Roubini should know better. Gold did terrible during the 80s and 90s even though consumer prices gained ~100% from 1980 to 2000. Gold is not a systematic risk-free inflation hedge. It is a risky asset.
the demise of the dollar is total nonsense as everyone would go down with it and there is no hedge against it, not even gold. What would replace the USD? Euros, GBP, JPY? The resulting depression of a dollar destruction game would mean the end of the world as we know it. Back to the age of stone. The world is based on international trade. If the dollar goes, so does world trade, so do all the developped/developping economies. Goodbye cars, refrigerators, friendly neighbours,... This would mean war. Hopefully nonsense. I guess Roubini is facing the challenge of facetious actors. Making sure he stays in the limelight by upping the ante. Well, at some stage, you make a complete fool of yourself. Roubini, you risk becoming catalogued as the sub 1% scenario forecaster, i.e. forecasting events that stand less than 1% chances of occurring in the next 10 years. FYI, I believe the dollar will strenghten as the second wave of deflationary pressure is about to hit. As a consequence, I expect wealth destruction effects to overpower any quantitative easing effect. It's not only the pool of dollars that is in circulation that matters, it's also the velocity at which it circulates. Velocity has been decreasing, I believe attempts at reflation are doomed.
The one thing that could move China is what we would consider a relatively small number.... So the next question is .... What is this number ? $200 per month per capita/person ? ............................................................................ When one considers this number via a population of a few billion....and one adds a form of consumer credit ....as part of the changing mix.... This is the real question.... Is this possible ? .............................................................................. The real driver in the US in the last 20 plus years was an increase in credit availability....in that US people became more like walking "loans"....Now what is likely is that the current situation takes this period out....times 300 million.... ...................................................................................... And one can think again.... What is several billion X $200 ....x 12 ......? What is 300 million X (-$400....X 12....)....? These are key questions.....
I have to say this thread has some of the most thought-provoking responses I've ever read. Not knowing much about gold myself, debaser and makloda take Roubini to task, although they arrive at somewhat different conclusions, regarding Roubini's attitude towards gold as a USD hedge. Brendan, your reply to Roubini is extremely interesting, and I'm sure many will consider it quite debatable, because of the conventional wisdom that the world is being inundated with trillions and trillions of USD. Despite that, you expect the USD to strengthen, and dramatically so. As an aside, libertad, the last stat I saw on median Chinese income was $2800 USD per annum, but many of us know how unreliable such statistics published by the Chinese Government are.
Any thoughts on the Singapore dollar? They also have nice compact $1000 and $10,000 bills S$1.58 ~ USD$1.
ByLoSellHi As an aside, libertad, the last stat I saw on median Chinese income was $2800 USD per annum, but many of us know how unreliable such statistics published by the Chinese Government are. ............................................................................ The point being....as you already know.... Small changes per capita....both in a cash or credit driven economy are a matter of significance with respect to the head count.... .............................................................................. The most likely US case currently is a backing out the credit add ons of the last 20 + years.... This is a staggering number for the US.....and the world....(particularly for China....the US credit money is largely their money).... At the moment whose loss is the greatest....? .............................................................................. The Future ? This is largely a demographically related number.... What does several billion times X buy ? What does 300 million times X buy ? US vs China ? Monetary dilution and all else ? What is the value of a manufacturing base with no one there to sell the products to ? F,GM, C.....know the answer to this question.... .................................................................................. Now think about demographics.... What is the future number starting from several billion.....? 300 million ....? Times what number ....?
