Tuesday, January 12, 2010
Frightening US Deficits
Peter Degraaf of Kitco shows the following chart of US deficits since 1900. Degraaf obtained the chart from the St. Louis Fed. It does not appear that these numbers are corrected for inflation (that is, they reflect nominal rather than real dollars) and therefore understate the debt during World War II. However, the graph paints a frightening picture. Those who have faith in the Fed's or the banking system's ability to "mop up" (whatever that rather odd phrase, which has been used by numerous Fed advocates and apologists, really means) newly created money might be able to describe precedents for the current situation and examples of how central banks performed well. There are numerous examples of how past central banks have performed badly, of course. I do not believe that there are many where central banks, including the performance of the Fed in the 1930s and the 1970s, long performed well.
Interview with Governor Gary Johnson
I will be doing an interview of Gary Johnson next week, according to his media relations director, Sue Winchester. Johnson is the former governor of New Mexico and is running for president. He was mentioned by David Brooks of the New York Times as a potential presidential candidate of the Tea Party movement.
China Now Tells You How Rich You Are
Kitco links to a Toronto Globe and Mail article that says that today's fall in the price of gold and the stock market and rise in the dollar is due to a speech by Pen Junming, who works in China Investment Corp., a sovereign asset fund. The Globe and Mail quotes Junming:
“'I think the dollar is at its bottom now. There will be very limited space for the dollar to drop further,' he told an academic forum. 'The yen is what, I think, has the worst outlook. The yen will continue to drop, unlike the dollar, which will not serve for long as a source of funding carry trades.'"
Carry trades involve hedge funds borrowing at low rates in the US and investing around the world at higher rates. Hedge funds have used much of the new money pumped into the economy by the Federal Reserve bank during the Bush and the Obama administrations in this way.
When, later that day Junming said that these views were not official and were strictly personal, the dollar gave back some of its gains. Mr. Peng added:
“'China should have the right attitude about investing in gold. There is no urgent need for China to increase gold buying for now, because prices are high.'”
Yesterday, I bragged of my coin flip method of deciding how to invest in the short term. Today I have a more substantive explanation for staying in dollars for now. Please note, however, that I do not think that Chinese bankers are particularly adept at investment (no more adept than Americans, anyway). They bought into US bonds when the dollar was far stronger than today, and rode a Cyclone roller coaster ride down. The article states that two thirds of China's sovereign assets of 2.27 trillion dollars are invested in dollars.
"Lou Jiwei, CIC's chairman, has been careful not to say much about how the fund invests its money. In October 2009, he said the fund was putting more money into commodities, real estate and infrastructure to hedge against medium- and long-term inflation and a fall in big currencies."
Thus, Pen's statement might reflect a change in position associated with last year's increase in the gold price. The article goes on to say that US asset managers continue to dominate the fluctuations in the dollar. Nevertheless, the Chinese have so entwined themselves in the dollar that their opinion matters. If the US ignores their advice, then we risk a sell off.
I have previously blogged about my fear of a major confrontation with the Chinese occurring in the next (22nd) century. I don't think the dollar will last that long. It should give Americans pause that the purchasing power of their dollars has, under the Federal Reserve Bank's and banking system's regime, become dependent upon the opinions and desires of foreign governments. Unless you idiosyncratically believe that the motives of the Chinese government coincide with your interests, you might wonder about the desirability of a system that has made you dependent on the opinions of a dictatorially and still-communist run nation with a culture very different from our own. I have always loved Chinese culture and the Chinese people, but frankly, I think the Americans have lost their minds.
“'I think the dollar is at its bottom now. There will be very limited space for the dollar to drop further,' he told an academic forum. 'The yen is what, I think, has the worst outlook. The yen will continue to drop, unlike the dollar, which will not serve for long as a source of funding carry trades.'"
Carry trades involve hedge funds borrowing at low rates in the US and investing around the world at higher rates. Hedge funds have used much of the new money pumped into the economy by the Federal Reserve bank during the Bush and the Obama administrations in this way.
When, later that day Junming said that these views were not official and were strictly personal, the dollar gave back some of its gains. Mr. Peng added:
“'China should have the right attitude about investing in gold. There is no urgent need for China to increase gold buying for now, because prices are high.'”
Yesterday, I bragged of my coin flip method of deciding how to invest in the short term. Today I have a more substantive explanation for staying in dollars for now. Please note, however, that I do not think that Chinese bankers are particularly adept at investment (no more adept than Americans, anyway). They bought into US bonds when the dollar was far stronger than today, and rode a Cyclone roller coaster ride down. The article states that two thirds of China's sovereign assets of 2.27 trillion dollars are invested in dollars.
"Lou Jiwei, CIC's chairman, has been careful not to say much about how the fund invests its money. In October 2009, he said the fund was putting more money into commodities, real estate and infrastructure to hedge against medium- and long-term inflation and a fall in big currencies."
