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Originally Posted by Charlie
I can't remember the guys name but there was a Russian Billionaire who got on the wrong side of Putin and was/is jailed. There are currently Trillions of dollars sitting on the sidelines being held as cash by corporations. Do you think much of this money is held in politically unstable countries like China and Russia. |
That would be Mikhail Khodorkovsky:
Mikhail Khodorkovsky - Wikipedia, the free encyclopedia
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Originally Posted by Charlie
Even though the US Congress is making a mockery of being called a political body. They can't get anything done. The US is relatively more stable then most other countries in the world. If you had 100 million $ or Euros where would you invest it or try to keep it safe. The US for all its problems has to big advantages 1) It has a big enough economy to absorb an investment of $100b and 2) It has a legal system that is mostly transparent to protect your ownership of that money. I'm not saying that there isn't the need for a change or that a change isn't coming but given the turmoil in the world the US T-Bill is still considered safe by most people with a lot of money. Remember in 2007 or 8 when the T-Bill had a negative rate? |
Actually, Charlie, the "real" or "effective" rate of return on US Treasuries (bills, notes, bonds) has been negative for years. The real rate of return is the interest rate paid less the rate of inflation. Even using the government's grotesquely manipulated figures for inflation, the real rate of return is negative - in other words, if you loan the
government $100 for a given term, and they give you back, say $101 at maturity, you must deduct the loss of
purchasing power incurred over whatever the time period was that you held the
government IOU (US T-bill or T-note or T-bond). If, after accounting for the destructive influence of inflation on the currency during the time you loaned the government your money, the
purchasing power of the money you receive at maturity is less than that of the $100 you "invested" at the beginning, you've effectively paid the government to borrow from you. This has been the end result with US Treasuries for years, and there's very little chance it will go positive any time soon.
Why not? Because the true inflation rate is several times what the government reports it to be, first of all, and because as long as fools will continue to loan the government money and accept a loss on their investment because they don't understand the destructive effect of inflation, the US Treasury will not have to pay a sufficient rate of interest in order to sell their IOUs.
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Originally Posted by Charlie
(BTW Tao if you can give us a link to that statistic about the Fed Reserve I would love to read the article.)
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This isn't the original source I read, but it'll do:
Fed Now Largest Owner of U.S. Gov
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Originally Posted by Charlie
English Common Law and its derivations, or should I say the lack of it in China, is what makes people hesitant to invest in China.
And on the OP comment. Perhaps you are right that the USD and the Euro may come on Par. I can't find anything to back up my claim but I seem to remember a time when 1 Euro cost USD$.087. |
It was the fourth quarter of 2000, and the correct figure was actually less . . . about $0.82. (See graph, below)
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Originally Posted by Charlie
People with lots of cash bought up properties in Europe. A friend bought an apartment in Costa Del Sol Spain for $35k. While boats can be moved, as opposed to apartments, Aren't we seeing exactly what the OP is talking about happening right now. Aussies and Europeans are buying US boats because of the strength of their respective currencies and then sailing them home. The currency exchange rate is going to shift like the tide. IT is not at all predictable like the tide though. At some point the Euro and the USD are going to be at Par. That will make European boats more attractive to US buyers. I just lost a bunch of money on a boat I bought in Europe because of the exchange rate. But then again I guess I paid for the fun that my family and I had in Europe last summer and for the next four summers. It is money that I am prepared to lose or -- As my account says -- I'm buying memories. |
As is apparent in the chart, below, the Euro was last at par with the $US in late '02/early '03, and has not been less than about $1.17 to the Euro at any time since (4Q05). Even now, in the throes of a sovereign debt crisis in the Eurozone, the exchange rate has not been lower than about $1.22 (2Q10) and has been as high as $1.50+ once (4Q09) since the credit markets froze up in late '08, and nearly $1.50 again as recently as just a few months ago (1Q11).
It is in the interest of the Europeans to not let their currency appreciate too much against the world's other currencies because a strong currency hurts exports. This is why exporting countries will allow their currency to decline in value, and why as recently as last month the Japanese intervened in the forex market to sell their own yen and buy $US - it was a desperate market manipulation designed to weaken their own currency to protect their exporters.
The problem is that all exporting economies are trying to do the same thing, and that is what creates the infamous condition known as the "race to the bottom," an amazingly destructive economic event when it is engaged in between sovereign nations, even those who are ostensibly allies for other strategic reasons.
In other words, don't count on the collapse of the Euro against the $US any time soon.
TaoJones
unless your on a big gas powered yacht and can't afford 
Wind in my hair and a nice catamaran 
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