ROBERTSON: GREECE WILL DEFAULT, “MACRO IS SO BAD EVERYWHERE”
Hedge fund guru Julian Robertson was on CNBC this afternoon to discuss the state of the global economy. He says we are “in plenty of trouble” and that Greece is certain to default. He sees a great dichotomy between the macro and the micro. In general, he is bearish about the global economy, but sees opportunities.
On the bullish front, Robertson is bullish the Norwegian Krona, Singapore Dollar, the Canadian Dollar and believes the “great technology companies” in the USA provide a “fabulous” opportunity. He is bullish Apple, Google and US tech in general. He is also very bullish on Mastercard and Visa.
He says Washington policy is just trying to remain in power rather than provide real solutions. In other words, the politicians are just focused on getting re-elected.
Unfortunately, he perpetuates the old myth that foreigners fund our spending and could cause a bond market collapse if they were to sell our debt….
Source: CNBC
Cullen I asked this before but never receive a response.
I’m unclear on the MMT position, if treasury’s are dumped, does theory predict
- no effect on yields
- small effect on yields
- large effect on yields (this I know MMT clearly rejects)
And what drives long rates, simply the Fed or are there market forces?
And does a “free market” exist in bond market?
I’m trying to reconcile this theory with what is observed in reality.
Not sure what you mean by Tsys being “dumped”. Who will they dump them on and why will they do so? Foreigners accumulate tsys by virtue of the fact that they maintain trade surpluses with us and are net accumulators of USDs. All they can do with these dollars is accumulate USD denominated assets. They can’t “dump” UST’s in reality without completely overhauling their trade position with us. So, the whole argument is a non-starter and misunderstands the basis of the entire transaction process.
On rates and the Fed see here:
http://pragcap.com/i-want-to-come-back-as-the-federal-reserve-you-can-intimidate-everybody
“Foreigners accumulate tsys by virtue of the fact that they maintain trade surpluses with us and are net accumulators of USDs. All they can do with these dollars is accumulate USD denominated assets. They can’t “dump” UST’s in reality without completely overhauling their trade position with us. So, the whole argument is a non-starter and misunderstands the basis of the entire transaction process. ”
That + the fact that if there ever was a run on Tsys… foreigners would be forced to buy other US assets (due to current account imbalances).
And further…
the fed will be forced to buys the bonds (in this hypothetical situation). Obviously more money enters the system and we have inflation lowering real returns on whatever they bot…
Nothing changes… MMT still wins. unless i missed a step somewhere
The only scenario I can see to dump treasuries for USDs would be if energy prices got so high the dollar value in BTUs (british thermal units) of paper bills exceeded their monetary value. I call that, “combustion arbitrage”
I am sure the Chinese can dump their tsys and buy something else with the proceeds, if they want to: gold, oil companies, euros, etc. In the current environment, they like the safety of the US tsys. There is no rule that says you have to keep the US$ earned with exports as US assets. When they find suitable alternatives, the chinese can convert the US$ to other international assets they want.
So someone else will be a buyer. You don’t seem to understand that as long as China is a net accumulator of USDs they will continue to be a net accumulator of USTs. Besides, if they stopped buying it wouldn’t really impact us at all…
That doesn’t mean the tsys cannot go down and yield cannot go up. Depending on how much tsys they sell they can drive the tsys yield up, especially if there are not many willing buyers. Nobody is immune from market forces. When too many people sell (or when somebody sells a large volume), the price must go down.
Does the market really set the long bond? http://pragcap.com/i-want-to-come-back-as-the-federal-reserve-you-can-intimidate-everybody
http://www.pimco.com/EN/Insights/Pages/FF_10_2003.aspx
“But What About Interest Rates?!?!
But what if China gets wrapped ’round the axle of annoyance and quits buying so many dollar-denominated bonds, driving up U.S. interest rates, I hear some dear readers retorting. You have a point, I will concede up front, as it applies to market-determined interest rates. I submit, however, that the “threat” of a nearby calamitous increase in U.S. interest rates in the wake of more muted foreign buying is much more muted than many of you fear. And the key reason is U.S. monetary policy itself: American monetary and fiscal policies are openly geared to fostering a cyclical increase of inflation, or at a minimum, avoiding an “unwelcome” cyclical disinflation.
