Posted on 01/24/2005 9:39:05 AM PST by JFK_Lib
Central banks are shifting reserves away from the US and towards the eurozone in a move that looks set to deepen the Bush administration's difficulties in financing its ballooning current account deficit.
In actions likely to undermine the dollar's value on currency markets, 70 per cent of central bank reserve managers said they had increased their exposure to the euro over the past two years. The majority thought eurozone money and debt markets were as attractive a destination for investment as the US.
The findings emerge from a survey of central bank reserve managers published today and conducted between September and December of last year. About 65 central banks, controlling assets worth $1,700bn, took part and the results showed a marked change in attitude over the past two years.
Any rebalancing of central bank reserve portfolios has serious implications for the global financial system as the US has become increasingly dependent on official flows of funds to finance its current account deficit, estimated at $650bn in 2004.
At the end of 2003, central banks held 70 per cent of their official reserves in dollar- denominated assets and central bank purchases of US securities had financed more than 80 per cent of the the US current account deficit in 2003.
(Excerpt) Read more at news.ft.com ...
To all Y'all,
Its like this: The EU can continue to devalue the dollar, the EU will bring about its own demise in the process.
How? With a devalued dollar, OUR exports to Europe increase. Why? Because a strong Euro gives the EU more buying power against the dollar, and thus they spend more of their money on U.S. goods. Bottom line? It (a devalued dollar) helps OUR export markets.
Flip side: The EU's biggest trade partner is who? That's right...THE U.S. of A. So what the devalued dollar means, is that the Euro's "premium" price against the dollar is KILLING their export biggest export market, because why spend $$$'s on similar Euro goods when it will cost you almost twice the amount?
That my Freeper friends is why a devalued dollar (or attempts by the EU to devalue) are counter productive to the EU!
That is why the average rate of unemployment in the EU countries is above 9 percent right now. There is no market for them to produce for with a devalued dollar!
A double edged sword.
Saving money in a bank doesn't hurt the economy. It makes capital available to those who buy/build houses, factories, infrastructure, etc. This myth that consumption drives the economy is hogwash. You have to produce before you consume.
I know this modern day Babylon speak.
However Europe is exporting it's trash to us.. not the other way around.
There is still plenty of good in this country.
"While we wage a War on Terror, an economic war is being waged upon us. EU, China, Russia, Oil States are willing allies in the fight against us."
I am noticing that too. Like most nations or alliances, when a war is waged, the aggressor always feels it can win. In this case, if the aggressor wins it will not likely result in gain but in calamity.
"and so is our consumer debt."
That is a BIG point. Are we Americans really RICH because we are all 6 fugures plus in debt between our nice homes, fancy cars and super neato electronics? 2% of the population in this country are truly rich, the rest of us are just in major debt.
Since someone mentioned Revelations, I am reminded how Jesus tells the congregations of Laodecia that they feel they are rich, but they are really naked and poor and to take rub their eyes to see the truth. We live in comfort but I would dare say we are truly a "rich" country anymore. I would say we were a rich country when the average American owned their homes and cars by age 40 and only Dad in the household had to go to work to pay the bills. That was more like 1960.
Let's face it - we are all in new territory with the Chinese giant and the EU along with massive deficits from consumers and goverment. It will likely be sloppy or painful at one point even in the best of circumstances. Is the sky falling? I don't know, think the deficits were in the trillions by the middle 80's if I remember correctly.
Understood.
While we are still (just barely, and soon to be eclipsed by China) Japan's largest trading partner, China's largest trading partner is already the EU. For the EU, we are still a larger market, but China is already number two.
I think we should pull the rug from under China and stop trading with them, but I don't think it will have that much economic effect at this point.
>>There is still plenty of good in this country.<<
yes there is.
That has been bugging me for a long time.
Everything I have read says the 10-year is reacting to structural events, just as the 30-year rallied when the government announced it would cease issuing the 30-year.
The problem is the dollar has decreased in value for the last 3 years with no increase in exports as a result.
