Is The Us$ Destined To Collapse?

[12DrinkMore]

No need to be defensive about what tat the East makes its irrelevant to my point.

For now the US/UK and many EU govts are keeping the Ponzi scheme going by borrowing more and more money aswell as printing money, this cant go on forever, im sure we can all agree on this.

Eventually they wont be able to pay it back, this will lead to default in some way or other. (if they do keep up with payments the interest on the debt will be so great itll lead to the same thing as stated below)

When they cant borrow any more theyve no money to pay the huge public sector or unaffordable pensions that successive govts havent dealt with for 50 years, thus the public sector/pension cash that now trickles into the service sector wont be there thus we'll lose masses of public and service sector jobs.

So as the scam of public and service sector jobs has been exposed the only way to create growth in the economy will be to make things to sell in our masses of shopping malls.

So as the proles of the UK/US/EU come out of the trance that is shopping on credit as its no longer available to them, theyll quickly realise the only way to get back to the life theyre accustomed to is to vote for a party that will create and protect manufacturing jobs, thus our govts. will have 2 choices from what i can see, have equal trade agreements with developing nations, or revert to the protectionist policies similar to what the East has now, but what we had in the western world in the 20th Century, something the baby boomers who have had an easy life gifted to them benefited from.

Thats what should happen in theory, but for it to happen sooner rather then later i am relying on common sense of the voter, and as the half million retards (i apologise for insulting retards) marching in London recently show much of the electorate doesnt quite get it yet, but eventually theyll have no choice as you cant borrow and print fro ever, its just a case of how much longer the global govts can keep the plates spinning for.

I have to admit that I am struggling to understand how all the government finances currently work, what the repercussions will be heading into the future and how it all fits together on a global scale. It is an immensely complicated subject. The US and the UK have a certain degree of freedom in that they can print out the money to pay the bills and the interest on the government bonds. The individual states within the Eurozone have a lot less flexibility, but they do have the reluctant backing of Germany and France. Whether any of the PIGS will actually leave the EUR is impossible to say, but it would be fascinating to watch how it could be achieved and how successful the result would be.

Maybe to highlight the problem I have with understanding the issues is take, for example, a small US company buys 1,000 widgets from a Chinese manufacturer for say 1 USD each. These are then imported. The transport costs inside of the States is say 25%, the distributer markup is say 25% and the end seller markup 50% of the final selling price of USD 2, although the markups tend to be a lot higher.

All this has somehow generated USD 100 of extra value or wealth in the States, which has gone to pay US based wages and profits, surely in the same way that if the initial product could have been made in the States for the same manufacturing price? The Chinese are presumably also paying wages and making profits as well. Happy days all around.

So what is missing from this equation? Basically the transfer USD from the US to to China, as China accepts USD as payment, sterilises it through the semi-fixed exchange rate, accumulating a huge volume of USD's which are then send back to buy up Geithner's bonds. Now the effect of this is to artificially hold the value of the Yuan down, benefiting the US consumer to the detriment of the Chinese worker. So why does Geithner want to do something about this comfortable process? I don't really know, unless he is scared that the Chinese will suddenly become net sellers of his bonds, which would cause Ben to start buying even more through his QE machinations in order to artificially hold the interest rates down.

Too many what ifs and imponderables.

So to get back to your "scam", does it matter if the manufacturing is carried out in the States or in Asia if the bulk of the mark-up occurs in the States? It is all too complex. What would be good was if the west could manufacture stuff for export to the east, Germany has been successful in this, but for how much longer?

And as to relying on the commonsense of the voters? You are destined to be sadly disappointed. They are all sitting in front of Asian manufactured wide screen lcd TV's lapping up soap, sport, music and reality shows. And when it comes to the vote, it's all the same, same and not different, no real choice.

[markone1]

Maybe to highlight the problem I have with understanding the issues is take, for example, a small US company buys 1,000 widgets from a Chinese manufacturer for say 1 USD each. These are then imported. The transport costs inside of the States is say 25%, the distributer markup is say 25% and the end seller markup 50% of the final selling price of USD 2, although the markups tend to be a lot higher.

All this has somehow generated USD 100 of extra value or wealth in the States, which has gone to pay US based wages and profits, surely in the same way that if the initial product could have been made in the States for the same manufacturing price? The Chinese are presumably also paying wages and making profits as well. Happy days all around.