Thus, there is virtually zero risk that a revaluation of the Yuan – via a shift to a floating exchange rate regime, or a one-off revaluation in the context of a fixed pegged exchange rate regime – would invoke the Federal Reserve to hike its 1% peg for the Fed funds rate. Accordingly, any market-induced – foreign or domestic-driven – upward pressure on U.S. intermediate and long-term interest rates would/will be limited by the leash of the Fed’s reflationary anchoring of the Fed funds rate at 1% .
Put differently, there is a limit to how steep the yield curve can get, if the Fed just says no – again and again! – to the implied tightening path implicit in a steep yield curve. “
Plus, as Cullen has written about many times before, the Fed could more explicitly control long rates by standing by as an unlimited buyer of specific maturity at a specific price.
The Fed can always buy up Treasuries. There is no need for the yield to go up. But if China want’s out of dollars they have to buy commodities (such as Gold), and someone else will hold those dollars. Someone has to hold the dollars until they are returned to the US Government through the IRS.
more, in add’n to Cullen’s comments……. Trsys being “dumped” means they would be purchased by someone. And what would they be purchased with?? Krona, euros, rubles, real? Someone with more understanding of int’t banking can help you with this more than I, but I’m assuming they would be purchased with US $$, thus effectively exchanging an interest bearing note for a non-interest bearing note. I don’t see it happening……….
I guess first off my question is not answered…rather I’m given a question to respond to.
So let me attempt to answer….
1. Let say China chooses to sell treasuries (some but not all and for the sake of discussion more treasuries then the trade surplus with the US) and convert USD into gold or Euro debt or oil.
2. Someone else foreign or domestic buys the treasuries and I expect supply/demand sets the interest rate (but I have no clue if MMT accepts this concept with regard to interest rates).
3. And China continues to export into US market and buy other treasuries
4. And I strongly disagree that my above “argument is a non-starter and misunderstands the basis of the entire transaction process”?
5. Let me continue how I understand MMT because I still can’t get a straight answer. If no one wants to buy the treasuries that China is selling, then yields would be pushed up (maybe yes no ? this is the point MMT won’t comment on) and at some point the Fed can step in as buyer or last resort to hold the rates.
So if that is the case then MMT says the “free market” and adam smith invisible hand is pretty much irrelveant to setting the rate if the Fed steps in as buyer. And I’m supposed to believe this is “stable” and “sustainable” system over the long term?
See McCulley’s quote above and Cullen’s article. The yield curve can only get so steep since it is anchored by the FFR. This is even absent the Fed stepping in.
Regarding the impact of supply and demand, Mosler himself, when describing the bond market, has spoken of technicals- supply/demand factors affecting the bond market, much more so out at the long end where the market is thinner.
http://moslereconomics.com/2010/11/17/qe-dynamics-one-more-time-its-about-price-not-quantity/
My sense is current and expected FFRs will always matter much more due to the arbitrage opportunity.
And again, the Fed is always there as a backstop.
Regarding ‘sustainability,’ if we define that as fostering a healthy economy or even avoiding hyperinflation – I think what matters is economic policy and decision making in general. If it’s wildly wasteful, corrupt, and destroys the economy, our economic policy is potentially not sustainable (it’s gotta be really really bad). But duh. I don’t think this has much to do with interest rate setting within reason, but people like Edward Harrison, who is sympathetic to MMT, may disagree a bit. He sees problems with interest rate suppression in terms of resource misallocation.
Also, primary dealers are always there making deep, liquid markets in treasuries. They have theoretically an unlimited ability to buy treasuries at auction or service the secondary market. That China could somehow derail this system I think is just not realistic at all, both from an operational perspective and a magnitude of holdings perspective.
At the end of the day, the US bond market isn’t a ‘free market,’ and only appears to be one to the extent the Fed allows it. I don’t see why this is ‘unsustainable’ though. It just is what it is. The Fed HAS to set the FFR, there is no other choice. Once they do that, everything else follows.
