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Si1

What is it with the Fed raising IRs?

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Seriously, I agree with what they're doing, there's recognition of the damage that too-low interest rates do to the regular guy. But why are the Fed differing so much to Carney's (misguided) low IR fetish? What gives, institutionally and politically?

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My guess is that Carney has brexit uncertainty to contend with, so until he knows if we are heading for WTO deal , another hybrid deal or referendum he is really just watching the stats regarding inflation, which seems reasonably under control at just over 2% this no rash decisions just yet.

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1 hour ago, Si1 said:

Seriously, I agree with what they're doing, there's recognition of the damage that too-low interest rates do to the regular guy. But why are the Fed differing so much to Carney's (misguided) low IR fetish? What gives, institutionally and politically?

The UK and US economies are different for starters - different rates of growth and inflation.

That's before you throw I'm the perceived threat from Brexit. 

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3 hours ago, Ah-so said:

It's not under threat. 

I agree that from a purely financial point of view there's not that much pressure on the dollar  - However, there has been a lot of talk of de-dollarisation from non-Western countries after the US has repeatedly 'pushed the nuclear button' and overtly used the dollar as a blunt political tool.

It's becoming pretty clear to just about any national government outside the Western alliance that by transacting in dollars you are a) Reinforcing US Global hegemony by essentially creating demand for dollars that the Fed can and will print as it sees fit    and     b) Leaving yourself wide open to US economic pressure if you don't bend the knee.

 

All this is going to make the dollar shakier and shakier over the mid term future.

 

 

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Well, aside of gold, I can't see a currency that could replace the dollar, even in localized exchanges. 

Yuan is too connected to the Chinese government. 

Yen has seen ultra low IR for decades

Euro, well, euro ... They ******ed up.

All the others are resting on too small economies. CHF for example. 

GBP, massively devalued on Brexit vote. Doesn't foster confidence

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The Fed has been raising rates because Trump lit a fire under the economy by introducing massive stimulus. Not only that but he wants to keep doing it - probably right up until the next US election.

It's worth remembering as well that the Fed has also been rolling back QE at a pretty fast rate (the QE everyone said would never be paid back).

https://wolfstreet.com/2018/12/06/feds-qe-unwind-reaches-374-billion-balance-sheet-normalization/

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2 hours ago, Freki said:

Well, aside of gold, I can't see a currency that could replace the dollar, even in localized exchanges. 

Yuan is too connected to the Chinese government. 

Yen has seen ultra low IR for decades

Euro, well, euro ... They ******ed up.

All the others are resting on too small economies. CHF for example. 

GBP, massively devalued on Brexit vote. Doesn't foster confidence

The IMF's Special Drawing Rights (SDR) will replace the dollar. A basket of reserve currencies rather than a single denomination. The U.S economy is far too small and provincial to satisfy a lender of last resort mandate to the rest of the world. Far from making America great again, Trump is symptomatic of its secular decline.

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Because the US economy is white hot at the moment.

You dont see wage inflation as people dont ask for pay rises anymore - modern HR put an end to that. Instead people jump jobs.

US economy is a lot older than it was in the 90s.

A large part - 10/20% -  has been wiped out of employment by opiod addiction.

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38 minutes ago, zugzwang said:

The IMF's Special Drawing Rights (SDR) will replace the dollar. A basket of reserve currencies rather than a single denomination. The U.S economy is far too small and provincial to satisfy a lender of last resort mandate to the rest of the world. Far from making America great again, Trump is symptomatic of its secular decline.

No it wont.

The US economy may be relatively smaller as part of the world economy but there is no other currency used for international trade.

US has stumbled into this position.

Dollar  took over sterling (british empire) as the global currency in 1990s.

No other country has come close.

Theyve tried but they always fail at the last hurdle.

Late 80s - Japan. Whoops banks blew up.

90s/00s Europe. Whoops EURO and PIIGS blow up.

China. Whoops. All blowing up.

US works as it does not care. Trade is a very small part of the US economy.

Dollar - Our (US) currency; your problem.

 

 

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14 hours ago, Sour Mash said:

I agree that from a purely financial point of view there's not that much pressure on the dollar  - However, there has been a lot of talk of de-dollarisation from non-Western countries after the US has repeatedly 'pushed the nuclear button' and overtly used the dollar as a blunt political tool.

It's becoming pretty clear to just about any national government outside the Western alliance that by transacting in dollars you are a) Reinforcing US Global hegemony by essentially creating demand for dollars that the Fed can and will print as it sees fit    and     b) Leaving yourself wide open to US economic pressure if you don't bend the knee.

 

All this is going to make the dollar shakier and shakier over the mid term future.

 

 

There has been plenty of discussion about replacing the USD as the reserve currency for years. There were plenty of discussions about it when the euro was established, but 20 years on, there has been no change. Given that most dollars are held outside the USA, there is too much wealth tied up in it to even risk replacing the dollar as reserve currency.

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1 hour ago, spyguy said:

No it wont.

The US economy may be relatively smaller as part of the world economy but there is no other currency used for international trade.

US has stumbled into this position.

Dollar  took over sterling (british empire) as the global currency in 1990s.

No other country has come close.

Theyve tried but they always fail at the last hurdle.

Late 80s - Japan. Whoops banks blew up.

90s/00s Europe. Whoops EURO and PIIGS blow up.

China. Whoops. All blowing up.

US works as it does not care. Trade is a very small part of the US economy.

Dollar - Our (US) currency; your problem.