The central bank is withdrawing reserves?
Just print more money to make up the difference!!
The Dollar is Falling! The Dollar is Falling! -- By Tobin Smith
FROM http://www.changewave.com/BreakingWaves.html?Source=/Archive/2005/1/21-2717.html
DEMOGRAPHICS ARE DESTINY
It just kills you to admit that there is a perfectly logical and
very specific reason for the special treatment that is afforded to
America and denied to Europe: demographics, oh bitter one, are
destiny.
And Europe?s (and Japan?s for that matter) destiny by 2050 is
quite arithmetically one of financial disaster.
Ongoing demographic changes in your society tell us in no
uncertain terms that your:
* Population will be SMALLER in 2050 than today
* Median population age will be 52 vs. 36 today
* Number of retired citizens on fixed pension and healthcare
benefits will be higher than the number of citizens under the age
of 50
* Sovereign net worth minus pension plan liability will be LESS
than your sovereign net worth today
On the other hand, mate, here is the U.S. demographic destiny in
2050, according to European and Asian demographers:
* 420 MILLION citizens, up from 290 million today
* Median age 36 vs. 34 today
* $160 TRILLION in sovereign net worth up from $88 trillion net
worth today
According to every demographic study conducted by European and
Japanese researchers, Europe's population DROPS to 340 million by
2050 from 380 million today. Japan drops to 110 million from 130
million today.
But here, again, is the absolute disaster as far as national
wealth is concerned: the median age for these two societies will
go from 36 today to 52.
More than 50% of their populations will be over age 50 in 2050
with guaranteed pension benefits of between 65%-80% of their last
five years' salaries starting at age 55 in Europe -- with COMPLETE
healthcare benefits as well. They will have more retirees than
working people and more people receiving national healthcare
during the ages (55-80) where more than 90% of healthcare costs
are incurred.
Stop for a second and let those numbers sink in.
Yes, Europeans and their corporations ?save? at a 20% national
savings rate (corporate and personal after-tax and consumption
revenues MINUS governmental budget deficits). Yes, Japan has a
national savings rate of 25%.
And, yes, the American national savings rate is only 14% IF you
only count physical plants and equipment and retained savings held
in banks and money market funds as capital ?savings.? (Which is
ludicrous, but I digress.)
For crying out loud, if you knew that in 45 years you would
absolutely, positively need to have more than 10 times your
current GDP just to pay the shortfall in pension and healthcare
costs -- over $100 TRILLION in today?s dollars -- just where would
YOU choose to save your money?
In Europe? In Japan?
If you knew there was a country that would double its net worth,
more than double its economic output to over 45% of the entire
world's economy, and have an median population age 16 YEARS
younger than your own by 2050, where would you stash the extra
savings you retain to hopefully pay off your population's
retirement and healthcare promises?
This is EXACTLY what is occurring in the world today. Most of the
foreign and domestic press do not have a clue as to how it is
possible:
1) That America can easily afford to run a current account
deficit. (A clue to clueless ones: it's because the world runs
such an enormous savings capital SURPLUS in a brave attempt to
store away enough cash by 2050 to make a dent in their
sure-to-fail pension schemes.)
2) That there has not been the forecast for a ?30% currency
disaster when the foreigners come to their senses and sell their
Treasury bonds to buy Eurobonds.?
A GREAT INVESTMENT
The reality of the global economy is very hard for those abroad to
swallow but very true and very real nonetheless. With the very
real demographic crises faced by Europe, Japan (and to a large
part Russia and China, too), it only makes perfectly logical
financial sense for these countries to own as many
government-guaranteed bonds as humanly possible.
The very real reason is to anticipate the day when the financial
reckoning does inevitably come so they have more than a snowball's
chance in hell of getting their money back.
Do you not see that with the demographic destiny of the global
economy there is ONLY one place where surplus savings capital can
go in order for these countries to have a fighting chance to hold
back the demographic tsunami that they most certainly will have to
endure in the near future?