So to get back to your "scam", does it matter if the manufacturing is carried out in the States or in Asia if the bulk of the mark-up occurs in the States? It is all too complex. What would be good was if the west could manufacture stuff for export to the east,

But the only actual wealth created for the respective nation is when the Chinese sell them to the US, the markups in the US is just the same money being circulated, and this money is being borrowed at interested from the people we're buying the widgets from, all the jobs once the goods have landed are just service sector be it marketing or checkout operators, hence when this money can no longer be borrowed the service sector is fcuked.

Germany has been successful in this, but for how much longer?

German companies will be succesful for a while from what i can see as they sell desirable goods and highend manufactured machines and products, but when Germans or Finnish voter refuses to bail the PIIGS out, theyll have no choice but to default and probably leave the Euro, thus the future new Euro will be extremely strong hence the manufacturing jobs that Germany is currently benefitting from, from having a currency weekened by the PIIGS will mean jobs going abroad where labour is cheaper unless of course they have protectionist policies.

And as to relying on the commonsense of the voters? You are destined to be sadly disappointed. They are all sitting in front of Asian manufactured wide screen lcd TV's lapping up soap, sport, music and reality shows. And when it comes to the vote, it's all the same, same and not different, no real choice.

Oh yes when you have people who vote for the rosette no matter what then it isnt going to change, but at some point the political parties being voted in will have no real choice as theyll not be able to borrow money to prop up the ponzi scheme and the people will need jobs hence theyll have to put in place mechanisms for creating a manufacturing base.

Anyway here is an article i read today, presumably we are getting these widgets from the East, so to keep and grow the manufacturing base we'll have create conditions to make the widgets here, thus we will be taking jobs back from the East.

http://www.bbc.co.uk...siness-13179589

As if we dont then all those people working in the car industry will be out of a job, and going down the route of the initial point where we import goods and make huge markups on the goods we import and borrow off China to buy them is clearly unsustainable.

Of course the other answer is to borrow and print forever more and completely devalue our currencies over time a race to the bottom so to speak, hence the answer to the OP is whilst the USD may not collapse, itll just lose much of its value over the coming years!

Edited April 24, 2011 by markone1

[JimsKnight]

Eventually common sense policies which are currently deemed right wing such as having equal trade agreements or more then likely tariffs on Eastern world goods such as they put on our goods, will happen and itll greatly affect the Eastern worlds ability to sell us their tat.

a. The Asians may produce a lot of tat, but they also produce a lot of high quality stuff too.

b. Tariffs are imposed to prevent a flood of cheaply produced goods from putting the national enterprises out of business. It would be shutting the barn door after the horse has bolted. And the barn door will remain closed unless the costs of setting up production in the west are reduced to Asian levels. Which won't happen.

LOL. They said WW1 was the war to end all wars but look what happened!

The b option is more likely than you might think.

China has a growing population, a growing middle-class that's very soon going to be driving up prices for the 'junk' they export overseas.

When that happen's option b, along with savvy western industry's will start to get making decent products at affordable prices again.

There are fingers hovering over the 're-set' button gentlemen...

[12DrinkMore]

But the only actual wealth created for the respective nation is when the Chinese sell them to the US, the markups in the US is just the same money being circulated,

In terms of wealth creation, I can't see a difference between buying a finished product from the Chinese and marking it up or buying raw materials from somewhere, applying some labour to it and then selling the same finished product to the same distributer. Surely the only difference is that the smaller part of the wealth creation process is given to the low cost producers in Asia if a finished good is imported rather than the component bits?

and this money is being borrowed at interested from the people we're buying the widgets from, all the jobs once the goods have landed are just service sector be it marketing or checkout operators, hence when this money can no longer be borrowed the service sector is fcuked.

But it is currently very cheap to run this system, Ben and Merv are running with their ZIRPS and QEs. The big losers are the Chinese, as far as I can make out, getting a load of depreciating USD's which are paying no interest.

Although another thought has sprung into mind. What if Ben is thinking of putting up the interest rates? This would have Tim forking out much more in interest payments. This thought might just possibly be the reason why Tim is continually harping on about letting the Yuan appreciate. I am sure he is not concerned about the welfare of the Chinese.

[markone1]

The b option is more likely than you might think.

China has a growing population, a growing middle-class that's very soon going to be driving up prices for the 'junk' they export overseas.

The the other elephant in the room is the QE needed to keep our economy going thus helping to pay the Chinese back is what is putting up the price of commodities and food, a very vicious circle.

Edited April 24, 2011 by markone1

[Crushdepth]

So to those 45% who think 'yes - the dollar is going to collapse', how many of you have moved your assets out of dollars and into (presumably) the euro, or at least rebalanced in that direction?

