Paul Tudor Jones has penned a masterpiece, with regards to the impotency of US policy towards China.
Fun fact for tonight: if we accounted for inflation the same way we did before 1980, right now, our inflation rate would be 10% instead of 1.
QE2, y’all.
If you enjoy the content at iBankCoin, please follow us on Twitter
link not working. Says 404 error page not found.
http://dealbreaker.com/ Available through the main page it seems.
It works fine for me. Anyone having issues?
Works for me.
By the way I will now respond to all questions market and non-market related with only two answers: POMO and QE2
I will dress as a clam this Halloween
You gunna haf a pearl?
True story I got my costume and I am going to be an illegal Mexican. I am thinking about trick-or-treating at Home Depot
not in arizona i hope…
I asked my wife if she wanted to ‘QE2’…..she said ‘no’….I said well can I at least get a POMO……she smacked me 8-(
Maybe it’s because I’m in Canada.
nope.
i’ve read it from the land of snow and social security for all.
Link is iffy. Took several tries. Great read. Thanks.
Link is good.
product inflation requires wage inflation to be sticky. until then, this is all a mirage.
Wages are for slaves
Historically North American wages are not downwardly flexible. 20 million people looking for jobs, people will gradually earn less. Only it won’t be less on paper thanks to inflation.
the top gets paid in divvy.
the top mgmt gets bonus.
mid mgmt gets salary.
slaves get wages.
Profits are evil.
The wages of sin are death.
Seriously PTJ doth protest too much. We are in fact, fucking China, not vice versa. We buy their cheap shit, which enhances our standard of living while suppressing theirs (artificially).
In turn, our manufacturing base is FORCED to become “super value added” as is our service sector — this is all conducive to higher standards of living.
Meanwhile, back in Chiner, Sung Wong Gap is sewing doll arms on Barbie knock offs, at an artificial price of 38 cent an hour.
What happens when the inevitable comes and Chiner realizes… shit, we’ve been suppressing our currency for years and now that we have to finally revalue (because the US dollar has become tissue paper) we are stuck with a high priced, artificially immature manufacturing base.
Meanwhile, Taiwan, Japan and Singapore are eating Chiner’s lunch with their more advanced value added manufacturing that actually pays a decent wage (while employming many robots).
It’s going to end badly for us, no doubt, but it’s going to be an absolute fricking ca-TAZ-trophe for the Chinese.
______________
this depend on the speed which china create a sustainable middle class. but how fast is fast enough?
the paradox of planed economies is that they tend to level it off so much as to crush the middle and make slave out of it while a few have it large at the top. creating inefficiencies slowing down the development.
how much time does it take for china to replace the slaves with robots? i guess that’s the question i’m asking.
i’m surprise you include japan in there. everybody mention japan as the next default.
Japan is a mystery. at every level.
Japan is still quasi-MOF controlled, and that’s a problem. That said, they’ve at least let wages rise. Note — they did not until the late 70’s, but guess what happened when they did? Remember the Time Magazine covers? Then they chickened out and tried to control the boom… dumb.
I remember being in bidness school when the yen was 82 to a dollar (about 1994), and my Japanese next door neighbors (in Japan, the banks PAY YOU to go to bidness school!) would go to places like EGYPT and sheet, for Spring Break.
Nice people though.
-this is all conducive to higher standards of living. (??????????)
What, we give up $50-100k mfg jobs for cheap mattresses with a free TV and that’s suppose to sustain our issue for another generation or two? Keep invoking Smoot-Hawley, protectionism and “trade war” at your own risk. As PTJ reminds, they fired the first shot. When are we gonna fight back? The only delay is the vote needed by the GOP based senate but they’re afraid to cut off the profits of their “business constituents” … screw their non-business constituents, they’re broke anyway!
China will get it back … what goes around, comes around. They used devalued currency to steal our wealth short term but will get back worthless dollars long term … I see pitchforks and sickles running wild through their industrialized streets in the future … last laugh, USA!
Teahat — you cannot sustain an increasing standard of living by manufacturing textiles and mattresses in Leominster just like your dear old grandad used to do. The world moves on, and competitive advantages are constantly eroded.
To stay a rich nation, you have to manufacture terraflops of new digital doodads, like your contemporaries are doing on the 495 loop. Capisce?
Learn economics Democrats, learn economics! For the sake of your grandchildren, if for nothing else.
__________
“this is all conducive to higher standards of living.”
