Gyroscopic Investing

Kshartle wrote:

moda0306 wrote: Kshartle,

We ask you questions because we have more questions about your opinions that true retorts to them.  We also hope that actually asking yourself these questions will derail you from this logic-only approach to predicting the future.

And in the spirit of asking questions...

Also, how is Asia going to own the future, what with their statist empires, universal healthcare systems, centrally-planned education schemes, etc?  Especially if they're doing things like importing confetti while exporting real goods? Sorry, man... there's nothing I can "assert" that is as useful as asking questions to invite you to further flesh out your position.  I try to use a slightly more sarcastic Socratic method of debate... but I really do try to refrain from loading my questions with straw men and loaded assumptions... maybe just a pinch of snark .

Well let's take a look, The Chinese are not bogged down with the same type of democracy that requires unrealistic promises to voters to get and retain power. They have sort of a bribeocracy that better faccilitates economic growth than stiffling regulations and satisfying every state and federal agency and thousands of regualtions. It's not capitalism and certainly hurts them but not nearly as bad judging by the explosive growth rates. It more closely resembles the US of the 19th century although not nearly as free.

To my knowledge few of the Asian countries have minimum wages, so called "worker rights", huge social safety hammocks from the government. Income tax rates and capital gains rates are lower as well further encouraging production.

Can you go down and file for disability, food stamps, a phone and all kinds of other "free" goodies in China, HK, Singapore, Thailand etc?

They are producing more than they are consuming. They are saving. Their GDPs are growing and at a faster rate than the West. Surprise surprise they are even growing without adding on debt? My goodness how is it possible? I thought growth was tied to deficits? Maybe it's the other way around.

When they stop giving away stuff for free to Americans their lives will really improve but it looks like an Asian century ahead regardless.

That being said they might blow it all on welfare and democracy, mix in some imperialism.

I'm not an expert on the Asian countries. I am an expert on the simple logic that if you sell something and get paper but never buy anything with it you're worse off. That's what is happening to countries that continue to stockpile dollars and treasuries. They are vendor financing to a customer who can never actually pay.

In international trade you actually pay when you export, not when you hand them paper they can't spend.

What do you think would happen to the value of their paper if they tried to exchange it for something valuable? If it's value dropped in half would it be more obvious that they got screwed when they sent us stuff?

The idea that it's Americans willingness to spend and the goernment's willingness to print that maintains the reserve currence status is just plain stupid. That should be obvious. It's only based on the willingness of foriegn central banks to let us get real stuff for free at the expense of their populations. Do you guys agree or disagree? If you disagree, why? Teach me if I'm wrong. Please....no graphs that don't prove anything.

Kshartle wrote:they are even growing without adding on debt? My goodness how is it possible? I thought growth was tied to deficits? Maybe it's the other way around.

Once again, you're oblivious to reality...

See: WSJ: China Has Its Own Debt Bomb

WSJ: Debt Drags on China's Growth

Ruchir Sharma wrote:Since 2008, China's total public and private debt has exploded to more than 200% of GDP—an unprecedented level for any developing country. Yet the overwhelming consensus still sees little risk to the financial system or to economic growth in China.

Source: WSJ: China Has Its Own Debt Bomb

Of course China has tons of debt. Just like the US, China's government and banks create its own currency by issuing more debt. How else do you think they "print" more of their currency?

Kshartle wrote:

Kshartle wrote:

moda0306 wrote: Kshartle,

We ask you questions because we have more questions about your opinions that true retorts to them.  We also hope that actually asking yourself these questions will derail you from this logic-only approach to predicting the future.

And in the spirit of asking questions...

Also, how is Asia going to own the future, what with their statist empires, universal healthcare systems, centrally-planned education schemes, etc?  Especially if they're doing things like importing confetti while exporting real goods? Sorry, man... there's nothing I can "assert" that is as useful as asking questions to invite you to further flesh out your position.  I try to use a slightly more sarcastic Socratic method of debate... but I really do try to refrain from loading my questions with straw men and loaded assumptions... maybe just a pinch of snark .

Well let's take a look, The Chinese are not bogged down with the same type of democracy that requires unrealistic promises to voters to get and retain power. They have sort of a bribeocracy that better faccilitates economic growth than stiffling regulations and satisfying every state and federal agency and thousands of regualtions. It's not capitalism and certainly hurts them but not nearly as bad judging by the explosive growth rates. It more closely resembles the US of the 19th century although not nearly as free.

To my knowledge few of the Asian countries have minimum wages, so called "worker rights", huge social safety hammocks from the government. Income tax rates and capital gains rates are lower as well further encouraging production.

Can you go down and file for disability, food stamps, a phone and all kinds of other "free" goodies in China, HK, Singapore, Thailand etc?