 

 

No. U.S. rejected Keynes proposal for a Bancor currency at Bretton Woods. Exorbitant privilege for Wall Street criminals; Joe Six not so much.

The U.S. is a basket-case, same as 2008. Just like China, France, UK etc. Private sector debt the cause.

Co-coordinated global recession ahoy.

 

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1 hour ago, spyguy said:

No it wont.

The US economy may be relatively smaller as part of the world economy but there is no other currency used for international trade.

US has stumbled into this position.

Dollar  took over sterling (british empire) as the global currency in 1990s.

No other country has come close.

Theyve tried but they always fail at the last hurdle.

 

Dollar - Our (US) currency; your problem.

 

 

Think you are out by several decades - do you mean 1950s?

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I don’t really believe this reserve currency business.

Sure the US and A benefits from the demand for its currency, but it’s that demand for dollars that gives it the status as reserve currency. It’s not the ‘reserve currency status’ that creates the demand.  

‘Replacing’ the dollar as reserve just means lessening demand, over time, for USD savings and increasing demand for something else.

The Euro is also a reserve currency, just not to the same extent. At some point demand for Euros and/or Yuan may increase, and they might become the major savings currencies but, again, it’s the demand that matters not the relative ranking.

Edited by BorrowToLeech

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3 hours ago, zugzwang said:

The IMF's Special Drawing Rights (SDR) will replace the dollar. A basket of reserve currencies rather than a single denomination. The U.S economy is far too small and provincial to satisfy a lender of last resort mandate to the rest of the world. Far from making America great again, Trump is symptomatic of its secular decline.

I'm looking forward to see international exchanges using your SDR, feels very impractical. Also won't be touched by common people. Many countries are pegged with dollar de facto because their population will quickly peg themselves to it. I've seen it in Afghanistan. And I see it in other parts of the world. 

Dollar or gold, they are here to stay

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22 hours ago, Si1 said:

Seriously, I agree with what they're doing, there's recognition of the damage that too-low interest rates do to the regular guy. But why are the Fed differing so much to Carney's (misguided) low IR fetish? What gives, institutionally and politically?

Well, whilst I like the pressure created by the FED on IR's (I believe we where robbed of high savings rates in 08 to save the idiots who bought into the bubble) I suspect the move is political. Either to Spite Trump, to deflate the bubble (the new FED chair may be a HPCer) or to create trouble for the BRICKS, specially China.

22 hours ago, crazypabs said:

My guess is that Carney has brexit uncertainty to contend with, so until he knows if we are heading for WTO deal , another hybrid deal or referendum he is really just watching the stats regarding inflation, which seems reasonably under control at just over 2% this no rash decisions just yet.

I don't know, maybe its just Carney

21 hours ago, Freezer? Best place for it said:

The Fed has got a fight withTrump (allegedly a Politician).  He wants a low IR, to promote the living dead, and a pro Zombie environment and increasing DOW.  May wants to keep Zombies.  Basically, the UK Politicians tell the BoE what to do, the Americans try to do economics.

That's a possibility.

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2 hours ago, BorrowToLeech said:

I don’t really believe this reserve currency business.

Sure the US and A benefits from the demand for its currency, but it’s that demand for dollars that gives it the status as reserve currency. It’s not the ‘reserve currency status’ that creates the demand.  

‘Replacing’ the dollar as reserve just means lessening demand, over time, for USD savings and increasing demand for something else.

The Euro is also a reserve currency, just not to the same extent. At some point demand for Euros and/or Yuan may increase, and they might become the major savings currencies but, again, it’s the demand that matters not the relative ranking.

The ECB was gunning for the EURO as a reserve/unit of exchange.

After the sht1 hit the fan, all the EURO banks shrunk back into their own countries, never mind the rst of Europe. 

Total fxup.

If the ERCB wants a EURO reserve then it needs solvent banks.

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41 minutes ago, spyguy said:

The ECB was gunning for the EURO as a reserve/unit of exchange.

After the sht1 hit the fan, all the EURO banks shrunk back into their own countries, never mind the rst of Europe. 

Total fxup.

If the ERCB wants a EURO reserve then it needs solvent banks.

Sure, my only point is that for the Euro, or any currency, to become the major currency requires confidence in that currency as a store of wealth to exceed all other currencies.  And if confidence in the Euro increases, then the Eurozone benefits from that even if  confidence in the dollar is higher. 

So the advantages of a reserve currency are just the general advantages of a strong, stable, liquid currency. 

Even the U.K. gets that, just not to the extent of the US. There no qualitative difference, and no special status, for the dollar, it just currently happens to be at the top of the pile. 

Or at least, that’s my understanding. 

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And the winner takes most. 

Using USD in international trade exposes you to US jurisdictions. And yet, everyone is dealing in dollars. North Korea, Iran, countries on the hit list are craving for USD. If there was an alternative, they would be the first one to use it.

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On 27/12/2018 at 19:09, Ah-so said:

It's not under threat. 

Do you not think it significant that China's short term borrowing is now lower than the US, and that's with them running a budget deficit?

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4 hours ago, BorrowToLeech said:

I don’t really believe this reserve currency business.

Sure the US and A benefits from the demand for its currency, but it’s that demand for dollars that gives it the status as reserve currency. It’s not the ‘reserve currency status’ that creates the demand.  

 

This seems to be a bit of circular logic and not really meaningful. Try replacing the word dollars for 'gold' and it doesn't make sense either. Just chicken and egg.

It is the reserve currency because it is the primary currency of trade and there is continued demand for it because it is the reserve currency. 

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  • 296 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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