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solarbirdThis is not so good:
And this is why this is not so good:
And this is why this is not so good:
Japan and China lead flight from the dollarAnd this is one reason why a dollar collapse, particularly a disorderly dollar collapse, is not as good as many would like to think:
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 1:09am BST 17/10/2007
Long URL elided
[...]
The US requires $70bn a month in capital inflows to cover its current account deficit, but the key sources of finance are drying up one by one.
[...]
Ian Stannard, a Paribas currency analyst, said the data was "extremely negative" for the dollar. "It exceeds the worst fears. It is not just foreigners who are selling US assets. Americans are turning their back as well," he said.
[...]
The Treasury data would have been even worse if it had not been for $60bn of inflows from hedge funds based in Britain and the Caymans, which needed to cover US positions at the height of the credit crunch.
Crude oil futures hit new record high at $89The good part, of course, is that the trade deficit will eventually have to sort itself out, one way or another, and a cheap US dollar will help that - at least, as long as the US can keep making stuff anyone cares about. The bigger question is whether this is a one-time event or whether something like it will repeat next month. Even as a one-off, it's ... striking, however.
By Nick Godt
Marketwatch
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no subject
Date: 2007-10-18 04:28 pm (UTC)Between the Oil Drum and The Housing Bubble Blog, I read lots of bad news on a daily basis, but I don't have words for just how dramatically striking (and not in a good way) that chart is.
no subject
Date: 2007-10-18 04:42 pm (UTC)And keep in mind that without the $60B in covers (mandatory inflow, essentially) mentioned in the Telegraph article, that spike would be $-129bn, not $-69bn. Unless there's a counter-cover going the other way (say, Great Britain, say, Northern Rock, so it's possible) then it's much, much more dramatic than even that chart shows. And that's a pretty striking figure as it stands.
no subject
Date: 2007-10-18 04:47 pm (UTC)no subject
Date: 2007-10-19 04:20 am (UTC)Dollar collapse
Date: 2007-10-18 04:44 pm (UTC)Just about the --only-- non-Asian funding we are getting right now is overseas Chinese trying to cash-out their North American and Euro investments and park them as working capital in China.
To say that this is unsettling is an understatement. I'm okay, our group is okay, since we're already IN the Chinese industrial markets, but now there is a stampede of folks trying to follow us and finding the reasonable opps taken. It's rather like the foolish exodus of Canadian oil money into Oklahoma and Texas in the early 80s. Small pond, lots of sharks. Sharks ate well.
As to economic model, all Stokos will cop to is that the benchmarks are Saudi oil (in local currency) and Chinese oil (in RMB); those two prices are set as reference points and everything else hangs on that. Over there, I've seen abandoned gas-stations converted into retail coal depots -- that should give a hint of the future
Now, none of us up here are rich, by American standards, but we already have some practice in getting through lean years. Remember stagflation, early 80s? That's what Stokos warned us about this past spring, and the markets are unfolding on schedule.
I do not think that what is being seen now is a one-time. This is not a general end-game, although some folks dear to my heart are seeing the end-game start to unfold in their business. Biggest argument for not sellingt-out, here and now, is that there are still the means to keep people employed doing work that has meaning and dignity, and I despair of any of my potential management buyers-out sharing that maternalistic philosophy. Lefty heart-driven business methods are always a tough sell, especially when it involves bank financing for a buy-out.
Enjoy the rain. Ww have high winds, scudding clouds, and serious horizontal rain here today.
Re: Dollar collapse
Date: 2007-10-18 05:08 pm (UTC)Ah, okay. Yes, since the collapse of Bretton Woods, the US has very much been on the Oil Standard rather than a Gold Standard, which, quite frankly, makes a lot more sense as the oil standard is a potential-productive-energy unit. Similarly, I have argued that a portion of the rise in oil prices has been a good measure of the actual debasement of US dollar in anticipation of it showing up in exchange rates. (Similarly, this is related to why I think the housing valuation spike, while quite real and very much a bubble, is overstated. The credit debacle, on the other hand, is less so overstated.) One very, very important question is what percentage of that is actual-dollar-value loss and what percentage is actually driven by demand destruction. Both are active, actual, and significant factors.
