Financial Crisis

[Gambles]

Precther - like so many financial market voyeurs - has fantastic theory but poor practice.

Making a living from financial markets inspires one to work a little more pragmatically on the latter

Totally agree, Badge - my only point being that doesn't always automatically make him wrong. Even Prechter is right sometimes!

[Gambles]

[Robert Prechter makes his deflationary case to a Goldbug:

http://www.financial...2010-0619-2.mp3

Thank you for this ! very informative

" outstanding credit is already there and it can implode faster than anybody can monetise "

Says it all really.

It says all about the one who is saying it.

This is not the 30's with a dollar backed by a gold standard.

Monetising now is very easy.

Look. 1.000.000.000.000 dollars created. It is that much work.

Oh wait i forget 3 zeroes. nevermind i just add 999.000.000.000.00. There ready. Deflation stopped.

It doesn't work like that

You have to run the taps for a long, long time

Sustained deflation followed by an overnight whipsaw into high inflation is a likely outcome of current policies

[Gambles]

On the double dip scenario, the numbers are increasingly sliding that way. Here are a few comments from David Rosenberg.

For the week ending June 11th, the ECRI leading index (growth rate) slipped for the sixth week in a row, to -5.7% from -3.7%. Only once in the past – in 1987, but the Fed could cut rates then – did this fail to signal a recession. But a -5.7% print accurately signaled a recession in the lead-up to all of the past seven downturns.

"The consensus is looking at 3% real GDP growth for the second half of the year, but as Chart 2 suggests, the two quarters following a move in the ECRI to a -5% to -10% range is +0.8% at an annual rate on average. So right now the choice is really either a 2002-style growth relapse or an outright double-dip recession – pick your poison."

Obviously you could also add that with the planned tax increases at the end of this year, which equate to about 1% of GDP and a fiscal multiplier (or is that divider) of 0.4x, then in the US you will be struggling against considerable headwinds.

However before getting too hot and bothered in a thread that is naturally bearish, there are indicators such as the manufacturing index numbers that point to 6% GDP growth this year, which if it was the case, would certainly not indicate a recession next. Personally, I feel that there are a number of reasons why this growth might be overstated (very much along the lines of why the UK Government halved the 'output gap' that they believed in before the recent budget.)

Albert Edwards and Dylan Grice at Socgen recently warned of the pre-emptive ECRI signals and also created a table based on the increasing bearishness of the outlook of analysts

[midas]

[Robert Prechter makes his deflationary case to a Goldbug:

http://www.financial...2010-0619-2.mp3

Thank you for this ! very informative

" outstanding credit is already there and it can implode faster than anybody can monetise "

Says it all really.

It says all about the one who is saying it

This is not the 30's with a dollar backed by a gold standard.

Monetising now is very easy.

Look. 1.000.000.000.000 dollars created. It is that much work.

Oh wait i forget 3 zeroes. nevermind i just add 999.000.000.000.00. There ready. Deflation stopped.

Robert Mugabe said something very similar to you !

Edited June 30, 2010 by midas

[midas]

Precther - like so many financial market voyeurs - has fantastic theory but poor practice.

Making a living from financial markets inspires one to work a little more pragmatically on the latter

prag·mat·ic (prg-mtk)

1. Dealing or concerned with facts or actual occurrences; practical

I think Prechter was being quite pragmatic to point out that you cant pay off your debts by borrowing even more ?

[badge]

Correct Midas. An extremely basic summation of theory, but one I subscribe to nonetheless.

Sadly for Prechter, in practice he wasnt shorting stocks last Monday, whereas others were.

Rather the whole point of my last entry you quoted.

This difference between having an interesting opinion, theory or view on where financial markets might go or do, and actually capitalising from it, are quite far removed for the vast majority.

[12DrinkMore]

If memory serves, and often it doesn't anymore, (or maybe it's because the storyline changes so often that it is difficult to follow?), weren't we being told that things would be on the up and up by now, after a year and a half or so of recession?