They are producing more than they are consuming. They are saving. Their GDPs are growing and at a faster rate than the West. Surprise surprise they are even growing without adding on debt? My goodness how is it possible? I thought growth was tied to deficits? Maybe it's the other way around.

When they stop giving away stuff for free to Americans their lives will really improve but it looks like an Asian century ahead regardless.

That being said they might blow it all on welfare and democracy, mix in some imperialism.

I'm not an expert on the Asian countries. I am an expert on the simple logic that if you sell something and get paper but never buy anything with it you're worse off. That's what is happening to countries that continue to stockpile dollars and treasuries. They are vendor financing to a customer who can never actually pay.

In international trade you actually pay when you export, not when you hand them paper they can't spend.

What do you think would happen to the value of their paper if they tried to exchange it for something valuable? If it's value dropped in half would it be more obvious that they got screwed when they sent us stuff?

The idea that it's Americans willingness to spend and the goernment's willingness to print that maintains the reserve currence status is just plain stupid. That should be obvious. It's only based on the willingness of foriegn central banks to let us get real stuff for free at the expense of their populations. Do you guys agree or disagree? If you disagree, why? Teach me if I'm wrong. Please....no graphs that don't prove anything.

It's not just our ability to print and spend confetti... It's our ability to reinforce it with the most productive economy in the world, and balance that with interest rates that aren't out of balance with the fed's promise (mandate) of full employment and price stability.

Oh and some of that Imperialist stuff we do. 

moda0306 wrote:The idea that it's Americans willingness to spend and the goernment's willingness to print that maintains the reserve currence status is just plain stupid. That should be obvious. It's only based on the willingness of foriegn central banks to let us get real stuff for free at the expense of their populations. Do you guys agree or disagree? If you disagree, why? Teach me if I'm wrong. Please....no graphs that don't prove anything.

Simple math. There aren't enough German Bunds in the world for most foreign governments to hold as reserves. There aren't enough Swiss Government Bonds for most foreign governments to hold as reserves. There aren't enough British Government Bonds for most foreign governments to hold as reserves. There are a lot of Japanese Government Bonds, but as you pointed out, the Japanese are domestic savers (i.e. they aren't willing to spend on many foreign goods). So, by definition, a domestic savers' currency rarely finds it's way into foreign pockets.

This is very simple logic (you ought to like that). A country has to be willing to create enough reserves (typically held as bonds) in order for there to be enough reserves for the entire world. And the citizens have to be willing to spend their own currency overseas to create those foreign reserves. There is no way around that.

Obviously foreigners have to be willing to accept that foreign currency. But the point is that it's a two way street.

Gumby wrote:

Kshartle wrote:they are even growing without adding on debt? My goodness how is it possible? I thought growth was tied to deficits? Maybe it's the other way around.

Once again, you're oblivious to reality...

See: WSJ: China Has Its Own Debt Bomb

WSJ: Debt Drags on China's Growth

Ruchir Sharma wrote:Since 2008, China's total public and private debt has exploded to more than 200% of GDP—an unprecedented level for any developing country. Yet the overwhelming consensus still sees little risk to the financial system or to economic growth in China.

Source: WSJ: China Has Its Own Debt Bomb

Of course China has tons of debt. Just like the US, China's government and banks create its own currency by issuing more debt. How else do you think they "print" more of their currency?

China is owed far more than they owe. They are a creditor to the rest of the world. They have trillions in excess reserves. Doesn't this fly in the face of what we have learned about growing an economy from the MR camp? If not please correct me.

They are net savers. This is one of the central reasons their economy is growing. The West is a net debtor. These economies are not growing.

When one Chinese person borrows money from another, does the Chinese economy become more indebted? The articles you found in your google search to switch the topic from the silliness of reserve currency status coming from a willingness to print and spend were about inter-chinese borrowing and lending. This is nothing like the US which is in hoc for trillions globally and will never pay those debts.

Gumby wrote:

moda0306 wrote:The idea that it's Americans willingness to spend and the goernment's willingness to print that maintains the reserve currence status is just plain stupid. That should be obvious. It's only based on the willingness of foriegn central banks to let us get real stuff for free at the expense of their populations. Do you guys agree or disagree? If you disagree, why? Teach me if I'm wrong. Please....no graphs that don't prove anything.

Simple math. There aren't enough German Bunds in the world for most foreign governments to hold as reserves. There aren't enough Swiss Government Bonds for most foreign governments to hold as reserves. There aren't enough British Government Bonds for most foreign governments to hold as reserves. There are a lot of Japanese Government Bonds, but as you pointed out, the Japanese are domestic savers (i.e. they aren't willing to spend on many foreign goods). So, by definition, a domestic savers' currency rarely finds it's way into foreign pockets.

