Monday, April 13, 2009

World Reserve Currency. I

This is the first in a short series about the necessary and sufficient conditions for a currency to be a reserve currency for the world.

First, what is a world reserve currency ?

A world reserve currency is a currency that has three characteristics. The currency is (I) held by central banks of many nations to provide a base of value for their local currencies; (II) the currency must be widely used in international trade; and (III) the currency must have a widely accepted value (even if such value fluctuates moderately). The second condition relates to the practical aspects of money. Money is used to trade goods and services. The third condition is required for nations and people to be willing to hold it for long periods of time - they must be satisfied they can buy something with it eventually.

This second characteristic is where gold and silver fail. There is simply not enough gold & silver in the world and it is bulky and heavy. I know that first hand. The gold bugs say the value of gold & silver should rise to the level needed to supply enough money to be useful. Unfortunately, that level is so far above their intrinsic value as jewelry or for industrial purposes that the third condition is violated. [By the way, I include silver as it was widely used before paper currencies to provide small change - viz., ready money.]

Now, let's deal with condition I. What is obvious about that condition ? tick ... tick ... tick ... the music is running out.

A world reserve currency MUST ... and I mean that MUST ... be exported to those other central banks. How else can it be their reserves ? Any nation that proposes to have its currency become a world reserve currency MUST run a large current account deficit. That eliminates the euro for now. Major European nations like Germany want to have export driven economies. Euros just won't flow overseas until European behavior changes. And the same applies to the yen. And the same applies to the Swiss franc. And even the Chinese yuan. The British pound could once have qualified - it once was a world reserve currency before the two world wars.

Only the dollar is left standing ... for now. Other nations' behavior may change in the future, however. I'll write more on this subject this week.

Markets

Copper continues to rise - now over $2.10/lb. A recent article in FT ascribed some of this strength to the moribund scrape market. That's probably true as the scrap market may have become somewhat uneconomic at low prices. But the demand is there, no doubt.

Word of the Day

"Iatrogenic" - adjective [$10]
Iatrogenic means caused by medical examination or treatment. The word arises from the Greek 'iatros' (physician) + GENIC.
Sentence: Let's hope Timmy's stress tests don't cause iatrogenic problems in the banks.

Le Mot du Jour

"Pis" - adjective, adverb and noun [pronounced 'pee']; several expressions use this word.
Pis means worse. "qui pis est" - "what is worse"; "aller de ~ en ~" - to get worse and worse.
Le pis means the worst (NB: the superlative).
La Phrase: La violence va de pis en pis à Bangkok.
Sentence: The violence gets worse and worse in Bangkok.

63 comments:

Bud said...

this talk about the dollar not being the world's reserve currency is laughable and nonsense and rubbish


it's all talk............go ahead............i dare any central bank to turn over to the yuan ....or yen.....or euro.....or ruble.....or dinar.....or ruppee



please........make my day

Bud said...

are the results of the stress tests gonna be made public ??

Bud said...

i have an important tax question for you Bman

is my monthly health insurance premium deductable ? ( i pay it out of my own pocket )

i have no other income other than speculation in stocks......i itemize using schedule A........i also file a sheduleD


and where do i deduct it ?? line 29 on form1040.....or on schedule A ?


it's $467 a month so that's a nice deduction

Bud said...

beefer registration coming......also leverage limits.......counterparties.........disclosure of positions


i don't like the smell of this .........oh well

Bud said...

GS vintage fund V........raised 5.5B ....wow......those guys are the best



PS.....GS goin to 200 ??

Bud said...

book comin out on A-fraud ............supposedly more revelations of steroid use.......i can't wait.......have to preorder it



' katie......i never felt overmatched on the baseball field'

Bunkerman said...

no re stress tests becoming public

Bunkerman said...

Bud,

The short answer is no.

BUT IF you file a Schedule C and claim "some" self employment income as a trader or whatever, then, yes, It is deductible. See Form 1040, line 29.

HOWEVER, most traders will show a loss on Schedule C (if they file it to deduct costs like the shark tank, eSignal, etc.) as all their income is on Schedule D. The health insurance deduction is limited by the amount of self employment income reported AND which is taxed on Schedule SE as self-employment income.