Left the US$ and went to $AUD. And done very nicely out of it. The US needs to reduce its debt problem or it will suffer the same fate as all other historically great empires. It's halfway down the toilet already.

Edited April 24, 2011 by Crushdepth

[12DrinkMore]

LOL. They said WW1 was the war to end all wars but look what happened!

The b option is more likely than you might think.

China has a growing population, a growing middle-class that's very soon going to be driving up prices for the 'junk' they export overseas.

When that happen's option b, along with savvy western industry's will start to get making decent products at affordable prices again.

There are fingers hovering over the 're-set' button gentlemen...

I seem to be a bit active this evening, but no worries, I find the discussions interesting. Hope to learn a bit.

Yes, I can see the growing wealth in Asia beginning to consume the previously un-affordable products, but will that in itself drive up the price of the products or will Asia be able to increase the production to make even more of the stuff at the same price?

At what point will it be cheaper to produce stuff in the west than the east?

Raw material is priced on the international markets so has no effect without government interference.

Labour costs are inherently cheaper in the east due to the lack of social safeguards, which have been bloated out of all reasonable proportion in the west, and much cheaper housing and food costs. The average Asian does not (maybe yet) consider it a basic right to own a detached property with pool and two cars, far from it, the average worker is more or less happy to have a job and afford basic housing and essentials.

So, in order for the hovering fingers to be lowered, there has to be the case that it will be considerably cheaper to produce stuff in the west than the east. This can only be achieved through the exchange rates. And there is the conundrum. Why should the Asians allow their currencies to appreciate so much that it becomes more profitable to make stuff in the west? And where would the west going to find the money to buy the rubber, palm oil, rice and chicken?

I do not know where this re-balancing will end up, and, I also believe that nobody on this planet knows either. That is the fascination, at least for me, of economics.

[Naam]

Why should the Asians allow their currencies to appreciate so much that it becomes more profitable to make stuff in the west?

why should the Asians not allow their currencies to appreciate to levels which do not really hurt their exports but strong enough to import western made goods much cheaper?

[Naam]

But it is currently very cheap to run this system, Ben and Merv are running with their ZIRPS and QEs. The big losers are the Chinese, as far as I can make out, getting a load of depreciating USD's which are paying no interest.

in the late 80s i visited Beijing, Shanghai and Guangzhou. would the Chinese appear to me being "big losers" if i visit these cities next week again?

[markone1]

Why should the Asians allow their currencies to appreciate so much that it becomes more profitable to make stuff in the west?

why should the Asians not allow their currencies to appreciate to levels which do not really hurt their exports but strong enough to import western made goods much cheaper?

Taking away their huge import tariffs would have the same or greater effect in making such goods affordable, the problem being if desirable foreign goods were more affordable it would inevitably affect the goods they make and sell to themselves, something theyre intent on not happening. (The beer market in Thailand be a nice simple example)

Its a case of we sell to you and you are not allowed near are over protected markets and western politicians do sweet FA about it.

Asia want to have one's cake and eat it, this situation has to come to a head sooner or later!

Edited April 24, 2011 by markone1

[Naam]

Asia want to have one's cake and eat it.

that might be the case but until now they got away with it and doing not badly.

[Naam]

Taking away their huge import tariffs would have the same or greater effect in making such goods affordable, the problem being if desirable foreign goods were more affordable it would inevitably affect the goods they make and sell to themselves...

having a stronger currency and keeping the import tariffs is killing two birds with one stone. besides cashing in with the import tariffs those in power are able to decide which foreign goods are desirable and which are not. countries see no reason why to make foreign goods more affordable/cheaper if these goods are domestically produced.

Edited April 25, 2011 by Naam

[markone1]

Taking away their huge import tariffs would have the same or greater effect in making such goods affordable, the problem being if desirable foreign goods were more affordable it would inevitably affect the goods they make and sell to themselves...

having a stronger currency and keeping the import tariffs is killing two birds with one stone. besides cashing in with the import tariffs those in power are able to decide which foreign goods are desirable and which are not. countries see no reason why to make foreign goods more affordable/cheaper if these goods are domestically produced.

I was thinking the taxes on big ticket imported goods such as a BMW are higher then any percentage gains in a currency we can expect in the short/mid term, can anyone tell me if the price of a Mini made in the UK has dropped since the baht has gained 30 odd percent v sterling?

Funny how the west like to think of themselves as educated and above these emerging nations, but it seems that when these trade deals are being struck the Asian nations are running rings around our so called educated dealmakers making them look like clueless schoolkids.