I have not been tracking oil prices in renminbi, however.
I do not remember stagflation, but I've certainly studied it. I am economically reasonably well positioned for this eventuality. Not where I would like to be, for which I place blame firmly on our unfortunate medical adventures over the last four, now five, years. But, still; reasonably well positioned.
I'm not sure what you are suggesting by "a general end-game," and this not being it, unless you mean a general collapse of the economy, which I don't think this is either. Besides, you always have economies. I don't really think in terms of ends-of-history.
We have similar weather today, as usual, tho' we won't be getting the brunt of it for another few hours - our forecast is generally basically the same as Vancouver's, +2C, and usually either a few hours ahead or behind. It is quite breezy already, tho'. ^_^
Re: Dollar collapse
Date: 2007-10-18 10:24 pm (UTC)I have bitter memories of stagflation: the oil price shock and the interest-rate spike, plus the institution of the Canadian NEP, were the economic factors that kicked the slats out from under Adrian and myself; like many of our friends, we fell into bankruptcy kicking and screaming (well, he did, I barely avoided it by the skin of my teeth, but the whole exercise was corrosive in the extreme to our marriage).
"General end-game" in the sense of the flight of mobile capital from the dollar realm; I'm not sure what the remaining fundmentals of the American economy would be. Was discussing that this morning with Thomas, who reminds me that he put his household's nest-egg into annunities, strictly money funds, not stocks. They've done okay from that very conservative decision to conserve capital.
"End of history" is, agreed, unlikely, and is mostly the sort of histrionic pronunciation that presages a renewed pitch for Snake Oil. The open question is just what America (and Canada and Mexico, since our economies are captured in tidal relationship with America's) would have to offer to the world. Commodities? Well, there's coal (which is what keeps me employed, in the end). But what else of fungible worth? I'm in the primary resource sector and I scratch my head concerning this problem.
Wx now... Storm blew through about an hour ago. Flat calm, high overcast, neutral grey migraine-inducing skylight. Supposed to be much nastier tomorrow, or at least so saith marine weather forecast this morning. Snow all melted, but one of the cottonwood trees fell down in the street where I usually park my car (but of course, having some wits left about me, did not park it last night). Heavy snowline just about 200 metres uphill from us -- quite lovely in a Currier and Ives way.
Re: Dollar collapse
Date: 2007-10-19 05:31 am (UTC)BTW, the RMG valuation curve over the last three years is, modulo a little noise, a very clear parabola.
Historically, there have been many rounds of success for heavily state-driven and/or state capitalist economies. We're in one of those for China right now. Unlike several of the previous, China has far more upside than downside, but I still hold to the thesis that open-market capitalism is going to come up with new tricks sooner than state capitalism. So I think if the US can avoid the traps it seems to want to lay for itself - the economic side of the authoritarian path it's on at the moment - and if it doesn't go into a protectionist binge (a much more severe threat than I realised earlier, as strong majorities of both self-identified Republicans and Democrats now consider free trade to be a negative policy), and if the anti-foreigner paranoia border-protection wave - and, in particular, its negative effect on student/researcher inflows - can be rolled back, then all sorts of ideas can be chased around for a while, and can usually be done so more freely and quickly than in state-capitalist economies. These, often, proceed to turn into new industries. C.f. the history of personal computing and software.
At least, that's been the history to date, and I haven't seen much that makes me think it'd be really that different this time. There will, of course, be another very painful adjustment round - c.f. again the dislocations between each of automobiles->electronics->computers and software. I may be overstating the parallels here - this one will likely be worse than most. But the underlying thesis that a state capitalist economy is going to be less flexible and less inventive than an open-market capitalist economy could hold true.
One could accordingly argue that the fundamental value of the American economy historically has been coming up with new ideas, winning the Internets for 20-25 years, going 'splody when somebody else starts doing it better, then starting over. Unfortunately, most of the current chief executive and party's policies have worked against the key value of this cycle at most opportunities so far.
If that went south, then I think you'd be looking at the "agricultural backwater" option, which kind of sucks. The US is the "Saudi Arabia of coal" only if you look at fixed 2005 extraction rates - that's how you get that "over 500 years supply!" number people like to toss around. Throw in historical growth rates and it collapses to more like 70ish years, still a long time - but significantly ramp up production and that gets shorter accordingly. But I don't know anything to speak of about Canadian coal reserves, perhaps the prospects are better there. (And I haven't done this math, I've just looked at math done by others.)
