Economics

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please explain......

[TrueLight]

anyway continuing with what this topic is about........


Currency: Mac Index tells the tale
William Pesek
August 11, 2009

THE year since Lehman Brothers collapsed has seen one of history's greatest wealth transfers. Asia has sent ever-increasing amounts of money to the West, while the US is moving ever-rising mountains of debt to the East. That trade averted the financial Armageddon many feared; that's good news, and it's still going on.

To verify the argument, you can spend days weeding through reams of US Treasury data. Or you can just think of the world's most famous hamburger.

The Economist's latest "Big Mac Index" shows the extent to which Asian currencies are undervalued against the US dollar. Hong Kong's dollar is 52 per cent undervalued, followed by the Chinese yuan (49 per cent), Malaysian ringgit (47 per cent), Thai baht (47 per cent), Indonesia rupiah (43 per cent), Philippine peso (42 per cent) and South Korean won (28 per cent).

Those figures suggest two things. One, Asian central banks are still buying dollars. Two, the region has yet to overcome a key vulnerability: addiction to the US consumer. The latter point means Asia can't be complacent about this crisis.

Granted, the Big Mac Index is a lighthearted barometer that some will dismiss. It compares prices for McDonald's burgers globally using the concept of purchasing power parity.

The idea is that the dollar should buy the same amount in all countries and that, over time, exchange rates should move towards a level that equalises the price of an identical basket of goods and services.

The measure has its flaws. Local inputs - such as wages and rent - say much about what a Big Mac costs in Stockholm or Jakarta. In Asia's case, though, the index is indeed providing insights as we assess the wreckage following the September 2008 demise of Lehman Brothers.

Who back then would have foreseen what's since become of the global financial system? Trillions of dollars of public bail-outs, the US breaking all the economic commandments it imposed on Asia a decade ago, Singapore bailing out Wall Street giants, China and Russia eyeing a replacement for the dollar, you name it.

A key side effect of Lehman's implosion was accelerating a dynamic that began during the 1997 Asian crisis. Back then, Asia began shipping household savings to the US to help exporters.

Unprecedented market turmoil and a deep global recession last year gave Asian governments even more reason to hold down currencies, says Simon Grose-Hodge, strategist at LGT Group in Singapore. That meant buying even more dollars.

Timothy Geithner is no doubt fine with that. The US Treasury Secretary is spending more and more time placating fears about the dollar in Asia. Yet concerns that Asian policymakers would pull the plug on US debt haven't been realised.

The reason says more about Asia's weaknesses than its strengths.

Many believe Asia's vast savings give it considerable leverage over the biggest economy. In reality, Asia's fetish with US Treasury bonds is more about weakness than strength. Asia has gotten itself into an arrangement from which it can't escape. If it dumps its treasuries, it loses billions of state money and wrecks any chance of a US recovery.

Political will is lacking to retool economies away from exports towards domestic demand. China, for example, is throwing nearly $US600 billion at its economy and the result is an astonishing 7.9 growth rate. It's doing little to boost domestic demand, though, and the unbalanced nature of China's pump-priming may be setting the stage for a Japan-like bad-loan crisis. And Japan's plight isn't much brighter. The hundreds of billions of dollars it is spending offers merely a short-term fix.

The money won't get Japan any closer to dealing with a steady loss of competitiveness amid the rise of China and India or an ageing population. It will only increase an already daunting debt load.

And so, policymakers are sticking to a formula that's worked wonders: hold down exchange rates. That's good for the US because Washington needs Asia's money to finance its historic borrowing spurt. That's why Asia's dollar-buying has a powerful inertia to it. The question, of course, is whether the phenomenon can continue indefinitely.

Korea's recent experience - managing in the second quarter to expand at the fastest pace in almost six years - shows the importance of weak currencies. Samsung recently joined exporters Hyundai and LG in reporting surging profits. An under-appreciated risk is the dollar crash on which hedge fund managers have been betting for years. Such an eventuality would boost exchange rates and act as a formidable headwind in Asia.

That may seem a more immediate problem for Europe. The latest Big Mac Index shows the Norwegian krone to be 72 per cent overvalued, followed by the Swiss franc (68 per cent), Danish krone (55 per cent) and Swedish krona (38 per cent).

Exchange rates in Asia, meanwhile, are in many cases below pre-Lehman-collapse levels. It's a short-term positive and a long-term negative for the fastest-growing region. The proof is everywhere - even in the burgers.

BLOOMBERG




also

Rand Paul on talking on RT about healthcare, foreign policy, economic policy. 11/8/09 
http://www.youtube.com/watch?v=HauPyV_kuHE

[shinny]

MODERATOR ACTION: EPIC FLAME WAR DELETED.

