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Pyrrhic Victory

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Re: Pyrrhic Victory

#81

Post by grandinj »

We're in the midst of an unprecedented effort to time-shift wealth/money/value.

Never before in history have we attempted to store wealth at this scale for things like retirement.

In a world that was continually growing at a pretty solid pace (i.e. since WW2) that was sort-of conceivable because the bigger next generation effectively created more space for that.

But now people live, and retire, for muuuuuccchhhh longer.

And sovereign-wealth funds, retirement funds, insurance funds, etc, are much larger.

And population growth is slowing (and with, financial growth).

Some very hard things to square coming up.

Re: Pyrrhic Victory

#82

Post by yardie »

tclancy wrote: post #46
RobertoG wrote: post #24

"That policy will work for as long as the rest of the world continues to accept US dollars as something other than pieces of funny green paper…" What a nonsense. Like if the USA is the only one doing it. Everybody is doing it and at the same time. I hope this help some people to dispel this myths about the "public debt" and living to the grandchildren expense. What markets are covering this public debt when everybody…

I think you missed the point. If the current administration, or possibly some other dumb one in the future, undermines US credibility where other countries unpeg from the dollar, we are going to turn into a shithole country pretty quickly.

No one is forced to buy US treasury bonds. And as soon as the Treasury issues new ones they always find buyers. There are a lot of finance managers sitting on billion dollar funds. They have instructions to invest it. It's a sure investment because tax payers always pay their debts.

Other countries, specifically China, have been trying for years to come up with an equivalent. They see it as an alternative to the instability of the US dollar. Problem is the dollar has been stable and the alternative provides almost no advantage to other countries who aren't China, or US embargoed.

Re: Pyrrhic Victory

#83

Post by RobertoG »

fuoqi wrote: post #66
RobertoG wrote: post #49

Earlier quoted context omitted.

"other countries unpeg from the dollar.." I don't know what that means. In the current international arrangements all the important currencies are floating against each other all the time. The value of the dollar (respect other currencies) comes from being the currency of one of the most valuable economies in the world.

I think you severely underestimate the power of positive feedback. Some economists argue that around of third of US GDP can be attributed to the unique position of the dollar. If for some reason foreign investors and governments will lose their faith in dollar (even today gov. bonds already have negative inflation-adjusted profits, imagine if inflation will be 10%-20%), then they will start to dump bonds and assets n…

So, if I understand it properly, your model of the world is that the USA needs to borrow in dollars (its own currency) in order to finance itself. In the case that there were not enough buyers for their bonds, the interest rate of the bonds should go up because offer and demand.

This beg the question of where is the money coming in the current situation, where all the major countries are following the same policies.

At the same time, you are saying that "foreign investors" and "governments" are buying bonds with negative inflation-adjusted profits because they have "faith" in the US economy. So, in the last years, at the same time the deficit and the public debt went up, the "faith" has gone up as show by the interest rate.

Here is an alternative view: the markets are powerless to determine the interest rate against the central bank. An example, Italy and the crisis of debt of 2011. They had a debt crisis until the ECB decided there will be not more crisis.

The markets dance to the song that the Fed sing. I don't know what more have to happens for people to start accepting it. The federal government don't need the markets, the markets need the bonds.

Re: Pyrrhic Victory

#84

Post by yardie »

tclancy wrote: post #70
RobertoG wrote: post #49

Earlier quoted context omitted.

"other countries unpeg from the dollar.." I don't know what that means. In the current international arrangements all the important currencies are floating against each other all the time. The value of the dollar (respect other currencies) comes from being the currency of one of the most valuable economies in the world.

Sorry, "unpeg" was the wrong word entirely and muddied what I meant to say. If US dollars stop being the de facto accepted exchange currency we are in trouble.

Some US politicians would love nothing more than for the US dollar to not being used for international exchange. Other countries enjoy the right to devalue their currency for trade and debt. The US has no relief valve mechanism. $1 is worth exactly $1 everywhere in the world. We can't sell cheaper goods to China, for example, without making the products physically cheaper. China can always sell cheaper goods to the US by manipulating the RMB relative to USD.