We had our windstorm; various trees down, the largest highway near my house partially blocked twice by falling trees, power outage for a couple of hours, but it's settled down now. The snowline is much higher here; there's plenty of snow on the mountains, and I heard earlier there was snow down in the mountain passes - but nothing all the way down here in metro Seattle area. Just rain.
Re: Dollar collapse
Date: 2007-10-19 01:34 pm (UTC)Coal supply is one of those matters that depends strongly on the rationality of the local government. In a place run by lawyers, coal supply will inevitably be constrained; for example, I'm sitting here in my cella roughly 100 m above a substantial body of type G4 coking coal, which under current local zoning is mineable, treatable, but not saleable because zoning utterly forbids the transport of coal in bulk quantities. As the head planner told me a decade ago, "We can't stop you from mining, but we can stop you from moving the stuff to market. And we will."
So, there is, legislatively, zero coal supply here. Likewise there is zero coal supply in the Tertiary coal-measures of King County. But geologically, the local resource is 107 million tonnes (my estimate, dated April 1981 [!]), of which reserves of clean coal risk-weighted but not NI 43-101 compliant are (say) 15 million tonnes. At 600 thousand a year, that's a twenty-year project, which is reasonable for a get-go.
Real limitation is human: these projects need brain-bugs to make them go. I can stay on top of two, maybe three, such projects, depending on the balance between hands-on and delegation. There are maybe, at this stage, a half-dozen Angharads in Canada; if we extrapolate by population, there are maybe a hundred Angharads Stateside. Being optimistic and giving each of us three pits to worrit over, that's 106 x 3 = 318 new projects a year, of which, realistically, only 50 will make it to production and only 20 will survive their shakedown year. Twenty pits at 600 thou a year is not replacement-level, let alone growth-level.
After the Crashes of 1980 and 1994, the industry contracted severely. There is a significant shortage of expertise available in North America. I work as much as I want to, maybe a bit more than that; there are health deficits that manifest in shakiness and a need to take lots of downtime -- and I'm one of the younger ones, and therefore more hale and hearty ones, in the field.
Long story short, the big wall we'll hit is transportable, fungible, convertible energy. All of that smoke and mirrors from Arnold, Christine and Gordie about the West Coast Hydrogen Highway is just that. Yes, you have the correct understanding about life-of-supply. National reserve base data are, understandably, held confidential. NIMBYism and BANANAism are what'll drive the agricultural backwater dynamic, rather than shortage of resources.
Rain? Well, more snow again overnight, but it's melting into slush again. Flat calm, ground fog mixed with woodsmoke. Good weather for doing mineral reserve economics.
Don't feed the baydakhs,
A.
Re: Dollar collapse
Date: 2007-10-19 03:42 pm (UTC)Coal supply is one of those matters that depends strongly on the rationality of the local government.
Eh, nobody wants to be Alberta, either.
As to the hydrogen silliness - yes, it's to date still in the quite silly category. And unfortunate, because of the distraction factor. Besides, I did the math on conversion of the American passenger fleet to electricity using best numbers available, ignoring silly things like "cost" and "time" and saw that we need roughly 8.4 times the current maximum theoretical electrical production and a similar build-out on the grid. To wit: good luck with that. That was for EV; the numbers I've seen run on hydrogen do not make me feel particularly comfortable that hydrogen "battery" efficiency is going to be that much higher than lead-acid. (Mostly because of substantially-unavoidable hydrogen loss.)
But I've gone on about that quite often before. Hence my political activities w.r.t. energy.
Long story short, the big wall we'll hit is transportable, fungible, convertible energy
I usually describe it as "transportable and high-density" in my commentary.
And having looked up the word "sharashkas," I'm hoping to avoid that. However, I didn't see a good definition for "baydakhs."
And to touch upon subject, look what broke through a recent support level today.
