Comments on: Central banks still buy dollars when no one else wants to …

By: bsetser

bsetser — Mon, 07 Jul 2008 00:47:22 +0000

central banks don’t usually buy oil, private oil cos (or nat’l oil cos) do. and if you want to buy oil, you have no need to hold $. the euro has fallen less relative oil than the $ … so those wanting to buy oil have as strong an incentive to hold euros as $, if not a stronger incentive.

in my view, this has everything to do with currency management, and nothing to do with the rise in the oil price.

By: pappy

pappy — Mon, 07 Jul 2008 00:37:31 +0000

Doesn’t this reflect more $ needed for Oil purchases by foreign central banks (since prices have triped in a few years!) as well as their own increased money printing to keep their currency’s from appreciating very fast (which would kill their manufacturing sector).

w/o this oil price increase perhaps the dollar’s status as reserve currency may have weakened. I guess what i am saying is that higher oil prices and increase central bank $ demand, which keeps % of $ reserves steady, which sans this increase, data may have shown foreign central banks diversifying more, so in other words should the price of oil drop, central banks would probably hold a significantly lower % of dollars, and OPEC would probably have more incentive to swith to euro (since as of now they are getting 300% more petro dollars, on a 30-40% dollar devaluation) which is a pretty good deal for the shieks.

By: One thing to remember…. » The Ethereal Voice

One thing to remember…. » The Ethereal Voice — Thu, 03 Jul 2008 22:55:17 +0000

[...] as long at the US government can sell bonds at will without effecting the interest rates. As Brad Setser reminds us…. The scale of growth in central bank foreign assets is hard to overstate, as is the extent to which [...]

By: flow5

flow5 — Thu, 03 Jul 2008 19:07:33 +0000

“Bernanke appeared to be addressing the growing lag in math, science and reading skills among American students when he raised education’s role in the economy.”

By: Rien Huizer

Rien Huizer — Thu, 03 Jul 2008 03:55:23 +0000

Brad, briefly: I was trying to refer to the EURR(the euro region) which has appr 70 bn in trade surplus.Apologies for not being clearer. The countries yet awaiting admittance can still bring FEER, BEER etc estimates into play when looking at entry rates (theoretically). Obviously the private sector in non-euro EU is attracted to low EUR interest rates and in many cases that may be economically justified, even it the local currency needs a depreciation in order to fit into euroland.Most of th lending is probably done by banks, predominently euroland-owned. That could become a problem.

Re China’ “orderly” I simply meant conditions that keep riots at an acceptable level.

By: Ian Hurst

Ian Hurst — Wed, 02 Jul 2008 22:54:52 +0000

God, another one.

By: marxbites

marxbites — Wed, 02 Jul 2008 21:31:29 +0000

When will the topic of how to profit from it turn to how to take the FED and it’s criminals working for private banking and never in the interest of the US Taxpayer?

There will never be enough dollars printed to pay off the debt. Each dollar Congress borrows indebts taxpayers $2.20 P&I.

No other industry is allowed this egregious a monopoly cartel.

The FED is govt’s unltd CC that indentures the unborn – how moral is that?

Their entire job is to milk the masses without actually killing off their golden geese.

They juice the markets which gets people over-extended, then contract it and suck up the bankruptcies they created for pennies. The big banks did this in concert even before there was a Fed – and were precisely the sources of all those banking “panics” they created to make the sheeple believe gold was the culprit, when it was their unconnectedness to gold doing it all the time.

Gold keeps the bankers and govt honest or we run the particular bank. That’s when bankers didn’t have taxpayers by the throat to bail them out when behaving criminally. Now it’s sanctioned and enforced by the Police State ever more gearing up to protect itself from WE THE PEOPLE – People!

Govt just does NOT have to have ANYTHING to do with money – they don’t even have to mint it – but thats the first step in stealing the freely market chosen metals from those that earned it by those who’d rather live off them, like bankers do who charge interest for money they create from thin air, let alone their stealth robbery via the printing press created inflationary debasement that robs our purchasing power secretly.

By: flow5

flow5 — Wed, 02 Jul 2008 19:53:53 +0000

Huizer – the BLS data (The Occupational Employment Statistics)- supports what you say. But world wide I think we still are underweighted in science, math, engineering etc.

Math? I think that most of the math used in economics is just window dressing.

Joseph Granville’s followers anticipated a market call back in Sept 81, and collectively they bought so much stock that Granville didn’t get to announce a buy signal. So it would be useless if MVt was common knowledge.

But monetary flows behave similar to Planck’s constant in physics. It’s not as written in the text books. I.e., there are no such things as variable lag(s).

I picked it up from Leland J. Pritchard, Ph.D. Economics Chicago 1933, MS Statistics Syracuse

By: Stefan, Tallinn

Stefan, Tallinn — Wed, 02 Jul 2008 19:30:41 +0000

Brad
Not only can dollar-printing finance real imports/inflows, it does.

Theoretically the dollars are of course supposed to be value preservers, i.e “something real”. We know that they are not exchangeable for “something real today” – they could be exchangeable for “something real tomorrow”. Obviously the Chinese and the Arabs think so.

The dollar (euro) holds a confidence-capital – but for how long. How long do we believe that it preserves value, i.e how long do we believe that the world currency reserves preserve value…

How long does the creditor believe that the debtor will pay him back. Well it is up to him, but if there are several creditors they might be tempted to realise their value before the others. Just as early movers among banks realise more value in a downturn than those who wait.

In other words, I would focus the analysis on the value of the dollar (euro).

By: bsetser

bsetser — Wed, 02 Jul 2008 15:10:21 +0000

Rien — look at the IMF WEO data for the EU. Norway isn’t part of the EU — so that pulls down the surplus. and the countries of Eastern Europe that have been admitted to the EU generally run very large deficits.

And i would argue that there are a series of steps (including ways of raising labor income, which has been trending down v GDP) that would be consistent with a faster pace of orderly expansion of domestic absorption in China, especially if combined with a more appreciated RMB. the current policy mix — an undervalued RMB, negative real rates, rising SOE profits financing high levels of investment, falling labor income v GDP, contractionary fiscal — strikes me as one that isn’t orderly or at a maximum.