If I accept Mosler’s thesis that the natural rate of interest is zero, doesn’t MMT see a problem with a central bank setting the long bond yields below inflation for an extended period of time?
- for existing bondholders
- for savers and pensioner funds
- international inflationary pressures of the reserve currency (outside the US balance sheet de-leveraging)
Gotta talk to them. Haven’t read that much on their specific views on monetary policies and these sorts of issues.
Lol, ‘even Mosler himself’….ahh, to have reached god like status….jk
Well, I do admire the man, but I stated it that way since he is a founding member of MMT, and I was trying to dispel the notion that MMT doesn’t see supply/demand issues in the market for govt bonds.
“And I’m supposed to believe this is “stable” and “sustainable” system over the long term?”
The Fed IS the one calling the shots regarding bank reserves. It sets the overnight funds rate regardless of market opinion. It sets the overnight deposit facility (in the US it’s called IOR, for the ECB it’s an actual deposit facility). We are just talking about the Fed setting the long-term excess reserve deposit facility on zero-risk assets (treasury securities).
The market can set the rate it wants on non-zero risk assets. If it wants to hold zero risk assets (and the government is the only one that can create them as a currency issuer) it has to play by the Fed rules.
Good so I am getting somewhere. And if I accept Mosler’s thesis that the natural rate of interest is zero, then the Fed can set the rate to any zero or positive interest rate.
But doesn’t MMT see a problem with a central bank setting the long bond yields below inflation for an extended period of time?
- for existing bondholders (encourages more dumping)
- for savers and pensioner funds (harms and ruins low income savers)
- international inflationary pressures of the reserve currency (outside the US balance sheet de-leveraging. (USD is used for world commodity purchases so inflation beyond interest leads to inflationary problems outside of the US and its output gap due to the BS recession)
I believe Mosler is being mis-quoted here. Many MMT’ers say that the government should stop issuing debt. This means that excess reserves will pile into the banking system and drive short term interest rates to zero. These same people then continue to suggest that the FED get out of the business of setting interest rates and let the market handle that.
So it’s not that ALL interest rates should be zero but the underlying REAL costs of the money should be zero. There should still be a positive interest rate to account for inflation risk, credit risks (for non-government debts), etc…
I could have written my comment clearer as I was referring the natural rate of (nominal) interest on reserves and treasuries and not corporate or private loans.
That said, the Fed as buyer of last resort can choose to force the private banking nominal rate below the inflation rate by stepping in as a buyer of last resort though that is a different discussion.
As I understand, MMT implies the natural (and nominal) interest rate of reserves and treasuries to be the same and zero. The Fed can “interfere” and set the nominal rate higher. That is, because reserves/30 year are equally “riskless” then the only difference in yield between a 30 year treasury and bank reserves would be the 30 year expected inflation rate unless the Fed “tolerated” a non-zero nominal interest rate in the 30 year note.
My question is the long term consequences of setting the nominal rate below the inflation rate (and one could argue Japan is somewhat instructive to how “savers” may behave) though the Yen is not the reserve currency. That is because countries transact with the reserve currency (and not Yen), setting nominal rates below inflation may produce some unintended consequences even though the country issuing the reserve currency is facing an output gap produced by a balance sheet delevarging.
Cullen,
Could you expound on ‘the natural rate of interest’ being 0?
Is that just for short-term rates?
I figured that prescriptively, MMT would be compatible with a continuing modest inflation rate. Would the ‘natural 0 rate’ of interest be equal to this rate?
Citation of a reasonably concise explication might do the trick.
Ocean,
You have done this over and over again! Your question does not get answered because while the answer is obvious and its the one you want, it is a loaded question (and therefore irresponsible). WHAT WILL CAUSE US TREASURIES TO BE ‘DUMPED’. If you cannot explain what will cause the mass exodus then there’s no reason to answer to your question.
First off I’m beyond this “loaded question” see my last question above above regarding the implications of the Fed setting interest rates below inflation.