Here is an interesting RGE article that casts some light on the current imbalances (US deficits vs. surplus in China/Asia) and how this might play out http://www.rgemonitor.com/globalmacro-monitor/256564/rge_monitor__navigating_towards_bretton_woods_3
You're assuming Bankers actually want the United States in good health. Or the entire Global Economy, for that matter. Unfortunately, the facts don't bear that out, however "rational" and conventional that assumption is. Facts on the ground are 13 Trillion in base money printed to-date. Thats a startling figure as most wealth destroyed was market equity not tied to banking - meaning it wasn't loaned out 30 times by fractional money creation. The offsetting 13 Trillion designed to reflate the economy will get leveraged out exponentially more than the original wealth destroyed, once banks resume lending. This will be very inflationary and destructive to private wealth. Second, the entire US subprime market is valued at no more than 2 Trillion Dollars: "An estimated $1.3 trillion in subprime mortgages are currently outstanding. Thatâs nearly as large as the entire California economy." http://www.msnbc.msn.com/id/17584725 That means the US Government could have bought OUTRIGHT the ENTIRE US MARKET for Subprime products for 2 Trillion dollars! P-R-O-B-L-E-M....S-O-L-V-E-D!!! Yet, Geitner, Paulson and Bernacke have printed and committed OVER 13 TRILLION DOLLARS, to-date!!!! http://www.bloomberg.com/apps/news?pid=20601087&sid=armOzfkwtCA4 Anyone care to do the math on that one?? Lets see......13 Trillion minus 2 Trillion, equals.....????? For some perspective, the entire US residential market for outstanding, unpaid mortgages is 10 Trillion dollars. http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#cite_note-22 EVEN IF every single homeowner in the United States was distressed and hamstrung Banks with heavy losses (in reality, its only some 20% of that.....), the US Government can buy ALL residential mortgages for 3 Trillion LESS THAN WHATS ALREADY BEEN SPENT!!! Get the picture yet?!?? Since the Government can end this entire debacle for a meager 3 Trillion (conservative) why has it spent 10 TRILLION MORE than need be?? Answer : Derivatives. Banks, funds, insurers and investment houses leveraged long their positions through derivative writing on assets that didn't perform. This compounded losses some 30 to 50 times on the underlying. This is where our money is going. Interesting still - nowhere in media has it been reported TO WHOM these vast sums of derivative losses are being paid, as they are channeled into "insolvent" banks, ferried out the back door, then vanish into the night! Never to be seen (or heard from) again!! The salient point here is derivative losses are bullshit. Its like 100 strangers that buy fire insurance on your house. And when it does burn down (gee, conflict of interest, perhaps?!), 100 people collect 50 MILLION on a single house that wasn't worth 500 Thousand! Derivatives can be regulated - at the bear minimum - at 1-to-1 on the underlying. For every CDS contract sold, the buyer must have insurable interest or an equivalent amount of the underlying in their possession. Either that, or nullify all Credit Default Swaps, have sellers return premium to buyers, and thats it. Thats all that had to happen - a 2-page Financial Regulation bill you could handily wipe your ass with - and this ENTIRE CRASH, RECESSION AND "CREDIT FREEZE" WOULD BE OVER IN A PEN STROKE. How many 1000-page Bills have been passed to "Save the Economy"?! How many Trillions have been printed to "Save the Banks"?! How much power was ripped from the People and handed to Banking Juggernauts that precipitated this derivatized implosion, to begin with?! Perhaps it isn't clear to you yet. The mental conditioning amongst the Sheep for their Butchers is very strong: America was drug into an alley, beaten to a pulp, raped for everything she had, then hauled off to some cockroach-infested basement and held for ransom by the very same people you claim have our best interest at heart: THE BANKERS. Just do the Math. Anyone who doubts me, just do the Math. Total US Subprime Value: 2 Trillion. http://www.msnbc.msn.com/id/17584725 Total Bailout Money Committed: 13 Trillion. http://www.bloomberg.com/apps/news?pid=20601087&sid=armOzfkwtCA4 Difference: 11 TRILLION PAID TO ?????? We've been screwed. It's time for everyone to Man Up and face Reality.
