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Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

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  • ThePythonicCow
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    P.P.P.S. -- Gold "backed" the Dollar in an indirect way in the two decades between the early 1980's and the early 2000's. It was commonly priced in Dollars, and its Dollar/ounce price was declining over that period, which us Conspiracy Cows Nuts blame on central bank and bullion bank manipulation. When you choose to price your product in units established by your "arch enemy" and when they have the power to manipulate that price, you're pwned. Gold was no longer the stronger money backing the Dollar; Gold was being abused by the Dollar Masters to the benefit of the Dollar. I am predicting this scenario will repeat, with the Wocu.

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  • ThePythonicCow
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    Originally posted by LargoWinch View Post
    TPC, do you believe that the Wocu will have a gold component?

    For my part, I think it will be essential in order to sell this new currency to the masses.
    The Wocu does not have a gold component at present, as others have noted above. I don't see any way that the Wocu could be directly modified to contain a gold element and maintain its current selling strengths, as an apolitical meta-currency weighted against a basket of all the worlds major national currencies.

    The Wocu isn't sold to the masses; individual nations (or regions, perhaps, with the Euro) keep their national currencies. The Wocu is only "sold" to major players in the Forex markets, such as national central banks and big energy and transportation interests.

    The Wocu would hope to become the world's reserve currency, the meta-currency, the currency in which national central banks settle accounts and hold reserves, and the currency in which major inter-national contracts for transportation and energy might be written, replacing the Dollar in its reserve currency role.

    Gold comes into the scene indirectly, as holdings of various national central banks, in varying degrees and as "insurance" (the same reason you or I hold gold in the long term) for the day that such international fiat currency arrangements collapse.

    P.S. -- When and if gold is commonly quoted in Wocu rather than Dollars, we will likely hear familiar sounding allegations from us gold bugs that the price of gold in Wocu/gram is being "managed" by the GIS/IMF/G20 and their central banks, in order to lend credence to the sustained value of Wocu. I'd expect we'd see the Wocu/gram price of gold fall for a decade or two, as we did with the Dollar/ounce price after the early 1980's Dollar crisis.

    P.P.S -- Ultimately it would be this falling price, in Wocu/gram, of gold, over a period of a decade or more, that would drive a substantial quantity of gold from smaller private hands back into central banks. That re-centralization of gold is something I also anticipate, and mentioned IIRC yesterday in some other post somewhere here on iTulip. Investors usually seek to hold what's increasing in wealth and to divest themselves of what is declining in value.
    Last edited by ThePythonicCow; 06-09-10, 04:24 PM.

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  • Chris Coles
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    With the run in to the first budget of the new government under way here in the UK the same debate applies to us as well. Here, I expect to see a move towards forcing the executive to work within the tax income which will be reduced by a measure for repayment of debt. So here also, there would be no incentive to drive raising the rate.

    But there is another aspect to this that is worth remembering. Low interest rates are a prerequisite for long term equity investment. Once savers realise they cannot see a return to banking their savings and earning an income above inflation, then the drive becomes irresistible to find a better home for the savings. In past times, that would have been "markets" of one form or another. But this time, that route will diminish as regulatory effects take hold and suppress the use of the savings in that sphere.

    It will soon dawn on many that the one place they might see a reasonable return will be from what are normally described as most risky, local community investment of equity capital into local small and medium businesses. Not for the expectation of a rising asset value for the share which will not trade on any market. But instead, from the dividend income. If such SME's realise they can gain friendly local investment if they provide a reasonably secure 8% annual return from their annual dividend; then a new phase of investment will start. But that will not be under FIRE rules, but true free enterprise rules.

    Policy makers need to realise the potential. But that will in turn bring them a downside. If savings start to run into such investments; then they stop flowing into the FIRE coffers and are not available for the use of the government. The more established bond markets will dry up if the flow of savings changes direction.

    The next few months will show us where the regulators want the flow to go.

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  • bill
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    Originally posted by LargoWinch View Post
    TPC, do you believe that the Wocu will have a gold component?

    For my part, I think it will be essential in order to sell this new currency to the masses.
    Bunker Oil
    http://www.navitasresources.com/pressrelease.asp

    Ben live
    http://www.c-span.org/Watch/Media/20...ic+Growth.aspx

    Leave a comment:


  • Jay
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    Originally posted by LargoWinch View Post
    TPC, do you believe that the Wocu will have a gold component?
    Looks like no is the answer:

    "Q2. Is Gold not the best store of Value?
    Answer:
    The WDX Organisation does not include gold in its basket. Gold may be priced in Wocu and this allows the markets to see the price of gold marked to a less volatile yardstick. The Wocu may be a valuable contribution to the pricing of gold, a volatile instrument in a class of its own. Opinions will always differ as to whether gold is the best way of storing value. "

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  • LargoWinch
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    Originally posted by ThePythonicCow View Post
    Only a few cows, but what do they know ?

    I figure they will have a go at re-basing the world's monetary system from the Dollar to some SDR-like (say the Wocu) reserve currency, and that it will take a few more decades at least for us to learn the hard way the limitations of that approach.
    TPC, do you believe that the Wocu will have a gold component?

    For my part, I think it will be essential in order to sell this new currency to the masses.