[TrueLight]

A nice video created by someone, summarising the economic situation.
pretty dramatic, the way he's made it, but i like it!

http://www.youtube.com/watch?v=4ZRbT_8N9Zs

[TrueLight]

ha cant believe it, its in the most popular section woohoo!

BERNANKE GETS APPOINTED FED CHAIRMAN FOR ANOTHER TERM!

http://www.youtube.com/watch?v=F4MPPGqPkwU&feature=topvideos

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Ron Paul : They´re Planning New Monetary Structure!

http://www.youtube.com/watch?v=1hxQAvB6Knk

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MUST SEE - RON PAUL INTERVIEW - Scarborough says Ron Paul was ALWAYS RIGHT!
ron paul explains lots of things! from the fed, to healthcare, to corporations being saved by obama and free markets!
15/9/09

http://www.youtube.com/watch?v=Ilcr6akrwoE

[TrueLight]

This Keen professor overlooked by MSMPLANET WALL STREET
September 10, 2009
THIS is how a free press operates. This is how the public came to know.

Professor Steven Keen, of the University of Western Sydney, was in Canberra at the weekend to work with the CSIRO.

We arranged to meet at the National Press Club, which, unknown to me, was hosting a wake for Fred Brenchley, a journalist of great repute and once editor of The Australian Financial Review. The place was bursting with journos, many of the financial persuasion.

Yet not one noticed or recognised one of Australia's foremost economists.

When I first spoke to Keen, only a few weeks ago, I mentioned that while I knew him well from international publications I rarely saw him mentioned in the Australian press. He remarked: ''Aussie intellectuals are sometimes treated as prophets abroad, but merely tall poppies at home.''

Of course Keen is not a prophet. He is an economist. But economists ''do prophecies'', as George W. Bush might say.

A team from Goldman Sachs in a report on the financial crisis basically said the best and the brightest could not have foreseen a black swan event of this nature, a one in 250,000 shot, as one economist put it.

The internet was in uproar, for many economists, banished from the mainstream media, had prophesied the inevitable consequences of profligate policies. A list was published of the top 12 economists to see the collapse of capitalism as we once knew it. Keen came in at No.2. Professor Nouriel Roubini, now paraded to the world as the only man alive who even thought it possible, was well down the list.

At the press club, Keen was quick to produce his laptop and his charts and we studied things like the explosion of money these past 12 months and discussed how quantitative easing had eased the royal family back to the situation where they, unlike the zombie banks of the world, would not require any more public money to sustain their modest lifestyle and such matters. Then we departed. Not a ''hello Professor Keen'' to be heard.

Fast forward two days. Late Sunday afternoon, Keen and I were discussing, almost in the shadow of Parliament House, the travails of economies to come when his phone buzzed.

Al Jazeera wondered if he could be available for a comment on the G20 meeting of finance ministers. Keen might not get much Aussie exposure but he does get on networks that are watched (like hawks) by 250 million people.

Keen agreed to make an appearance but, having just come from the gym, didn't quite look the part. I provided a suit coat and a shirt that had once been ironed. An hour later he was back. An impish smile could not be contained. He suggested we watch the Channel 7 news, an unheard of experience for me.

Amazingly they led with G20 (slow news day) and a full four minutes were wasted as the ministers crowed of their success in controlling the aforementioned fall of capital and their determination to make bankers earn their money. The spin was flying off the plasma. Our leaders were doing their all.

Then, like a bolt of navy blue - that being my suit and shirt colour - appeared Keen.

He had been seen commenting on the outcome of the talks and invited to enter Channel 7's office, partly because he had a suit, he overheard. Again no one knew quite who he was but he was an economist with a suit (coat). And it was a slow Sunday.

Channel 7 granted him but a minute but in that time he demolished the spinners, like Michael Clark at his best.

Bankers, viewers learned from this eminently and evidently respectable person, should be ''paid like plumbers''.

Then Keen told what must have been a startled TV audience that bankers long ago ceased being humble lubricants of commerce, and had instead become parasites. They lend us money to play in a Ponzi scheme, launder the loot through stock and housing markets - where prices are driven up using the money they lent us - and then take a slice of the rising prices and call it a performance bonus.

Far from deserving their salaries, let alone their bonuses, Keen told six o'clock Sunday viewers, bankers deserved to be paid no more than plumbers, and to be given less respect. After all, plumbers fix leaks; if bankers did anywhere near as well, we'd be having a financial ball, not a financial crisis.

That was it. A few simple sentences and the best-laid plans were kaput.

Thus, because an Arab network called, Keen had access to a suit coat and someone saw him commenting on the subject.

Let's see how much more the prophet comes to grace our screens and talk truth to power. Might be a long time between drinks.

