Hoisington Quarterly Report Predicts Lower Long Term Treasury Yields

[MediumTex]

#3 world oil producer (behind Russia and Saudi Arabia)

The WSJ recently reported that the US will be the #1 oil producer in the world, tied with Saudi Arabia, at the end of 2013.

I think that is propaganda, but it would be great if it actually happened.

[Lone Wolf]

I think that since this interesting exchange has erupted more or less off topic in a pretty boring sounding thread title, no one else may even be reading our posts.  :D

Ha!  I'm reading.  If this forum had some kind of "Like" button or whatever, I'd have been pressing it all over this thread.

Great points from you both.  I wind up believing whoever's post I read most recently.  :D  (This sort of experience is only fun with a properly diversified portfolio.)

[stone]

System Skeptic

What I am saying is once you take that away, we have to balance our trade... period.  The only way to do that is austerity, and that means a drop in the standard of living and a devaluation/hyperinflation of our debt.

I really think that that is a misguided view of this. Instead of austerity (which as Medium Tex says doesn't work) it makes sense to eliminate the waste of unemployment/underemployment. Having millions of people unproductive, uneducated and economically excluded is one of the most expensive indulgences possible. Another is having a vast military acting to provoke the rest of the world into giving it something to do. Cut out those twin indulgences and the problem is solved.

[MediumTex]

System Skeptic

What I am saying is once you take that away, we have to balance our trade... period.   The only way to do that is austerity, and that means a drop in the standard of living and a devaluation/hyperinflation of our debt.

I really think that that is a misguided view of this. Instead of austerity (which as Medium Tex says doesn't work) it makes sense to eliminate the waste of unemployment/underemployment. Having millions of people unproductive, uneducated and economically excluded is one of the most expensive indulgences possible. Another is having a vast military acting to provoke the rest of the world into giving it something to do. Cut out those twin indulgences and the problem is solved.

The time for austerity is when the economy is rocking.

[systemskeptic]

Instead of austerity (which as Medium Tex says doesn't work) it makes sense to eliminate the waste of unemployment/underemployment. Having millions of people unproductive, uneducated and economically excluded is one of the most expensive indulgences possible. Another is having a vast military acting to provoke the rest of the world into giving it something to do. Cut out those twin indulgences and the problem is solved.

stone,

As you mention, you can reduce a trade deficit by either decreasing aggregate consumption or increasing net production.  Either way your consumption drops as a % of net production, something I would call austerity.  Essentially, you are working harder (net) to maintain your previous standard of living, or working at the same level while your standard of living [or world presence] drops.

[stone]

systemskeptic, that isn't really how I've seen the term "austerity" applied though. If Haiti were to transform into another Singapore, would you call that "austerity"? I don't think many people would. "Austerity" is usually used to mean IMF style policies of creating a futile destructive cycle of mass unemployment, mass emigration, transfer of ownership of mineral extraction rights etc to foreigners and general impoverishment.  Such IMF policies do provide the USA with cheap commodities BUT they waste immense amounts of human potential. If such a policy were directed against the USA, then creditors would be squandering the really prime asset that the USA has- its innovative people. Creditors subjecting the USA to austerity might get lots of ultra-cheap food, coal, oil, timber or whatever BUT they would loose the cutting edge technologies that the USA has provided for the world. I'm sure that in different circumstances, the whole 7billion people on Earth could be as innovative as those on the US west coast. We are wasting all of that now.

Someone working a 40hr week at google in California produces far more than someone working 80hrs a week picking through trash on a dump. Moving an economy from doing the former to the latter is normally what is called "austerity" but the former is what enables a nation to truely pay its way in the world.

[atrchi]

Iran, Iraq, what do these countries have in common aside from what you hear in the news?  The answer is both officially declared they would no longer sell oil for dollars -- they openly removed their support for the $USD.

Iran "officially declared they would no longer sell oil for dollars"? LOL. This is literally how Iranian state media reported the stepped-up sanctions which took them off the SWIFT system. I'm very disappointed any time a self-styled "skeptic" is caught shamelessly parroting government spin.

Dollar collapse is not imminent.

[systemskeptic]

Iran "officially declared they would no longer sell oil for dollars"? LOL.

Dollar collapse is not imminent.

https://www.google.com/search?q=india+iran+oil+gold

https://www.google.com/search?q=iraq+oil+euros

Unless you hold a very top office in a central government/bank, I'm not sure you would have the ability to predict the timing if/when the dollar were to collapse.

[moda0306]

Holy shit!

Epic thread.

Good thing Gumby an I didn't find it... It would have been hijacked to MMR pages ago .

I have to go back through, but I think the trade deficit is the huge piece that's being interpreted almost 100% oppositely by melveyr than by system.  This is the big driver of everything, IMO, but it can be hard to decide what it really means.  It feels like loss of competitiveness on one hand, and more demand for our currency on the other.

[MachineGhost]

I have to go back through, but I think the trade deficit is the huge piece that's being interpreted almost 100% oppositely by melveyr than by system.  This is the big driver of everything, IMO, but it can be hard to decide what it really means.  It feels like loss of competitiveness on one hand, and more demand for our currency on the other.

Japan has a huge trade surplus.  What are the implications of that going into a trade deficit with its outrageous debt loads?

[melveyr]

I have to go back through, but I think the trade deficit is the huge piece that's being interpreted almost 100% oppositely by melveyr than by system.  This is the big driver of everything, IMO, but it can be hard to decide what it really means.  It feels like loss of competitiveness on one hand, and more demand for our currency on the other.

Japan has a huge trade surplus.  What are the implications of that going into a trade deficit with its outrageous debt loads?

If you are using a stock flow consistent approach Government Surplus + Domestic Private Surplus + Foreign Surplus = 0

The domestic private sector in Japan really really likes to save net financial assets (basically they pursue a surplus). Where can this domestic private sector surplus come from? Only from a foreign sector deficit or a government budget deficit. The Japanese government deficits and foreign sector deficits (trade surplus) in Japan will probably continue without Japanese inflation until the Japanese private sector is satiated with yen. Right now they appear to want to save more.

[MachineGhost]

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[melveyr]

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Two things:

1) It appears I was totally wrong on current Japanese savings rates!

2) However what I was really getting at with with the identity was (S-I) for the private sector, which is the private sectors surplus. You chart just shows S, without the I. But, that would merely make the Japanese private sectors negative surplus even more extreme, so your point is well taken!

Rephrasing what I said in my last post (S-I) + (T-G) + (M-X) = 0

or

Private Surplus + Government Surplus + Foreign Surplus = 0.

Your chart indicates that the private sector likely has a negative surplus. We cannot tell the exact cause and effect relationship driving this, but we can look at the relationship with the other sectors to come up with possible narratives.