I guess some people aren’t up on current events but there is one heck of a lot of people (the ones who don’t work on Wall Street) that aren’t doing to well. Believe it or not their wages haven’t supported their standard of living for a decade or more. Only by increasing debt levels could they improve or at least maintain their standard of living.
PTJ hit the nail on the head and what amazes me is that it took one of the wizards of Wall Street this long to figure all this out. We got people here in middle America, with barely more then a high school education, that could see what was happening years ago.
Great article! Another looming currency issue for the States: When oil goes over ~$90, Canadian dollar will go over parity. Within 5 years, 1 loonie will buy more than a $1.40 US thanks to high oil prices. That will be epic too. Road trip baby!
That is, if we don’t just annex your Labatt’s drinking asses.
What are you going to do? Send up the P-54 Mustangs?
________
Great quote from twitter: @TheEconomist Canada’s conservative policy worked because its trade grew exponentially thanks to “risk-taking” America. #askbuttonwood
Canada is the richest country in the world in natural resources per person. They have the luxury of socialist policies because of their vast natural wealth.
No amount of wealth can afford a hole in the boat. Look at wealthy UK — arguably the most stored capital in the Western World, circa 1896 (pre-Boer War).
Lanced in 1917, pummelled in ’39-45, and then drained of vast wealth, albeit slowly, 1945-’79 or so.
Still struggling.
______________
UK lost it’s wealth in trying to sustain colonies which eventually broke away
(common wealth nations)
uk was doomed to fail once navy no longer dominated
UK was at its strongest when it was leveraging the wealth of its colonies to feed it’s vast industrial revolution. Stuff only started to slide downhill when they began to implement such government bright ideas like the Corn Laws in the mid-19th century.
More very bad ideas followed, and of course, Marx and Engels were Englishmen, to boot.
Engels was the son of a wealth factory owner! How freaking typical is that?
Asshat!
_________
Canada is the richest country in the world in natural resources per person
Bullshit.
The Arrow will make a comeback.
Jake – that’s funny.
Jake – remember the war of 1812 when marched into Washington, burned down the White House, got drunk on Labatts and went hom.
The Canuckistanians were not the one who did that, it was the Redcoats from Merry Olde England.
The Canuckistanians beat off our cross-border raids in that war, though.
______
It’s not politically expedient. You’d annex the Middle East first. It has the side benefit of slowing the supply of oil the the rest of the world. Although most of the USA oil imports come from Canada, we are small potatoes on the global stage.
Then again, there is rumours of the Amero, and the agendas of bilderbergian consolidation…
If you annex something you take responsibility for it. The biggest pain in the ass Canuckistanian communist (see “Nice” or his other five names on my blog) is not as bad as the least competent Wahabbist.
No thanks, I’ll take the cans-of-blue-beer people over the cut-your-hand-off-for-drinking-a-beer people any time.
_____________
5 years?
I think sooner or not. … or sooner AND not.
Sooner because the current US monetary policy is leaking money out to commodity faster then it can be measured. ie: it will be too late to turn off the tap once the number start moving.
second not 5 years. because by then the US economy will have had its effect on the CAD economy. something you can’t really see yet. because the CAD govs (at three lveles) have gone full kaynesian on the populace wallet. by that time i think canada will be worst off then the states. its currency will be worth less.
whatever we fixed in 90s will have all been spent. all thrown away in less than 5 years.
Canuckistan is remarkably more stable than the US right now. If they get rid of the PC “think control” stuff, and start privatizing their healthcare (how ironic would THAT be?), they will be in far better shape than we will.
For one thing, we won’t even be rid of Obama for another two years, and he’s no Clinton. Prepare for the war of attrition.
____________
roundtable on tweet @the economist have another good quote tonite:
How can we make the free market system reward the sort of behaviour we are looking for?, asks Clark – but offers no anwer, alas #buttonwood
I think in some sense that’s where canada fin system (among others but certainly not everywhere) succeeded where US fin sys failed. IE: the system favored and rewarded the sort of behavior wished for.
but can an economy support conservative policies without a neighbor willing to take the risks? it’s all good to have a great defense, and it can take you to the cup, but the whole point of the game is to win and that is done through only one ultimate thing; scoring. and to score you need a risk taking offense.
The United States Dollar (USD) vs Costa Rican Colón (CRC), 10% drop in the dollar yoy for the past two. The USA jumped the shark.