The storyline has been subtly changed to push us out another four years before we can expect a recovery.

http://www.independe...sh-2014108.html

The article is basically about that "Well of Wealth", the Great UK Housing Market, which made us all feel so rich and prosperous during the last decade. Don't the "bleeding heart" tales at the end jerk a tear out of your eyes?

"I bought the place in 2006 for £154,000 and first advertised it at the end of 2008 for £139,950. I am hoping I will get a little bit more – maybe £142,000 – but it is absolutely horrendous that I have lost money and time.

Oh, sob sob, absolutely horrendous, sob sob,

"We never imagined that it would take so long to sell it," she said. "It is a beautiful cottage with four double bedrooms and a great garden, and it is in a beautiful area with brilliant schools. But not a single person made us an offer.

"We have been forced to bring down our price. Originally, we were trying to sell for £700,000 but have revised that down to £630,000. We also had windows refitted and the property re-wired. You would think such a great house would have sold by now but it hasn't. It is stressful, particularly at our age."

Maybe they should drop the price to where it does sell, THAT is the CURRENT market price, NOT some price based on the "Never Ending House Price Increases multiplied by 'my house is worth SOOO much more'".

But no, the difficulties in the UK Housing Market are STILL being blamed on "The market will only start to move when there is an easing of the mortgage market and deposits of about 25 or 30 per cent come down to more like 10 per cent". Nope, the Brits are still being very stubborn about holding on to their "boundless wealth through property" paradigm, and will use any excuse other than the house prices themselves to find the cause of the slow market, which, by many accounts, has a lot of would be entrants who could afford the old "10% and three times annual salary" model.

No end of ways to spend tax payers' money....

http://www.independe...ds-2013985.html

Another dam_n quango has come up with the conclusion that all quangos do, we need to spend more money

"The commission estimates that £550bn is needed for infrastructure and supply chains to allow the UK to meet climate change targets that call on the country to cut greenhouse gas emissions and boost renewable energy by 2020."

Yep, another half a trillion quid over ten years. If they go on this spending binge, every household in the UK will be forking out GBP 2,000 every year over the next decade to sponsor it. But, in the name of "GREEN" and "GLOBAL WARMING" no government will pull the plug, as it gives us all a nice warm feeling, doing our bit for the planet. My solution would be to achieve 100% involuntary sterilisation, after 100 years no more nasty humans and in 150 years all the mess would have been reclaimed by nature, except maybe that small "hole in the ground" issue that BP will still have failed to plug.

http://www.pbs.org/n...own/oil-ticker/

And not forgetting the financial crisis, which looks like it will go on forever too, as there doesn't seem to be a way of plugging the holes in the banks either.

Edited June 30, 2010 by 12DrinkMore

[midas]

Correct Midas. An extremely basic summation of theory, but one I subscribe to nonetheless.

Sadly for Prechter, in practice he wasnt shorting stocks last Monday, whereas others were.

Rather the whole point of my last entry you quoted.

This difference between having an interesting opinion, theory or view on where financial markets might go or do, and actually capitalising from it, are quite far removed for the vast majority.

" extend and pretend " and making things seem more complicated than they really

are is part of the problem On thing is sure -Prechter made far more sense than the squigly line theory that Parvis holds so dearly

And by the way I purchased put options and have since sold them and how can you possibly know Prechter didnt do the same ?

Edited June 30, 2010 by midas

[lannarebirth]

"The commission estimates that £550bn is needed for infrastructure and supply chains to allow the UK to meet climate change targets that call on the country to cut greenhouse gas emissions and boost renewable energy by 2020."

