WILL CHINA LEAD A STAMPEDE OUT OF THE US DOLLAR? (Very informative charts!)

FinacialSense ^ | November 29, 2006 | Gary Dorsch

[BlackjackPershing]

If they do, it'll wreck the US economy...which has been their plan all along--cripple us economically.

[GodGunsGuts]

Thank you!!! True anti-Communists are few and far in between on this thread!

[nopardons]

You're margined THAT much?

[Toddsterpatriot]

You have already admitted "how so."

Associated with or participating in a questionable act or a crime; having complicity:

I don't agree.

You yourself said you were against PNTR,

I was. I was also against giving China the Olympics.

Would you sell fertilizer to Timothy McVeigh?

Not if I knew he was making bombs with it.

[GodGunsGuts]

Yes. And I have been--in and out, over and over--for the last five years.

[GodGunsGuts]

Red China is making rifles, bombs, missiles, fighter aircraft, bombers, nuclear subs, warships, aircraft carriers, and lasers with our "fertilizer." Not mention making common cause with virtually all of our enemies.

Where do you draw the line when it comes to Red China?

[Toddsterpatriot]

If the Commies are still in power in 10 years, PNTR will have made them stronger. If the Commies get the boot, PNTR will deserve some of the credit.

Where do you draw the line when it comes to Red China?

I don't invest in China. Can't trust them Commies.

[GodGunsGuts]

We have finally found some common ground, Toddster. But PNTR will never succeed in toppling Communist China (if that was ever its purpose).

[Toddsterpatriot]

I think I saw something that said as soon as a country hits $6,000 GDP per capita, they become democratic.

[GodGunsGuts]

LOL...talk about faith (in something you were against)!

[Toddsterpatriot]

More recently Adam Przeworski of New York University confirmed this truism by studying every attempted transition to democracy around the globe. He and his colleagues found that once a country passes $6,000 in per capita income it is virtually guaranteed to succeed in its transition to democracy. States between $3,000 and $6,000 have less than a 50-50 chance of staying democracies. And countries below $3,000 are almost bound to fail.

Low Per Capita Income Countries Never Remain Democracies

[Toddsterpatriot]

Trade doesn't raise GDP? LOL!

[GodGunsGuts]

Are you sure about that?

[Toddsterpatriot]

Countries that trade more have higher GDP.

[GodGunsGuts]

I'm confused. Are you saying that trade can or can't raise GDP?

[Toddsterpatriot]

Trade raises GDP. Why are you confused?

[GodGunsGuts]

I must have misread your post. I thought you were saying trade can't raise GDP.

[Alia]

If that's the best response you can provide, perhaps you should take up drinking.

[expat_panama]

If gold goes south, then my celebratory mood will be considerably dampened :o( :o( :o(

There's absolutely no reason to accept that risk.   It's possible to enjoy a leveraged return while at the same time hedging your investment.  It's done by making the correct set of options contracts.  There's a lot of people and places with the info --my favorite is the book on the right.  The author is a genius, runs an options consulting online business, and he's a freeper. 

It's possible that some of the investing advice you've been getting was tainted by a conflict of interest, especially if it came from someone who's also trying to sell the particular commodity that's being recommended.  You did very well so far in spite of the risks you carried.  Check out your other alternatives, your options (as it were) with ways to profit with gold.

Good hunting!

[Alia]

Fed still treats unemployment as the price to be paid for lower inflation, as that is the only mechanism the funds rate target can provide.

When politicians enact micro-policies which serve to inflate the dollar, it is the Fed's job to hold the dollar steady.

This is precisely the type of intrusion into the market that intellectuals insist upon trying, while doing so much damage in the process. Their contention is that Americans will be much better off if they pay greater value for what they buy, and receive less value for what they sell. Experience since 2004 shows the fallacy; we pay more and we get less, making the current account deficit much worse than it would have been otherwise. The Fed should be prohibited from changing the values of private assets based on its theories of what will be best for Americans. The Fed should be required to provide currency with stable value - period.

I suspect you ignore the actual flexibility of the value of the dollar. Real GDP versus nominal GDP tends to show that variance. Are you arguing for a "board" with no rules, then?

You are saying that the Fed is intentionally weakening the dollar as a "temporary inflationary measure."

If you've gotten that impression, it's wrong. The Fed is not "intentionally weaking the dollar for the sole purpose as a hedge against "temporary inflation".

By all its public statements I have seen, the Fed contends it is trying to strengthen the dollar and is raising the funds rate target for that purpose.

I concur.

My contention is that the higher funds rate targets, coupled with regular purchases of T-securities in the open market, have produced a weaker dollar and greater inflation.

This is, in fact, a true assessment. But will it result in the horrid inflation of the 60s? Not necessarily.

Long term, these actions are strengthening the dollar in real terms across all market sectors. Which ultimately results in the dollar buying more rather than less.

Are you of the view that the funds rate hikes are intended to weaken the dollar, as well as the economy?

No. We've just been through a vast growth in our economy. It is now time to take those goods and services to the market. To make those goods and services attractive to buyers, couching the market is a very important bit in balancing all trade sectors.

The reduced budget deficit produced by higher tax revenues, the low unemployment rate, increased incentives for investment - all these result from the well-advised fiscal policies of the Bush administration, specifically the 2003 cuts in marginal tax rates. Based on those 2003 tax cuts, the dollar was holding its value very well and interest rates were lower than today. But the Fed then insisted on raising the short-term rates, effectively increasing the costs of capital to consumers and small/medium businesses by at least 4.25%, a total effective drain of capital of at least $180 billion/year.

Are you against reinvestment in the American economy?

That Fed mismanagement countermands the supply side tax cuts, will eventually cause small/medium businesses to stop hiring, especially if the Fed decides to raise the short rate higher. If the rate goes higher, recession will follow and the dollar will weaken further. Then the Fed-induced cycle will start all over, but after great capital losses.

Your analysis posits that small/medium businesses owners have no concept of what to do with their profits. On the plus side, this downturn permits companies, using credits/incentives, to reinvest in their own human resources; to streamline their operations, to train new employees, to get a handle on their operations, in addition to reinvesting in their own company via expansion, streamlining, investing in stocks and options, purchasing related firms, etc.

Democrat economic policy is hopeless, almost, on both the fiscal and monetary side of the equation. That is why lost opportunities with a good Republican president are so distressing, due to inadequate economic advice.

I concur fully with you in re Democrat economic policy. I do not see where the President and the Feds are awry. All actions by Feds portray to me all the signs necessary to achieve a REAL solid improvement in the value of the dollar. The stage setting. Cooling the low percentage rates of housing loans, for starters. That had to happen. The whackiest kinds of loans were being created which put me in mind of the S&L scandals of the past. Now, whether or not you think this is good or bad depends upon which part of the market section you are viewing this from. The Feds are tasked with the job of bank sector solidity.