WFC compared analysis of CAD austerity measures vs upcoming US autherity.
posted orig from PPT debert:
“http://www.scribd.com/doc/40178400/Would-Canadian-Style-Budget-Cutting-Work-in-America “
it is COMMIE CAPITALISM and we cannot beat it unless we have the balls to stand up to and suffer the crap now. Otherwise, we are a PLANTATION of China where we are allowed some work but send our money to China. [By the way, IF we have balls, AAPL is fucked (go back and read a bunch of the old HBS cases on how messed up AAPL manufacturing was before they got the combo of undervalued Chinese currency and Foxconn slave camps). ]
We are not a “plantation of China” for cripes sakes.
Unless you define a “plantation” as a group of wiley bastards trading cheap plastic beads for Sharp LED 56″ screens.
__________
as someone else said, “We are the new ‘native Americans’. We are selling our country, and its resources, for trinkets.”
aaah thrash trinkets. reminds me xmas is around the corner.
Talking about trash… A quote from PTJ:
“The United States lost six million jobs, indebted itself to China by $1.4 trillion, and received in return a host of consumer goods, many of which now reside in landfills across the country.”
Nope, we’re selling our useless paper for real value. You’ve got the meme backwards.
________
but you are forgetting the trade off … the loss of those long term good paying mfg jobs for cheap consumer products with a life span of at best 5 yrs.
You can call the Dems liars when it comes to the cost of providing a “security net” but won’t admit that Repubs lie when it comes to profits vs jobs and the law of diminishing returns when it comes to tax cuts for the elite.
See my response above. A job in a textile mill is not a “long term manufacturing” job, but an obsolescent, non-value added, economy sucking sore on the ass of Massachusetts.
It’s not sustainable. Move on! Create jobs that will support higher margins and better productivity. That’s the only way to stay rich.
You want crappy textile jobs… move to Mexico with them, and be a plantation owner. You want rich neighbors, start a software firm.
__________
there are no textile jobs in America – stay on point!
Now China wants toolmakers to relocate to China to ensure their supply of tungsten … the next good jobs to go abroad? Come on Jake, wake up to reality … all these mfg jobs aren’t archaic and some are even necessary to the defense of a nation.
Who holds the real value, though. It’s certainly not middle class Americans. May as well be the Chinese, or David Rockefeller, for that matter.
They who hold the “real value” will be the risk takers. It was ever thus. David Rockefeller may have gotten something for nothing, but his grandad created all that wealth out of naught but his ideas, a strong ambition, and .
Don’t tell me there aren’t first generation millionaires existing in the U.S. in exponential numbers over the trust fund babies, I’m in this game and I see it.
Our host is a prime example, fwiw.
Sorry, that last sentence, first para should end… “and a willingness to risk effort and capital.”
_________
That was a great piece. Thanks for linking to it.
paul tudor jones, da best..
regards
chuck
Not sure what I think of that article yet, it’s a very deep subject but I was surprised he didn’t talk as much about liquidity.
Speaking of currencies, here’s an interesting trade I found while stealing from children aka taking a piece of candy from our Halloween bowl:
Long TRY/JPY (Turkish Lira). Turkey has really turned around their current account in 2010 from y/y negative growth. In 2009 its current account was -$40B+ and now it’s under -$13B in 2010. Their GDP growth is 10%+ for 2010 and they are in the sweet spot of exporting appreciating commodities and goods that are in demand. If the Japanese currency sells off anytime soon the pair will appreciate. Technically it is hugging the bottom of that range right now and hasn’t broken down. As the kicker to this particular pair, the carry is positive 6.5%! So you’ve got 6.5% covered to the downside and if it reaches pre-crisis levels it could appreciate 50% from here. Love this trade.
chart- http://yhoo.it/cP6FfZ
Fly thank you for the piece….I so love PTJ….not just cuz we share the same birthday, but because he is one of the few that really gets it……I loved the Foot Story Metaphore….it so reminds me of a line from a really really old movie called “dinner with Andre”…when the Doctor looked at his dying Aunts arm and was so happy how it was healing and never payed attention to the fact she was dying…..this is all so ugly and it ain’t going to end pretty at all.
Sean at Live posted this WSJ article on possible QE2 http://online.wsj.com/article/SB10001424052702303891804575576533845166848.html?mod=WSJ_hp_MIDDLETopStories
Heng seng getting stuntman mike’d
and eur/usd give up it’s barrier of 1.3800 too.
Anyone know anything about SandForce … IPO?
After all, one way or the other, the real US and Chinese exchange rate will find equilibrium– either through nominal movement or through relative inflation rates.
Deflation in the US?