[Naam]

I was thinking the taxes on big ticket imported goods such as a BMW are higher then any percentage gains in a currency we can expect in the short/mid term, can anyone tell me if the price of a Mini made in the UK has dropped since the baht has gained 30 odd percent v sterling?

BMW 320 2.5i and several Mercedes Benz models (C, E and S-class) are manufactured (or rather assembled) in Thailand and of course the prices have not dropped because those involved love to make higher profits respectively charge higher excise duties.

the same applies to most imported items which went UP in price even though THB appreciated considerably vs. a bunch of currencies. no matter how irritating that is for those who buy imported or partly imported and locally assembled goods there's nothing they can do about it.

[Robby nz]

Dont know if this has been on this thread before, hevent read every page.

http://www.usdebtclock.org/

The debts are going up at an alarming rate, how long can it go on?

Heard it said that S&P had warned the US that they may have to drop the credit rateing.

[Naam]

Dont know if this has been on this thread before, hevent read every page.

http://www.usdebtclock.org/

The debts are going up at an alarming rate, how long can it go on?

Heard it said that S&P had warned the US that they may have to drop the credit rateing.

S&P has changed one week ago the rating outlook to "negative".

[markone1]

I was thinking the taxes on big ticket imported goods such as a BMW are higher then any percentage gains in a currency we can expect in the short/mid term, can anyone tell me if the price of a Mini made in the UK has dropped since the baht has gained 30 odd percent v sterling?

BMW 320 2.5i and several Mercedes Benz models (C, E and S-class) are manufactured (or rather assembled) in Thailand and of course the prices have not dropped because those involved love to make higher profits respectively charge higher excise duties.

the same applies to most imported items which went UP in price even though THB appreciated considerably vs. a bunch of currencies. no matter how irritating that is for those who buy imported or partly imported and locally assembled goods there's nothing they can do about it.

You couldnt make such things up could you.

I wasnt aware that BMWs or Mercs were made in Thailand, so why is it that Toyotas assembled in Thailand are a similar price to what you would get in the West, whereas BMWs, Mercs etc... have these huge tariffs on them, surely as theyre all assembled in Thailand with the parts being imported and taxed at the same rate then prices should be similar?

Edited April 25, 2011 by markone1

[Naam]

You couldnt make such things up could you.

I wasnt aware that BMWs or Mercs were made in Thailand, so why is it that Toyotas assembled in Thailand are a similar price to what you would get in the West, whereas BMWs, Mercs etc... have these huge tariffs on them, surely as theyre all assembled in Thailand with the parts being imported and taxed at the same rate then prices should be similar?

no i did not make such things up. google and you will find

trying to answer your question i can only speculate or make [un]educated guesses:

-parts for japanese cars are partly produced in Thailand, no import duties on these parts.

-most, if not all parts for BMW and Mercedes are imported.

-as opposed to the japanese manufacturers the profit margins for both german "assemblers" are kept arbitrarily high ("why not fleece the suckers?").

for the simple reason

-that somebody who is willing to shell out a minimum of 4 million Baht for a car it does not really matter whether his final choice costs 6, 8 or perhaps 10 million Baht.

apropos "suckers". i am one of them and own a Mercedes and a Benz

[flying]

Gotta admit it is not a bad problem to have.....Well at least preferable to most

China should cap forex reserves at 1.3 trillion U.S. dollars: China banker

BEIJING, April 23 (Xinhua) -- China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.

The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement" and that the government should upgrade and diversify its foreign exchange management using the excessive reserves.

Meanwhile, Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.

Tang also said that China should further diversify its foreign exchange holdings. He suggested five channels for using the reserves, including replenishing state-owned capital in key sectors and enterprises, purchasing strategic resources, expanding overseas investment, issuing foreign bonds and improving national welfare in areas like education and health.

However, these strategies can only treat the symptoms but not the root cause, he said, noting that the key is to reform the mechanism of how the reserves are generated and managed.

[Naam]

You couldnt make such things up could you.

I wasnt aware that BMWs or Mercs were made in Thailand, so why is it that Toyotas assembled in Thailand are a similar price to what you would get in the West, whereas BMWs, Mercs etc... have these huge tariffs on them, surely as theyre all assembled in Thailand with the parts being imported and taxed at the same rate then prices should be similar?

no i did not make such things up. google and you will find

trying to answer your question i can only speculate or make [un]educated guesses:

-parts for japanese cars are partly produced in Thailand, no import duties on these parts.

-most, if not all parts for BMW and Mercedes are imported.

