http://www.bloomberg.com/news/2011-...ond-term-facing-argentina-s-25-inflation.html with all the lying in the inflation statistics the US is headed this way
Something is missing in the article on Argentina - "Aided by surging soybean exports and growth in neighboring Brazil, Fernandez used record government revenue to boost spending on public works, raise pensions and provide subsidies to poor families who kept their children in school. That helped fuel a consumer boom and annual inflation economists estimate is 25 percent." This says increased government spending caused 25% inflation. Reduce government spending and use surplus to pay down debt. Of course one of the important things missing is what the inflation rate was before the increase in G.
Greece would be a far better comparison to Argentina, but even there the comparison is not a good one because of EU membership. For the average person, in spite of the problems caused by failure of all types of pension plans to achieve the anticipated actuarial return because of malfeasance on Wall Street and changing economies, the defined benefit plan remains, in general, significantly superior to individually funded defined contribution pension plans. The fundamental reason for this is that in a defined benefit plan those who live beyond their anticipated lifetimes are subsidized by those who die younger than expected, thus the monthly contribution required during one's working years is significantly less. And too, government or corporate run defined benefit plans tend to have lower costs. It is not surprising that Wall Street is blind to these advantages of the defined benefit plan. Of course the trade of for the greater security and lower cost offered by the defined benefit plan is that if one dies young in such a plan little or nothing passes to heirs, just as nothing passes in a defined contribution plan if one exhausts their pension fund before dying. The best arrangement is to have the option of participating in both, as in the United States. But of course only those reasonably well off can take advantage of both types of plans. It does seem wrong for those who took jobs with the promise that their COLA adjustments would be computed at one level to then have that level "adjusted" downward after they have reached their "golden years" and it is too late for them to make compensating adjustments. Financial commitments should be kept. Things are seldom quite as simple as they seem to those whose thinking is driven primarily by personal ideology.
"Things are seldom quite as simple as they seem to those whose thinking is driven primarily by personal ideology" sometimes they are. excess debt and excess goverment salaries and pensions are destroying the US. add crony capitalism which is killing the US by resulting in the dwindling of the rule of the law and the game is over. financial collapse and chaos are the results. whether it is inevitable people can debate. do u have a bottom line for the legacy mess in the United States.
Look, I know the whole nonsense about how rampant gov't spending and grasping public employees and their oversized pensions will destroy everything. And yes, the problem is in fact serious and all that. And it's kinda fun to say the US is on its way to being the next Argentina - or Greece, or whatever. But really, to be serious about stating this stuff is just, well, I'm not sure there's a good way to say it without being brutal. Argentina was once a rich country, yes. But it was never a true first-world country. It has never exported more industrial than agricultural or commodity products, which is the first - scratch that, the only - real qualification for being first world. Third and second tier countries produce either mostly commodities, or mostly agricultural products. Sometimes they produce this stuff in such abundance that they can make themselves into first world countries in appearance, especially if they have good governments - as in representative republics that mimic the Anglo-American model. That doesn't make them, economically, first world. Argentina's rank as a manufacturing nation: 24th, with 74 billion dollars. US: number one, at 2.3 trillion. This was as of 2009 and yeah, I know, probably China's caught up and passed us by now. The fact remains Argentina isn't remotely in the same league. Also, more importantly, it never was. Argentinian exports: soybeans and derivatives, petroleum and gas, vehicles, corn, wheat US exports: agricultural products (soybeans, fruit, corn) 9.2%, industrial supplies (organic chemicals) 26.8%, capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment) 49.0%, consumer goods (automobiles, medicines) 15.0% Notice what's missing in that list from Argentina. Capital goods is the real giveaway; highly developed economies produce mountains of stuff that consumers never see but that businesses sell to other businesses because it makes them more efficient in some way or is just plain vital to their simply being in business. Undeveloped economies have very small capital goods components to their economies, because they don't need it: the stuff they're involved in making is either too simple to need it or if it's more complex is likely final assembly of something where most of the parts are either made elsewhere or made in the country but by foreign-owned and operated companies looking for a cheap place to make the stuff. Either way it doesn't contribute to the development of the local economy because it's not really part of it, not in the same way it is here or in Germany or, now, in China. The dollar is the world's reserve currency because we have trillions invested overseas and other countries have trillions invested here. That's a result of the US's massive and dynamic economy. Just as important, everyone knows they can get their money out of here just as easily as they got it in, something that isn't really certain with China. So, with the reserve currency, a situation that's not changing anytime soon, and massive industrial capacity, and what is still by a wide margin the most advanced economy on the planet, to seriously debate this takes a level of ignorance that can only be described as breathtaking. I know on the trading forums, not just this one, everyone likes to take the ridiculous extreme. But really fellas, you're not making yourself look smart by debating this crap like it's some sort of serious proposition.
