity enhancement makes it incapable of absorbing the country’s massive labor surplus.
Instead, under the new Plan, China will adopt a more labor-intensive services model. It will, one hopes, provide a detailed blueprint for the development of large-scale transactions-intensive industries such as wholesale and retail trade, domestic transport and supply-chain logistics, health care, and leisure and hospitality.
Obviously, a reserve currency would be not only extremely useful, but quite critical in achieving the goal of China's conversion to an inwardly focused, middle-class reliant society. And even that would not guarantee a smooth transition. However, should China really be on a path to a step function in its evolution, the shocks to the system will be massive. Roach puts this diplomatically as follows:
But there is a catch: in shifting to a more consumption-led dynamic, China will reduce its surplus saving and have less left over to fund the ongoing saving deficits of countries like the US. The possibility of such an asymmetrical global rebalancing – with China taking the lead and the developed world dragging its feet – could be the key unintended consequence of China’s 12th Five-Year Plan.
A less diplomatic version implies that the relationship between China and the US would suffer a seismic shift in which the game theoretical model of Mutual Assured Destruction, and symbiotic monetary and fiscal policies, would no longer exist, allowing China to pursue its fate completely independent of any economic shocks that the increasingly distressed United States may be going through.
And confirming that the PBoC announcement is far more serious than the amount of airtime allotted to it by the mainstream media, is the just released article in Spiegel "China Attacked the Dollar" (google translated):
The Chinese central bank surprised with a spectacular announcement: The would-be superpower wants to handle their entire future foreign trade in yuan, not in dollars. Beijing shakes America's claim to represent the key currency - with serious consequences for the U.S..
The announcement was inconspicuous , but it has the potential, to permanently change the balance of power on the world currency market: China strengthens the international role of the yuan. All exporters and importers will, this year, be allowed to settle their business with their foreign partners in Yuan, the central bank said on Wednesday in Beijing.
This will respond to the growing importance of the yuan as a global reserve currency. "The market demand for cross-border use of the yuan rises," said the central bank. The PBoC had previously tested this plan by allowing 67 000 enterprises in 20 provinces to run their business abroad in yuan. The trade volume amounted to the equivalent of €56 billion.
Now the amount of yuan to be extended, it should be handled much more business in Chinese currency - and less in the U.S. Chinese companies trade at present often in dollars, they are thus dependent on the decisions of the U.S. Federal Reserve to pay on it in a rising oil price and will have pay higher transaction fees than necessary. That should change now.
Currently, the People's Republic can hardly take yuan out of the country and even that is monitored within the boundary of all legitimate capital flows. Chinese exporters have to change a large part of their euro, yen or dollars at a fixed rate revenue in yuan. Foreign companies wishing to do business in China must do so in Yuan, they can exchange their money in the People's Republic. Tourists are allowed a maximum of 20,000 yuan and exporting. Yuan an international market can not occur - and not on supply and demand-based exchange rate.
Needless to say, should the yuan be seen increasingly as a reserve currency, all of this, and virtually everything else is about to change.
The only question is whether or not the Yuan will cement its status at the top of the currency pyramid by allowing the backing of the currency with individual or a basket of commodities. If that were to happen, it would be the last nail in the coffin of the already terminally ill dollar.
In a surprising turn of events, today's biggest piece of news received a mere two paragraph blurb on Reuters, and was thoroughly ignored by the broader media. An announcement appeared shortly after midnight on the website of the People's Bank of China.
The statement, google translated as "Pragmatic and pioneering spirit to promote cross-border renminbi business cum on monitoring and analysis to a new level"...
Reuters provides a simple translation and summary of the announcement: "China hopes to allow all exporters and importers to settle their cross-border trades in the yuan by this year, the central bank said on Wednesday, as part of plans to grow the currency's international role. In a statement on its website www.pbc.gov.cn, the central bank said it would respond to overseas demand for the yuan to be used as a reserve currency. It added it would also allow the yuan to flow back into China more easily." To all those who claim that China is perfectly happy with the status quo, in which it is willing to peg the Renmibni to the Dollar in perpetuity, this may come as a rather unpleasant surprise, as it indicates that suddenly China is far more vocal about its intention to convert its currency to reserve status, and in the process make the dollar even more insignificant.