This is very simple logic (you ought to like that). A country has to be willing to create enough reserves (typically held as bonds) in order for there to be enough reserves for the entire world. And the citizens have to be willing to spend their own currency overseas to create those foreign reserves. There is no way around that.

Obviously foreigners have to be willing to accept that foreign currency. But the point is that it's a two way street.

So if the Swiss would just print more and be willing to spend it on imports they could make a run at the reserve currency status around the world?

I hope you can see how this is not the case. It only matters if other countries will accept and hold the francs and how many they are willing to accept and hold. It has nothing to do with the proclivity to print or the desire of Swiss people to buy imported goods. That is just not relevant. If foreigners are willing to subsidise Swiss comsumption by artificially keeping their currencies low against it and giving away products for free of course the Swiss will consume imports and of course the government will take it's share of the loot by printing.

The other countries provide cover for the Swiss government's inflation of the Franc. This is what has happened to America. Now our factories are gone and we are living off money borrowed from Asians.

It looks like they are getting tired of working for free.

Kshartle wrote:China is owed far more than they owe. They are a creditor to the rest of the world. They have trillions in excess reserves. Doesn't this fly in the face of what we have learned about growing an economy from the MR camp? If not please correct me.

MR is just a description of the monetary system. The Chinese have trillions of dollars in foreign reserves. And, regardless of that fact, every single renminbi (except their coins) must come from either a public or private debt. They can't pay down their domestic public/private debt with foreign-denominated reserves. The government eats the reserves (they are nothing more than a worthless asset that backs up their currency) and the Chinese still have to create new debt to issue new currency. This doesn't fly in the face of anything. It's just the way it is.

Kshartle wrote:They are net savers. This is one of the central reasons their economy is growing. The West is a net debtor. These economies are not growing.

You are contradicting yourself. In one breath you say that the Chinese are getting worthless dollars and are working for free. In the next breath you are saying that they are "net saving" and the rest of the world is indebted to them. Which is it? Are the dollars valuable to them or not?

Kshartle wrote:When one Chinese person borrows money from another, does the Chinese economy become more indebted?

All money, except coins, comes from debt. So, yes. There is more private credit. We already explained this to you from a US perspective a few weeks ago. Private credit is enormous compared to public debt — and as Ray Dalio pointed out, that's what drives the economy.

Kshartle wrote:The articles you found in your google search to switch the topic

You're the one that erroneously claimed that the Chinese don't accumulate debt. Of course they do — that's how they create their currency. Either from public debt or private credit. Their private credit is ginormous.

Kshartle wrote:from the silliness of reserve currency status coming from a willingness to print and spend were about inter-chinese borrowing and lending. This is nothing like the US which is in hoc for trillions globally and will never pay those debts.

Nothing silly about it. By definition, Japan can never become a world reserve currency if they are unwilling to give other people Yen.

And as long as Congress allows it, we will always pay our debts — we are legally required to. Congress not raising the debt ceiling is in direct conflict with other laws that require us to pay our debts by issuing new debt.

Gumby wrote:
Nothing silly about it. By definition, Japan can never become a world reserve currency if they are unwilling to give other people Yen.

What? How would Japan, or any other country, "give" money?

Kshartle wrote:So if the Swiss would just print more and be willing to spend it on imports they could make a run at the reserve currency status around the world?

I hope you can see how this is not the case.

Huh? All I said is that a currency cannot become a world reserve currency unless that country is willing to make enough and put it in other people's hands (via spending or loans, etc.). It's a very obvious requirement. That doesn't mean that that's all it takes to become a world reserve currency. There are other factors involved — such as the willingness to accept that currency, stability, etc. How on Earth did you jump to that conclusion that all we have to do is print?

That's not what I said — nor is that with the Triffin Dilemma says. What it says that the willingness to print/spend is one paradoxical requirement to being a world reserve currency. You can't be a world reserve currency if you don't create enough currency and let other people have it (duh).

Kshartle wrote:It only matters if other countries will accept and hold the francs and how many they are willing to accept and hold.

And you must also make sure that you have enough of that currency to go around for the rest of the world and find a way to give it people around the world. That should be obvious.

Kshartle wrote:It has nothing to do with the proclivity to print or the desire of Swiss people to buy imported goods. That is just not relevant.

Of course it does! How else do billions of people around the world obtain Swiss francs if they don't print enough?

Kshartle wrote:

Gumby wrote:
Nothing silly about it. By definition, Japan can never become a world reserve currency if they are unwilling to give other people Yen.

What? How would Japan, or any other country, "give" money?

By purchasing exports. They don't do that very much — they save their money and keep it locked up at the Japan Post Bank — which invests their cash in JGBs. Most of their Yen rarely ever gets into foreign pockets. By definition, you can't be a world reserve currency if almost all of the currency is saved domestically (my original point).