So the best one can do is arrange affairs with complexity to create some self-emloyment income that is taxed (at 15.3% up to $102,000 and .29% over that), but lets one then take the health insurance deduction against total income at a higher bracket, like 35%. This would save $35 while paying $15.3 per $100 Schedule C income (up to the health insurance amount).

There is also a requirement that the insurance plan be established under one's business - I'm not familiar with how that requirement is met, but later this year will learn more about it.

Bunkerman said...

That GS fund ... private equity investmstns were a dog and GS & others can't get fees, so they create a fund to buy them at discouns and then get their 20% IF they recover.

What a scam!

Bud said...

oh ok...........it would have been nice to take that deduction


ummmm.........i don't file a schedule C..............i been takin all my trading deductions ( esignal, briefing trader, streetaccount, l'aquarium de requin, etc.. ) on my scheduleA..........they amount to about 15k.........wonder if i've been doin that wrong


i have filed my taxes that way since 2003..........so far no problems..........but who the heck knows..........the tax code is so complex

Bunkerman said...

If it works ...

I used Schedule C to avoid the 2% limitation on miscellaneous deductions. That mattered a lot to me since I had a lot of other income. If might be less for you.

Bunkerman said...

I just followed the information in that book, Trader's Tax Book, or something like that title. It worked.

Bud said...

correct...........there is a 2% limitation on scheduleA



i'll look into sceduleC for next year....i got my taxes done over the weekend and am too tired to research more and do them again

Bunkerman said...

sold AAPL from Fido Fund. Had 50% gain, and all these upgrades & news worry me. A nice run so sayonara.

Mrs. B owns it in Sky fund anyway for LT. Had too much all in.

Spin-em said...

"helluva job bunk".....

RED SOX ARE THE STRONGEST TEAM IN THE AL EAST....HOLDING EVERYBODY UP!!!

RED SOX..RED SOX..
GOOOOOOOOOOOOOOOOOOOOOOOOOOOO
RED SOX!!!

mern said...

bman- thoughts on gore vidal?

ty

Bud said...

yeah.........sure was a helluva job........to go down 50points and hold on and average down........helluva a job indeed


PS......what about the AAPL core ?? sell that too .........or just the common


'core'..........pffffffffffffffft

Bud said...

listen you yankee douchebags


played the rays and the angels......new york....O's and royals


well played yankees.......well played indeed

Spin-em said...

zip it Bud..nobody care what you think....just a waste of electronic ink... go green fagboy

maverick said...

uhh Bud I don't think you can do that on Schedule A..gimme your ssn ....I will have an IRS agent call you

Bunkerman said...

uh Bud ... I bought that AAPL at 80.

I had sold it at 180 and 200.

the rebuy at around 130 got flipped around 120.

The core is held by Mrs. B in Sky Fund.

I reported a large LT capital gain on AAPL in 2008.

Sheesh ...

mfl59 said...

"zip it Bud"

oh man...that is a backhand with rings....Scranton style...Bud not gonna get up from that one

Bunkerman said...

Gore Vidal is a good writer and quite an intellectual, but is rather leftist and wrong on much.

Spin-em said...

"sorry bud"...fagboy was outta line...but ya gotta expect it when ya toss douchebags around...loool

mern said...

i watched him speak, on maher.

he said JFK was the worst president of the 20th century.

thoughts?

mern said...

here is how the danes r dealing with speeders.

http://www.threedonia.com/archives/4689

nice tits!

Bunkerman said...

I disagree. LBJ was worst.

LBJ did some great things, like push through civil rights legislation, but Vietnam and his inane Great Society waste canceled them all out.

(W was in 21st century)

Bunkerman said...

LBJ crippled the US for a dozen years untl Reagan revived it.

mern said...

he agreed with u on bush/cheney.

he said the spear chucker is likely to fail.

is he a donut puncher?

Bunkerman said...

a donut puncher ?

mern said...

um gay

lol

mern said...

im listening to last nites dead show.

i just read they each getting 3.3 mil for this tour. bob, phil, billy and mickey. i dont know what haynes or jeff r taking.

thats sickening.

tickets r 100 bucks plus reach around fees. 20 yrs tickets were 20 bucks, 25 tops and jer bear was still kicking it. but they will sell out, these shows. they just sticking to their core 100 hits, and its been so long, a lot of the faithul will go becuase its been so long since they had a release, even this tripe sounds great.

after i listen to the "i need a miracle", "truckin" to close the first set, i will decide whether or not to check out the two in philly.

mern said...