Yep, another half a trillion quid over ten years. If they go on this spending binge, every household in the UK will be forking out GBP 2,000 every year over the next decade to sponsor it. But, in the name of "GREEN" and "GLOBAL WARMING" no government will pull the plug, as it gives us all a nice warm feeling, doing our bit for the planet. My solution would be to achieve 100% involuntary sterilisation, after 100 years no more nasty humans and in 150 years all the mess would have been reclaimed by nature, except maybe that small "hole in the ground" issue that BP will still have failed to plug.

http://www.pbs.org/n...own/oil-ticker/

And not forgetting the financial crisis, which looks like it will go on forever too, as there doesn't seem to be a way of plugging the holes in the banks either.

It would be a lot cheaper to give everyone a free mass transit pass, but the goal isn't a cleaner environment. The goal is to spend money. Same like war..

[12DrinkMore]

Written in 2002

http://www.fes.de/ipg/ipg1_2002/ARTHEWITT.htm

Our economic and social organization depends on continued economic expansion. The imminent demographic transition is likely to cause economic contraction, rendering the welfare state as we know it unsustainable. A radical overhaul, focusing on lifelong productivity as opposed to subsidized old-age leisure, is as urgent as it is unlikely to come forth.

[Naam]

Written in 2002

http://www.fes.de/ipg/ipg1_2002/ARTHEWITT.htm

Our economic and social organization depends on continued economic expansion. The imminent demographic transition is likely to cause economic contraction, rendering the welfare state as we know it unsustainable. A radical overhaul, focusing on lifelong productivity as opposed to subsidized old-age leisure, is as urgent as it is unlikely to come forth.

nothing new, it could have been written 20 years ago.

[badge]

<BR>

<BR>Correct Midas. <B>An extremely basic summation of theory</B>, but one I subscribe to nonetheless. <IMG class=bbc_emoticon alt= src="http://static.thaivisa.com/forum/public/style_emoticons/default/smile.gif"> <BR><BR>Sadly for Prechter, in practice he wasnt shorting stocks last Monday, whereas others were. <BR><BR>Rather the whole point of my last entry you quoted. <IMG class=bbc_emoticon alt= src="http://static.thaivisa.com/forum/public/style_emoticons/default/rolleyes.gif"> <BR><BR><BR><BR>This difference between having an interesting opinion, theory or view on where financial markets might go or do, and actually capitalising from it, are quite far removed for the vast majority.<BR>

<BR><BR>" extend and pretend " and making things seem more complicated than they really <BR>are is part of the problem  <IMG class=bbc_emoticon alt= src="http://static.thaivisa.com/forum/public/style_emoticons/default/unsure.gif">   On thing is sure -Prechter made far more sense than the squigly line theory that Parvis holds so dearly  <IMG class=bbc_emoticon alt= src="http://static.thaivisa.com/forum/public/style_emoticons/default/rolleyes.gif"> <BR>And by the way I purchased put options and have since sold them and how can you possibly know Prechter didnt do the same ?<BR>

<BR><BR><BR><BR>Because Ive recieved Precthers reports evey month for many years. Precther advised going short SPX.... at SPX 1000, with a 100 point stop. I think it was SPX 1000, it may of been SPX 1100, but whatveer it was he had a 'fantastical' 100 handle stop, and got stoped. Ridiculously impractical. Woeful. No doubt the reason he makes his living talking about markes and not trading them.<BR><BR>Oh, you purchased and sold out of Puts on the quiet did you, you should have let us know <BR><BR>We've already been over the effectiveness of Parvis' squiggles on the other thread

[12DrinkMore]

nothing new, it could have been written 20 years ago.

Didn't mean to post it as something new.

Just to emphasize that the issues have been kicked down the road for the last twenty years, and still nothing, or very little, is being done.

I do wonder just how long is the road?.

[BlackJack]

Tomorrow the banks are supposed to repay €442 billion in emergency loans but they almost certainly will have to be bailed out again. Fears of bank collapses are rife. On top of this dire outlook, Europe's austerity measures will bring on recessions in countries ranging from Greece to the UK which will make it even harder for the banks. And the strikes in Greece will be repeated in many countries, which could make the spending cuts impossible to deliver.

