Get Out Of $dollars$ Now!

[PeaceBlondie]

SS pensions in the USA are adjusted for the inflation, a COLA per the CPI, which always gets tinkered with. Same for civil service and military pensions, federal level. So we don't lose anything from inflation. Income tax rates are also adjusted by a similar mechanism. Other pensions in the USA may not be adjusted for inflation.

People over 50 can expect to get their SS, subject to minor adjustments by future congresses. Younger Americans who are now working in the system (FICA or SECA) shouldn't expect to get half the SS pension they're being told.

[ray23]

The bottom line is that I worked all my life and paid into the SS system so that I could be assured a pension in my later years. That time has nearly arrived and I expect no less than was promised to me. I fully expect the US government to make good on its promise.

Sure Gary. It will do it. The governement will keep its promise.

It's so easy to print dollar bills. They own the press.

You will have your pension... But, meanwhile, its value will decrease, year after year because of inflation.

Meanwhile in Europe, they are going to push back the age of retirement (60 years average now, in France for instance), reduce the amount of pensions, and increase taxations to finance thoses pensions. Of course, nobody agree (who would it ?)

But I can't stop thinking : your reaction, as a future retiree, is very interesting.

You don't care about the macro economic situation, you don't care that in 1 generation life expectancy has gained a dozen of years, that medical technologies are more efficient but much more costly etc. You just want your pension.

It's human. But now you start to understand why this bonzi scheme is doomed : because you are in the US alone 78 millions people of the same generation who share the same views.

Uncle Sam will give it to you : with crispy 100 USD bills.

Maybe Gary's reaction would be the same a mine, yes I expect to get it. I paid for it wasn't free to me. Some people will have paid into that system in excess of 40 years. So yes that would create some expectations.

[cclub75]

SS pensions in the USA are adjusted for the inflation, a COLA per the CPI, which always gets tinkered with. Same for civil service and military pensions, federal level. So we don't lose anything from inflation. Income tax rates are also adjusted by a similar mechanism. Other pensions in the USA may not be adjusted for inflation.

It's exactly for that reason that CPI is constantly and artificially depressed.

Which CPI you take ? The one calculated after 1999 or before ?

Check it out : they've changed their methodology...

http://www.bls.gov/cpi/cpigm02.htm

http://www.shadowstats.com

When I was talking about inflation, I was not refering about CPI, or better "core inflation" (a great invention by the way), and its pathetic manipulations... But hyper inflation. The one with printing press running at full speed (and they will need to act fast, with all those SS pensions to pay...).

Anyway. The whole story show how it's easy to manipulate figures, statistics, and therefore... people.

[Naam]

"The THB yield curve (reflecting interest rates) is flattening out, which means that THB interest rates are not expected to increase over the next several years."

*****

all these years i strongly believed that prophets do not exist nowadays. i stand corrected as i was quite obviously wrong.

p.s. this is the polite version of my answer to "...over the next several years". the impolite one i (hesitantly) discarded because i remembered my mother telling me i should not use foul language.

[Naam]

here's my rational rebuttal to the statement

quote: "The THB yield curve (reflecting interest rates) is flattening out, which means that THB interest rates are not expected to increase over the next several years."

no yield curve and no analyst can predict for sure whether interest rates for any given currency will be stable, decreasing or increasing. not for a few week and definitely not for several years.

[Martin]

Where people saving and not over-spending, or spending and under-saving, is concerned, I don't 'do plumbing' (i.e. relative currency rates). I 'do people'.

And the thing that I have noticed about people is that, after they have been a bit exhuberant for a while, they turn quiet for a while. In excess, it is called 'manic-depressive', I believe.

My reading of the past tells me that the twenties were manic and the thirties were depressed.

I was born in 1935 in a town that had 53% unemployment, and some of my earliest memories are of some of the unpleasant aftermaths of that.

So when economist thinkers point to unjustified exhuberance in the people who collectively make up the world's biggest economy, I think what may follow, and then I remember the saying that "If America sneezes, the rest of the world catches the cold".

So I am mentally prepared for the Second Great Depression and the purchasing power of my sterling pensions to drop over the years to come.

But we have our rice fields and a big granary in which my wife 'squirrels away' more than enough to see us through till next year.

To insure us against a year or two of bad harvests, there are some little bars of gold in the safety deposit that were purchased with the income from the surplus rice that we sold in the years of bumper harvests.