    Leave a comment:


  • Adeptus
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    I was wondering if anyone had some insights on a similar question but in regards to Canada. Recently, on June 1st, the BoC (Bank of Canada = US Fed), dipped its pinky toe and tested the waters of market sentiment by raising the rate by 25 basis points. Canada was the first of the G7 to do so btw. The result was a sell-off in the Canadian dollar by almost 2 cents in one day, which was opposite of what I was expecting since I was under the impression that like Australia, interest rate hikes, means dollars return to your country and currency valuates higher against other major currencies. Anyway, various "expert" interpretations of the BoC announcement were provided here. (worth a read if you are interested in Canada)

    For the past many years, as per the chart below..



    ...Canada nearly always mirrored the US Fed in regards to interest rate hikes & cuts. While the BoC is still leaving its options wide open and could hit the pause button at any time should the global markets go into another downward spiral cutting off inflation & Canadian GDP growth, its stated intent is to return back to the historic 2-3% norm. So it is entirely possible we see a few further 25 basis point increases for the remainder of the year, but I would be surprised to see Canada ultimately go off on a different tangent than the US fed for very long.

    Any insights on this matter? I'm closely watching the Western Canada real estate market, and while it may very well start tanking (price wise) any month now, a continuous set of interest rate hikes, would push variable mortgage rates higher and immediately accelerate the over extended housing bubble up here.



    ... Found another relevant chart...


    Thanks,
    Adeptus
    Last edited by Adeptus; 06-09-10, 01:12 AM. Reason: 1x grammar + 1x aesthetics, 2% to 2-3%, + added 1 chart@bottom, + additional comments in 1st paragraph

    Leave a comment:


  • ThePythonicCow
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    Originally posted by jtabeb
    Still, is ANYONE doubting the trajectory we are on.
    Only a few cows, but what do they know ?

    I figure they will have a go at re-basing the world's monetary system from the Dollar to some SDR-like (say the Wocu) reserve currency, and that it will take a few more decades at least for us to learn the hard way the limitations of that approach.

    Leave a comment:


  • jtabeb
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    "As I've been saying, this is not a drill. Our economy is in a horrific bind of multi-generational proportions. The gold market is broadcasting loud and clear what it believes the outcome will be: a debt and currency crisis as governments over-extend themselves in trying to bail out economies that went into crisis as a result of over-leverage in the private sector. "

    Can we just call this "hyper-inflationary depression" a Spade and be done with this none sense? (I know, I know, we have to wait for the POOM first. Still, is ANYONE doubting the trajectory we are on. The only question left is one of timing).

    Leave a comment:


  • FRED
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    Originally posted by Chomsky View Post
    Link's broken.
    Fixed it. Thanks!

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  • ThePythonicCow
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    Originally posted by Chomsky View Post
    Link's broken.
    The correct link is Are fed rates going to rise soon?

    Leave a comment:


  • Chomsky
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    Originally posted by FRED View Post
    This article resulted from a subscriber question to Ask EJ. Taking questions on that forum: Are fed rates going to rise soon?

    Link's broken.
    Last edited by FRED; 06-08-10, 07:51 PM.

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  • FRED
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    Originally posted by gnk View Post
    How would the Fed react to an exogenous factor that pushes up price inflation? Such as...

    Chinese workers are getting raises: http://www.nytimes.com/2010/06/08/bu...l/08wages.html

    or

    Instability in the Middle East - oil skyrockets.
    This article resulted from a subscriber question to Ask EJ. Taking questions on that forum: Are fed rates going to rise soon?
    Last edited by FRED; 06-08-10, 07:50 PM.

    Leave a comment:


  • vinoveri
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    Originally posted by EJ View Post

    It takes more than beer to make a party and more than low interest rates to get an asset bubble going. It needs a catchy theme like the New Economy of the technology bubble era, a guest list of hopeful suckers, and a source of funding such as Venture Capital. Someone has to send out invitations, as the National Association or Realtors did during the housing bubble, and someone else has to publicize the event the way the business media did during both recent bubbles. Without the whole package, no bubble.

    The Japanese can tell you all about it. The Bank of Japan dropped interest rates to near zero in 1995. Fifteen years later there's no new bubble in sight.
    But are'nt we americans supposed to be more "inventive" than the Japenese? ) (where are the emoticons anyway?)
    In any case, we have their failure to generate a sufficient bubble as something to learn from.
    Do the powers that be really want another bubble? If so, then surely they are smart enough to have been seeding it in this ZIRP period. Hey that free money has to go somewhere ( perhaps zombewhere is more appropriate) ... to balance the bad debts and reliquify banks and perhaps; I agree, it's not employment but the sustainability of FIRE that is the goal (b/c with FIRE another bubble and with that employment will take off).

    So, how can we recognize, (not the early stages of the bubble even though that would be nice), but the seeds of the next bubble, i.e., policy decisions, and posturing of the politicos, and FIRE industry actions??? We know they want a bubble and are either thinking hard about it and have probably already laid the groundwork.

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  • gnk
    replied
    Re: Don't hold your breath waiting for Bernanke to raise rates - Eric Janszen

    How would the Fed react to an exogenous factor that pushes up price inflation? Such as...

    Chinese workers are getting raises: http://www.nytimes.com/2010/06/08/bu...l/08wages.html

    or

    Instability in the Middle East - oil skyrockets.

    Leave a comment:

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