In the US they are helped because in a crisis money flows to the world currency, so the US dollar rises. Nevertheless, there are still chronic housing problems so consumer confidence is depressed and the US economy is still living on the old stimulus packages. Accordingly Wall Street's earnings estimates look too optimistic.

And finally the falls in the markets are triggering selling from chart-based investors which multiplies the fear and concern.

Allaying all of these fears will require a lot of work on the behalf of Europe, China and the US.

And of course when it comes to Australia, we must face the fact that our enormous level of overseas bank borrowing is going to be difficult to sustain at current interest rates. As I keep pointing out, Australian debt, including bank debt, is in a similar range to Italy and not far behind Spain when related to GDP.

I flipped a coin and so golds going up again

[midas]

Tomorrow the banks are supposed to repay €442 billion in emergency loans but they almost certainly will have to be bailed out again. Fears of bank collapses are rife. On top of this dire outlook, Europe's austerity measures will bring on recessions in countries ranging from Greece to the UK which will make it even harder for the banks. And the strikes in Greece will be repeated in many countries, which could make the spending cuts impossible to deliver.

In the US they are helped because in a crisis money flows to the world currency, so the US dollar rises. Nevertheless, there are still chronic housing problems so consumer confidence is depressed and the US economy is still living on the old stimulus packages. Accordingly Wall Street's earnings estimates look too optimistic.

And finally the falls in the markets are triggering selling from chart-based investors which multiplies the fear and concern.[/b]

Allaying all of these fears will require a lot of work on the behalf of Europe, China and the US.

And of course when it comes to Australia, we must face the fact that our enormous level of overseas bank borrowing is going to be difficult to sustain at current interest rates. As I keep pointing out, Australian debt, including bank debt, is in a similar range to Italy and not far behind Spain when related to GDP.

I flipped a coin and so golds going up again

I could not believe my ears last night when even the Bloomberg channel which is usually full of " spin " admitted that

investors are now more inclined to sell the rallies instead of buying the dips. They also pointed to the lower highs that are created each time there is a rally and the fall below the moving average. So maybe they will announce the $5 trillion stimulus RBS has predicted But i wonder if the general public will allow TPTB to have a $5 trillion stimulus ?

[midas]

So yes, governments ( and their " agencies " ) are one of the biggest threats to property, wealth, freedom and human rights if their past and current records are anything to go by.

“Economics is hard. Really hard. You just won’t believe how vastly hugely mind-boggingly hard it is. I mean you may think doing the Sunday Times crossword is difficult, but that’s just peanuts to economics. And because it is so hard, people shouldn’t blithely go shooting their mouths off about it, and pretending like it’s so easy. In fact, we would all be better off if we just ignored these clowns.”

This was written by Kartik Athreya, senior economist for the Richmond Fed who thinks all of us “ amateurs ” i.e. bloggers and presumably contributors on forums like this are “ chronically stupid and a threat to public order ”.

Ok maybe I should just stop commenting on such a hugely mind-boggingly subject as the financial crisis and ago away and polish and clean my AK47

FULL STORY HERE http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100006729/time-to-shut-down-the-us-federal-reserve/

Edited June 30, 2010 by midas

[Gambles]

Correct Midas. An extremely basic summation of theory, but one I subscribe to nonetheless.

Sadly for Prechter, in practice he wasnt shorting stocks last Monday, whereas others were.

Rather the whole point of my last entry you quoted.

This difference between having an interesting opinion, theory or view on where financial markets might go or do, and actually capitalising from it, are quite far removed for the vast majority.

" extend and pretend " and making things seem more complicated than they really

are is part of the problem On thing is sure -Prechter made far more sense than the squigly line theory that Parvis holds so dearly

And by the way I purchased put options and have since sold them and how can you possibly know Prechter didnt do the same ?