Thus, Pen's statement might reflect a change in position associated with last year's increase in the gold price. The article goes on to say that US asset managers continue to dominate the fluctuations in the dollar. Nevertheless, the Chinese have so entwined themselves in the dollar that their opinion matters. If the US ignores their advice, then we risk a sell off.
I have previously blogged about my fear of a major confrontation with the Chinese occurring in the next (22nd) century. I don't think the dollar will last that long. It should give Americans pause that the purchasing power of their dollars has, under the Federal Reserve Bank's and banking system's regime, become dependent upon the opinions and desires of foreign governments. Unless you idiosyncratically believe that the motives of the Chinese government coincide with your interests, you might wonder about the desirability of a system that has made you dependent on the opinions of a dictatorially and still-communist run nation with a culture very different from our own. I have always loved Chinese culture and the Chinese people, but frankly, I think the Americans have lost their minds.
Al Gore Freezes to Death Due to Global Trend
Not really, but the truth is not far off. My former student and currently third year law student at Cardozo Law School, Pini Bohm, sent me this link to David Rose's article in the UK Daily Mail about the current trend toward GLOBAL COOLING. The article states:
"According to the US National Snow and Ice Data Centre in Colorado, Arctic summer sea ice has increased by 409,000 square miles, or 26 per cent, since 2007 – and even the most committed global warming activists do not dispute this."
Apparently, none of the political advocates of the global warming theory care whether the factual evidence supports or refutes their claims. The Mail article quotes Professor Mojib Latif, who has developed evidence that a cooling trend originating from oceanic depths will reduce temperatures. Latif finds that we are now in an incipient global cooling trend:
"Last week, as Britain froze, Climate Change Secretary Ed Miliband maintained in a parliamentary answer that the science of global warming was ‘settled’...
"Prof Latif, who leads a research team at the renowned Leibniz Institute at Germany’s Kiel University, has developed new methods for measuring ocean temperatures 3,000ft beneath the surface, where the cooling and warming cycles start.
"He and his colleagues predicted the new cooling trend in a paper published in 2008 and warned of it again at an IPCC conference in Geneva last September."
As I e-mailed Pinni, I was in the parking lot of the IGA Supermarket in Boiceville, New York this afternoon and someone said aloud "Where's global warming!?#?." It was 28 degrees Farenheit.
About a year ago I blogged that the global warming advocates had not outlined a means by which their theory could be falsified. Falsifiability is the basis of all science. If a theory is not falsifiable it is not science. Ordinarily, falling temperatures as we have seen in the past two years would evidence falsification of the global warming hypothesis, but as the article notes, global warming enthusiasts deny that the presence of global cooling contradicts the claim of global warming.
Perhaps global warming advocates practice a Keynesian version of geology, whereby it can be getting hotter and getting cooler at the same time. According to Keynesian economics we become wealthier by wasting money. There are actually strange people, crackpots, who read the New York Times and believe things like this.
"According to the US National Snow and Ice Data Centre in Colorado, Arctic summer sea ice has increased by 409,000 square miles, or 26 per cent, since 2007 – and even the most committed global warming activists do not dispute this."
Apparently, none of the political advocates of the global warming theory care whether the factual evidence supports or refutes their claims. The Mail article quotes Professor Mojib Latif, who has developed evidence that a cooling trend originating from oceanic depths will reduce temperatures. Latif finds that we are now in an incipient global cooling trend:
"Last week, as Britain froze, Climate Change Secretary Ed Miliband maintained in a parliamentary answer that the science of global warming was ‘settled’...
"Prof Latif, who leads a research team at the renowned Leibniz Institute at Germany’s Kiel University, has developed new methods for measuring ocean temperatures 3,000ft beneath the surface, where the cooling and warming cycles start.
"He and his colleagues predicted the new cooling trend in a paper published in 2008 and warned of it again at an IPCC conference in Geneva last September."
As I e-mailed Pinni, I was in the parking lot of the IGA Supermarket in Boiceville, New York this afternoon and someone said aloud "Where's global warming!?#?." It was 28 degrees Farenheit.
About a year ago I blogged that the global warming advocates had not outlined a means by which their theory could be falsified. Falsifiability is the basis of all science. If a theory is not falsifiable it is not science. Ordinarily, falling temperatures as we have seen in the past two years would evidence falsification of the global warming hypothesis, but as the article notes, global warming enthusiasts deny that the presence of global cooling contradicts the claim of global warming.
Perhaps global warming advocates practice a Keynesian version of geology, whereby it can be getting hotter and getting cooler at the same time. According to Keynesian economics we become wealthier by wasting money. There are actually strange people, crackpots, who read the New York Times and believe things like this.
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