I am just a very unsophisticated, boring, old-fashioned yeoman (wrongly sneered at as a 'peasant') in my thinking; but therein lies my comfort zone.

[Gary A]

If I listened to all the gloom and doom prophets I'd likely blow my brains out. I prefer to live happily and whatever the future brings is OK with me because I am powerless to change it. I was given some VERY good advice years ago when I was a young man and I was quite angry about it because I knew it was wrong. As I got a little older I realized that it was true and was actually good advice. That advice was not to concern myself with things I have no control over. There are some seriously paranoid and depressed people on this board. I've been cheated and scammed more than most people but I have learned from it and I am a lot tougher target than I was in the past.

[Naam]

"I am just a very unsophisticated, boring, old-fashioned yeoman (wrongly sneered at as a 'peasant') in my thinking; but therein lies my comfort zone."

*****

peasant or not Martin. you seem to have acquired a certain peace of mind for which i envy you although (most probably) i have a fistful more dollars, pounds and euros in my bank account.

[Old Man River]

"Falling interest rates normally means a weakening currency. "

From which institution of higher education did you study economics? That statement is so wrong, from any angle.

You are right. Interest rates are just one of the variables that affects currencies and I shouldn't have said normally, as this could have been misleading.

Now, if you have problem with this statement, then I suggest you forget about economics in the classroom and look to those that have done this for a living for a better understanding. There is a lot of information on the internet.

You can start by answering PeaceBlondie's question, since you seem to be an expert.

[Old Man River]

"Falling interest rates normally means a weakening currency. "

From which institution of higher education did you study economics? That statement is so wrong, from any angle.

You are right. Interest rates are just one of the variables that affects currencies and I shouldn't have said normally, as this could have been misleading.

Now, if you have problem with this statement, then I suggest you forget about economics in the classroom and look to those that have done this for a living for a better understanding. There is a lot of information on the internet.

You can start by answering PeaceBlondie's question, since you seem to be an expert.

OK, Backflip, to make your job of answering PeaceBlondie's question easier, since it is obvious you need help, you can get an overview of exchange rates on Wikipedia. In the section of fluctuations, under the heading of exchange rates, it will say: the value of a currency is based on the demand for that currency. The higher a country's interest rates, the greater the demand for that currency.

[Naam]

"The higher a country's interest rates, the greater the demand for that currency."

*****

that of course is typical Wikipedia nonsense where any clown can write whatever he/she wants.

example: one U.S. Dollar fetches presently (at official rate) 250 Zimbabwe Dollars. on the parallel (black market) one gets ZWD 1.100 and interest rates are around 50% PER MONTH!

[Old Man River]

"The higher a country's interest rates, the greater the demand for that currency."

*****

that of course is typical Wikipedia nonsense where any clown can write whatever he/she wants.

example: one U.S. Dollar fetches presently (at official rate) 250 Zimbabwe Dollars. on the parallel (black market) one gets ZWD 1.100 and interest rates are around 50% PER MONTH!

OK, I don't normally use Wikepedia either, but it was handy, although in this case it is far from nonsense. Treasury 101 teaches that the difference between two foreign currencies is their interest rates. Yes, before you attack I know in the real world there are many other factors at play when considering the supply and demand of currencies, but that is the base definition. Therefore, to say there is no relationship whatsoever between a country's currency and its interest rates, as the other person did, is ludicrous.

Really Dr. Naam, a bit unfair to compare the black market demand for USD's in Zimbabwe with a functioning global market that exists for the USD/THB. You could have got closer to home for this with Myanmar.

In liquid, functioning global markets, global fund managers move large amounts in to take advantage of higher interest rates in other stable, liquid markets all the time and this increases the demand for that currency, bidding it up. I have the feeling you already know this.

[cclub75]

I am just a very unsophisticated, boring, old-fashioned yeoman (wrongly sneered at as a 'peasant') in my thinking; but therein lies my comfort zone.

Therefore, you are a wise man.

Think that 6 years after the Internet Bubble Burst (march 2000), most of the people have already forget what it was about.

[backflip]

"look to those that have done this for a living for a better understanding. There is a lot of information on the internet."

Done "what" for a living?

[lannarebirth]

"The higher a country's interest rates, the greater the demand for that currency."

*****

that of course is typical Wikipedia nonsense where any clown can write whatever he/she wants.

example: one U.S. Dollar fetches presently (at official rate) 250 Zimbabwe Dollars. on the parallel (black market) one gets ZWD 1.100 and interest rates are around 50% PER MONTH!