Prechter has more in common with Parvis than you might realize from the large parts of that interview when he tries to talk fundamentals too

His lines are much less squiggly than those of Parvis (because they're longer term) and EWP is much more trnasparently easy to understand than PPP (Parvis Proprietary Pronouncements) but he's a squiggly line devotee nonetheless

[Gambles]

nothing new, it could have been written 20 years ago.

Didn't mean to post it as something new.

Just to emphasize that the issues have been kicked down the road for the last twenty years, and still nothing, or very little, is being done.

I do wonder just how long is the road?.

I think the end may be coming into sight....

Dear all,

Please find below the latest update from MBMG International.

Marketwatch’s Paul B. Farrell recently collated some apocalyptic quotations for his article-

‘Warning: Crash dead ahead. Sell. Get liquid. Now.’

"This game's in the refrigerator! The door's closed, the lights are out, the eggs are cooling, the butter's getting hard and the Jell-O is jiggling ..."

Lakers' radio announcer Chick Hearn's signature way of calling a game early, telling fans to head for the exits before the final buzzer.

Farrell sees the stock markets game as being up too and doesn’t need to see the markets retest the 2009 lows, as we at MBMG recently also predicted

Economic historian and author of The Ascent of Money: A Financial History of the World, Niall Ferguson told Dow Jones Veronica Dagher where he's investing his money amid the uncertainty.

‘Last March I wrote "6 reasons I'm calling a bottom and a new bull." Today it's time for a new call. We've had a good year. Net gains over 50% in 2009. But now: "Game over, head for the exits.”’

Economist Gary Shilling said price-to-earnings ratios are at a "nosebleed 22.5 level." The Dow was around 11,000.

Money manager Jeremy Grantham recently said the market's overvalued 40%. That could mean a collapse to 6,600.

Last week in Reuters’ "Markets Could Be Derailed Again," George Soros echoed the "game over" warning with a stark warning ... “that the financial world is on the wrong track and that we may be hurtling towards an even bigger boom and bust than in the credit crisis."

Now Dow Theory's Richard Russell is warning the public of an imminent crash: "Sell ... get liquid ... by the end of this year they won't recognize the country…

A bigger meltdown than the credit crisis? Yes, Bush's team drove America into a ditch. But now Obama and his money men, Summers, Geithner, Bernanke, are digging the hole deeper” Soros says we have not learned "the lessons that markets are inherently unstable." As a result, "the success in bailing out the system on the previous occasion led to a super-bubble." Now "we are facing a yet larger bubble." Worse than 2008?

What's coming could be worse than the 2000 dot-com crash and the 2008 meltdown combined, a "Super-Bubble" says Soros. And the biggest reason, Nouriel Roubini and Stephen Mihm told Newsweek, is that "the president's half-measures won't fix our failed financial system" because he refuses to "bust up the too-big-to-fail banks."

Recently Roubini was interviewed by Charlie Rose in BusinessWeek. His message confirms the worst. Roubini was questioned about his new book, "Crisis Economics." Rose began by asking, "what have we learned from these crises of capitalism?" Roubini could easily have said, "nothing, we learned nothing." His actual reply:

"The first lesson is that crises are not 'black swan' events ... they're not just random outcomes. They are the result of a buildup of financial and policy vulnerability and mistakes -- excessive risk-taking, leverage, debt, and so on." They are 'White Swans' "because these events are predictable. But generation after generation, we seem to forget the past. When there's a bubble, there's euphoria. There's irrational exuberance. Consumers can use their homes like ATM machines. Governments and policy makers are happy because they get re-elected. Wall Street makes billions of dollars of profits. Everybody's delusional."

In "This Time Is Different: Eight Centuries of Financial Folly," economists Carmen Reinhart and Kenneth Rogoff pinpoint the key signal that will blow the whistle and call the game: The "90% ratio of government debt to GDP is a tipping point in economic growth." For 800 years "you increase it over and beyond a high threshold, and boom!"

