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World Imbalance

  • #1
  • First Post: Sep 19, 2006 8:57am Sep 19, 2006 8:57am
The world needs:

1) strong USD, less risk premiums needed on credit, USD bonds. Domestic consumption of foreign exports. Relative cheaper commodity prices for domestic manufacturers(if there are any).

2) cheap JPY, exporting nations need a cheaper currency, especially when they are trying to get out of economic gloom.

3) dollar proxys: EUR GBP, some with a bias against the USD, will favor inflows into these.

4) cheap YUAN, cost of living is less for americans.

This ultimately leads to deterioration of manufacturing in this country and turns this country into a service industry. The USA creates instability all over the world, and USA into a premium local to live in. Everyone flocks to this nation for the service industry, whether it be the infrastructure or healthcare. So the rich of the world end up buying assets in the USA, and hiding money here instead of their own nations, where political and financial instability is worse.

This is the largest macro cycle around. Not sure when it will end.
Price is the only indicator.
  • #2
  • Sep 19, 2006 9:15am Sep 19, 2006 9:15am
A higher form of extortion, really producing nothing, but demanding a higher quality of living from the rest of the world.

Think of the Sopranos, and you have a good analogy of what we are turning into.

Carrying the biggest guns. But really not producing anything.
Price is the only indicator.
  • #3
  • Sep 19, 2006 9:26am Sep 19, 2006 9:26am
Quoting Spectre2006
A higher form of extortion, really producing nothing, but demanding a higher quality of living from the rest of the world.

Think of the Sopranos, and you have a good analogy of what we are turning into.

Carrying the biggest guns. But really not producing anything.
How is it that Americans aren't producing anything? We just don't MANUFACTURE anything (scratch that)...we don't manufacture much...some manufacturing is still done here.

Our biggest exports are still technology. Even though the actual items aren't manufactured here, the businesses that DO produce them are still here. We export planes, cars, pharmacuticals, microchips, paper, lumber, building materials, software, heavy machinery and of course, the finest defense systems money can buy.

Since when don't Americans produce anything?

Trust me, I could find you 150,000,000 americans that actually do work for a living.

I don't know where you got the idea that we don't produce anything.

Not to pounce on you, Spectre, but your statement is a bit ridiculous. If it's one thing that I find most offensive is someone telling me that I'm just wasting my time...which, apparently, since you think I don't produce anything, well...I must be.
  • #4
  • Sep 19, 2006 9:36am Sep 19, 2006 9:36am
I think the evolution is towards UK style economy. Mostly service oriented. The analogy is carried a little far, but ultimately this where we will end up or moving towards.

Most of the manufacturing will take place in the Pacific Rim, Russians will demand premiums to enter their markets. Eur and GBP will benefit from close proximity to this region.

Middle East will become less important, as a push is made into alternative fuels. In another 50 years, something will come up. A form of fusion. Latin America will still be a drug based economy. With poor political infrastructure.
Price is the only indicator.
  • #5
  • Sep 19, 2006 10:01am Sep 19, 2006 10:01am
Forex traders debating whether a certain population produces anything? The irony of this made milk come out my nose.

... and I wasn't even drinking milk.




In defense of Spectre I would like to posit that a strong nation depends upon its industrial self-sufficiency. After all what is this tool called money? ...just a piece of paper that a lot of people believe to have meaning? No. It is a measure of a nation's ability to produce.
  • #6
  • Sep 19, 2006 10:22am Sep 19, 2006 10:22am
Quoting SKW322
Forex traders debating whether a certain population produces anything? The irony of this made milk come out my nose.

... and I wasn't even drinking milk.




In defense of Spectre I would like to posit that a strong nation depends upon its industrial self-sufficiency. After all what is this tool called money? ...just a piece of paper that a lot of people believe to have meaning? No. It is a measure of a nation's ability to produce.
On some level, you are correct, but I'm sure we could argue the finer economic points of this.

However, if what you're saying is correct, explain to me why the GBP and EUR are so strong...what exactly is "produced" in those countries? As Spectre said, both those economies are mainly service industry based. And if what you are saying is true, then the EUR and GBP should be on par with the dollar. I think it's just a little simplistic to say that a currency reflects a nation's ability to produce...there are OBVIOUSLY more factors involved than just the ability to produce...there are political factors, and financial risk factors to take into account. I'm sure there are other economic factors to take into account.

