Financial topics

[John]

Lyrics for today:

Irene, goodnight Irene. Irene goodnight.
Goodnight Irene, goodnight Irene,
I'll see you in my dreams.

Sometimes I live in the country.
Sometimes I live in the town.
Sometimes I get so disgusted,
I want to jump in the river and drown.

Irene, goodnight Irene. Irene goodnight.
Goodnight Irene, goodnight Irene,
I'll see you in my dreams.

[Higgenbotham]

When the US prints money it is stealing value from dollar holders all around the world, and then spending the new dollars inside the US. If half the dollars are outside the US and the US prints $1 trillion new dollars, they have stolen $500 billion from the rest of the world. At some point the rest of the world will not go along with this and stop holding dollars. After this ends the rest of the world is relieved of an "inflation tax" and better off, but the US will miss this trick badly. The transition will be painful for the whole world.

The boundary between the periphery and the center is moving inward. Perry's remarks and subsequent lead in the polls are indicative that the giant sucking sound is being heard louder and clearer, closer and closer to Washington. One result of the boundary shift, as Old1953 demonstrated, is people will simply leave the US because anything outside the boundary is outside the boundary, whether in the US or not. The giant sucking sound into Washington and New York is rendering a substantial part of a state like Texas as no different from its third world neighbors and confers no advantage to US citizenship. 300,000 Mexicans have left California.

The QE looting expedition may have reached diminishing or negative returns would be another way of summarizing it.

http://www.mcclatchydc.com/2011/07/28/1 ... aving.html

[aedens]

Empire. Must prove thesis.
The posturing for the election cycle to blame.
Democrats will rush to the middle to survive.
Republican will rush the middle to survive.
Taxpayers are not amused.
We must provide products to maintain Civilization.
http://econintersect.com/news_asia.htm

monkey-gun.jpg (15.91 KiB) Viewed 3849 times

[Higgenbotham]

Word Search: empire "looting expedition"

The US public mostly still wants imperial power. Nearly all Americans refuse to understand that our nation is a huge empire, but we absolutely adore the benefits of our empire especially the part about spending way above our means to pay. Here is an example of the schizoid thinking, the wishful desires, the rampant stupidity at the very top elites in our massive empire:

"Historian warns of sudden collapse of American ‘empire’

Harvard professor and prolific author Niall Ferguson opened the 2010 Aspen Ideas Festival Monday with a stark warning about the increasing prospect of the American “empire” suddenly collapsing due to the country’s rising debt level….Ferguson said empires — such as the former Soviet Union and the Roman empire — can collapse quite quickly and the tipping point is often when the cost of servicing an empire’s debt is larger than the cost of its defense budget…."

The inner rot of all empires is very, very slow and quite insidious. Usually, the military ceases being a citizen’s obligation and becomes a mercenary operation that is increasingly expensive and increasingly useless for defense, good only for looting distant provinces or neighbors while the core of the empire rots away. The tipping point isn’t military spending overhead. The tipping point is up at the top: do the elites see the empire as a road to personal wealth? When they decide this, they go on an internal looting expedition, cutting their own taxes while increasing taxes on the lower classes. Rome did this, Spain did this and the UK did this. All empires do this.

http://emsnews.wordpress.com/2010/07/14 ... -in-sight/

This is a popular thesis and I agree with much of it. However, the elites have better data collection today. Politics intersect on data collection. Charles Plosser laid it out in January in Chile.

Operation Twist 2 coming to a theatre near you, premiering late September. Fed watcher's delight. Silver shorts remain in place (break even is 42.22).

[OLD1953]

There are two types of empire, there is the uniting of a group of peoples with no common ethnic background into a single unified entity by force, and that's an empire. China today is that kind of empire, the USSR was that kind of empire a few decades ago. The US is not that kind of empire. Many people misidentify the US as that type of empire, but the differences are huge and practical.

However, there are trade empires or federations, that unite such peoples for the purpose of trade and commerce. The US is indeed the leader of a trade empire that stretches to every part of the world. In a trade empire, differences between peoples are slowly erased as they move freely between nations for the purpose of trade, and that's exactly why we have much of the unrest in the MidEast, they do a lot of trade with the US/Europe/Japan and this causes their culture to "want" to converge toward that of their trading partners. Since this convergence will represent a major power shift away from their established church, this is resisted by traditionalists, often violently.

To be perfectly clear, western culture is not being forced on anyone, you are simply able to make better business deals and make more money if you are able to understand the people you deal with. You encourage your daughters to dress in their styles when they meet these people, you learn their languages, you visit their countries, and you will become "westernized". And you've got a lot of influence because you are now rich. And that's what the world is doing and that's a large part of the reason why the US is the hated one now, because we are seen as the core of this change in the world.