Re: Dollar collapse
Date: 2007-10-19 04:05 pm (UTC)At the Kex** cokery, they are running all the motor vehicles on benzol, which is recovered in quantity as part of the by-product train. Wish I could run my car on by-product benzol here: the PNW coals are particularly reactive, and have good response to hydrogenation (mid-1930s data, mind you); in general, they are perhydrous, and the only compositional drawback is that they have a high S/O ratio, which means H2S is a by-product of either conventional (Koppers-type) or fluid-coking. Watch out, I can bore everyone to tears on the subject of fuels and fuel-based economies.
Baydakh, from L. n.zool. baydakhan, collective term for large opportunistic omnivores of the boreal forests, such as wolverines or grizzlies; as used in a work-in-progress, Tales of the Baydakh-Shan; remains yet to be seen under whose name that gets published, but it's happening.
Sharashka, hell, I've inhabited one in the past; short story liable to get long, but it was at once the most interesting summer of my life and the most frightful, too. Wasn't just the Russians wot had 'em, so did others.
Thanks for pointer to CAD>USD conversion. I remain glad that I am being paid in RMB; thus far, the Chinese are eating the cross-difference by letting CAD float and USD fix (at least in practice: I am not a currency wonk, I do project management and ops analysis). Bottom line is that my day-rate in CAD is slowly climbing, whereas my major costs in USD are shrinking. Border troops are starting to get nastier towards us coming southbound, so I've noticed. Nexus card doesn't count for that much slack and grace, any more. (Not that the passage of lines at Checkpoint Charlie has ever been particularly graceful). I am actively fearful to enter American territory now, and if it were not for the urgency of the regional board meeeting on Sunday night (to which I cannot send my proxy in time) I wouldn't even want to come down this weekend.
Money's not the issue, personally; I can't take it with me, anyway, and just about everything that wanted being built in life has gotten built. Goal was always quiet life in a house with a white picket fence -- even when I was in Jo'burg that was the goal; and it seems to have come to pass, mirabile dictu.
Re: Dollar collapse
Date: 2007-10-21 06:30 pm (UTC)Yee gods aromatic carcinogenic mutagen! Godt damn! So how much of that runs out into the air?
thus far, the Chinese are eating the cross-difference by letting CAD float and USD fix (at least in practice
...sorta. The charts look to me more like the spread is mostly just what you get if you get the generalised USD fall and the specific CAD gains which are independent of that. The USD is sinking even against RMB, just, you know, slowly. (8%-ish in two years.)
(Not that the passage of lines at Checkpoint Charlie has ever been particularly graceful)
Ha HA - ramifications!
stinky Asian air, and local economies
Date: 2007-10-23 11:41 pm (UTC)You wouldn't want to live downwind from that place. When the wind comes down the valley, my little mud-brick house is right in the path of the plume. Sometimes the air has a distinctly chlorotic colour; other times it smells like the world is on fire. That's partly why I have the very nasty chronic cough still. Right now it looks like I won't be headed back over there until early December -- I'm sort of grounded for now. And they may ultimately get to be mad enough at me to not want me back, tough on them.
I wondered in detail what the USD was doing on cross-comparisons. Practically speaking, it's making casual trips down to Sea-Atoll a lot cheaper, especially if I fill up the gas tank before heading home. ARCO on SR 530 seems to have best prices.
By the bye, we're going as an Asturian co-op -- that was as close to consensus as we could get. Less money in my pocket, but better spread of assets all round, and it maximises local social gains (which, to me in my middle-aged idealism, matters a great deal). Have someone at work now, figuring out how to wudge the paperwork to convert to a co-operative society that happens to do heavy industry. Crown Agents and Corporate Registry may try to block this: it flies in the face of local (essentially Socred) politics; it's sort of a reverse privatisation. If we can't do this provincially, we'll do it federally. Bottom line, is that I already have lots less to worry about than I did this morning.
Right livelihood matters, y'know.
Re: stinky Asian air, and local economies
Date: 2007-10-26 04:30 am (UTC)I have a friend whose father-in-law is a major commercial concrete engineer. He's done a lot of port work for them and is the kind of person you call when you need a three acre pour to have no more than 1/8th of an inch variance. He's been up to the Three Gorges Dam.
You don't want to be downstream, either.