My exception to the statement was the extortion comment. Not everyone in America is like the Sopranos. Not everyone believes that the world is our playground. Not everyone believes that we are a "superpower" because we have the guns. Not everyone believes that our lives increase in value because another country's population suffers. I'm not saying that the world can't be viewed with such cynical eyes, but I just don't think it's the whole picture...especially when I work hard for my family's fortune and give back to not only my local community, but to the international community when I can spare it.
  • #7
  • Sep 19, 2006 10:30am Sep 19, 2006 10:30am
Just look at what your seeing in the world playout. There are a lot of good people in this country, and a lot of bad people thinking they are doing good things in this country for them. But ultimately they are fooling themselves.
Price is the only indicator.
  • #8
  • Sep 19, 2006 10:36am Sep 19, 2006 10:36am
This sounds like a political discussion. Maybe the lounge is a better place for this.
  • #9
  • Sep 19, 2006 10:40am Sep 19, 2006 10:40am
Quoting smjones
This sounds like a political discussion. Maybe the lounge is a better place for this.
It seems to have migrated in that direction, Scott.
  • #10
  • Sep 19, 2006 10:45am Sep 19, 2006 10:45am
Nothing wrong with a political discussion, just better suited here...
  • #11
  • Sep 19, 2006 11:41am Sep 19, 2006 11:41am
Gosh, I did not mean to kill the discussion. I'll move it back...
  • #12
  • Sep 19, 2006 11:49am Sep 19, 2006 11:49am
Thai crisis.. Iran speech...FOMC tomm....PPI weak...Housing Weak..Equity crashing...Bonds behaving badly....

=)

lots more interesting things happening.
Price is the only indicator.
  • #13
  • Sep 19, 2006 11:51am Sep 19, 2006 11:51am
Oil down hard.. before Iran speech. I wonder if someone has the transcript of the speech.. an extra copy can get lost easily.. especially if the xerox machines are networked and scan copies as copies are made.
Price is the only indicator.
  • #14
  • Sep 19, 2006 1:52pm Sep 19, 2006 1:52pm
First of all, the reason I didn't bother to take issue with the extortion comment is because it seemed self-evident that it was an oversimplification of how the US economic strategy is trending based on what Spectre thinks "the world needs". Long term economic strategy on the order of decades seems to be what Spectre is interested in discussing, implied by post#4. This range of prediction has always seems moot to me because of the strong political divisions in the US combined with frequent elections.

Fact is that the US still has a sizeable manufacturing component that may or may not be eroded depending on the politics of our elected officials. According to data released by the US Census Bureau regarding July (http://www.census.gov/indicator/www/m3/)

"New orders for manufactured nondurable goods increased $3.0 billion or 1.6 percent to $193.8 billion" AND
"New orders for manufactured durable goods in July, down following two consecutive monthly increases"

So, the actual month to month data go up and down, but do not support the doom and gloom you'd expect from watching CNBC alone.
  • #15
  • Sep 19, 2006 1:54pm Sep 19, 2006 1:54pm
Secondly,

in response to mrmikal's question: When I said that "a currency reflects a nation's ability to produce", I did not strictly equate production with manufacturing. GBP and EUR are very capable producers with modest manufacturing capabilities.

An opinion I am expressing is that a strong nation, may or may not have a strong currency, but will have the means to produce much of its own goods. I see no strength or world stability in polarizing the world into some countries predominantly filled with consumers and others predominantly filled with manufacturers.
  • #16
  • Last Post: Sep 19, 2006 2:01pm Sep 19, 2006 2:01pm
Quoting SKW322
First of all, the reason I didn't bother to take issue with the extortion comment is because it seemed self-evident that it was an oversimplification of how the US economic strategy is trending based on what Spectre thinks "the world needs". Long term economic strategy on the order of decades seems to be what Spectre is interested in discussing, implied by post#4. This range of prediction has always seems moot to me because of the strong political divisions in the US combined with frequent elections.

Fact is that the US still has a sizeable manufacturing component that may or may not be eroded depending on the politics of our elected officials. According to data released by the US Census Bureau regarding July (http://www.census.gov/indicator/www/m3/)

"New orders for manufactured nondurable goods increased $3.0 billion or 1.6 percent to $193.8 billion" AND
"New orders for manufactured durable goods in July, down following two consecutive monthly increases"

So, the actual month to month data go up and down, but do not support the doom and gloom you'd expect from watching CNBC alone.
You and I are totally on the same page with this. Thanks for the clarification.

As you said, manufacturing is merely a component to the overall picture and that decades is a time range to large for the market as frequent elections can yield 3 different economic positions in less than a decade.

Thanks for your insight on this.
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