International Business Times provides further insight:
This is all part of China’s plan for the internationalization of its currency, which may, in the decades to come, threaten the global ‘market share’ of other currencies like the US dollar.
Previously, China also announced that bilateral trades with Russia and Malaysia will begin to be conducted with the yuan and the ruble and ringgit, respectively.
Other moves on the part of China to internationalize its currency include allowing foreign companies to issue yuan-denominated bonds and relaxing rules for foreign financial institutions to access the yuan.
Aside from the efforts of the Chinese government, fundamentals also point to the increasing international popularity of the Chinese currency.
China is already the leading trade partner with Australia and Japan. It’s also the leading or a large trade partner with many of its smaller neighbors. The purpose of having foreign currencies is to conduct foreign trade and investment, so the yuan is expected to become a more attractive currency for China’s trade partners, espeically as the government continues to relax restrictions.
The reason for this dramatic move may be found in what Stephen Roach wrote a few days ago in Project Syndicate:
In early March, China’s National People’s Congress will approve its 12th Five-Year Plan. This Plan is likely to go down in history as one of China’s boldest strategic initiatives.
In essence, it will change the character of China’s economic model – moving from the export- and investment-led structure of the past 30 years toward a pattern of growth that is driven increasingly by Chinese consumers. This shift will have profound implications for China, the rest of Asia, and the broader global economy.
Like the Fifth Five-Year Plan, which set the stage for the “reforms and opening up” of the late 1970’s, and the Ninth Five-Year Plan, which triggered the marketization of state-owned enterprises in the mid-1990’s, the upcoming Plan will force China to rethink the core value propositions of its economy. Premier Wen Jiabao laid the groundwork four years ago, when he first articulated the paradox of the “Four ‘Uns’” – an economy whose strength on the surface masked a structure that was increasingly “unstable, unbalanced, uncoordinated, and ultimately unsustainable.”
The Great Recession of 2008-2009 suggests that China can no longer afford to treat the Four Uns as theoretical conjecture. The post-crisis era is likely to be characterized by lasting aftershocks in the developed world – undermining the external demand upon which China has long relied. That leaves China’s government with little choice other than to turn to internal demand and tackle the Four Uns head on.
The 12th Five-Year Plan will do precisely that, focusing on major pro-consumption initiatives. China will begin to wean itself from the manufacturing model that has underpinned export- and investment-led growth. While the manufacturing approach served China well for 30 years, its dependence on capital-intensive, labor-saving productivity enhancement makes it incapable of absorbing the country’s massive labor surplus.
Instead, under the new Plan, China will adopt a more labor-intensive services model. It will, one hopes, provide a detailed blueprint for the development of large-scale transactions-intensive industries such as wholesale and retail trade, domestic transport and supply-chain logistics, health care, and leisure and hospitality.
Obviously, a reserve currency would be not only extremely useful, but quite critical in achieving the goal of China's conversion to an inwardly focused, middle-class reliant society. And even that would not guarantee a smooth transition. However, should China really be on a path to a step function in its evolution, the shocks to the system will be massive. Roach puts this diplomatically as follows:
But there is a catch: in shifting to a more consumption-led dynamic, China will reduce its surplus saving and have less left over to fund the ongoing saving deficits of countries like the US. The possibility of such an asymmetrical global rebalancing – with China taking the lead and the developed world dragging its feet – could be the key unintended consequence of China’s 12th Five-Year Plan.
A less diplomatic version implies that the relationship between China and the US would suffer a seismic shift in which the game theoretical model of Mutual Assured Destruction, and symbiotic monetary and fiscal policies, would no longer exist, allowing China to pursue its fate completely independent of any economic shocks that the increasingly distressed United States may be going through.
And confirming that the PBoC announcement is far more serious than the amount of airtime allotted to it by the mainstream media, is the just released article in Spiegel "China Attacked the Dollar" (google translated):
The Chinese central bank surprised with a spectacular announcement: The would-be superpower wants to handle their entire future foreign trade in yuan, not in dollars. Beijing shakes America's claim to represent the key currency - with serious consequences for the U.S..
The announcement was inconspicuous , but it has the potential, to permanently change the balance of power on the world currency market: China strengthens the international role of the yuan. All exporters and importers will, this year, be allowed to settle their business with their foreign partners in Yuan, the central bank said on Wednesday in Beijing.