Second why is MMT so defensive, if MMT theory is not rigorous to describe a hypothetical scenario, then why should it be taken at face value. I believe much of MMT, but I do believe there are shortcomings which are often ignored or dismissed as trivial. Or maybe the short comings have not been communicated to me effectively.
Third we want to have a productive discussion so we need to define “dumped”. I stated above that dumped does not mean 100% selling. I take it to mean trading some value greater than yearly trade surplus in exchange. Why? China wants
- gold (if they question reserve currency for political or sustainability reasons)
- euro debt (to support euroland from defaulting)
- oil and commodities (to deficit spend to build up their economy by the amount the trade is impacted by decrease in China exports because of the global recession)
Now you can dismiss each of these reason are silly, dumb, impractical and would never happen. But I fail to see how that justifies MMT.
That said, my question above regarding setting long bond yield below inflation does not require this “hypothetical” dumping and still holds in general case.
Ocean,
You may have moved past the original question in this thread, but you have moved past it before and yet here you pose it again.
“Second why is MMT so defensive, if MMT theory is not rigorous to describe a hypothetical scenario, then why should it be taken at face value.”
I don’t think that when someone asks ‘When the sky falls will gravity make it fall up or down’ responding ‘Why do you think the sky will fall?’ is defensive.
Supply and Demand does control the US Bond market, but the government has the ability to control both the supply and demand.
As for your questions regarding the long end being lower than inflation I’ll let someone with a larger intellect answer.
True I brought up the “dumping” argument a few times. And keep in mind, no one has answered the bond machinations of July 2003 in both the US and Japan for me satisfactorily . Rather, I am asked to accept spoon fed pablum that treasuries are risk free and I’m a fearmonger for questioning treasuries. Like I said, MMTers may assume I’m a complete fearmongering moron or maybe they may consider the question has never answered by MMTer accurately in the first place.
I question the inherent assumption that economic agents (individuals, central banks, countries, corporations, banks) behave “rationally” when it comes to monetary matters. Of course, that does not mean anyone will do something irrationally destructive as dumping treasuries (even though July 2003 may make one question the possibility) but for me I’m more open to that possibility regardless what MMT theory suggests. (Or at least what I perceive MMT to suggest because it seems my question is dismissed as outright fearmongering rather than being directly addressed. And I’m open to the possibility that it may turn out to be fearmongering, but it still has never been answered satisfactorily for my simple untrained academic mind. At any rate, I don’t intend to belabor this specific point at this time, but I see no problem if I wish to bring it up again at a future point.
And for now I’m more interested in the previous question stated above.
Ocean,
You are misunderstanding the market actions. Your 2003 example actually proves our point. If the Fed was expected to ease substantially and only eases marginally, then the market takes that as an implicit tightening, ie, the bond market was reading the Fed wrong. So, the fact that bond yield rose in 2003 is perfectly consistent with the idea that Fed tightening and higher rates may be on their way in the near future. And of course, we know they were. So the bond market got this right and the Fed’s message was accurately relayed to the markets.
As for dumping – let’s just stop using the term all together. The market as a whole can’t dump bonds. Someone has to buy them. They don’t get dumped in a toilet and flushed only to never be seen again. They get bought by someone who thinks they are of value.
I fear you’re making sweeping conclusions about MMT based on your misperception of market actions….Hopefully, this helps a little bit.
Cullen
I won’t disagree with what you say.
And would add if at some point, the Fed does a poor job setting market yield/inflation expectations while artificially suppressing interest rates, than this “disequilibrium” can bring upon unintended consequences. Now that doesn’t mean “bond collapse” (terms we toss around with defining) but perhaps a few weeks of interest rate volatility as was observed in 2003 is not unreasonable outcome.
Ocean,
You’re making another form of the “just wait til yields surge” argument. I’ve been hearing people say this in Japan or the USA for 20 years. It’s quite tiresome.
First the argument that because I cannot give you an exact time and date for bond market volatility is weak. MMT claims their work predicted the 2008 financial “collapse”, but did MMT give the exact time and date of the occurrence?
And just because you find this conversation “tiresome” does not mean it does not mean I should accept MMT reflects blindly.