I'm not sure I'd go along with that. It could just as easily be said "the higher a countrys interest rates, the less the demand for that currency". If a countrys currency is in great demand, usually the bonds of that country are bid higher, lowering yields, which act as a moderating mechanism on what central bankers may do.

[ray23]

Ok guy I dont get it things are so bad why is the international community buying?

Foreign Purchases of U.S. Securities Surge to Record (Update1)

By Kevin Carmichael

Oct. 17 (Bloomberg) -- International investment in U.S. securities jumped to a record $116.8 billion in August as foreigners stepped up their buying of Treasury notes.

The increase compares with July's $32.9 billion, which was the lowest since May 2005, the Treasury Department said today in Washington. The figure exceeds the $56.5 billion median estimate of 14 analysts surveyed by Bloomberg News.

Demand for U.S. assets jumped in August as the Federal Reserve ended two years of interest-rate increases and reports showed a combination of easing inflation and greater consumer spending. More than a month later, that confidence in the U.S. is holding, helping drive the Dow Jones Industrial average to a record high yesterday.

``It's a massive number,'' said Andrew Pyle, head of capital market research at Scotia Capital in Toronto. ``It explains the strong moves we saw in the markets earlier in the year.''

International purchases of U.S. securities previously peaked at $102.6 billion in October 2005, and averaged $71.6 billion over the 12 months through July. The average over the previous five years was $57.8 billion.

The dollar pared a decline against the yen and strengthened against the euro after the report. Treasury stayed higher.

The Treasury report captures international purchases of U.S. government notes and bonds; stocks; corporate debt and debt issued by U.S. agencies such as mortgage-lenders Fannie Mae and Freddie Mac. The figures don't include direct investment in the U.S. or bank deposits.

Trade Deficit

The U.S. trade deficit was a record $69.9 billion in August. Some economists say the difference between the deficit and securities purchases by foreigners is indicator of how easily the U.S. can finance its external obligations. The current-account deficit, a broader measure of trade that includes investment income and transfers, widened to a record $804.9 billion in 2005.

Private investors bought a net $89.4 billion, compared with a net $31.8 billion in July. Official purchases, mostly by central banks increased to $30.1 billion, up from $22.7 billion. Americans bought $2.7 billion worth of securities abroad in August.

Purchases of Treasury securities rose a net $46.3 billion, up from $6.6 billion in July. Demand for agency debt rose $31.3 billion from $18.5 billion.

Foreign purchases of U.S. stocks rose $4.4 billion in August, down from $10.4 billion in July. Corporate bond buying climbed to $37.5 billion from $19 billion.

Federal Reserve

The Fed left interest rates unchanged on Aug. 8, the first pause after 17 consecutive increases dating back to June 2004, signaling Chairman Ben S. Bernanke thought inflation was under control. That helped boost interest in stocks by signaling policy makers had no immediate plans to crimp economic growth.

The Standard & Poor's 500 Index, rose 2.1 percent in August after a 0.5 percent gain in July, and the Dow Jones Industrial Average gained 1.75 percent after a 0.3 percent rise the previous month. The Nasdaq Composite Index advanced for the first month since March.

Investors also pushed up the price of U.S. benchmark 10- year bonds in August, dropping the average monthly yield to 4.728 percent from an average of 5.086 percent in July.

China, Japan, the U.K. and major oil exporters increased their holdings of U.S. government debt. Caribbean investors scaled back their purchases.

Japanese Purchases

Japan, the largest holder of U.S. Treasury securities, raised their holdings by $7.6 billion to $644.2 billion. China, the second-largest holder, raised its holdings by $8.7 billion to $339 billion.

Major oil exporters -- a group that includes the 11 members of the Organization of Petroleum Exporting Countries, Ecuador, Bahrain, Oman and Gabon -- purchased a net $1.7 billion of U.S. securities. The U.K., which, through London, acts as a transit point for international investors, especially those in the Middle East, added a net $11.1 billion.

Caribbean banking centers, which analysts link to hedge funds, sold a net $800 million.

Total international holdings of Treasuries increased 2.4 percent to $2.15 trillion in August from the previous month. That's about 44 percent of the U.S.'s $4.9 trillion ($4,884,685) outstanding public debt in August.

