Comments on: The worse the dollar does, the more dollars central banks want … http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/ Sat, 21 Nov 2009 16:40:10 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Brad Setser: Follow the Money » Blog Archive » The dollar and the world’s central banks (once again) http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-111713 Brad Setser: Follow the Money » Blog Archive » The dollar and the world’s central banks (once again) Thu, 21 Aug 2008 04:17:27 +0000 http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-111713 [...] reserves when the dollar is under pressure than when the dollar is rising (graphs and data here, and here). There is a bit of noise — the price of oil matters, and oil rose in 2005 along [...] [...] reserves when the dollar is under pressure than when the dollar is rising (graphs and data here, and here). There is a bit of noise — the price of oil matters, and oil rose in 2005 along [...]

]]> By: Guest http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105178 Guest Sat, 16 Feb 2008 04:26:16 +0000 http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105178 This is a <a href="http://www.powells.com/biblio?isbn=0-8264-9169-3">sociological argument</a> that moldbug might appreciate: can you attribute to the US what you can to mold, viz. magical mold properties? In other words, to the extent that the US -- writ large -- 'invented' nuclear war/power, <a href="http://opinion.latimes.com/opinionla/2007/03/mars_on_the_roc.html">space exploration</a>/strike/surveillance and the microprocessor/(mobile)internet, there appears to be a dearth in 'miraculous' achievements in the rest of the world... and that's <i>not even including</i> jazz, rock'n'roll, rap and the Hollywood star system -- the Dream Factory :D Therefore, given the dearth in miracles, why not convert USD into hope bucks? Cheers! This is a sociological argument that moldbug might appreciate: can you attribute to the US what you can to mold, viz. magical mold properties? In other words, to the extent that the US — writ large — ‘invented’ nuclear war/power, space exploration/strike/surveillance and the microprocessor/(mobile)internet, there appears to be a dearth in ‘miraculous’ achievements in the rest of the world… and that’s not even including jazz, rock’n'roll, rap and the Hollywood star system — the Dream Factory :D Therefore, given the dearth in miracles, why not convert USD into hope bucks?

Cheers!

]]> By: moldbug http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105177 moldbug Fri, 15 Feb 2008 10:00:19 +0000 http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105177 I can't argue with any of that! I only wish it was more often put so forthrightly. The main problem with CB mold sales is that the less mold the CBs have, the harder it is for them for them to (a) restore the mold standard in an orderly and sane way, and (b) defend against the market's attempts to restore the mold standard in a disorderly and insane way. (Look at the freakin' platinum market!) Once Volckerian high-rate chemotherapy is off the table, those 30,000 tons are all the ammo you have. Use them wisely, young padwan. I can’t argue with any of that! I only wish it was more often put so forthrightly.

The main problem with CB mold sales is that the less mold the CBs have, the harder it is for them for them to (a) restore the mold standard in an orderly and sane way, and (b) defend against the market’s attempts to restore the mold standard in a disorderly and insane way. (Look at the freakin’ platinum market!) Once Volckerian high-rate chemotherapy is off the table, those 30,000 tons are all the ammo you have. Use them wisely, young padwan.

]]> By: bsetser http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105176 bsetser Fri, 15 Feb 2008 06:12:07 +0000 http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105176 modlbug -- it is politically impossible to meet the IMF's payroll by selling assets. It is politically possible to meet payroll out of interest income. and this actually might not be a bad time to sell a bit of mold ... modlbug — it is politically impossible to meet the IMF’s payroll by selling assets. It is politically possible to meet payroll out of interest income. and this actually might not be a bad time to sell a bit of mold …

]]> By: Guest http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105175 Guest Fri, 15 Feb 2008 05:20:47 +0000 http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105175 "But isn't twofish a prime example of a Chinese national pricing CDOs for Wall Street rather than contributing to "the new world colossus?"" Twofish is a second-generation Chinese American, not your typical "Chinese national". “But isn’t twofish a prime example of a Chinese national pricing CDOs for Wall Street rather than contributing to “the new world colossus?”"

Twofish is a second-generation Chinese American, not your typical “Chinese national”.

]]> By: Guest http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105174 Guest Fri, 15 Feb 2008 02:28:06 +0000 http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105174 But isn't twofish a prime example of a Chinese national pricing CDOs for Wall Street rather than contributing to "the new world colossus?" But isn’t twofish a prime example of a Chinese national pricing CDOs for Wall Street rather than contributing to “the new world colossus?”

]]> By: df http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105173 df Thu, 14 Feb 2008 21:22:17 +0000 http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105173 It s too late for Dr Volker. On top of it has any of you noticed that monetary agregates started to really rise faster than GDP just after Volker ? The main causes have been hitting on labor, deregulating the finance industry (both moves pushing up borrowing and lending) and opening borders to all trades, especially capital movements. Free capital movement outside of borders is suicidal for any democracy, it turns it in plutocracy in no time. Anyway the least painful solution now is keynes Medecine (Bernanke update). BUt if we want to prevent the next global debt bubble, the one coming in 70 years or so, we have to strongly regulate the debt/GDP ratio, put caps on the amount of private lending that can happen on any given years, REGULATE the finance industry. Passing the printing press mop can help clean the mess, but it takes time, there are risks of inondation and it s better to keep the house clean all time by not eating junkfood everywhere all the time. It s too late for Dr Volker. On top of it has any of you noticed that monetary agregates started to really rise faster than GDP just after Volker ?
The main causes have been hitting on labor, deregulating the finance industry (both moves pushing up borrowing and lending) and opening borders to all trades, especially capital movements.

