shopping spree, page-20

Reckon more like everyone will be closing their borders as local and global unemployment rates soar.

RMB is interesting. As most raw materials contracts would be written in USD, a stronger RMB means cheaper imports / raw materials for their domestic expansion / urbanisation of 350 mill people but would impact negatively on their exports. But since local / foreign GDP increments are pretty evenly balanced atm methinks, not sure which they would prefer right now. If borders were closed by others, they would prob seek lower raw materials costs as a priority? I dont know. Best guess is they will prob continue being a yoke around USD's neck and if anything, prob devalue progressively against it. Advantage China has is they are a military dictatorship and thats the most effective in quick implementation of economic policy ... classic Olympian !

Its all relative tho .... atm we have a soaring CON-SUCK of everything (except JPY) into USD as the yanks try to convince there is no inflation problem .... and a rising USDX (now 82.41 and on its way to 88 first pause IMO) gives them breathing space with keeping rates low (er)without short term inflation worries. Buts its all in the definition ......asset deflation is in property and equities atm. Yet monetary inflation is high globally and will accelerate as they find a need to pump more liquidity into the global financial system to keep ut alive.

With receding economies tho and hence lower tax incomes from here, how else will they be able to keep feeding the black holes without printing more ? And the notional size of those black holes (if they domino default) is about 1000 times bigger than the liquidity being thrown into them atm ... so KEY IS THEY ARE PREVENTED FROM DEFAULTING by whatever smoke and mirrors can be conjured up.

BUT u cant keep printing paper and not expect it to come back and bite ya in the derrier ... and thats the paper burn I expect later ... after we HOPEFULLY manage to hold the sysytem together thru the debt default induced asset deflation stage we are currently in ... megabear C.

So 3 possibilities IMO :

(1) either fin sys naturally collapses into the virtual black hole for complete reset of capitalism / a socialist modified version of it ...... they shouldave done this in 1993 (ref Ravi Batra pre 1993) .......result global mega-depression ala 1930s ...... YEE (yuppie extermination event ...havent used this one since the GORM) ..... EASIEST to later get out of .......

(2) they try to nimble-foot fudge themselves along the tightrope into ongoing asset deflation + monetary inflation keeping the derivatives black holes from dominoing ...... DIFFICULT STAGFLATION, much worse than mid 1970s

(3) panic pump priming to sate the debt defaulting black holes by turning up the print presses a few notches .... HYPERINFLATION ala Weimar Republic back in the 30s and Zimbabwe nowadays ...... sets the scene for some real evilmongers to emerge and play on the manic depressed mass psychologies.

Case (1) is controllable by strong governments with strong security forces to implement. Precedence exists on how to handle ... usually by manufacturing a stimulatory war to end it. But wars cost so much these days as Irak mark 1 and 2 follies have shown having not learnt the lessons of Vietnam where it probably has all started from.

Atm they are trying to nimble foot case (2) and will do so as long as poss without really knowing what to do hoping they accidentally fall upon a viable solution (IMO). Some precedence exists BUT NOT when confused by the added potential disaster of derivatives defaults and the lightening speed of the internet to spread it. We can wake up to a bank holiday anytime (ref uncle Alf)

Case (3) is Mad Max and "controllable" best by powerful governments with neutron bombs to control their anarchist factions ... that "Escape From NY" scenario keeps cropping up in my mind .

The US has the highest portion of potential anarchists in its population ..... created by the constitutional right of every citizen to own and carry a gun .... and politically that will be an increasingly powerful THIRD "party" to increasingly rival the other two IMO.

There is a case (4) but really an extension of above combos .... we wake up to a global bank holiday and announcement of a pre-arranged new financial system where paper is replaced by some kinda e-credits tho EVERYONE would have to agree to this in advance .... maybe thats on the current agenda for discussion .... or future agendas if alternatives prove ineffective.

Its all a matter of how long economies stand still for and how long before extreme measures are globally agreed upon and implemented to get them rolling again. Again, unprecedented magnitude of problem with the unknowns of derivatives.

So yeah, of Biblical proportions now and will need some drastic measures ... and maybe (IMO) premeditated to bring in some new kinda world order while CHina is still "small enuff" (still only 5% of global economy)to not be able to influence cos they have a 1.3 bill pop control priority to worry about and have done it well in the past behind closed doors and could do it again if they had to IMO.

So yeah, closing of borders and ultimate devaluation of all exixting FIAT paper currencies (thats all of them since gold standard was removed) against real commodities. Reckon we might see either a system of e-credits to replace (and based upon country net wealth / GDP etc ... tho try getting everyone to agree without a global war first with one victor emerging !) or back to gold standard with transactions based in say "micros" ... ie foreign trade done in micrograms of gold eg.

I remember some debating what a disaster it would be if oil was eventually transacted in EUR instead of USD ... well we are way past that and speed of e-commerce means changes happening in an instant. Who knows what will emerge next. But one thing for sure, energy and metals (and more importantly clean water) will be in increasing demand as world population increases by 50% next 30 years ..... yet most resources have reached "PEAK" replacement production and will be in decline from here.

I remember even musing about how a "synthetic" global depression was necessary to ALLOW INFRASTRUCTURE TO CATCH UP WITH INCREASING DEMAND ... ie manufacture the demand slowdown and while yr at it, a financial system revamp same time to save doing it later. IMO these things have all been manufactured by the real powers that be, and they have used FEAR to con us into giving them greater powers to "protect us". No wonder the increasing influence of the gun lobby from here on for mine.

IMBOOC

PS simple answer, in short-medium term I think RMB will continue more or less tied to USD and AUD will underperform both. China's economy size is only 5% of the wolrd cf USA abt 28% and Euroland 24% so it will be a while before RMB achieves "reserve" status. HOWEVER there is another technical view that if JPY/USD falls below 95, it can head for 50 and if Asia joins forces in some monetary / economic bloc, yr revaluation call lof RMB /USD comes into play big time. Whatever the case reckon POG is set to decouple from all paper (amazed it did so easily recently from the AUD) and IMO will soar to dizzy heights prob into 2011-2012 cycle peak (?) So many contra drivers to keep us alert hey haha.

Hope I havent contradicted myself in above ... been a long day haha and gotta prepare for a ringside seat for the hedge fund redemptions deadline coincident with the full moon Oct 15 .... These are the REAL events affecting us ... politicians are so insignificant.

May Zeus guide us.

IMBOOC