If anybody here still reads books…
“Dave daydreams about a great flood while stuck in traffic; stuck on their island, the Hamsters aspire to plastic fragments stamped “Made in China.”
http://www.amazon.com/Book-Dave-Novel-Will-Self/dp/1596911239
No mention of this (below) in the supposedly “deep” or “excellent” article that was posted. As is typical these days, it’s easy to take bright minds and stroke their ego by talking at their level, which makes it easy to take their eye off the ball… hiring intelligent writers who are capable of stroking the masses of bored white male egos is an inexpensive endeavor in this job market…
Let’s not forget —
DAVID ROCKEFELLER AND CHINA
1973. After a trip to China, David Rockefeller praised Mao Tse-tung who had slaughtered over 40 million people. His report, “From a China Traveler,” highlights the goals presented in UN reports such as “The Commission on Global Governance” and UNESCO’s Our Creative Diversity. Both focus on lofty ideals such as peace, harmony and unity in the communitarian “global” village — a vision that demands absolute control and universal participation in facilitated small groups (modeled by the hierarchy of “soviets” or councils in Communist lands):
“One is impressed immediately by the sense of national harmony…. Whatever the price of the Chinese Revolution it has obviously succeeded… in fostering high morale and community purpose. General social and economic progress is no less impressive….The enormous social advances of China have benefited greatly form the singleness of ideology and purpose…. The social experiment in China under Chairman Mao’s leadership is one of the most important and successful in history.” New York Times, 8-10-1973.
DAVID ROCKEFELLER: Under his stewardship the Chase spread internationally and became a central pillar in the world’s financial system, including being the leading bank for the United Nations. It has a global network of correspondent banks that has been estimated to number about 50,000, the largest of any bank in the world. A notable achievement was the setting up of the first branch of an American bank at One Karl Marx Square, near the Kremlin, in the then Soviet Union, in 1973. This was also the year Rockefeller traveled to China, resulting in his bank becoming the National Bank of China’s first correspondent bank in the United States.
Before becoming Chairman of the Federal Reserve, Paul Volcker worked for Chase. Volcker has had a long association with Rockefeller, becoming a member of the Trust Committee of the family in 1987, after stepping down from his position at the Reserve. The Trust Committee is the pivotal committee which controls the wealth of the family through trusts established by John D. Rockefeller, Jr., as well as the real estate firm that then owned Rockefeller Center, before it was sold.
The Chase Bank has also had a strong connection to the World Bank, as three presidents (John J. McCloy, Eugene R. Black, Sr. and George Woods) all worked at Chase before taking up positions at the international bank. A fourth president, James D. Wolfensohn, is also closely associated with Rockefeller, serving as a director of the Rockefeller Foundation, amongst other family-created institutions.[
Synchs with my recent discussions of statism on my blog.
While I am not a global conspiracist, there is certainly no doubt that there is a naturally borne propensity in humans to dominate their weaker cohorts via a model of elitist power usually promulgated under the rubric of “its for their own good.”
This is why our “US experiment” is so important to retain. It is unique in the history of the world.
_________
Amen.
“While I am not a global conspiracist.”
You don’t have to be. You are living it and it goes on without you, regardless of anyone’s opinion if it exists or not.
Hugh Hendry still believes China has built a factory to supply a 20 trillion dollar US economy which is not going to happen any time soon? Chanos still believes that the China model is based on build build build and they have already overbuilt?
Software is no longer made here.
Lies. I just financed/sold three companies down here, and we are hardly Silicon Valley (or Alley, or even Ditch in the Road).
The digital revolution continues and there is sooooo much more still to do… it’s amazing.
For example, one of those companies is monetizing data the gov’t has lying around. Do you know how much stuff is available, just through FOIA? It’s a gold mine, and it could end up saving the states’ bacon.
__________
You both are right, to a point. I have the feeling that software is mostly designed here, but has the ability to be developed elsewhere. India has an advantage because of the democracy instilled in their society (among other influences like the scissor wielding Brits) that has made the adoption of English and freer thinking an asset to access a wealth of information.
A friend of mine uses sites like elance.com to outsource code monkey and development work to the best bidder. America still possesses the most advanced knowledge and information base in the world, which gives birth to wickedly creative entrepreneurs.
Infrastructure, rule of law, and flexibility are our competitive advantages. India has smart and cheap labor, but it very much lacking in those first three.
____________
Jake
Everyone is not suited to be king. We still need those loser jobs, for the losers.
Even loser jobs can be higher value added, if the automation connected to them is idiot-proof enough.
The point is, ditch digging is no way to grow an economy.
_________
or auto manufacturing, huh?
That guy hit it right on the money.
China just nuked the USA and no one noticed
Lol