Warning, fans, the numbers on the game-clock are flashing wildly. America's ratio is now 92%, thanks to Obama's $1.7 trillion budget, future deficits, exploding debt. Soon, Ka-Booom! Another great nation bites the dust. Depression follows. Goodbye retirement.

"The lesson of history, then, is that even as institutions and policy makers improve there will always be a temptation to stretch the limits. ... If there is one common theme to the vast range of crises ... it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom. ... Highly indebted governments, banks, or corporations can seem to be merrily rolling along for an extended period, when bang, confidence collapses, lenders disappear and a crisis hits. ... Highly leveraged economies ... seldom survive forever ... history does point to warnings signs that policy makers can look to access risk. If only they do not become too drunk with their credit bubble-fueled success and say, as their predecessors have for centuries, 'This time its different'."

As always, you can view this email or any of my past emails on Paul’s Blog at:

www.mbmg-international.com

Enjoy your day!

Once again, very best regards,

MBMG International

Please Note: While every effort has been made to ensure that the information contained herein is correct, MBMG International cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG International. Views and opinions expressed herein may change with market conditions and should not be used in isolation

[lannarebirth]

^ So you're saying its a "BUY" on sentiment Paul? More objective measures of sentiment are getting darn close to saying the same thing, but they got late 2008 early 2009 wrong.

[yabaaaa]

If memory serves, and often it doesn't anymore, (or maybe it's because the storyline changes so often that it is difficult to follow?), weren't we being told that things would be on the up and up by now, after a year and a half or so of recession?

The storyline has been subtly changed to push us out another four years before we can expect a recovery.

http://www.independe...sh-2014108.html

The article is basically about that "Well of Wealth", the Great UK Housing Market, which made us all feel so rich and prosperous during the last decade. Don't the "bleeding heart" tales at the end jerk a tear out of your eyes?

"I bought the place in 2006 for £154,000 and first advertised it at the end of 2008 for £139,950. I am hoping I will get a little bit more – maybe £142,000 – but it is absolutely horrendous that I have lost money and time.

Oh, sob sob, absolutely horrendous, sob sob,

"We never imagined that it would take so long to sell it," she said. "It is a beautiful cottage with four double bedrooms and a great garden, and it is in a beautiful area with brilliant schools. But not a single person made us an offer.

"We have been forced to bring down our price. Originally, we were trying to sell for £700,000 but have revised that down to £630,000. We also had windows refitted and the property re-wired. You would think such a great house would have sold by now but it hasn't. It is stressful, particularly at our age."

Maybe they should drop the price to where it does sell, THAT is the CURRENT market price, NOT some price based on the "Never Ending House Price Increases multiplied by 'my house is worth SOOO much more'".

But no, the difficulties in the UK Housing Market are STILL being blamed on "The market will only start to move when there is an easing of the mortgage market and deposits of about 25 or 30 per cent come down to more like 10 per cent". Nope, the Brits are still being very stubborn about holding on to their "boundless wealth through property" paradigm, and will use any excuse other than the house prices themselves to find the cause of the slow market, which, by many accounts, has a lot of would be entrants who could afford the old "10% and three times annual salary" model.

No end of ways to spend tax payers' money....

http://www.independe...ds-2013985.html

Another dam_n quango has come up with the conclusion that all quangos do, we need to spend more money

"The commission estimates that £550bn is needed for infrastructure and supply chains to allow the UK to meet climate change targets that call on the country to cut greenhouse gas emissions and boost renewable energy by 2020."

Yep, another half a trillion quid over ten years. If they go on this spending binge, every household in the UK will be forking out GBP 2,000 every year over the next decade to sponsor it. But, in the name of "GREEN" and "GLOBAL WARMING" no government will pull the plug, as it gives us all a nice warm feeling, doing our bit for the planet. My solution would be to achieve 100% involuntary sterilisation, after 100 years no more nasty humans and in 150 years all the mess would have been reclaimed by nature, except maybe that small "hole in the ground" issue that BP will still have failed to plug.

http://www.pbs.org/n...own/oil-ticker/

And not forgetting the financial crisis, which looks like it will go on forever too, as there doesn't seem to be a way of plugging the holes in the banks either.