This will respond to the growing importance of the yuan as a global reserve currency. "The market demand for cross-border use of the yuan rises," said the central bank. The PBoC had previously tested this plan by allowing 67 000 enterprises in 20 provinces to run their business abroad in yuan. The trade volume amounted to the equivalent of €56 billion.
Now the amount of yuan to be extended, it should be handled much more business in Chinese currency - and less in the U.S. Chinese companies trade at present often in dollars, they are thus dependent on the decisions of the U.S. Federal Reserve to pay on it in a rising oil price and will have pay higher transaction fees than necessary. That should change now.
Currently, the People's Republic can hardly take yuan out of the country and even that is monitored within the boundary of all legitimate capital flows. Chinese exporters have to change a large part of their euro, yen or dollars at a fixed rate revenue in yuan. Foreign companies wishing to do business in China must do so in Yuan, they can exchange their money in the People's Republic. Tourists are allowed a maximum of 20,000 yuan and exporting. Yuan an international market can not occur - and not on supply and demand-based exchange rate.
Needless to say, should the yuan be seen increasingly as a reserve currency, all of this, and virtually everything else is about to change.
The only question is whether or not the Yuan will cement its status at the top of the currency pyramid by allowing the backing of the currency with individual or a basket of commodities. If that were to happen, it would be the last nail in the coffin of the already terminally ill dollar.
Saturday, March 5, 2011
You Heard Of Sam Zell?
He is a Billionaire! I have highlighted some comments I feel are very telling.
Look at what he is saying:
ZELL ON THE DOLLAR LONG:
"YOU ASK ME ME WHAT IS MY BIGGEST SINGLE FINANCIAL CONCERN IS THE LOSS OF THE DOLLAR AS THE RESERVE CURRENCY I CAN'T IMAGINE ANYTHING BEING MORE DISASTROUS TO OUR COUNTRY THAT IF THE DOLLAR LOST ITS RESERVE CURRENCY STATUS."
Zell: Dollar's Global Fall Will Be 'Disastrous’ for US Living Standard
Thursday, 03 Mar 2011 12:27 PM
Billionaire real-estate magnate Sam Zell warns that Americans should brace for a "disastrous" 25 percent decline in the standard of living if the U.S. dollar’s reign as the global reserve currency ever ends.
He says that there are signs in the market that it could eventually happen. As it is now, a Korean manufacturer who wants to sell to Brazil must first buy dollars to complete the deal. If countries decide to bypass the dollar, the effect would be a disaster, Zell says.
Sam Zell
"Frankly, I think we’re at a tipping point. What’s my biggest single financial concern is the loss of the dollar as the reserve currency," he told CNBC in an interview. "I can’t imagine anything being more disastrous to our country than if the dollar lost its reserve-currency status."
Although he is "hoping against hope" the dollar remains the standard for international exchange, he warns that "you’re already seeing things in the markets that are suggesting that confidence in the dollar is waning."
If that happens, the impact on the United States would be deep. "I think you could see a 25 percent reduction in the standard of living in this country if the U.S. dollar was no longer the world’s reserve currency," Zell said "That’s how valuable it is."
Zell says that the bond market seems remarkably complacent about the risk. But that could turn on a dime, he warns.
"The worry in the bond market is never there until it’s there. The dollar has gone down 20 percent in the last three or four years," Zell says. "I don’t know who is buying 30-year fixed-rate debt. I don’t understand TIPs (Treasury inflation-protected bonds) that are projecting 30 years of benign inflation."
Benchmark 10-year Treasury note yields are around 3.48 percent. TIPs maturing in 2041 have a yield of 1.96 percent.
Once the world turns on the U.S. dollar, if it does, things will change fast, Zell warns. "How could interest rates not go up? Either they go up or the dollar goes down, one or the other," Zell says.
As for inflation, he estimates that actual inflation is between 5 percent and 7 percent right now, despite government figures showing the CPI flirting with low single digits. Fear of deflation — prices falling out of control — has been the primary motivator at the Federal Reserve to pump up money supply by more than $2 trillion in recent months.
Nevertheless, oil is rising fast and food riots are breaking out in developing countries. The United States has been less affected until recently. Zell points out that our Consumer Price Index tends to hide inflation by counting depressed home prices at 42 percent of the index.
"If you adjusted the CPI to reality you’re probably looking at 5, 6, 7 percent inflation today," Zell says.