Quote from Brendan R: the demise of the dollar is total nonsense as everyone would go down with it and there is no hedge against it, not even gold. What would replace the USD? Euros, GBP, JPY? The resulting depression of a dollar destruction game would mean the end of the world as we know it. Back to the age of stone. The world is based on international trade. If the dollar goes, so does world trade, so do all the developped/developping economies. Goodbye cars, refrigerators, friendly neighbours,... This would mean war. Hopefully nonsense. I guess Roubini is facing the challenge of facetious actors. Making sure he stays in the limelight by upping the ante. Well, at some stage, you make a complete fool of yourself. Roubini, you risk becoming catalogued as the sub 1% scenario forecaster, i.e. forecasting events that stand less than 1% chances of occurring in the next 10 years. FYI, I believe the dollar will strenghten as the second wave of deflationary pressure is about to hit. As a consequence, I expect wealth destruction effects to overpower any quantitative easing effect. It's not only the pool of dollars that is in circulation that matters, it's also the velocity at which it circulates. Velocity has been decreasing, I believe attempts at reflation are doomed. -------------------------------------------------------------------------------- You're assuming Bankers actually want the United States in good health. Or the entire Global Economy, for that matter. Unfortunately, the facts don't bear that out, however "rational" and conventional that assumption is. Facts on the ground are 13 Trillion in base money printed to-date. Thats a startling figure as most wealth destroyed was market equity not tied to banking - meaning it wasn't loaned out 30 times by fractional money creation. The offsetting 13 Trillion designed to reflate the economy will get leveraged out exponentially more than the original wealth destroyed, once banks resume lending. This will be very inflationary and destructive to private wealth. Second, the entire US subprime market is valued at no more than 2 Trillion Dollars: "An estimated $1.3 trillion in subprime mortgages are currently outstanding. Thatâs nearly as large as the entire California economy." http://www.msnbc.msn.com/id/17584725 That means the US Government could have bought OUTRIGHT the ENTIRE US MARKET for Subprime products for 2 Trillion dollars! P-R-O-B-L-E-M....S-O-L-V-E-D!!! Yet, Geitner, Paulson and Bernacke have printed and committed OVER 13 TRILLION DOLLARS, to-date!!!! http://www.bloomberg.com/apps/news?...id=armOzfkwtCA4 Anyone care to do the math on that one?? Lets see......13 Trillion minus 2 Trillion, equals.....????? For some perspective, the entire US residential market for outstanding, unpaid mortgages is 10 Trillion dollars. http://en.wikipedia.org/wiki/Subpri...is#cite_note-22 EVEN IF every single homeowner in the United States was distressed and hamstrung Banks with heavy losses (in reality, its only some 20% of that.....), the US Government can buy ALL residential mortgages for 3 Trillion LESS THAN WHATS ALREADY BEEN SPENT!!! Get the picture yet?!?? Since the Government can end this entire debacle for a meager 3 Trillion (conservative) why has it spent 10 TRILLION MORE than need be?? Answer : Derivatives. Banks, funds, insurers and investment houses leveraged long their positions through derivative writing on assets that didn't perform. This compounded losses some 30 to 50 times on the underlying. This is where our money is going. Interesting still - nowhere in media has it been reported TO WHOM these vast sums of derivative losses are being paid, as they are channeled into "insolvent" banks, ferried out the back door, then vanish into the night! Never to be seen (or heard from) again!! The salient point here is derivative losses are bullshit. Its like 100 strangers that buy fire insurance on your house. And when it does burn down (gee, conflict of interest, perhaps?!), 100 people collect 50 MILLION on a single house that wasn't worth 500 Thousand! Derivatives can be regulated - at the bear minimum - at 1-to-1 on the underlying. For every CDS contract sold, the buyer must have insurable interest or an equivalent amount of the underlying in their possession. Either that, or nullify all Credit Default Swaps, have sellers return premium to buyers, and thats it. Thats all that had to happen - a 2-page Financial Regulation bill you could handily wipe your ass with - and this ENTIRE CRASH, RECESSION AND "CREDIT FREEZE" WOULD BE OVER IN A PEN STROKE. How many 1000-page Bills have been passed to "Save the Economy"?! How many Trillions have been printed to "Save the Banks"?! How much power was ripped from the People and handed to the Banking Juggernauts that precipitated this derivatized implosion, to begin with?! Perhaps it isn't clear to you yet. The mental conditioning amongst the Sheep for their Butchers is very strong: America was drug into an alley, beaten into a pulp, raped for everything she had, then hauled off to some cockroach-infested basement and held for ransom by the very same people you claim have our best interest at heart: THE BANKERS. Just do the Math. Anyone who doubts me, just do the Math. Total US Subprime Value: 2 Trillion. http://www.msnbc.msn.com/id/17584725 Total Bailout Money Committed: 13 Trillion. http://www.bloomberg.com/apps/news?...id=armOzfkwtCA4 Difference: 11 TRILLION PAID TO ?????? We've been screwed. It's time for everyone to Man Up and face Reality. ................................................ Awesome post....Achilles.....!!!!!! The bottom line is the bottom line..... The answer....follow the money..... The problem.... People that have the podium.... The problem ......Fascist attributes ....intended or not....