But with those few words all the spin of G20 was hammered out of the ground. I suspect the doctors are still looking for the ball.

David Hirst is a journalist, documentary maker, financial consultant and investor. His column is syndicated by News Bites, a Melbourne-based sharemarket and business news publisher.

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Canary in the Coal Mine
  

Like a battering ram in a medieval siege, gold keeps hammering away at the gate. For the third time in less than twelve months, the yellow metal is once again crashing into the $1,000 per ounce level. As of press time, it looks like gold will close above that level today and will set a new record in the process. Even if the breach is fleeting, who can doubt that it will mount another assault soon? In the meantime, there is no shortage of market analysts who are not buying gold while questioning the motives of those who are. Although they offer a variety of strained reasons, they nearly all agree that it has nothing to do with inflation, which is nearly universally considered dead and buried. As a self-confessed gold bug, I can assure all that inflation is the only reason I buy gold. And recently, I'm buying a lot.

When individuals choose to accumulate savings in the form of gold rather than interest-bearing paper deposits in government-insured accounts, there is only one reason for doing so: they fear that the interest will not be enough to compensate for their expected loss of purchasing power through inflation. This fear reflects both current inflation and the expectation for future inflation. While there are those who buy gold to speculate on its appreciation, the underlying factor that drives that appreciation in the first place will always be inflation. If governments were not creating inflation, there would be little investment advantage to owning gold.

Some believe that gold investors are primarily motivated by fear. It is often assumed that gold is the one asset class that holds its value when all other asset classes are falling due to market uncertainty. But this explanation brings us right back to inflation. When economies move into recession, there is always political pressure for governments to intervene. Their one tool is the printing press.

When governments act to prop up sagging markets, or bailout investors or depositors of failed institutions, they create inflation (print money) to pay for it. This, in effect, transfers capital from prudent investors to speculators. At the same time, it pulls the rug out from under the safest vehicles of traditional investment – bonds and cash. It becomes hard for investors to protect their principal, much less grow their wealth. Some turn to gold, with its historically guaranteed ‘floor’ against losses, and others start making ever riskier investments to try to ‘beat’ the inflation rate.

Gold’s appeal as an asset of choice during times of political uncertainty, particularly during wartime, is again a function of its being a hedge against inflation. Wars are always expensive. They are also often unpopular, which makes paying for them through tax increases politically dangerous. As a result, they are almost always financed through the ‘secret tax’ of inflation. For a nation that loses a war, or suffers revolution or systemic civil conflict, there is always the chance that its currency could become worthless. While this may not be the kind of inflation that we read about in the business section, it is the ultimate form of the monetary malady – whereby a currency loses all of its purchasing power.

Whenever the price of gold rises sharply, I always take it as an early warning sign that inflation expectations are rising. If those expectations are not met, its price will fall. If the market is correct, gold will maintain its gains. And if the inflation continues to intensify, so too will gold’s rise. Most analysts, however, simply look at the dubious CPI to determine the presence of inflation and inflation expectations. They perennially forget that prices are a lagging indicator and only a symptom of inflation, and may in fact not be rising at the moment when inflation kicks into high gear.

The anti-gold camp takes their greatest solace from the bond market, where things have been eerily quiet. They maintain that since bond yields have not risen much, inflation must not be a problem, and so the gold bugs are simply paranoid. The bond market, they tell us, is populated by ‘vigilantes’ who sound a bugle call at the first whiff of inflation. But this argument ignores the fact that central bankers themselves are the biggest bond buyers and are in effect ‘vigilantes-in-chief.’ Their outsized participation in the market has led to gross distortions. When the Fed or another central bank buys treasuries, real returns are not considered. Purchases are made for political reasons rather than investment merit, which renders meaningless the signals current bond prices are sending.

The gold-bashers also believe that reduced consumer demand due to unemployment will keep inflation pressures at bay for the foreseeable future. However, inflation will ultimately act to reduce the supply of goods much faster than unemployment reduces demand for goods, sending prices up despite lower demand. The stagflation of the 1970s is an example of such an outcome.

The bottom line is that gold is continuing its long-term bull run, and those who dismiss the message behind its rise do so at their own financial peril. When it comes to inflation, gold is the canary in the economic coal mine. Just as unseen toxins kill the canary before the miners succumb to the fumes, a spike in gold is a harbinger of reckless monetary devaluation. Our leading commentators think that since they can’t see or smell the gas, all those canaries (gold prices, commodity prices) must be dying of natural causes. Good luck to them when the toxins flood the mine.

Peter Schiff

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Broadband play could backfire
KEVIN MORGAN
September 16, 2009


HAS the Minister for Broadband Stephen Conroy gone too far in the package of telecommunications reforms he introduced? He says it offers Telstra flexibility to choose its structure, and consumers and businesses a competitive future.