Also don’t keep twisting my aruegment into armageddon and make me to be a fearmonger. I’m saying yield volatilty like we saw in 2003 is not unreasonable – do you disagree with that?
We don’t claim to have predicted the crisis. There are dozens of research papers and other works that prove it. The fact that you are not familiar with them and instead persistently misrepresent the MMT position does not prove that wrong. I am very patient with all readers. But you are among the few who consistently misrepresents the MMT position due to a lack of research and understanding. That is what gets tiresome.
I mean no disrespect. But you have to understand that which you criticize before you can expect to make a reasonable refutation of it. In my opinion, you have more work to do.
Cullen,
I read a number of times where MMT has predicted the “Euro demise” without giving a date.
And with regards to the financial crisis, the following is from your primer. Although upon reading this again, I may be incorrectly guessing what “elements” MMT predicted.
“as many of its most controversial elements have been proven correct during the economic crisis of 2008. MMTers have experienced remarkable success predicting much of the economic outcomes over the last 20 years”
Anyway look at me, I sidetracked the conversation and this is not the point. My questions are left unanswered, again I don’t want to belabor this point but if I am misrepresenting facts, I will own certainly own up to it.
You asked me to answer your question about 2003. I did. But you persist by claiming that I did not answer it. Now you question whether MMTers predicted the crisis. Warren wrote several papers in the late 90′s and 2000′s about the failures of the Euro and why this crisis was inevitable. Wynne Godley and Randy Wray wrote several paper in the 2000′s describing why the Clinton surplus was bad and why the inadequate budget deficits would lead to a household debt problem. Their predictions weren’t prescient. They were remarkable by any standard. They predicted the exact cause of the greatest economic calamity in modern times. The fact that you aren’t familiar with their work does not surprise me.
You are intent on pushing your personal agenda rather than understanding the MMT position. It’s not my job to force MMT down your throat and if it does not agree with you (for whatever reason) then I have no desire to force you to eat it up and swallow it. You’re free to come to your own conclusions, but you are not free to misrepresent the MMT position and persist here in your misbeliefs merely because you refuse to understand our position and take the time to read our work.
Cullen,
Again I will repeat if I have misrepresented let me know where and how and I will own up. I said, asking me to give an exact date for “yield volatility” is as weak as me asking for MMT to give exact date for the euro demise (or financial crisis ). I don’t discount the quality of their papers, I have read some of them. And my point was that it would be unreasonable for me to expect them to predict the exact date of the crisis even with their sound theory. I’m not sure your view on that.
At any rate, the questions I asked which for me are not really answered are
1. If MMT disagrees, that yield volatilty like we saw in 2003 is unreasonable outcome if the Fed suppresses interest rate?
2. Doesn’t MMT see a problem with a central bank setting the long bond nominal yields below inflation for an extended period of time?
- for existing bondholders (encourages more selling)
- for savers and pensioner funds (harms and ruins low income savers)
- international inflationary pressures of the reserve currency (outside the US balance sheet de-leveraging). That is, USD is used for world commodity purchases so inflation beyond interest leads to inflationary problems outside of the US and its output gap due to the BS recession.
Also can we stop with saying I have not read enough, misrepresent or claiming I have agenda. If you mean to say because I don’t understand MMT and so my questions are superficial then just say that. And if I have agenda please let me know what it is. But for the record I have read quite a bit of MMT – from you, Galbraith, Mosler, Wray, Fullwiler, Kelton etc. Even watched a few you tube videos some of their talks. Honestly more than I would like. That said, I am no monetary expert nor claim to be. And as I have said many times MMT is most accurate description of the monetary system but I feel it does not totally reflect what is observed in the real world.
Let me try to humbly expound upon this.
If China sold their treasuries/unloaded their cash, someone else would have those treasuries/cash, in exchange for XYZ. For treasuries/cash to lose a ‘significant’ amount of value, that new someone would also have to want to unload their new supply of t/c as well, as would the next entity, as would the next. IOW, the value of t/c losing value is based upon the majority of the entire system thinking t/c are for some reason worth less. So the question becomes, what would make t/c so reviled in comparison to other asset choices, from today’s valuation? What event would make this situation so, such that the entirety of the world thought t/c were a sell at the same moment?