Free capital movement outside of borders is suicidal for any democracy, it turns it in plutocracy in no time.

Anyway the least painful solution now is keynes Medecine (Bernanke update). BUt if we want to prevent the next global debt bubble, the one coming in 70 years or so, we have to strongly regulate the debt/GDP ratio, put caps on the amount of private lending that can happen on any given years, REGULATE the finance industry.

Passing the printing press mop can help clean the mess, but it takes time, there are risks of inondation and it s better to keep the house clean all time by not eating junkfood everywhere all the time.

]]> By: df http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105172 df Thu, 14 Feb 2008 21:14:10 +0000 http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105172 There you have it exports to US are 5% on top of this you have exports to europe; exports to others exporters to the west, investment in export sector, and indirect spilling on the rest of the economy/ Now nobody said the chinese economy would fall first. THe chinese economy will fall once there are no foreign markets for its products. That is not the case yet. There is no outcry on China. China has shoot itself in the foot by subsidizing its exports of manufactured products, just like the west has shoot itself in the foot by subsidizing exports of agricultural products and allowing financial deregulation. We all let the global debt bubble happen. All this has a cost, it will be felt. There you have it exports to US are 5% on top of this you have exports to europe; exports to others exporters to the west, investment in export sector, and indirect spilling on the rest of the economy/

Now nobody said the chinese economy would fall first. THe chinese economy will fall once there are no foreign markets for its products. That is not the case yet.

There is no outcry on China. China has shoot itself in the foot by subsidizing its exports of manufactured products, just like the west has shoot itself in the foot by subsidizing exports of agricultural products and allowing financial deregulation.
We all let the global debt bubble happen.

All this has a cost, it will be felt.

]]> By: don http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105171 don Thu, 14 Feb 2008 17:32:40 +0000 http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105171 The global savings glut seems likely to continue. U.S. private borrowing may slow, but the government seems intent on taking up the slack. Asian economies are following export-led growth strategies through undervalued currencies. Consumption in oil exporters will lag the tremendous growth in their income for awhile. If the excess saving in Asia and oil exporting countries continues, and if the U.S. government takes measures to keep up U.S. spending, then unsustainable U.S. current account deficits will continue. I don't see Asian lenders changing their policies, even if U.S. government debt starts to look shaky, because I think their policies are not aimed at accumulating wealth, but rather at supporting their economies. If present trends continue, though, there will eventually be some very painful adjustements. gillies - I like your post. I too would prefer Dr. Volker. The global savings glut seems likely to continue. U.S. private borrowing may slow, but the government seems intent on taking up the slack. Asian economies are following export-led growth strategies through undervalued currencies. Consumption in oil exporters will lag the tremendous growth in their income for awhile. If the excess saving in Asia and oil exporting countries continues, and if the U.S. government takes measures to keep up U.S. spending, then unsustainable U.S. current account deficits will continue. I don’t see Asian lenders changing their policies, even if U.S. government debt starts to look shaky, because I think their policies are not aimed at accumulating wealth, but rather at supporting their economies. If present trends continue, though, there will eventually be some very painful adjustements.
gillies – I like your post. I too would prefer Dr. Volker.

]]> By: moldbug http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105170 moldbug Thu, 14 Feb 2008 13:57:05 +0000 http://blogs.cfr.org/setser/2008/02/13/the-worse-the-dollar-does-the-more-dollars-central-banks/#comment-105170 Stephen Jen is <a href="http://www.morganstanley.com/views/gef/archive/2008/20080208-Fri.html">particularly amusing</a> on IMF gold mobilization: <i>The sharp rise in gold prices in recent months has pushed up the value of one of the IMF's assets from US$23 billion in 2002 to US$92 billion now.</i> <i>Having most of the assets yielding no investment return does not seem to make a lot of sense.</i> Obviously Mr. Jen has his own very interesting definition of investment return. bsetser, I'm curious - what are the special qualities of (as you put it) "interest income?" It strikes me as perfectly sensible that if the IMF needs to sell assets to meet its payroll every month, it should do exactly that. On the other hand, I can think of other reasons why the IMF might want to exchange 400T of Au for "AAA rated securities" - few of which have much to do with meeting payroll. There is clearly a shortage of sellers in the one market, and a shortage of buyers in the other. Could it serve the public interest to relieve this imbalance? I'm sure it could. Whatever the explanation may be, I'm sure it's being presented to Senator Reid (D-NV) as we speak. Congress has blocked IMF gold sales before, and paying the salaries of international economists does not exactly have the political Midas touch to it. Unless of course there is some other story. Stephen Jen is particularly amusing on IMF gold mobilization:

The sharp rise in gold prices in recent months has pushed up the value of one of the IMF’s assets from US$23 billion in 2002 to US$92 billion now.

Having most of the assets yielding no investment return does not seem to make a lot of sense.

Obviously Mr. Jen has his own very interesting definition of investment return. bsetser, I’m curious – what are the special qualities of (as you put it) “interest income?”

It strikes me as perfectly sensible that if the IMF needs to sell assets to meet its payroll every month, it should do exactly that. On the other hand, I can think of other reasons why the IMF might want to exchange 400T of Au for “AAA rated securities” – few of which have much to do with meeting payroll. There is clearly a shortage of sellers in the one market, and a shortage of buyers in the other. Could it serve the public interest to relieve this imbalance? I’m sure it could.

Whatever the explanation may be, I’m sure it’s being presented to Senator Reid (D-NV) as we speak. Congress has blocked IMF gold sales before, and paying the salaries of international economists does not exactly have the political Midas touch to it. Unless of course there is some other story.

]]>