Nothing could be further from the truth because, as so often, the devil is in the detail. What the legislation is about is trying to guarantee the commercial success of the planned $43 billion national broadband network by coercing Telstra to transfer its customers to the new network as it is rolled out and shutting down the rival Telstra copper network to give the government-owned one a monopoly on fixed network services.

Nevertheless, according to the minister, Telstra has a chance to determine its own future. It can agree to voluntary structural separation and no longer ''beneficially own'' or control a fixed network, in which case it gets to share in the spoils of new wireless spectrum, while possibly keeping its pay TV interests at the minister's discretion, or it can cop enforced functional separation.

The latter would mean the network and retail divisions operate at arm's length and Telstra would be denied access to spectrum from the digital TV conversion or higher frequencies for next-generation high-capacity mobile services.

At first glance it would seem Telstra has no choice. Take an agreed path to structural separation or wither because functional separation will remove any incentive to invest in the fixed network and the company won't have any spectrum for growth and new services in the all-important mobile sector.

It looks like a brilliant strategy from Conroy that has wedged Telstra. It will force Telstra on board the national broadband network because, as the memorandum to the legislation explains, if it transfers its customers to the new network, that would satisfy the call for structural separation. The other way Telstra could satisfy the conditions and get new spectrum and possibly keep cable TV would be to sell down its stake in the copper network to 15 per cent and buy services from the new owners or another network operator.

Neither of these latter two options is in the least realistic. Who would pay $17 billion plus for the ageing copper? Certainly, not the national broadband network company because the Government believes it has a big enough stick to secure Telstra's customers at a time of its choosing. And there is no other national network Telstra could buy from. But is transferring customers to a network, the costs, design and roll-out of which are as yet unknown, any more realistic? Scarcely, when it's the provision of economically and socially vital telecommunication services that are in question.

Like Conroy's earlier attempt to wedge Telstra, the $4.7 billion fibre to the node broadband tender, this new policy threatens to be too clever by half and it's a high-stakes gamble that puts the future of the Australian telecommunications industry at risk.

While the Government believes it has all the cards, it may have overplayed its hand and Telstra could just call the Government's bluff. It mightn't look like it but the Government may need Telstra more than Telstra needs it.

The chances of the legislation getting through the Senate are remote and Telstra could find its competitors' enthusiasm for the national broadband network will wane rapidly now that they are confronted with having to buy access at far higher prices from it than they pay for Telstra's copper. Many of Telstra's competitors believe the copper network should continue to operate in competition. They must be sorely disappointed.

And despite the credentials of the national broadband network team, the task of building the network is monumental. It took more than 100 years to build the copper network. Now the Government tells us it can do it in eight years from a cold start.

Obviously it needs more than the promised transfer of Telstra's customers to the new network. It needs Telstra's expertise and resources to build it. Telstra would be entitled to tough it out and not offer the much-needed assistance until the threats are withdrawn.

The downside to Telstra toughing it out until rationality returns to policy is that there would be no immediate investment in the fixed network and little investment in new mobile services if the largest player is frozen out of the market. Kevin Rudd's vision of a nation of the best and brightest could get a lot dimmer as the key telecommunications infrastructure fossilises.

Kevin Morgan is an independent telecommunications consultant.

[TrueLight]

Ron Paul gets interviewed by TIME magazine 17/9/09
questions include: auditing the fed, media, legalizing cannabis, sasha baron cohen film, conspiracy theories, income tax (4:34 is lol cause its so true), iraq and afghanistan.

http://www.youtube.com/watch?v=4kMxgOJK3-0









Jim Rogers on CNBC
Let the bankers turn in their Lamborghinis and start driving Taxis. Pay them in toxic waste.The regulators should be in jail.

http://www.youtube.com/watch?v=TukdxAuTmao

[TrueLight]

love this video... Ron Paul explaining his new book and the case against the Federal Reserve! sept18th/09

http://www.youtube.com/watch?v=SyqJNvYAXe8&feature=channel_page

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Ron Paul on Bloomberg explaining why we don't need a Federal Reserve 23/9/09

http://www.youtube.com/watch?v=y0O8Kdy2Hwc



Ron Paul schools Bernanke

http://www.youtube.com/watch?v=dMqSxUPvS6o




Ron Paul "We Should Never Be Fearful Of The Truth"  on MSNBC 24/9/09
http://www.youtube.com/watch?v=GZ5e5MfEY2o

[Collin Li]

TrueLight, and any others interested in a great networking experience in Sydney with the CIS (an economic think tank), check out:

http://libertyandsociety.org

I went there earlier this month - it was awesome!

[TrueLight]

mmm interesting ill check it out more later on