Would a ‘dumping’ of t/c cause a temporary imbalance? Probably, but for how long? Likely not long, without a fundamental reason behind the dump in the first place. What would this reason be that willing buyers were not at the other end?
And what asset would be the better to hold, in exchange for t/c? Other fiat? Other than Yen in terms of stability (but not growth), I don’t see a lot of markedly better options out there, at the moment. Commodities? Unlike speculators, sovereigns would actually have to take delivery at some point. And while some sovereigns would like to warehouse more, others would dearly love to sell more (ME, Russia, Venezuela, South Africa, etc). Gold perhaps, but they’re only making so much of it, you can’t (easily) trade with it, and are fiat currencies going to die and usher in a new era of metallic currencies? Perhaps, but are you willing to bet the farm on it? Would a cautious communist regime whose primary goal is national stability do it? Plus how much t/c selling / gold buying would it take to shoot the price of the limited amount of gold there is to the moon? Probably not much, there’s not a lot of it to be had, so while it could cause a spike in the value of Au, you wouldn’t necessarily affect the price of USD or TNX much in comparison.
Perhaps most importantly, China needs to sequester t/c in order to maintain its (semi) peg. This in and of itself is a large reason why the event is unlikely to happen in the first place. If Soros is right and they’re also propping up the Euro, then their primary economic goal at present seems to be keeping the value of their currency low against all other major currencies. Not the environment for dumping.
The size of the world t/c market is too large for even China to markedly unbalance – unless a) they really decided to sell the boat (but again, for what in return, and for what reason), and b) there were no buyers at the other side of the transaction who eventually thought the price being offered was in fact a good deal, thus bidding the price of those t/c back up to ‘fair market’ value (whatever that would be).
Finally, ultimately the Fed can buy/sell whatever excess it wanted to, if it felt like it, to maintain whatever price it deemed appropriate, if things got out of hand.
As for treasuries being below inflation rates … all I can say is buyer beware. It’s happened before by design (late 40s/50s). Can’t mistake the Fed for an institution that looks out for savers – it is not and has never been. Whether this is a good or bad thing is an entirely different discussion. As Connally said, “It’s our currency, but your problem.” Until a suitable substitute is found, and it doesn’t look like the Euro is yet ready for prime time, nor gold, the world – including national and international savers – has to deal with the monster from Jekyll Island in the mean time.
Thanks for the explanations…I believe the Fed is in a difficult position managing the interest rate of a reserve currency with regards to
- banking interests
- managing core inflation (with the US balance sheet recession)
- managing international commodity inflation where transactions are based in USD (and whose economies likely face a traditional recession)
I think we may experience some interesting outcomes like high headline inflation both domestically and internationally (but not hyperinflation) regardless of the state of the US output gap. Unless of course we face a global recession which we may very well be facing, then everything should deflate to the almighty reserve currency. And how deficit spending effects commodity headline inflation (but not hyperinflation) is another layer of abstraction. Anyway this is what I conclude which may or may not be consistent with MMT and the balance sheet recession view.
I wouldn’t want the Fed’s job.
I suspect the dollar will long-term trend lower in terms of commodities and other currencies, as has been the case, barring temporary shocks to the system, like a Euro or whatever-comes-next crisis. It’s not really a ‘saving’ currency, but then it’s not designed to be.
If everything is so sure about Greece, Euro, macros,… , what is left and not priced by markets? Time to think to take the other side of the trade… Wait for capitulation point.
Exactly why I’m not betting the farm on this one….
Everyone was sure that the debt ceiling was going to be passed and that would give the markets a relief rally….you could bank on it….
Debt ceiling was past, next stop was August lows.
I’m not saying Greece isn’t a big deal, what I am saying is I feel far more comfortable taking a big position when it’s just us talking about it, not when my friends who know nothing of markets are asking me (like I’m an expert? wtf?) what they should be doing to be ready for the Greece collapse….further, every technical analyst is watching the rising bear flag approach the cluster of resistance….everyone.
