Friday, October 15, 2010

The Dollar

Let it fall.

Emerging markets in South America and Asia have been parasites on the backs of America since World War II. Those governments have also impoverished their own people by keeping their purchasing power low. These countries want the US consumer to buy their stuff and their governments don't want their people to buy our stuff.

One can see photos and TV of cities in Brazil and South Korea and China and it's rather obvious the standard of living is not far from the US. Yet travelers to those places can see costs far below costs in major US cities. Why? Those currencies are intentionally undervalued.

Now that capital flows are putting pressure on the US dollar, they whine.

I say tough &^%$. Let it fall.

I'd like to see a broad-based purchasing power parity study ["PPP"]. Nations where they keep currencies low, but a PPP study shows prices there are very low compared to the US - set an automatic tariff. The test would have a wide band - say 25% - for fluctuations; inside that band, no tariff would be set. But when one goes to China and sees prices 50% less than in the US, yet they peg the Chinese yuan at low levels, it's obvious that China using the US and US consumer as a tool for its own internal development. And US jobs are being hurt on that account.

This might seem to be a radical solution, but the entire world [and the rest of Asia which has free-floating currencies] is being hurt by China's use of its currency as a self-serving tool. The tariff would only apply to nations that peg their currency to the dollar.

The principal problem with economic theory is that it relies on static, equilibrium assumptions, and ignores the dynamics of the market. China uses the dynamics of business to drive US & other manufacturers out of business, and then capture that business themselves. An automatic tariff based on FACTS such as a thorough, regularly updated PPP model would be a rational means to prevent dynamic trade tactics that China is using to help itself at the expense of US workers.

Word of the Day

"Tergiversate" - verb, intransitive [$10]
Tergiversate means 1. be apostate, change one's party or principals; 2. equivocate, make conflicting statements; 3. turn one's back on something.
Sentence: Readers might be surprised by today's post by Bunkerman, thinking he is tergiversating on free trade, but his PPP-based tariff system is simply a modification - an improved version of free trade - as Fraternal Libertarianism is a more workable, better version of libertarianism.


Spin-em said...

- as Fraternal Libertarianism is a more workable, better version of libertarianism.

and you say you dont fish.....Patrick bait lool

Spin-em said...

Bunk..would you buy TBT??

Spin-em said...

National Infrastructure Bank....USA USA USA

Bunkerman said...

re TBT, in "principal" I like it;

BUT remember it's one of those daily return ETFs and thus cannot be held either LT or IT as it will grind you down even if one is correct about the direction of LT rates.

Bunkerman said...

would not shorting TLT be better for a intermediate-long term play?

Bud said...

let it fall................yeah..............destroy and debase your currency

what a great idea............i guess it's time for me to go shopping this weekend......for what ???

guns ammo canned foods gold shovels

Bud said...

Bman do you know your assett gains are in dollars ??? you have to pay taxes on them....ordinary and cap gains........the Fed is just wiring money out of your bank account are getting looted

Harvard MIT my ass

Bud said...

marc faber says get out of bonds and stocks........he also doesn't think the USdollar will be the reserve currency in 10years

Bunkerman said...

nope, Bud.

Almost all my expenses are in $, too.

And asset gains in retirement acconts are not taxed until I draw the money out to spend ... in the US.

I run a matched book.

Bud said...

this no inflation nonsense cracks me up too...............seems like my grocery bills are gettin bigger.............i'll be doin an inflation check this weeknd too

Bunkerman said...

I wonder what marc faber thinks will be a reserve currency?

He's right about bonds. those are now certificates of confiscation.

Question: What other time period had ultra low long term interest rates ? And how did stocks & bonds perform?

Answer in a few minutes.

Bud said...

the 1920s ...........after ww1

we had very low rates and stocks did great...not sure about bonds

Bunkerman said...

re 20s, that time period is not too relevant since there was a gold standard then.

The correct answer is the 1950s.

Great bull market in stocks.

Bonds did poorly LT.

Bunkerman said...

Hmmm, maybe '20s si aprtly relevant.

the 1950s had a gold standard for foreigners per US $, but US citizens could not own gold.

Conclusion: a great bull market is coming.

I propounded the coming great bull market before for other reasons.

Spin-em said...

What about Bob????...What about Bob?????.....soonofabitchinBobbbb!!!!

Spin-em said...

Red Sox boyz buy Liverpool...they buy NASCAR at the kickball..handshake mfl

Bud said...

Bman ...........are you ready for the oncoming currency crisis ?? what preparations should i make for one ??

do you know what happened in Russia in 80s ??

Bunkerman said...

Russia was under the Commies in the 1980s. Maybe you mean the 1990s.

For any and all crises you need gold, silver, silver coins, guns, ammo, liquor, food, water, medical supplies, some outdoor survival gear and a defensible position.

If atomic attack is feared, you also need radiaton pills.

Bunkerman said...

That's a silly question to ask me, "Am I ready"

I've been ready for 20+ years.

Spin-em said...

cept ur water go down to the

Bud said...

sorry.............i meant Russia in 1990s........why liqour ??

for the conquoring troops ??

Bud said...

Bman the book WHEN MONEY DIES by adam ferguson i was talking about

very famous book about mega-inflation in the weimar republic in 1920s

the book was not could get it for 800 bucks on just got released in US in paperback...........i am looking forward to reading it

surprised you had not heard of it...........i am sure u will enjoy it

Bunkerman said...

liquor is a very marketable and useful commodity in times of stress; useful for bribes, to make friends, and to maintain a positive mental attitude.

Bunkerman said...

I know a lot about the Weimar hyperinflation already.

Bunkerman said...

I do have two 50 gallon water barrels that could be filled on any notice, before the town water goes out.

And I have two filtration systems for using river water.

Spin-em said...

ohhh..must have upgraded since I showed you the soft underbelly of your plan....YOU'RE

Spin-em said...

lool Bob emailed... hes at Druckers... wants to know if water taxis will be operating during times of crises???

Bunkerman said...

oh, I've had that water eq. for years. I still need the river for LT crisis after first couple weeks.

But thanks for thinking about any holes I might have in my plan :)

I suppose I should have some kind of solar power system, though; one to charge batteries might be useful


Bunkerman said...

uh, sunboy, is your well on solar power ... or can you hand pump it ?

Spin-em said...

the big one hits..Im

Spin-em said...

pfftttt My boyz total pisspots today..thanks Bunk Have a fine circus party....Spinny outta here