Some of us here though bought in 2000 and sold in 2006 and did very nicely in the UK thanks very much, then bought elsewhere (Thailand) when the £ was at 72 baht instead of its current 48ish.

[12DrinkMore]

Some of us here though bought in 2000 and sold in 2006 and did very nicely in the UK thanks very much, then bought elsewhere (Thailand) when the £ was at 72 baht instead of its current 48ish.

Well, thanks for letting us know and congratulations, but how about letting us all in on your plans for the next decade, as you are obviously well tuned in to the vagaries of the financial world?

[12DrinkMore]

So all this EUR financial calamity due today has sort of petered out.

http://www.bloomberg...an-expires.html

The European Central Bank said it will lend banks 131.9 billion euros ($161.5 billion) for three months, less than economists forecast and a sign that the region's financial industry may be stronger than investors estimated.

Banks tomorrow need to repay 442 billion euros in 12-month funds, the biggest amount ever awarded by the ECB and a key plank in its efforts to fight the financial crisis last year. Demand for the three-month cash today was a litmus test for the health of Europe's banking system, economists said.

"A lot of the original 442 billion was taken by banks who didn't need it, banks that saw an opportunity for arbitrage," said Patrick Jacq, head of interest rate strategy at BNP Paribas SA in Paris. "There was never going to be a repeat of the full amount."

So, if I understand this correctly, the banks took out some EUR 300,000,000,000 of cheap cash they did not need, and issued at no no cost by the ECB and then used it to pump up profits by betting on currency exchange and interest rates. So well done ECB, you seem to have been screwed by the banks that came begging. No honour amongst thieves and all that. But in the process you helped out Tim and Ben across the Atlantic, and also kept the bubbles expanding.

My question is; why are banks that don't need cheap credit being given massive amounts of it without any checks to see if they really need it? This is evidently not under control.

[12DrinkMore]

So the Yuan.

Which way is it going to head? Tim has a bee in his bonnet about this, and wants the Yuan to appreciate by some percent, and I don't think the odd 2% approach is where he considers it should end up. But, as with all economic issues, there are many facets to the problem.

http://www.bloomberg.com/news/2010-06-29/chinese-yuan-is-sideshow-to-looming-wage-inflation-commentary-by-andy-xie.html

So will Chinese wage inflation and the ensuing increase in Chinese export prices balance out the imbalance in global trade? I have no idea, but this mechanism strikes me as being far more likely than a substantial appreciation of the Yuan against the USD to achieve the same result. To allow the Yuan to appreciate strongly against the USD would destroy a chunk of value in all the UST's that the Chinese possess. But a gradual increase in the price of Chinese exports as the wages in China increase is surely a more gradual and sustainable process?

And, indeed, far more beneficial to the Chinese. Which is, in this situation, a very important factor.

[Gambles]

^ So you're saying its a "BUY" on sentiment Paul? More objective measures of sentiment are getting darn close to saying the same thing, but they got late 2008 early 2009 wrong.

Sorry for being dim, Lanna, not sure which comment you're referring back to? Gold?......

sentiment's always difficult to exploit safely - if it's flying in the face of fundamentals then picking up nickels in front of 'dozers is always risky; this is why we only dipped our toes in last year's rallies rather than diving in

[Gambles]

So all this EUR financial calamity due today has sort of petered out.

[/url]

The European Central Bank said it will lend banks 131.9 billion euros ($161.5 billion) for three months, less than economists forecast and a sign that the region's financial industry may be stronger than investors estimated.

