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 Strategies & Market Trends | Mish's Global Economic Trend Analysis


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To: mishedlo who wrote (62168)1/18/2007 10:49:44 AM
From: Pravda
   of 115994
 
If you truly believe your statement:

"All fiat currencies go to zero over time.
The only issue is at what rate."

Why do you believe inflation is impossible for the United States?
Do you think Japanese deflation is partly caused by depopulation?

Pravda

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From: jimmg1/18/2007 10:57:55 AM
2 Recommendations   of 115994
 
Looks to me like the economy is accelerating. Unemployment claims dropping to a very low 290k, retail is on fire.

So far, housing has had almost no impact on retail sales.

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To: regli who wrote (62218)1/18/2007 11:09:17 AM
From: mishedlo
2 Recommendations   of 115994
 
MichaelH@the yen -- trotsky, 09:32:31 01/18/07 Thu
leaving your thinly disguised personal animosity aside, you should read what i write before you post snippy replies.
i didn't say 'i am expecting a yen collapse' i said 'Mish is speculating that one is possible'. as for my own stance, i merely noted that volatility premia on currency options are so low that we can expect big moves - i didn't say a word about direction (except for mentioning that i think cable will break $2, but that's a dollar bearish stance, so it presumably meets with your approval).
the reason why i'm throwing out Mish's idea on this is because it seems an almost perfect contrarian idea.
as far as i know, only Mish and Bob Hoye have ever mentioned the possibility. everybody else is looking for the Yen carry trade to implode and carry the Yen sharply higher - supported by the large speculative net short positions in yen futures that are extant and will need to be covered at some point. the fact that Japan is the world's largest creditor nation meanwhile has little to do with where its currency is going to go. if that had any influence, the yen would already be much higher - but it's been in a clear downtrend for quite a while now. the most important long term fundamental datum w.r.t. fiat currencies is how much of a currency has been printed relative to the others, not how much of it has been lent out to foreigners.
however, in Japan's case there is one worrisome fundamental datum that could impact sentiment on the yen, and that is the country's stunningly large fiscal deficit. as a percentage of GDP ist cumulative fiscal debt is more than twice as large as that of the US, and it indeed ranks as the most indebted industrialized nation on the government level.
in spite of having the lowest interest rates in the world, a full 45% of the government's tax revenues go toward servicing this debt mountain every year. therefore, there is a residual likelihood of a fiscal crisis in Japan, which would without a doubt destroy confidence in the yen, as the markets would rightly assume that the government would try to print its way out of the situation. in short, the yen collapse which Mish regards as possible and Bob Hoye actually expects (Hoye bases his expectation on the long term chart) is not totally out of the question, on the contrary, it's a scenario that should be considered thoroughly, since it would have important implications for financial assets around the world (i think it would be very bullish for gold btw.).

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To: mishedlo who wrote (62210)1/18/2007 11:26:07 AM
From: philv
   of 115994
 
One of the largest bullion banks, Bank of Nova Scotia, here in Canada, requires all transactions for gold, buying and selling to be done in US dollars. Of course, they will convert the local currency to US dollars in both cases, and take their commission accordingly.

In coin shops, they may already be priced in Canadian dollars, but they do not clear these items.

There are many who would disagree with your assertion that oil is already sold in Euros or Yen today. Euros or Yen have to be converted to US dollars, which is the only accepted currency for oil transactions.

"Non-US-dollar holders so far have been the victim of additional transaction costs in the oil trade. The necessary conversion of local currencies into oil-buying greenbacks can be considered a hidden tax, charged and enjoyed by the international banking sector. The IOB, by eliminating this transaction cost, will becomea factor that could unsettle the dollar's dominant position."

atimes.com 

"Realizing the world was embarking on something new and mind-boggling, elite money managers, with especially strong support from U.S. authorities, struck an agreement with OPEC to price oil in U.S. dollars exclusively for all worldwide transactions. This gave the dollar a special place among world currencies and in essence “backed” the dollar with oil. In return, the U.S. promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite the radical Islamic movement among those who resented our influence in the region. The arrangement gave the dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as dollar influence flourished."

"The agreement with OPEC in the 1970s to price oil in dollars has provided tremendous artificial strength to the dollar as the preeminent reserve currency. This has created a universal demand for the dollar, and soaks up the huge number of new dollars generated each year. Last year alone M3 increased over $700 billion.

The artificial demand for our dollar, along with our military might, places us in the unique position to “rule” the world without productive work or savings, and without limits on consumer spending or deficits. The problem is, it can’t last."

lewrockwell.com 

"Iran pricing oil in Euros" resulted in 1.4 million references using Google search.

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To: Mike Johnston who wrote (62228)1/18/2007 11:28:53 AM
From: mishedlo
   of 115994
 
Anyone have a link to that quote somewhere?
I do not think I can use Dow Jones
Was that in a Fed Speech?

Mish

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To: Crimson Ghost who wrote (62235)1/18/2007 11:30:05 AM
From: Haim R. Branisteanu
   of 115994
 
OT - now I see - you do differentiate between the "GOOD Jews" and the "BAD Jews" - nice to know!

Further -did not know that you like to quote idiots like Olmert - may be y are on the same intellectual level like him and his other partners in his government - now at least I have the idea of your intellectual level - which is nothing to be proud about.

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To: Crimson Ghost who wrote (62233)1/18/2007 11:32:09 AM
From: mishedlo
   of 115994
 
But the Japanese owe the money to themselves

I just put an IOU in my piggy bank.
I owe myself $1 billion dollars.

Hopefully that concept ends the silliness over owing oneself money.

Mish

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To: jimmg who wrote (62239)1/18/2007 11:32:37 AM
From: Haim R. Branisteanu
   of 115994
 
yep - but did y check continuous claims?

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To: Pravda who wrote (62238)1/18/2007 11:38:50 AM
From: mishedlo
   of 115994
 
If you truly believe your statement:

"All fiat currencies go to zero over time.
The only issue is at what rate."

Why do you believe inflation is impossible for the United States?
Do you think Japanese deflation is partly caused by depopulation?

Pravda


Over the truly long haul fiat currencies head to zero.
We are debating what is next and the credit conditions are similar to 1929. There can easily be periodic bouts of deflation even though over the long haul Mike Johnson is correct.

Yes, part of the problem in Japan is related to demographics.
But things change.
Japan will eventually allow immigration and birth rate will pick up.

Mish

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To: philv who wrote (62241)1/18/2007 11:43:49 AM
From: mishedlo
   of 115994
 
There are many who would disagree with your assertion that oil is already sold in Euros or Yen today. Euros or Yen have to be converted to US dollars, which is the only accepted currency for oil transactions.

How do you know what is accepted or not?
If Saudi Arabia wants to maintain reserves in YEN why not just trade some oil for Yen. I can not prove that is happening and you can not disprove it. But it is irrelevant anyway.

The conversion from Yen to dollars to buy oil and then from Saudi Arabia from dollars back to Yen all takes place in less than a second. It is essentially meaningless.

"Iran pricing oil in Euros" resulted in 1.4 million references using Google search.

All of that a clear waste of time by my simple example above.
Mish

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