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OnlyMe

Mogambo - Where Is The Us Heading?

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Take note of the size of the US trade deficit and waht would happen if that trade of USD was used to buy up the assets of the US that foreigners want, highly unpalatable both in the short term and long term effects. Is this the beginning of the end of the US or the beginning of the end of the US printing dollars to encourage further debt-fuelled expenditure which could backfire hugely. More to the point how do you stop it - put up interest rates?

Fare Thee Well, Vermont

http://www.dailyreckoning.com/Writers/Moga...ys/MG11805.html

- The monstrous trade deficit got worse, and it was a tidy $66 billion in September, although Barron's has the merchandise trade deficit at $71 billion. A lot of the trade deficit was caused, as usual, by our gluttonous imports of oil. But about 80% of the change in the deficit ($2.3 billion's worth) was in the area of non-petroleum goods, especially in the area of advanced technology (computers, biotechnology, information technology, aerospace materials, etc.). AmericanProgress.org reports, "deficit in these products increased by $2.3 billion in September to its second highest level on record, $5.6 billion." In short, the level of American exports in advanced technology had the biggest drop in four years.

And in that vein, Paul Collins calculates that this $66 billion trade deficit is a lot, and he compares this to, "The value of all of Iowa’s farmland [which] is $85.7 billion. So the trade deficit for the month was equal to the value of 77% of Iowa’s farmland."

Then, for good measure, he throws in, "the value of all Kansas farmland is $124.1 billion. So, simply by giving foreigners all Iowa and Kansas farmland, we can cover our trade deficit for a bit over three months at current rates." But, lest you think that this is all bad news, there is a strange silver lining. He says, "This has the fringe benefit that U.S. taxpayers will no longer have to pay billions of dollars of agricultural subsidies to farmers in these states." Hahaha!

.....

don’t know why the foreigners are not buying U.S. government debt. Maybe it has something to do with the question posed by ContraryInvestor.com, which is: "for how much longer will foreign buyers of U.S. Treasuries be willing to accept negative real returns at what is now close to being the case across the entire Treasury curve?" Ahhh! I think I am seeing the problem! Investing a dollar's worth of buying power only to wind up with 90 cents of buying power is the kind of stupidity that made The Mogambo famous! And believe me, nobody wants to emulate that reputation!

So, what in the hell are they doing with all that money they are earning? The fact that the stock market went up last week, surprising the hell out of me, may hold part of the answer; they may be literally buying the little part of industrial America that they don't already own. Bill Buckler, of the Privateer.com, had this to say, "The U.S. has ended up consuming its once massive manufacturing machine

Edited by OnlyMe

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"the value of all Kansas farmland is $124.1 billion. So, simply by giving foreigners all Iowa and Kansas farmland, we can cover our trade deficit for a bit over three months at current rates."

So what do you reckon will happen to CORN and wheat prices?

I find this quite interesting.

The Chinese can sell us manufactured goods at a fraction of their cost in the west, yet their peasants are still struggling to feed themselves on rice.

Something here is wrong.

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I find this quite interesting.

The Chinese can sell us manufactured goods at a fraction of their cost in the west, yet their peasants are still struggling to feed themselves on rice.

Something here is wrong.

I suspect there is enough food in the world for all.

Just gotta have the money to buy it.

Don't get me started on the wasted amounts or "value added" processed stuff either.

Sorry, food issues bring out a touch of the Puritan in me.

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Result: Inflation of chinese-produced goods will stay low until the Chinese currency appreciates against the Dollar and the Euro etc. That will happen when China improves its banking system enough to recycle its excess credit to its own consumers, rather than buying foreign bonds, and thereby keeping long term rates down in the West. Those low long term rates have helped to inspire our property boom

What I find seriously frightening is the number of commentators and strategists saying that the US (and by extension the UK and my country Australia) don't have a problem because the Asians and particularly the Chines must keep recycling their surpluses.

Some are even floating the idea that the deficit countries are doing the Asians a huge favour by being prepared to soak up their 'excessive savings'.

I'm sorry if I'm not sophisticated enough in my economic analysis, but I can't see a happy end to a situation where a persistent debtor considers they don't have to change their behaviour.

I think that one way or the other we are about to see at least a partial mean-reversion from the wealth imbalance of the last 2 centuries, and the 'affluent west' is going to find that very painful and may even resist the trend by force or threat thereof.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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