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In reply to: woteva on Saturday 29/09/07 07:35am

Foreign Governments do not want an uncontrolled and drastic drop in the USD, so I think we are guaranteed that they will be making every effort to prop it up.

 

Be interesting to see what the effect is on inflation, as they will have to print more of their own currencies to compensate. Genuine inflation, i.e. the increase in the supply of money, in the US is estimated at around 14 per cent (hard to be sure since they stopped publishing the M3 figures) and the rest of us are in a similar position.

 

That could lead to at least a nominal increase in stock prices over the next two or three months, but I ain't selling my gold.

 

Regards,

Monteverdi.

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In reply to: Monteverdi on Saturday 29/09/07 12:33pm

The blogger, Brad Setser, indicates in his latest post that there are signs of a fraying around the edges of the solidity of international support for the USD.

 

http://www.rgemonitor.com/blog/setser/217775

 

My reading of the article is that it is being indicated that the US is exporting inflation to those economies with a currency effectively pegged to the USD and is gaining unfair trading advantage over those economies with actual floating currencies (the Canadian loonie, the euro and of course the Aussie). There is some chance that those with appreciating currencies may be tempted to drop local interest rates which would cause another surge in liquidity and further bubbles. Our Reserve seems intent on pushing up rates which appears to be the prudent strategy but one likely to cause short term pain.

 

Marc Faber argues that the US Fed should also have increased interest rates last month to put an end to the liquidity nonsense - it is funny that Paul Volker is a hero in the States for raising interest rates to kill inflation back in the early 80's but here Keating is still vilified for bringing on the recession we had to have in the early 90's even though we have consequently enjoyed 15 years of low inflationary growth (or maybe it is because he was / is such an arrogant bugger).

 

By the way, Faber has not much time for any of the currencies and is indicating that whilst in the short term the USD may be oversold and gold overbought in the longer term gold, gold stocks and other precious metals are the place to be.

 

regards

 

triage

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QUOTE (triage @ Tuesday 02/10/07 02:56pm)

QUOTE
it is funny that Paul Volker is a hero in the States for raising interest rates to kill inflation back in the early 80's but here Keating is still vilified for bringing on the recession we had to have in the early 90's even though we have consequently enjoyed 15

 

triage, Paul Volker was and to this day remains THE best Fed Chairman the US has had, it was through his tough unpopular actions that saved the US from out of control inflation as as a direct result of the Nixon years, and he is a far cry from the likes of Greenspan and Bernanke, their style of inflationary expansion at any cost has me somewhat perplexed. It is as if the global economy has become terrified of any economic slowdown, unfortunately their styles of continuous pumping without the relief valve of a economic downturn to control excesses will ultimately result in runaway hyperinflation followed by complete collapse. The result will not be pretty.

 

WHY have we become so bloody scared of the "R" word?....The balloon can hold only so much air before it bursts.

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QUOTE (woteva @ Tuesday 02/10/07 06:29pm)

 

Thankyou for those thoughts on Volker.

 

Sometimes I think I like Costello for the same reason I liked Keating (though I was only a teenager at the time doing the only formal economics I have ever done - hi Mr. Flemming, shame you never acknowledged my talent homie).

 

I suspect Costello would be the most qualified and skilled at preparing our economy for the future but his cocky style (ala Keating) may prevent him from getting that chance.

 

As you can see I am not schooled on Volker, but suspect he was more a purist? As opposed to Greenspan and Bernanke who are prepared to lubricate financial markets when required, even against the grain of economic rationale?

 

I have really enjoyed reading your thoughts over the last few months woteva, there are undiscovered gems in both markets and forums it seems. You helped make me good coin recently by re-enforcing my own convictions. You were never psyched out, not even once.

 

 

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In reply to: neutron on Tuesday 02/10/07 07:10pm

Thankyou for those thoughts on Volker.

 

Sometimes I think I like Costello for the same reason I liked Keating

----------------------------------------------------------------------------------------------

 

i'd thank you guys who pumped out something that stuck in my chest since Fed cut the rate.

 

really, we need some one like Volker to deliver the madicine that world economy really needed atm.

 

 

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In reply to: early birds on Tuesday 02/10/07 08:43pm

 

You got my respect as well EB - you are no mug punter.....

 

Your observation a little while ago that the Hong Kong Index has become the THE global trendsetter and subsequently my no. 1 indicator was right on the money.

 

Good work.

 

 

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In reply to: triage on Tuesday 02/10/07 01:56pm

Thanks Triage,

 

I suppose that if I had a few trillion USD in my account I would be getting a little edgy. I share Faber's view that all fiat currency is essentially counterfeit, hence my current preference for Gold and Silver and very well capitalised oil and resource stocks with big production and large reserves.

 

I suppose that for as long as commodities and oil are settled in USD's there is some basis for support.

 

Certainly there seems to be a consensus amongst old-fashioned economists that Bernanke's actions are unlikely to help anybody other than the banking cartels that make up the Fed. It is the old situation of 'why would you trust the people who got you into a mess, or at leasts created the conditions to allow it to happen, to get you out of it".

 

I seem to recall that US mortgage rates are actually determined by the medium term bond rate. If so those who took on debts that they had no hope of repaying will continue to lose the houses that they never owned.

 

Those even further down who didnÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t even qualify for a liarÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s loan will be even worse off as the legalised theft of inflation effectively takes the money from their pockets.

 

I am no forecaster, but find it difficult to see how any economy that is based on ever-increasing credit rather than productivity can prosper indefinitely. I don't suggest that the US is going to follow Zimbabwe (which has seen enormous nominal gains in it's stock market, incidentally) but suspect that a shake out will occur at some stage. The longer it is postponed the more unpleasant it will be.

 

I don't trade currencies. If I did I would not be long the USD for more than a few hours, but I continue to hold my Gold.

 

Regards,

Monteverdi.

 

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In reply to: cooma on Sunday 30/09/07 08:09am

Hi Cooma,

 

I haven't been here since my last post on September 24th, only just noticed your replies, thank you. I am downloading latest Financial Sense podcast at the moment, thanks for the tip. Now I just have to find the time to listen to it http://www.sharescene.com/html/emoticons/smile.gif

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