Banks tomorrow need to repay 442 billion euros in 12-month funds, the biggest amount ever awarded by the ECB and a key plank in its efforts to fight the financial crisis last year. Demand for the three-month cash today was a litmus test for the health of Europe's banking system, economists said.

"A lot of the original 442 billion was taken by banks who didn't need it, banks that saw an opportunity for arbitrage," said Patrick Jacq, head of interest rate strategy at BNP Paribas SA in Paris. "There was never going to be a repeat of the full amount."

So, if I understand this correctly, the banks took out some EUR 300,000,000,000 of cheap cash they did not need, and issued at no no cost by the ECB and then used it to pump up profits by betting on currency exchange and interest rates. So well done ECB, you seem to have been screwed by the banks that came begging. No honour amongst thieves and all that. But in the process you helped out Tim and Ben across the Atlantic, and also kept the bubbles expanding.

My question is; why are banks that don't need cheap credit being given massive amounts of it without any checks to see if they really need it? This is evidently not under control.

they need it to plug huge holes in their balance sheets but they know that this doesn't even begin to cover it - MGI reckon that the top 25 global banks need another $ 600 Bn and christ knows what the top 50, 100, 500 need

[Gambles]

So the Yuan.

Which way is it going to head? Tim has a bee in his bonnet about this, and wants the Yuan to appreciate by some percent, and I don't think the odd 2% approach is where he considers it should end up. But, as with all economic issues, there are many facets to the problem.

http://www.bloomberg...y-andy-xie.html

So will Chinese wage inflation and the ensuing increase in Chinese export prices balance out the imbalance in global trade? I have no idea, but this mechanism strikes me as being far more likely than a substantial appreciation of the Yuan against the USD to achieve the same result. To allow the Yuan to appreciate strongly against the USD would destroy a chunk of value in all the UST's that the Chinese possess. But a gradual increase in the price of Chinese exports as the wages in China increase is surely a more gradual and sustainable process?

And, indeed, far more beneficial to the Chinese. Which is, in this situation, a very important factor.

sorry to be a broken record but China's adherence to silver standard kept the currency artificially cheap in the '30s and China was (from memory) by far the biggest economy (even though it wasn't globally anywhere near as significant as today obviously) to avoid recession/depression

The Chinese (IMHO) remember this far better than we do and are far better than we are at drawing the right conclusions

The West meanhwhile tried to bail out like crazy and ended up destroying their economies trying to protect theuir indefnesible currencies and banking systems

Any familiar patterns emerging here??

[flying]

destroying their economies trying to protect their indefensible currencies and banking systems

Good line

defend for protect even better....Hey a T-shirt?

Edited June 30, 2010 by flying

[Gambles]

And of course when it comes to Australia, we must face the fact that our enormous level of overseas bank borrowing is going to be difficult to sustain at current interest rates. As I keep pointing out, Australian debt, including bank debt, is in a similar range to Italy and not far behind Spain when related to GDP.

The main differences being that it's partially priced into Spain and Portugal and that they have a bail-out benefactor

[Gambles]

destroying their economies trying to protect their indefensible currencies and banking systems

Good line

defend for protect even better....Hey a T-shirt?

agreed - I stand corrected (or at least improved)

[badge]

^ So you're saying its a "BUY" on sentiment Paul? More objective measures of sentiment are getting darn close to saying the same thing, but they got late 2008 early 2009 wrong.

Sorry for being dim, Lanna, not sure which comment you're referring back to? Gold?......

sentiment's always difficult to exploit safely - if it's flying in the face of fundamentals then picking up nickels in front of 'dozers is always risky; this is why we only dipped our toes in last year's rallies rather than diving in

The royal "we"? Or you threw some client money to our hero Scott Campbell, and he dipped his toes in last years rallies?

Incidentally I disagree with your nickel/dozer/sentiment adage too, as those situations simply dont arise. Being as subjective as it is though, Im sure you can drum up some tenuous examples if bothered

Edited July 1, 2010 by badge