To contact the reporter on this story: Kevin Carmichael in Washington at [email protected]

[Old Man River]

"The higher a country's interest rates, the greater the demand for that currency."

*****

that of course is typical Wikipedia nonsense where any clown can write whatever he/she wants.

example: one U.S. Dollar fetches presently (at official rate) 250 Zimbabwe Dollars. on the parallel (black market) one gets ZWD 1.100 and interest rates are around 50% PER MONTH!

I'm not sure I'd go along with that. It could just as easily be said "the higher a countrys interest rates, the less the demand for that currency". If a countrys currency is in great demand, usually the bonds of that country are bid higher, lowering yields, which act as a moderating mechanism on what central bankers may do.

Lannarebirth, this started a few pages back now when nobody was answering PeaceBlondie's question vis a vis the USD/THB so, not having any analysts reports in front of me, I gave a simple answer to a not so simple question. I have since found out that some prefer to sit back and wait for someone else to help and then find fault with whatever is being said. Don't take this personally, as I don't mean you. I have seen your postings on other threads and also anyone who likes dogs is a friend of mine.

Markets regulate themselves, but in general, if expectations of USD rates are that they will fall (negative yield curve), then central bankers of its trading partners will discuss what to do with their interest rates as changes in interest rate differentials impact currencies. In your example above, higher yields cause the demand for that currency to increase (appreciating the currency) and then when yields fall, money moves out and the currency depreciates. Your understanding of the impact of rates on a currency is correct, but it doesn't skip from higher yields to lower demand for the currency in one step, currencies appreciate and depreciate according to supply and demand, unless their are shocks to the system or other things at play such as exists where US securities are involved.

For US securities, this doesn't hold as the big purchasers (China and Japan) buy US securities regardless of the trend in USD interest rates because they have built up huge USD investment portfolios from the large surpluses they run with the US. They know, even in times of lower expectations of the USD interest rates. that if they were to dump USD investments for another currency due to higher rates elsewhere, this would cause a weakening of the USD, hurting their portfolio's of USD investments. They hold huge amounts of USD securities.

[lannarebirth]

"The higher a country's interest rates, the greater the demand for that currency."

*****

that of course is typical Wikipedia nonsense where any clown can write whatever he/she wants.

example: one U.S. Dollar fetches presently (at official rate) 250 Zimbabwe Dollars. on the parallel (black market) one gets ZWD 1.100 and interest rates are around 50% PER MONTH!

I'm not sure I'd go along with that. It could just as easily be said "the higher a countrys interest rates, the less the demand for that currency". If a countrys currency is in great demand, usually the bonds of that country are bid higher, lowering yields, which act as a moderating mechanism on what central bankers may do.

Lannarebirth, this started a few pages back now when nobody was answering PeaceBlondie's question vis a vis the USD/THB so, not having any analysts reports in front of me, I gave a simple answer to a not so simple question. I have since found out that some prefer to sit back and wait for someone else to help and then find fault with whatever is being said. Don't take this personally, as I don't mean you. I have seen your postings on other threads and also anyone who likes dogs is a friend of mine.

Markets regulate themselves, but in general, if expectations of USD rates are that they will fall (negative yield curve), then central bankers of its trading partners will discuss what to do with their interest rates as changes in interest rate differentials impact currencies. In your example above, higher yields cause the demand for that currency to increase (appreciating the currency) and then when yields fall, money moves out and the currency depreciates. Your understanding of the impact of rates on a currency is correct, but it doesn't skip from higher yields to lower demand for the currency in one step, currencies appreciate and depreciate according to supply and demand, unless their are shocks to the system or other things at play such as exists where US securities are involved.

For US securities, this doesn't hold as the big purchasers (China and Japan) buy US securities regardless of the trend in USD interest rates because they have built up huge USD investment portfolios from the large surpluses they run with the US. They know, even in times of lower expectations of the USD interest rates. that if they were to dump USD investments for another currency due to higher rates elsewhere, this would cause a weakening of the USD, hurting their portfolio's of USD investments. They hold huge amounts of USD securities.

That's a very good explanation. Thanks.

[backflip]

Let's consider the Japanese Yen....considering inflation, the return of rate of a savings account is nearly zero. I guess that means that the Japanese currency is worthless, right fellas? A couple years ago when the refinance and new home purchases in the US skyrocketed, the mortagage rates were the lowest in 40 years. I guess that means the US currency is worthless...but why would both Japan and China be holding lots of US paper. Hmmmm.