Re: Pyrrhic Victory

#85

Post by nappy-doo »

wazoox wrote: post #21

The FED is buying out every asset in existence, that means that there aren't any markets, any prices, everything is state-owned and the economy is entirely socialized, and it's now the "USSA". Stock markets are surfing the wave to grab as much as possible before the inevitable crash and collapse. No wonder the IMF head said we need a "Great Reset". This can't end well...

You realize the Fed isn't controlled by the government, right? Some of the leaders are selected, but the decisions CAN (not necessarily are) made without consultation of any of the branches of government. Besides the oversight of the leadership, there is no power granted to the branches of government into the Fed's decisions.

Re: Pyrrhic Victory

#87

Post by aphextron »

MichaelMcG wrote: post #71
chadash wrote: post #42

Earlier quoted context omitted.

> How, exactly? What "long term decisions" would not have been worse off if the 2008 bailouts hadn't been made and a large chunk of Western retail banking had gone insolvent, tying up accounts until it could have been resolved? There is an important difference between "this business is no longer viable", and "this business is perfectly viable in the future but is experiencing a temporary shock which its cashflow and…

> This is essentially what’s happening to Warren Buffett right now who has a war chest is billions of dollars saved up during the good times that he’s ready to invest now. But it’s not as viable a strategy because the government props everyone up. In all fairness, Berkshire Hathaway stepped in to bailout Bank of America. It obviously paid out handsomely for Buffett and Co. long term, just find it interesting to use a…

>In all fairness, Berkshire Hathaway stepped in to bailout Bank of America. It obviously paid out handsomely for Buffett and Co. long term, just find it interesting to use as an example.

Private capital does not "bail out" companies. That's called an investment.

Re: Pyrrhic Victory

#88

Post by RobertoG »

yardie wrote: post #84
tclancy wrote: post #70

Earlier quoted context omitted.

Sorry, "unpeg" was the wrong word entirely and muddied what I meant to say. If US dollars stop being the de facto accepted exchange currency we are in trouble.

Some US politicians would love nothing more than for the US dollar to not being used for international exchange. Other countries enjoy the right to devalue their currency for trade and debt. The US has no relief valve mechanism. $1 is worth exactly $1 everywhere in the world. We can't sell cheaper goods to China, for example, without making the products physically cheaper. China can always sell cheaper goods to the U…

How could possible China manipulate the RMB relative to the USD but the USD be worth exactly the same everywhere in the world?

Re: Pyrrhic Victory

#89

Post by pjc50 »

chewz wrote: post #80
StillBored wrote: post #75

Earlier quoted context omitted.

You forgot inflationary pressure from all the "free" money. That is what really upset me the most about the 2008/etc situation. I was looking to buy a house, and you would have never known there was a housing crisis where I lived (Austin). The banks were more than willing to sit on assets than actually sell foreclosed properties at market values. So while the housing prices went down slightly, your talking maybe a 10…

I did mention pushing savers into real estate and other assets. Lots of people are flipping houses simply because thay cannot get decent returns on bank savings anymore. Same goes for professional money managers of all kinds who simply cannot provide decent returns to their customers by buying bonds like old school. So they are forced to chase yields in other risky assets. Also with bank savings everyone has an equal…

Why are people entitled to a positive return on capital, a particular form of unearned income?

Re: Pyrrhic Victory

#90

Post by woeirua »

orbifold wrote: post #33

It is interesting how different countries and cultures deal with the same challenge. Streets were pretty empty and shops were closed for maybe a month here in Germany. Now (almost) everything is open again, the streets are full. Unemployment rose somewhat but not catastrophically. The images and videos we get from the US feel apocalyptical in contrast.

You have to be careful with what you look at in the US. The media here is definitely cherry picking the worst of the worst to show people. Were some places hit really hard? Yes. Absolutely. Does the entire country look like NYC? No. Not even close.
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