Sometimes the air has a distinctly chlorotic colour; other times it smells like the world is on fire. That's partly why I have the very nasty chronic cough still.
gak.
I wondered in detail what the USD was doing on cross-comparisons. Practically speaking, it's making casual trips down to Sea-Atoll a lot cheaper, especially if I fill up the gas tank before heading home. ARCO on SR 530 seems to have best prices.
ARCO is scary. But cheap. But scary.
Re: stinky Asian air, and local economies
Date: 2007-10-26 11:21 am (UTC)Yeah, the quality of Chinese construction work... varies, and is mostly driven by cheapness and the desire to make a killing, sometimes quite consequentially. Non-existent rebars and the like: they really do not have a culture which supports QA/QC. Roads there are really shoddily-constructed, almost as bad as I-5 through Everett (which is brand new shoddy construction, gosh!)
Okay, the reason for the early morning post: CBC radio just reports on four ayem news that Eddie Stelmack (Premier of Alberta) has announced an increase in the provincial oil-royalty take. As is typical of these things, expect the market to wobble and the price of Leduc crude to spike temporarily.
Let's see, the price of oil spikes because demand goes up. It spikes because demand goes down. It spikes because of the summer driving season (what, we get out and walk in the winter?), it spikes because of sunspots, because they can make it spike (hah....bitter laugh from the zek of the great northern islands).
vale,
Angharad
Re: trees down
Date: 2007-10-19 01:59 pm (UTC)Am very glad I don't have to do the 168 km of daily commute anymore --- liked the folks who worked there at the mine, but the long drive in the winter snow was always a bit much, and once one got off the freeway there was always the possibility of finding blow-downs on the road. I suppose what it reminded me is that one can put up with almost anything in exchange for a secure livelihood.
Understand that the winds and heavy rain missed Vancouver altogether -- lucky tarts, there. You may have gotten it worse than we did; but then again, the village is scarcely in the convergence zone, and instead we get Qualicum winds coming through the valleys from the outside (Comox Lake is a fjord lake). When it blows hard, the clouds spill over like carbon dioxide fog, and the house shakes in the wind.
If there was some reason why I moved here, it must have had something to do with the weather. Nahh, it was the 14.4 dial-up that attracted me, that's it.
Re: trees down
Date: 2007-10-19 03:42 pm (UTC)Re: trees down
Date: 2007-10-19 04:10 pm (UTC)Flinty weather? More snow overnight, and from what I can see out the summer-room window, the snowline is about halfway up Nikkei Mt. -- say 300 metres asl, more or less.
Stay warm and well, and no storms for weekend, hey? Have to take the Duke Point boat on Sunday and would appreciate a smooth crossing (oh, and no hassles at Nexus would be nice, too, while we're on asking for things to be).
no subject
Date: 2007-10-18 05:26 pm (UTC)no subject
Date: 2007-10-18 05:28 pm (UTC)no subject
Date: 2007-10-18 06:12 pm (UTC)no subject
Date: 2007-10-18 09:04 pm (UTC)no subject
Date: 2007-10-19 03:26 am (UTC)Ain't that pretty?
Date: 2007-10-19 12:50 am (UTC)Been talking about this for quite a while over at http://market-ticker.denninger.net and http://tickerforum.org
(The former is my blog, the latter a forum)
Anyway, if you think this is a "one off" - you're wrong.
Fun times coming. Buckle up!
no subject
Date: 2007-10-19 01:28 am (UTC)no subject
Date: 2007-10-19 03:45 am (UTC)Still, so far it's a one-off, and hopefully you are entirely correct.
no subject
Date: 2007-10-19 02:29 am (UTC)no subject
Date: 2007-10-19 06:01 am (UTC)no subject
Date: 2007-10-19 08:10 am (UTC)no subject
Date: 2007-10-20 11:29 pm (UTC)(and does anybody have anything similar, say, for Britain in the 1920s?)
meanwhile, the foreign currency bonds are suddenly showing 10% gains across the board (and that's after paying out interest and getting hammered by rising (foreign) interest rates). Even the Brazilian Real bond isn't looking totally stupid.
(...sort of annoying that Section 988 is ordinary income no matter what you do, but then, hey, income...)
no subject
Date: 2007-10-21 05:41 am (UTC)