Many things are driven by the supply and demand mechanism. The price of money is driven by a country's central banking system (the system in the US is referred to as the "US Reserve", or simply as the "Fed").

Pretty basic, guys.

[Naam]

link to a breakdown of "holders of U.S. Treasuries"

http://www.ustreas.gov/tic/mfh.txt

[Naam]

"In liquid, functioning global markets, global fund managers move large amounts in to take advantage of higher interest rates in other stable, liquid markets all the time and this increases the demand for that currency, bidding it up. I have the feeling you already know this."

*****

old man river,

it's not necessarily the interest rates. the basic aim for institutional investors (and of course the small fry like me) is "where can we make a buck or two?". interest rates are completely irrelevant when e.g. a ratings upgrade of a sovereign oder corporate debtor is expected and there are numerous other reasons (too many to list) why money flows from one liquid asset class into the other.

i am not an economist and i don't believe what kind of basics are taught at universities but i know my maths. the real world (as you mentioned) looks quite different. perhaps that is the reason why a bunch of my economist friends (my age) still drive during rush hour to their offices and during rush hour back home worrying about their mortgages or how to finance the education of their offsprings whereas i am happily "retired" since 16 years, 10 months and 18 days.

p.s. i too had my ups and downs as far as investing is concerned and i have reached now the point of being completely fed up with looking at several screens 12-14 hours a day to follow the markets. moreover, the old lady does not like it anymore when we watch TV and i interrupt a nice film or report to switch to Bloomberg or CNBC.

[TRIPxCORE]

In the U.S., Net Foreign Security Purchases (NFSP), which you may recall fell to its knees in July at $32 Billion, far below the needed $72 Billion each month to finance the deficit. August's number came in at a record $116 Billion this morning! That triples July's figure! Something smells fishy to me... How can the NFSP be at dire straits one month, and then turn around and triple the size the next month?

Add July and August together, and divide by two, you get $74 Billion, just barely enough to cover the $72 Billion needed each month to finance the deficit. There's no room for error there.

Another piece of data that has already printed is PPI, which has come in stronger than the markets expected... The headline number decreased 1.3%... But the core number, which the markets get all lathered up about gained... Pipeline inflation is strong, and plays right along with my call that the Fed would return to the rate hike table to tweak rates one more time. Inflation is much higher than the CPI reports tell us, because the CPI report is a JOKE! And I think someone with some brain power at the Fed has figured that one out!

The dollar should be taking back some of the lost ground it suffered during yesterday's trading session. But... For once its not! Unbelievable! For once these mental giants that have been rewarding the dollar for having high inflation that was being chased down the street by the Fed, have reversed gears, and see things the way I've seen them the whole time! Inflation is NOT good for a currency, it erodes the value and the holder of the dollar has less purchasing power.

Yesterday the Russian Central Bank Deputy said the Russian Central Bank was prepared to begin buying Japanese Yen with their currency reserves (read dollars)... Well... In the past those types of statements usually brought a Japanese official out of the wall to strongly suggest that they will not tolerate any strong moves in yen.... (this is a part of the manipulation of the currency) However, last night, Japanese Finance Minister, Omi, said that Japan "welcome Russia's decision to raise yen exposure in their currency reserves."

[Old Man River]

Let's consider the Japanese Yen....considering inflation, the return of rate of a savings account is nearly zero. I guess that means that the Japanese currency is worthless, right fellas? A couple years ago when the refinance and new home purchases in the US skyrocketed, the mortagage rates were the lowest in 40 years. I guess that means the US currency is worthless...but why would both Japan and China be holding lots of US paper. Hmmmm.

Many things are driven by the supply and demand mechanism. The price of money is driven by a country's central banking system (the system in the US is referred to as the "US Reserve", or simply as the "Fed").

Pretty basic, guys.

Thanks for the info on the Fed, it was highly informative.

The question's of PeaceBlondie that is on the table, which has been on the table for quite awhile, is the following:

"Let's say that by the end of the next year, the USD falls 10% or 20% or even 40% against the Euro or the GBP. How would such a weak USD compare against the THB?

Backflip, care to hazard a guess?

[Old Man River]

"In liquid, functioning global markets, global fund managers move large amounts in to take advantage of higher interest rates in other stable, liquid markets all the time and this increases the demand for that currency, bidding it up. I have the feeling you already know this."

