Oh look – China to plunder Oz mineral wealth. Suprise surprise.

I have just started

The Predator State: How Republican Economics Betrayed Us, and What We Should Do about It
By James Galbraith
Published by Simon & Schuster, 2008
ISBN 141656683X, 9781416566830

There is an excellent discussion of China from page 81-86.

The book is a corker. I think Steve K. and James G would agree on a lot of things.

My experience is that most economic professors are to theoretically oriented to ever be any good at investing, if they are poor at investing it means they don’t know anything, as money talks. I don’t think you can be a good professor without having certain practical skills. I think the process of making correct theories begins with a correct perception. Most guys like Krugman, that don’t even understand the faults with the CPI, falls off already there. I think it’s lack of intuition or common sense. What good is it to know latin if everything you hear and see is distorted. If your input are faulty, nothing good is going to come out of it. George Soros, or Warren Buffet is different. I perceive them to be geniuses or artists in what they do. I think it’s in their perception of the world it lies, the input are perceived correctly with as little bias as possible. They perceive things as they are, and don’t assume to much. I think that’s a good start. What I see now is that the practical guys seems to call for inflation, and the theoretical guys are betting on inflation. The non practical guys never get things to work in the real world, therefore the outcome must be inflation. Really simple is it not?

Note to self: proof read.

Inflation has been massive. Yes, the expansion of the money supply has been growing at an astronomical level. Until early 2008 when the destruction of credit money began. This destruction of credit first started to slow the rate of increase in the money supply and then once the flood of destruction took off, reversed the growth in money supply.

Forget CPI, it is a floored lagging measure (but it still approximates changes from period to period). The money supply was inflating massively and now the money supply is deflating.

In Norway, prices were certainly just as high as in Australia and even higher than in the US, but inventory and building activity have been much smaller. So that they level out and rise after just a very short time suggest to me that the currency devaluation to gold, and lowering of interest rates do work, and that we are likely to get a second cycle of inflation and price rises similar to in the seventies. The other countries just needs a bigger push to clear the inventory.

The biggest confusion that exist are those of real commodity prices. We haven’t yet been anywhere near the level of oil in 1980.

http://research.stlouisfed.org/fred2/series/USMINE

I think we are at least halfway in a natural resources cycle.

Since the rise in natural resources employment have been just as similar to the early seventies, it just confirms my idea that inflation have been just as bad. What mess the whole thing up is that most economists trusts the CPI. The changes made to the CPI in the US since 1980 means it’s no longer a usable tool.

Inflation still at 8 %, and the federal reserve keep pumping.
http://www.shadowstats.com/imgs/sgs-cpi.gif

if you are serious, read some sites that perform some credible analysis. I recommend you review Brad Setser’s site

http://blogs.cfr.org/setser/

to have some understanding of world trade flows, which shall play a central role in how this saga will be played out.

With regards to US debt, and in particular the metric their debt/gdp ratio, the US infact ran up a much greater ratio during World War II and then drew it down after, so it not beyond the realm of possibilities that this crisis will certainly give the US the impetus to do the same of the coming decades. One must also acknowlege that it is not the US versus the rest of the world, the rest of the world is as much in this as the US. In effect they are in a deadly-embrace, one needs the other and vice-versa, which is exactly what Schiff et al. completely ignre.

I wouldn’t worry to much about the US, many other countries, and Australia in particular, are in as much a precarious state as is the US, and in many instances even worse. The saving grace for the US is that it holds the international reserve currency and that matters. The USD denominated economies of the world, China-Gulf-America, put together are a formidible USD denomiated trading block. The US makes use of this arrangement to allow them to run deficits.

The US has major challenges ahead of it, like most countries that have gone on a debt binge, and Australia is right up with the worst culprites. There will be pain. But to extrapolate to the only outcome being economic armeggedon is ridicules.

“I think the countries you mention is to small to support the treasury market if you remove Asia from the equation.”

Oh really…, why should these countries be removed, you are creating hypothetical cases which do not exist, like Schiff, et al. You hope this, and hope that, but don’t consider the facts on the ground. One can rightly put the case that what currently exists will continue. You have not given any justification for your proposition.

Norway did not participate in a housing buble like the majority of the Anglo-Saxon economies did, so I wouldn’t expect that Norway has any relevance to what happens in such bubble economies.

dojufitz,

you have merely put a hotch-potch of numbers without any analysis to go with it. I await your analysis. For unfunded social security and medicare mediaid numbers can always be repudiated, nothing is ever written in concrete.

The US is once again turned into a saving nation, the US deficit will be funded domestically and by foregin countries that a USD pegged and run current account surpluses, like China and the Gulf petro-states.

First of all , the next stimulus package has nothing to do with the banks. The 850 billion to one trillion being proposed is nothing more then pork and some tax cuts.

The original tarp was 700 billion.

The next tarp is being estimated to rise to at least two trillion dollars.
This is what it will cost to make a good bank bad bank scenario work.
If you listen to N Roubini, he says the number is really 4 Trillion.

Then we have the last stimulus by G W last year. I don’t remember how much that was, but it was hundreds of billions . Maybe 3 or 4 hundred .

Then you have the 7 to 8 Trillion that has been loaned out buy the Federal reserve last year . Nobody other then the feds themselves really know where this money was loaned and what was taken in return as collateral.

And we have not even disscused the fact that the federal govt is now running over a trillion dollar defecit for its general operations.

Then you have to consider the unfunded social security and medicare mediaid numbers which are being estimated at anywhere from 50 to 100 trillion dollars.

I’ll stick with Gold & Silver!