"The reality out there is the costs are going up. The fact that we’ve been massive beneficiaries of Chinese mercantilist policies that have allowed us to buy goods at much less than their fair value. That has hurt us on the manufacturing side, but it has been a subsidy to America. That subsidy is coming to an end."
Others agree with Zell that the dollar’s world dominance will soon fade.
Ray Dalio, founder & CIO of Bridgewater Associates, told CNBC that it is "inevitable that the dollar's role as the world's currency will diminish from the dominant world currency to one of a few."
"It will fade probably fairly quickly so the United States which accounts for almost two-thirds of the reserves will probably go down to 50 percent of the world's reserves and it will have an effect on lending," he added.
Meanwhile, Bill Gross, found of bond giant Pimco, recently told investors that the Fed’s heavy thumb on the scales on behalf of low interests was perhaps necessary given the magnitude of the crisis. The second round of easing known as "QE2," perhaps, also had a role to play.
However, as the deadline for the second round to end looms — it is set to expire in June — there are serious questions about whether a smooth transition to private demand for U.S. debt will appear, Gross said.
Stocks have doubled from the March 2009 bottom and marked steadily upward since the second round was announced in August, which has given some stock investors pause.
"Investors should view June 30, 2011 not as political historians view Nov. 11, 1918 (Armistice Day — a day of reconciliation and healing) but more like June 6, 1944 (D-Day — a day fraught with hope for victory, but fueled with immediate uncertainty and fear as to what would happen in the short term)," Gross said in recent commentary online.
"Bond yields and stock prices are resting on an artificial foundation of QE2 credit that may or may not lead to a successful private-market handoff and stability in currency and financial markets."
-END-
People, I have said this before (pretty much from the start of this blog) you need to PREPARE. We have seen inflation (just look at your grocery bill and gas bill) and after QE2 is finished (June 30, 2011) we may see hyperinflation. If you think things are expensive now, wait until hyperinflation hits. You will need food and supplies. Here is a good place to start http://www.jrhenterprises.com/.
Look at what he is saying:
ZELL ON THE DOLLAR LONG:
"YOU ASK ME ME WHAT IS MY BIGGEST SINGLE FINANCIAL CONCERN IS THE LOSS OF THE DOLLAR AS THE RESERVE CURRENCY I CAN'T IMAGINE ANYTHING BEING MORE DISASTROUS TO OUR COUNTRY THAT IF THE DOLLAR LOST ITS RESERVE CURRENCY STATUS."
Zell: Dollar's Global Fall Will Be 'Disastrous’ for US Living Standard
Thursday, 03 Mar 2011 12:27 PM
Billionaire real-estate magnate Sam Zell warns that Americans should brace for a "disastrous" 25 percent decline in the standard of living if the U.S. dollar’s reign as the global reserve currency ever ends.
He says that there are signs in the market that it could eventually happen. As it is now, a Korean manufacturer who wants to sell to Brazil must first buy dollars to complete the deal. If countries decide to bypass the dollar, the effect would be a disaster, Zell says.
Sam Zell
"Frankly, I think we’re at a tipping point. What’s my biggest single financial concern is the loss of the dollar as the reserve currency," he told CNBC in an interview. "I can’t imagine anything being more disastrous to our country than if the dollar lost its reserve-currency status."
Although he is "hoping against hope" the dollar remains the standard for international exchange, he warns that "you’re already seeing things in the markets that are suggesting that confidence in the dollar is waning."
If that happens, the impact on the United States would be deep. "I think you could see a 25 percent reduction in the standard of living in this country if the U.S. dollar was no longer the world’s reserve currency," Zell said "That’s how valuable it is."
Zell says that the bond market seems remarkably complacent about the risk. But that could turn on a dime, he warns.
"The worry in the bond market is never there until it’s there. The dollar has gone down 20 percent in the last three or four years," Zell says. "I don’t know who is buying 30-year fixed-rate debt. I don’t understand TIPs (Treasury inflation-protected bonds) that are projecting 30 years of benign inflation."
Benchmark 10-year Treasury note yields are around 3.48 percent. TIPs maturing in 2041 have a yield of 1.96 percent.
Once the world turns on the U.S. dollar, if it does, things will change fast, Zell warns. "How could interest rates not go up? Either they go up or the dollar goes down, one or the other," Zell says.