125 bucks for this?

anyone in on this is on drugs................

mfl59 said...

isnt that a given, or?

Bud said...

ace sure likes to stroke the SKFqueen


fagboy indeed

Bud said...

listen Bman


i just want you to admit that buy ans sell stocks quickly if you have a gain............enough of this 'core' garbage.......or 'long term long only investing'


you enjoy a game of ping-pong just as much as the next guy ( or next fagboy.....like ace)



binomial indeed

Bud said...

mern are you working these days ??

why don't you start trading til the house sells..........i heard frosty is good with the QID


'ops expo open interest spreadsheet'

Bud said...

is GS goin to 200 ???

Bunkerman said...

Bud, for now, I have some ST loss carry forwards (thanks to C and WB), so don't mind a flip & rebuy.

But I prefer a 40 point gain to a 2 point gain.

So I hold the stocks for weeks or months.

Nothing against trading here - I used to like it (stocks & commoditeis), but now don't want to spend the time watching them.

mfl59 said...

"or next fagboy, like ace"

lmaooooooooooooooo


PGA professional indeed

Bud said...

PGA pro thinks i need to get new irons


he'll fit me .....free of charge of course..........if i buy thru him

Spin-em said...

loooooooooooooooool

"free of charge"

pull this one..it plays jingle bells

mfl59 said...

lmaooooooooooooo

of course he does....

snake oil salesman...

Bud said...

jingle bells




LMAOOOOOOOOOOOOOOOOOOOOOOOOOOOOO

Bud said...

i almost bought philsdvd at the turn yesterday.............30.........holy smokes


then he missed that 4-footer for eagle on 15



pfffffffffffffffffffft

mfl59 said...

ya know....if you bought these new shoes for $250...nah I'll knock em down to $225....you should be breaking 80 in no time...

Bunkerman said...

what does a good set of clubs cost nowadays ? $1000 ?

Bud said...

a good set of irons is gonna cost me around 800...........i'm also gettin anew driver for 300


and i want those shoes ace is talkin ....225?....size 11.5 please




merci jim !!!

mfl59 said...

game of the rich indeed Bunkerman...

ya want to wrestle? bring yourself and a big heart...thats all ya need...

Bud said...

i better make my firearms purchase soon

60mins last nite on guns..........prices are shooting up.......and ammunition is in very short supply


i want a revolver and a long gun.....the ones the SWAT team or snipers have




'merci jim'

Bunkerman said...

that's reasonable. A good rifle can cost $700 ... or more nowadays.

Spin-em said...

trust me..a dope like you will blow your hand off with a pistol....if ya wanna do it right...stick with what you know ... napsack bombs

Spin-em said...

knapsack...spelling police

mfl59 said...

SWAT team...lmaoooo

son you cant even get out of a sand trap...

dont shoot your dick off

Spin-em said...

"dont shoot your dick off"

ROFLMAOOOOOOOOOOOOOO

Spin-em said...

Bud get that Taylor Made the one you can change loft,slice,draw...between that and your range finder..you should really steam the boyz behind ya...maybe getta move the F-along knuckle sammich....lool

mern said...

yes bud, i found a job in two weeks, in this economy.......

mfl, goes down swinging on the dead. geesh that was a cutter that landed 5 feet in front of the plate.

im on drugs and wont spend 125 for this tripe. im almost done now. im listening to phil sound like a dying duck (singin) on franklins tower.

UGH!

Bunkerman said...

Try Judy Garland, mern.

I was listening to her superb voice last evening in "Meet me in St. Louis"

Or Julie Andrews CDs. - I heard her in My Fair Lady CD last evening, too.

Both are the best.

mfl59 said...

Judy Garland...oh man...Id rather watch Bud hit 7 irons for an hour at the range...

Bunkerman said...

Mary Poppins is one of my favorite movies.

Spin-em said...

The hills are aliiiiiive
with the sounds of
euro horns,houses and ho---telllllls

mfl59 said...

the new GS...gimmie a break...

die GS die!!!!

mern said...

this lineup still better than garland.

i wonder he did more drugs? her or jerry. given she lived longer, my money is, frankly, on her.

the jacked her up all day, and that brought her down hard, so she cud sleep.