As for Ferguson's thesis, the wealth does get redistributed eventually, by force if necessary. China had periodic revolts in the provinces, and during those revolts the peasants would rush into the palaces and hunt for gold or silver or anything of worth. This they would later use to buy land or set up in business. And that started the cycle over - Pearl Buck wrote of that entire cycle in "The Good Earth". This happens everywhere, somehow, whether Robin Hood sets up in Sherwood Forest or you have buccaneers working for the queen, the wealth does not and cannot be placed into a cave and guarded, this has never worked in history and it cannot work now. Ali Baba's cave is a myth, but even in the myth, the poor man got the gold in the end.

Because of interest, wealth tends to flow uphill. Every society has tried to prevent this from happening since the invention of money, I can quote the Old Testament on usury if you'd like. There is no successful society that I know of where the wealth does not get redistributed or destroyed in some manner over a full sacelum (many unsuccessful ones, but that's another issue) and we will either break down the ultra wealthy or destroy their wealth or we will fall in this cycle and another society will take over in our place, doubtless with a different currency which will make the point of "what I was worth in dollars" kind of moot.

A new class of wealthy will emerge, and the cycle will start over. And this time it may well be short circuited by the coming singularity, but we've quite a bit of time to get through before that fully hits, more than enough time to see things fall apart and come together again.

This just popped up, if you like stories of overzealous government, this one's a winner. And don't leave the country with an antique wooden guitar.

http://online.wsj.com/article/SB1000142 ... stpop_read

Or search on "Guitar Frets: Environmental Enforcement Leaves Musicians in Fear".

[Higgenbotham]

Through time, empires can take many forms. At any given point in time, though, there isn't a lot of leeway as to what can constitute an empire. Today's empire needs control in the areas of food production and distribution (Agricultural), goods production and distribution (Industrial), and communications/cyberspace (Information). In an Agricultural economy, a good way to build an empire is through territorial expansion and for that reason the Roman Empire was successful. The Soviets attempted that but it didn't work because they never had dominance in the Industrial space. They tried to use their dominance in the Information space (espionage) to make up for that but the economic configuration that existed at that time doomed that strategy to failure.

Getting back to the subject of printed money, the Romans could debase money and maintain dominance for centuries because the feedback loops were so slow that no competitors could exploit them. That's not the case today. The Chinese can exploit the rapid QE feedback loops to increase dominance in the Industrial and Information spaces and they have already done so (GE/AVIC as one example). The information systems have picked up on this and I do not believe it is a matter of political debate; it is fact. Obama has bobbled the ball.

[Higgenbotham]

GE Defends Joint Venture With AVIC
Share Of Unfolding Chinese Aviation Market Trumps IP Concerns

http://www.aero-news.net/index.cfm?do=m ... 06d16b10ae

GE appears to be hoping the deal can improve its market share...

But the company has clearly decided it can't afford to wait ...

[jcsok]

....... Obama has bobbled the ball.

Its not that he has bobbled the ball, its more like he's actually playing on the other team, in our teams jersey. I couldn't resist.

[Higgenbotham]

....... Obama has bobbled the ball.

Its not that he has bobbled the ball, its more like he's actually playing on the other team, in our teams jersey. I couldn't resist.

Perry's words (treacherous, treasonous) were correctly and carefully chosen in my opinion, and they were stated in a timely manner. And I think he can crush Obama in any debate when it comes time to prove that with facts.

[Higgenbotham]

"The Rapid QE Feedback Loops"

Hong Kong
Q&A on Monetary Conditions – August 2011 Edition
August 26, 2011

By Denise Yam | Hong Kong

2) How Much Capital Inflows Has Hong Kong Seen Since September 2008? Where Have They Shown Up in the System?

While it is not possible to identify the gross amount of inflows, we can simplify things and assume that the peak the total liquidity stock netted against the level before QE gives us the maximum inflows we have had. Our proxy for the total liquidity stock (MB + NFA) totaled US$77.2 billion at end-August 2008, peaking at US$197.1 billion at the end of October 2010, implying total inflows of US$119.9 billion.

3) How Much of the Inflows Have Already Reversed?

By the end of June 2011, the total liquidity stock has retreated to US$167.8 billion, so we can say that we have had outflows of US$29.3 billion, which is 24% of the inflows.

5) How Does HIBOR React to Capital Outflows?

As mentioned in question 3, part of the QE-induced inflows since September 2008...

__________________________________________________________________________

The Chinese can exploit the rapid QE feedback loops to increase dominance...

Wrong choice of words above in my post. "The Chinese can exploit the rapid QE feedback loops to chip away faster at US dominance..."
___________________________________________________________________________
Also, I thought this was a bizarre comment:

As GE Aviation Systems CEO Lorraine Bolsinger tells the Post, “We don’t sell bananas. We can’t afford to take a decade off.”

Did any US manufacturer of auto parts or autos feel the need to team up with Lada in the 1960s or 1970s? Of course not! Even if the Russians had proposed it, I doubt we would have.

John or anybody, any comments on this from a generational dynamics perspective?

http://www.gereports.com/ges-china-avio ... bolsinger/

Good grief.