Imagine the short squeeze if people like that are loaded for bear for this event and the EU just kicks the can for another 6 months….(not saying I’m bullish either, just saying I’m going to trade the tape when it happens.)
To funny, I’m getting the same questions from family and friends! I’m never sure what to say either. I don’t want to be responsible.
I can’t see a union either. Not unless, as you point out, there is a war first.
As much as we may think it’s silly, gold standards have been around for a long time. What if they keep passing regulations to have automatic haircuts in place and more stability funds? Don’t you think this union could last a lot longer then everyone thinks?
I think we all know Greece is going to default. The question I have is, IF Germany and the IMF get them through till 2013 will the new Stability fund and built in haircuts on bonds buy them enough time for austerity to work (and banks to prepare)? Looks to me like Ireland and their austerity plan is going to work, rates are already slowly dropping for them.
On a different note, does anyone know if the US Treasury is starting to move our debt out to longer maturities? I’m wondering if they are taking advantage of these low rates.
Julian Robertson 2009 oct
FT: US dollar?
JR: Short.
FT: Copper?
JR: A belated short.
FT: Google?
JR: Long.
FT: Gold?
JR: Gold stocks.
FT: Goldman Sachs?
JR: Bullish.
FT: Australian dollar?
JR: Bullish.
FT: Barack Obama?
JR: Ambivalent.
FT: Visa?
JR: Love it.
FT: China?
JR: Don’t understand it; trying to understand it and a great opportunity for a long/short fund.
FT: Apple?
JR: Long.”
http://www.ft.com/intl/cms/s/0/fdb8cb90-ddf0-11e0-a391-00144feabdc0.html#axzz1XlkDFjBv
it seems that “the train has left the tracks” with respect to the first posted comment.
…in this sense: shouldn’t we be discussing Robertson’s opine about greece, etc, not
the mechanics of the primary and secondary Treasury markets?
I looked at frenchy’s link to FT… good stuff on the Euro zone.
how do they get to a true USE (united states of europe) to remedy the
inherent flaws in the original design? the article points out that it
isn’t likely to get from A to B in one neat clean step. how can it get
to USE in baby steps? does it really *have* to get there in one big
move? If so, it seems impossible, given the various views of its
participants that the FT article highlights.
Note: a negative of FT.com links, like frenchy’s, is that you must be a
registered member to view that link….
I don’t see how they get there through normal Parliamentary, Democratic, Constitutional processes. EU public opinion is against Federalization. Even in a maximum panic enacting a new Federal Constitution would be a very hard sell. It seems to me they need some kind of coup, power play, subterifuge, or illegal power grab to Federalize Europe. It is hard to see how that is done with so many States and the total lack of military command powers at the EU level. But the EU political elites are incredibly clever, and they are ideologically determined to reestablish the Roman Empire at any cost, so I wouldn’t rule out the possibility that they will somehow succeed at true political unification. Perhaps the Obama Administration, through its command powers over NATO, will conspire to implement an EU-wide military coup during a crisis??
Good posts fellas.., lot of good insight to help all of us.
The questions and thoughtful answers by all helped me.
I thought Norway was heavily invested in Greece???
Didn’t Shilling say to avoid Credit Card companies???
http://www.businessinsider.com/gary-shilling-avoid-these-12-investments-in-the-age-of-deleveraging-2010-11?op=1
Maybe the ‘Guru’ is trying to offload some losers.
At least two european countries – Germany and the Netherlands – have accepted that Greece is going to default. Who’s next ?
Bill Fleckenstein just came out saying fiat money has been a failure(and by extension, MMT), and predicting a return to the gold standard. This is the second person(after Steve Forbes) who is now saying it’s a fait acompli.
How do you feel about that?
These people don’t understand international trade and monetary systems. They literally have no idea what they’re talking about. They don’t recognize that the Euro and the gold standard are essentially one and the same in that they cause trade imbalances which lead to economic calamity. The Euro crisis is a direct consequence of the single currency. The gold standard would do the same thing and did the same thing. That’s why it failed and we should never ever go back on it. It’s like wishing to become apes again because human beings made nuclear bombs and nuclear bombs are bad. It’s madness.