Wednesday, June 10, 2009

Open Forum

"Two Fort Knoxes"?
















Fiat Money In Death Throes
By Antal E. Fekete

8 comments:

Siege said...

It's refreshing to see truth covered in mainstream media, especially when it's not framed as the end of the world. People like Celente and Shiff are so alarmist they get discredited without consideration. If the message is to get out, it's elequent people like those posted here today that will need to share it.

I have read a great analysis of the world's two largest economies that I highly recommend. It shows why the upcoming century belongs more to China than the US. Bias is high, but the facts are hard to rebute, even if you do believe in the US green shoots.

http://www.bullionbullscanada.com/index.php?option=com_content&view=article&id=521%3Aa-tale-of-two-economies-us-versus-china&catid=51%3Acommentary&Itemid=99&showall=1

Martijn said...

@Siege

On the article:

What makes this economic performance much more spectacular is that the explosion of China's domestic economy has occurred while individual Chinese citizens maintained an almost unimaginable savings rate of between 30% and 40%! It was this phenomenal pool of savings which immediately convinced me that China would decouple from the rest of the world when the global economy “crashed” last fall.
China had to maintain that savings rate due to pegging the yuan to the dollar. Think about it. For every dollar that came in a yuan had to be handed out be the Chinese central bank in order to maintain the peg. Many dollars came in, and many dollars were exchanged for yuan. Had those yuan not been saved, China would have had massive inflation. Still it is a remarkable savings percentage nonetheless.

Thus, China looks to the future with the following fundamentals in support. It has the world's largest manufacturing base, the world's largest population (meaning an essentially infinite supply of “cheap labour”), the fastest-growing domestic economy, virtually no national debt, and the world's largest pool of savings to fund (on a sustainable basis) rapidly increasing consumption and rapidly increasing investment in building China's economy much larger.
Chinese had many inhabitant, and hence much potential labour. However, Chinese labour is not cheap by default but by economic policy. Besides this massive supply of labour can also be a massive supply of joblessness.

Just as the extremely positive future for China is assured, based on its current parameters, so too is the certainty that the U.S. will continue its economic devolution toward national bankruptcy and individual poverty. Once again, the numbers refute the propaganda coming out of the mouths of people like “Helicopter” Ben and Tim-the-tax-cheat.
It is true that the US has shipped out it's production facilities. They will have to build that up again in order to enter the play.

It is true indeed that China will most likely takeover the lead. And that the US needs to deleverage much more. The US is also highly unlikely to repay it's debt.
On the other hand one should not forget that China has been working their ass of to "steal" American production facilities. As soon as China drops the dollar peg and starts looking after itself they will open up a new market of over a billion people. That is large enough for both China and the US I reckon. So in the end we shall see the two countries on a more equal base I guess. And for that, China will increase it's wellfare, while the US is going to have to decrease. However, should we get to that situation, we can truly start to worry on ecological problems instead of economical ones.

Shanti said...

FEKETE sums it up nicely but still missing the opportunity of FREE GOLD in that piece.

Isn't the FREE-GOLD concept developed as an antidote?

Daniel said...

>>http://www.bullionbullscanada.com/index.php?option=com_content&view=article&id=521%3Aa-tale-of-two-economies-us-versus-china&catid=51%3Acommentary&Itemid=99&showall=1

Whenever I see articles like these they remind me of "irrational exuberance" of recent past. You cannot take a trend and extrapolate it to infinity.

Can the planet sustain another 400 Million living near-american lifestyle? The answer is NO, simply not enough resources, so something will have to give.

The Author further discredits himself concluding that USA will eventually default on the debt.

How and why would a country default on debt denominated in its own currency? USA owes US Dollars, which it can print in near infinite amounts.

Yes it would destroy the credibility...etc...etc... But if it ever came to the actual choice between "Default" and "Print" what do you think will be done?

What would you do?

FOFOA said...

Shanti,

Yes, I liked Fekete's piece too. It would be nice if he broadened his view to include more than just a new gold standard.

But it is my understanding that FreeGold is not a solution. It is the outcome of the lack of any workable solution. It is not a construct, it is the absence of construct. If by antidote you mean a cure, FreeGold is not the cure for the disease. FreeGold is the "afterlife" that comes once the disease runs its course.

If something close to FreeGold became a construct of government, then it would essentially be a sort of gold standard, which Fekete wants.

I could be wrong about this.

FOFOA

Shanti said...

Hi FOFOA,

Knew you would come up with that. I could not find the right words to express.

The Freegold concept does not pop up out of the blue, (cfr. redistribution) so it has therefore been ........ you fill the dots as i can't still find the right expression.

Btw, if we are now heading for one side of the polar, we maid not want to shoot over to the contrary polar. I.m.h.o. we need to find the BALANCE (yin/yang) in the middle.

One way or another it is becoming clear, we will face Freegold, by human action or by natural law.

If i remember well, Another did said something on this subject, will look it up in the weekend.

FOFOA said...

Shanti,

Is this the quote you were thinking of?

"There are nations that will try to "resource a new currency" as the old financial system implodes. Oil or gold or both may be used. If it is done at the correct time, much will be gained by all! Fail this Attempt, and gold will never trade on an open exchange again, in our lifetime! We will see this end in our time."

FOFOA said...

Three curiosities today:

1. Jim Sinclair warns of trouble...

2. Some "Indirect Bidder" can't wait to lend the USA $5 billion for 30 years at 4.6% interest...

3. $134 billion in US "bearer bonds" surface on the Italy/Switzerland border...

Who is cashing out and who is cashing in?

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