*****

old man river,

it's not necessarily the interest rates. the basic aim for institutional investors (and of course the small fry like me) is "where can we make a buck or two?". interest rates are completely irrelevant when e.g. a ratings upgrade of a sovereign oder corporate debtor is expected and there are numerous other reasons (too many to list) why money flows from one liquid asset class into the other.

i am not an economist and i don't believe what kind of basics are taught at universities but i know my maths. the real world (as you mentioned) looks quite different. perhaps that is the reason why a bunch of my economist friends (my age) still drive during rush hour to their offices and during rush hour back home worrying about their mortgages or how to finance the education of their offsprings whereas i am happily "retired" since 16 years, 10 months and 18 days.

p.s. i too had my ups and downs as far as investing is concerned and i have reached now the point of being completely fed up with looking at several screens 12-14 hours a day to follow the markets. moreover, the old lady does not like it anymore when we watch TV and i interrupt a nice film or report to switch to Bloomberg or CNBC.

Dr. Naam, we are agreeing. At the end of the day, it comes down to supply and demand for a currency and interest rates, are but one of several factor. However, interest rates trends are important when major trading partners are involved and rate differentials are also important to fund managers, who can move unbelievably large amounts of money in very short periods of time (i.e. hot money).

p.s. I worked on the treasury side, but am also very happily retired. I would also go for the nice film over Bloomberg or CNBC (except when Jay Leno is on).

[Naam]

"I would also go for the nice film over Bloomberg or CNBC (except when Jay Leno is on)."

*****

Jay Leno = you talked to my old lady behind my back... confess!

[Old Man River]

"I would also go for the nice film over Bloomberg or CNBC (except when Jay Leno is on)."

*****

Jay Leno = you talked to my old lady behind my back... confess!

My wife has spies all over the place. I admit to nothing!

[ray23]

Well guys I just wanted to say thank you for sharing you knowledge this I way beyond anything beyond I'm willing to work at to enjoy the depth of knowledge that many of you have. But it is interesting to follow even if I only undertand a small percentage of it. The origninal explanation give to my former post was east to understand it go very confusing down line with other thoughts applied.

From the position of a novice it almost sounds like black jack rules hit at a certain number Ect and X should happen. But it doesn't always

[Old Man River]

Well guys I just wanted to say thank you for sharing you knowledge this I way beyond anything beyond I'm willing to work at to enjoy the depth of knowledge that many of you have. But it is interesting to follow even if I only undertand a small percentage of it. The origninal explanation give to my former post was east to understand it go very confusing down line with other thoughts applied.

From the position of a novice it almost sounds like black jack rules hit at a certain number Ect and X should happen. But it doesn't always

Ray, you touched on the very area that has some people very, very concerned about the value of the US dollar, but also gives comfort to others.

The amount of USD based securities held by the US's trading partners with surpluses (China and Japan), as well as the amount held by oil exporters (OPEC), is huge. The fear is that some countries would collude against the US and dump their holdings of USD securities on the market (sell USD's), causing the value of the USD to plummet. The ones that take comfort in this argue that these countries hold so much USD's that if they dumped USD's on the market they would take huge losses as the value of the USD dropped. This explains why foreign holders with huge USD positions are not selling their positions, but rather continuing instead to buy USD securities even while USD interest rates are dropping.

The info in TripxCore's message has people concerned. Large holders of USD's do not want to see Russia buying Yen instead of USD's.

All the best.

[cclub75]

In the U.S., Net Foreign Security Purchases (NFSP), which you may recall fell to its knees in July at $32 Billion, far below the needed $72 Billion each month to finance the deficit. August's number came in at a record $116 Billion this morning! That triples July's figure! Something smells fishy to me...

You should quote your sources...

http://www.kitcocasey.com/displayArticle.php?id=1012

[Martin]

I just watch economics and politics from afar these days, but Russia is a player that I watch carefully.

I have a gut feeling that, one day, Russia will try to settle an old, very big, score with the US and UK.

The Reagan/Thatcher strategy was to get the suppliers to pump so much oil that its price held down at US$20, and Russia had to sell its oil at the same price, even though it needed far more to finance its purchases of wheat.

That, plus making Russia compete in the arms race, beggared Russia, and I don't think the Kremlin will ever stop resenting it, though they keep up their diplomatic smiles.

But, as someone's signature says: "Diplomacy is the art of saying "Nice doggy!" till you can lay your hand on a brick".

We live in interesting times.