As for inflation, he estimates that actual inflation is between 5 percent and 7 percent right now, despite government figures showing the CPI flirting with low single digits. Fear of deflation — prices falling out of control — has been the primary motivator at the Federal Reserve to pump up money supply by more than $2 trillion in recent months.
Nevertheless, oil is rising fast and food riots are breaking out in developing countries. The United States has been less affected until recently. Zell points out that our Consumer Price Index tends to hide inflation by counting depressed home prices at 42 percent of the index.
"If you adjusted the CPI to reality you’re probably looking at 5, 6, 7 percent inflation today," Zell says.
"The reality out there is the costs are going up. The fact that we’ve been massive beneficiaries of Chinese mercantilist policies that have allowed us to buy goods at much less than their fair value. That has hurt us on the manufacturing side, but it has been a subsidy to America. That subsidy is coming to an end."
Others agree with Zell that the dollar’s world dominance will soon fade.
Ray Dalio, founder & CIO of Bridgewater Associates, told CNBC that it is "inevitable that the dollar's role as the world's currency will diminish from the dominant world currency to one of a few."
"It will fade probably fairly quickly so the United States which accounts for almost two-thirds of the reserves will probably go down to 50 percent of the world's reserves and it will have an effect on lending," he added.
Meanwhile, Bill Gross, found of bond giant Pimco, recently told investors that the Fed’s heavy thumb on the scales on behalf of low interests was perhaps necessary given the magnitude of the crisis. The second round of easing known as "QE2," perhaps, also had a role to play.
However, as the deadline for the second round to end looms — it is set to expire in June — there are serious questions about whether a smooth transition to private demand for U.S. debt will appear, Gross said.
Stocks have doubled from the March 2009 bottom and marked steadily upward since the second round was announced in August, which has given some stock investors pause.
"Investors should view June 30, 2011 not as political historians view Nov. 11, 1918 (Armistice Day — a day of reconciliation and healing) but more like June 6, 1944 (D-Day — a day fraught with hope for victory, but fueled with immediate uncertainty and fear as to what would happen in the short term)," Gross said in recent commentary online.
"Bond yields and stock prices are resting on an artificial foundation of QE2 credit that may or may not lead to a successful private-market handoff and stability in currency and financial markets."
-END-
People, I have said this before (pretty much from the start of this blog) you need to PREPARE. We have seen inflation (just look at your grocery bill and gas bill) and after QE2 is finished (June 30, 2011) we may see hyperinflation. If you think things are expensive now, wait until hyperinflation hits. You will need food and supplies. Here is a good place to start http://www.jrhenterprises.com/.
Friday, March 4, 2011
Monday, February 28, 2011
Sunday, February 27, 2011
, always a sniper.Wednesday, February 23, 2011
$200-$400 Oil?
I would hope not, but we all should pay close attention to Lybia and Saudi Arabia. Not to say Egypt (Suez Canal), Yemin and Bahrain are not players as well.
Saturday, February 19, 2011
Thursday, February 17, 2011
Obama's 2012 Budget
Obama spoke to the American people and told us that his new budget was not adding to the National debt. Take a look at this video and just see how much really is added to the debt.
For an example, if your monthly budget was $2000 and you reduced your budget the same percentage that Obama lowered the Federal budget, your monthly budget would be $1999.94. That's right, you only lowered your budget by 6 cents. So don't believe that he is doing much buy reducing the budget by $100 billion. Yes that sounds like a lot, but it is just pennies compared to what we are paying.
We will, in fact we are seeing inflation. Get your house in order as you may not have much more time.
For an example, if your monthly budget was $2000 and you reduced your budget the same percentage that Obama lowered the Federal budget, your monthly budget would be $1999.94. That's right, you only lowered your budget by 6 cents. So don't believe that he is doing much buy reducing the budget by $100 billion. Yes that sounds like a lot, but it is just pennies compared to what we are paying.
We will, in fact we are seeing inflation. Get your house in order as you may not have much more time.
Here Is Your Secretary Of Treasury
Sec. Geithner has to say about the proposed budget. Interesting though is the remarks he made about the interest we are paying. In 2009 we were paying $187,000,000,000 per year. Today we pay $844,000,000,000. You can thank the QE1 and QE2. If inflation continues to rise so will our payments. If you have not started to prepare, you better. We will be seeing massive inflation sooner that later.
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