-as opposed to the japanese manufacturers the profit margins for both german "assemblers" are kept arbitrarily high ("why not fleece the suckers?").

for the simple reason

-that somebody who is willing to shell out a minimum of 4 million Baht for a car it does not really matter whether his final choice costs 6, 8 or perhaps 10 million Baht.

apropos "suckers". i am one of them and own a Mercedes and a Benz

"apropos "suckers". i am one of them and own a Mercedes and a Benz"... which of course is rubbish because it should read "a Mercedes and a BMW"

[flying]

going......going......

Will be interesting to see where.. when the debt ceiling bomb is addressed in May

[12DrinkMore]

Here's the man with all the silver, or maybe none of the silver, talking.

J.P. Morgan's Kasman: Dollar Isn't Weak Enough, Fed on Hold until 2013

http://blogs.wsj.com...=WSJ_EC_RT_Blog

Edited April 30, 2011 by 12DrinkMore

[AlexLah]

Here's the man with all the silver, or maybe none of the silver, talking.

J.P. Morgan's Kasman: Dollar Isn't Weak Enough, Fed on Hold until 2013

http://blogs.wsj.com...=WSJ_EC_RT_Blog

Snip:

He added that while the outlook for the U.S. economy has darkened a bit of late, underlying growth remains on a decent 3% trend and the labor market should start generating 175,000 to 200,000 jobs per month this year.

175,000 to 200,000 jobs assuming full time? In exactly what bizniz?

Aaaaaaaaand: that resistance of other central banks to run tighter monetary policy is interfering with the U.S. dollar’s ability to weaken.

Anyway it's just his opinion.

[12DrinkMore]

Hi Alex,

Any mileage in starting up a Chinese based company to unshred the shreds?

http://www.moneyfactorystore.gov/5lbbagofshreddeduscurrency.aspx

The Bureau of Engraving and Printing offers 5lb bags of Shredded U.S. Currency. This bag contains approximately $10,000 worth of Shredded U.S. currency notes

Price USD 45.

Unfortunately out of stock

But come with a guarantee

These notes were removed from the manufacturing process prior to delivery to the Federal Reserve System and have not been monetized

Edited May 1, 2011 by 12DrinkMore

[Carib]

Looks like this??

[12DrinkMore]

Here is a major rant against the USD

http://news.goldseek.com/GoldenJackass/1303946553.php

Nothing to do with reading that lot, but more to do with being absolutely pissed off with Geithner and the Bernank saying one thing and doing another. Sorry guys, but I just liquidated my remaining USD denominated assets and am out of the USD indefinitely. I'll need some very positive signs of real economic progress in the US before I even think about going back in.

Trying to ride bubbles is just too much stress.

[badge]

As mentioned on the Thai Economic crash thread I think, I firmly believe the THB will start a course of significant weakening in coming months(years).

Its largely dependant on the USD though in my opinion.

The US$ Index has turned up from awfully close to my aforementioned longer term support levels, but I would still prefer a further dip to meet them exactly, at either 75.6, 74.5 or 74. Lower than this would suggest 67.5/68, but Im inclined to think that a) it wont get there, and at those levels it would be an amazing long term buy.

This would correspond to USDTHB having perhaps making a low right now, or, if US$ Index weakens further, perhaps USDTHB could see as low as 29.50, some -10% lower than current rates.

[...]

Having had a DXY Buy signal at 73, and (within 30ticks) seeing a bounce from this level, Im now inclined to revist the above train of thought; either the current bounce continues or perhaps the 68 level will be visited.

Where this leaves the next USDTHB Buy signals, I havent checked, but 29/29.5 has yet to be broken.

[midas]

either the current bounce continues or perhaps the 68 level will be visited.

But this kind of headline doesn't help sentiment?

United Nations report warns of dollar "collapse"

[flying]

Elvis has left the building

How long they leave the lights on is anyone's guess

[RedFxTrade]

either the current bounce continues or perhaps the 68 level will be visited.

But this kind of headline doesn't help sentiment?

United Nations report warns of dollar "collapse"

Or on the other hand headlines like that favour a brave contrarian...and more likely to hear that at market extremes.

I use google insights to find trends in certain things and it can be a good gauge of sentiment...I typed in the search trend for the term "USD Collapse" and here is the chart attached.

Look at how people searching world wide for USD collapse back in 2008, just as it made one its most ferocious rally in a decade. Once again people have been jumping on the search engines searching USD collapse. I tend to fade these hysterical headlines.

Edited June 1, 2011 by RedFxTrade