Imo it is a serious topic. The Public Sector in the US of A cannot sustain it's current debt load and it's not doing the necessary things to reduce it. China is holding a lot of dollars and their CB traders can see that the US will inflate it's way out of debt.. They will be selling their dollars before that costs them too much. They want to eventually have the global reserve currency and are moving in that direction. The upshot will be that our CB will raise rates and that will worsen the US ability to pay it's payments.. rates rising will be the last blow to the US housing market and prices will fall [inflation adjusted of course]... If my above speculations are correct I'm thinking that we will be in a real SHTF scenario. Think of the position of ghetto folk that depend on welfare and crime, and the legions of the unemployed. Inflation, wow, it hits the poorest the hardest maybe, they are going to be some desperate individuals and when they go off the reservations, forgetaboutit, polite society grab on to your hat, it's going to be a long and wild ride...
"The dollar is the world's reserve currency because we have trillions invested overseas and other countries have trillions invested here. That's a result of the US's massive and dynamic economy. Just as important, everyone knows they can get their money out of here just as easily as they got it in, something that isn't really certain with China. " - trefoil there is a tipping pt. at which a reserve currency is no longer. printing money like there is tomorrow hastens the day. non US investors are not fools. tripling of the price of gold is a harbinger of the dim future of the dollar and the US.
It seems to me that the important relationship is that of the dollar relative to our trading partner's currency; thus the Euro, the Yuan, the Loonie, the Pound and the Peso loom large in that relationship, with other currencies having a lesser impact. We are not inflating in isolation, but coincident to inflation in our trade partner's currencies. The U.S. presently enjoys an advantage because the world is awash in U.S. dollars. If you're a competing CB and you want to dump your dollars, you will have to do it carefully. Going forward, how well the dollar does relative to other currencies is very much going to depend on the relative skills of the various central bankers. How well each CB plays this game could have large consequences for their respective economies. The U.S. might eventually get into more serious trouble if competing economies are able to sidestep the U.S. and develop their economies at a faster pace than the U.S. does, leaving, as it were, the U.S. in their dust. I think that is a real and present danger. The U.S. could help itself greatly by taking measures to restore and grow a middle class while adopting a serious long-range plan to put its Federal fiscal house in order. Nevertheless, the morons in congress have failed to deliver anything that would give one hope for the future. The cuts being proposed on one side of the isle to medicare and social security will be counter productive and make the dwindling middle class worse off. A pay roll cut in social security contributions is insane in my opinion. The contribution needs to be increased, not cut. Sadly, cuts in the social security payroll tax amount, indirectly and once again, to robbing from social security to pay for excessive expenditures in the discretionary budget, particularly excessive DOD expenditures and related. In effect, by this route what you end up with is a diversion of money from a critical entitlement program to corporate welfare, i.e., the "defense" industry. It is small comfort to know that the future budget shortfall you've created will be made up by inflation, and thus paid partly by our foreign creditors, because the bulk of it will be paid from ever shrinking wages of the middle class in the form of higher prices. This is counterproductive. We are moving backwards and making matters worse. Cuts need to come in the lower income tax brackets, not in entitlements. Bring medical and defense costs down to fall in line with the other developed nations, and you have gone most of the way toward solving the U.S. fiscal problem. Then medicare will be more than adequately funded, and shortfalls in the discretionary budget will be easily handled. There is no evidence whatsoever that raising taxes modestly on the highest income brackets will have any effect on job production, all the hard evidence being to the contrary. The tiresome insistence that a modest increase of the tax rate on millionaires would affect job production, when it clearly wouldn't, is a present form of nuttiness being exhibited by half the crew on the ship of fools otherwise known as the U.S. congress; while the other half is so disorganized that that can't even agree to all be nutty in the same way. The far right is correct to call for fiscal cuts, but they're calling for them in the wrong areas. Apparently they are driven by ideology rather than logic. Furthermore, they ought to give in on their dogmatic opposition to raising taxes, but instead insist that tax increases now be tied to binding reductions in the discretionary budget later. It would be wrongheaded to insist on large and precipitous fiscal cuts while real unemployment is pushing 20%. It is an all too common form of fiscal insanity to be blind to the reality that when the government spends beyond its revenue nothing is saved by not raising taxes, because by doing so you have agreed to raise the indirect inflation tax later. So you haven't really accomplished anything by dogmatically opposing tax hikes. You have only shifted more of the fiscal burden to the middle class, because that class is hurt more by inflation than the monied class. And that's counterproductive when what is needed is a larger stronger middle class. As one opposed to the death penalty, I might make an exception for Mr. Norquist. And as an aside, I would add that there may be rare instances where even the death penalty is not severe enough. The case of Mr. Corzine would be an example. He should be waterboarded.
I heard a talk about the various CB teams.. The Chinese may have a distinct advantage. Their CB players have, in addition to great educations, experience on Wall Street!! They send them to work in GS for a year or two! Five to fifteen years might be a better Street Edu but nonetheless, most of the rest of the CB's typically have PhD's with no trading experience driving their decisions... The US's CBer's are integrated with Wall Street probably... Time will tell of course.