Don?t you see that retained savings capital in light of the huge
future needs for fungible assets by these countries makes national
savings capital a mere commodity?
There is some irony to this whole ?national savings? rate canard
that continues at hysterical levels in every moronic article I
read. These ?analysts? also fail to recognize that if you counted
the capital gains that Americans have accrued in their IRAs,
401(k)s, brokerage accounts, mutual funds, insurance annuities --
and their personally owned real estate -- our ?personal savings
rate? combined with our corporate savings rate MINUS our share of
governmental debt would EXCEED that of Europe and be close to
Japan.
This reality is just plain lost on the world somehow.
So, to the reality that in an information-based world where wealth
is created from human capital and innovation, the U.S. spends
almost 10% of its GDP on education (7.3%) and R&D (2.7% at the
corporate and government level).
One day soon the bureaucrats will recognize that this is an
INVESTMENT and not a consumptive activity. (Until 1999 these
geniuses ruled that software that lasts for decades was thought of
as an expense, not an investment.) One day soon the world?s great
bureaucrats will come to the conclusion that when you count
retained capital gains and education and R&D investment into the
modern concept of ?national savings rate,? the U.S. will have led
the world in national savings rate for the last 30 years.
How do I know this? Because while our currency was supposedly
collapsing to the euro or yen, our national wealth TRIPLED while
the demographically doomed society wealth barely budged in
relative terms.
The destiny of demographics is precisely why our currency is not
headed for disaster, and precisely why the demographically DOOMED
societies will continue to buy and store away the safest
investment in the world -- U.S.-backed treasury bonds.
Next time you run into a gloom-and-doomer predicting an end to the
American dollar and our economy, don?t confuse them with the
facts.
Just buy the stocks they are selling in a panic and tell them,
?Thank you, love, quite sportin? of you to sell me these stocks at
such a low price.?
Tobin Smith
www.changewave.com
That is simply not true. The U.S. broke its monthly export record at least twice last year.
I think Thomas Malthus is a key example of a “dumb economist.” An Essay on the Principle of Population, 1798
http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/malthus/popu.txt
Thomas Malthus was born in Dorking (England) in 1766. Dorking is a rather appropriate place of birth for this guy, in my opinion and I get a chuckle just thinking about it. Maybe Malthus was the first “dork.”
Malthusian theory goes something like this: "population increases in a geometric ratio, while the means of subsistence increases in an arithmetic ratio." (I have provided this via a sample link below, yet this is “general knowledge” regardless)
http://www.blupete.com/Literature/Biographies/Philosophy/Malthus.htm
Holding that tenet, one must disavow God's sovereign ability to provide for an expanding human population. On the other hand, Libertarian economists have pointed out that there is clearly enough arable land and resources to support the human population several times over. Advances in agricultural management and technology in the 20th Century I believe tend to discredit Malthusian theory. I believe Mr. Malthus was generally wrong in his key pre-theoretical assumptions.
Complications and "other factors" do arise however, even given the opinion by many that the good earth can support “sustainable development.” As we see, civil wars, civil unrest and so on hardly create ideal local conditions for man to focus on tilling the soil. Land ownership and management are other attendant issues. Ending turmoil and civil wars throughout the globe and getting demilitarized rebel personnel (or amoral murderous “government” troops) into farming would be a boost to world agricultural output.
There is no point in farming if someone is shooting at you and wants to take your land or exterminate all the people in your tribe. For example, in the Sudan, I don’t foresee them concentrating on farming anytime soon. Darfur is a mess, the UN is not the solution, and farming is the last thing on their minds, but this has nothing to with the error of Malthus’ math. Interesting read anywhoo.
http://www.concordmonitor.com/apps/pbcs.dll/article?AID=/20050125/REPOSITORY/501250359/1224
The US birthrate is exactly at replacement level. Our population increases due to immigration. Were it not for hispanic immigrants having high birthrates we'd have the same scenario as Europe. Now, who's to say that current demographic trends won't change by 2050?
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