The US Dollar was woefully undervalued and still continues to be against the Euro and the Pound.

A decent marker for world liquidity is the Euro/Yen rate and it’s had a very big move to down recently too.

So too the Aussie Dollar, particularly when the Japanese housewife not only refuses to buy Aussie bonds, but also sells out what she has in the portfolio which seems to be what we have experienced recently.

The Australian Dollar always does well when the worlds risk appetite jaws are open wide and does badly when the jaws close shut. Ask the Japanese housewife why shes panicking.

They still need iron, coal, gas, uranium, gold, zinc and food, just like they did six months ago. Sure there is a speculative component, no disagreement there, but if it was all about risk and panic then I would expect those jaws to have snapped shut back in January/February/March when the Aussie bank shares came tumbling down.

My belief is that the US govt is shining up the chromework ready to sell the old girl to the voters and it’s all going to fall flat by Christmas at the latest (maybe sooner, if Obama is very lucky, maybe before the election). They seem to be selling gold, keeping gold prices down and the US dollar up — a short term strategy at best. I certainly expect the Aussie dollar to be back over 95 US cents before the year is out.

Incidentally, I was under the impression that we dont know where the massive losses are, or even what sort of a composition these funds have in their portfolios,

Conrad, try going back and look at the names that shoveled money into the first tranche of the bank and i-bank recaps. The entire SWF gang was in there:-) There’s a lot of wound licking after that.

So is my superannuation (and probably your superannuation and most other people in the world’s supperannuation also), but that doesn’t mean it isn’t a good idea given the alternative of buying just treasury bonds, especially once you have enough of the latter to gain the political clout you need (do you need more than 350 billion?).

Incidentally, I was under the impression that we don’t know where the massive losses are, or even what sort of a composition these funds have in their portfolios, since most of the SWFs are essentially unidentifiable. For example, where did all the recent cash come from for Chinalco to buy Rio Tinto shares (I assume a pretty good and strategic purchase if your main goal is to secure resources)? I assume this is just the Chinese government slush fund in another guise, especially because these sorts of assets are being bought up world-wide (try checking out PetroChina).

or not wasting it to buy up their good assets with SWFs probably is also

That surely isn’t serious? SWFs are mostly sitting on massive losses from their recent forays into US banks, in particular!!

Try taking population growth into account, and then tell us how much better off Australians are than the Japanese. In any case, their recession wasn’t caused by overseas investment, so buying overseas assets at the time versus inflated ones at home makes sense. In any case, their problems were caused by a huge speculative bubble at home (notice any parallels here?), not buying overseas assets.

“My point was more that sometimes the debt is so big the lender is in dread of the borrower”

I think you are confusing banks with countries. Banks are rational entities whose main goal is to make money. Countries have lots of objectives, some of them nationalistic and not very rational. If you have billions of dollars of surplus cash floating about, wasting some of it to spite others is probably worthwhile (or not wasting it to buy up their good assets with SWFs probably is also).

You don’t build nations by giving stuff away. Not that I’m saying the Chinese are giving stuff away. My point was more that sometimes the debt is so big the lender is in dread of the borrower.

No one is saying the US is in good shape, however it’s propensity is to always make a comeback and win in the 12th round. Europe on the other hand is on the mat in the first few seconds of the first round and stays like that for ages.

If you think they’re cooking the books there’s always the GAO and the Dem congress to hear your story. So I suggest you contact the ranking congressmen and tell them what executive are up to.

Hey, dont let me stop any of you guys putting your money where your mouth is and buying up plenty of US shares.

I have. I’m scaled in buyer of Morgan Stanely, Well Fargo, Citigroup (little), KBE Homes, Caterpillar, and a few others like QQQQ and an oil refiner.

May I suggest the big auto makers might be an excellent choice if you enjoy losing

Why? They’re basically health care companies that happen to make cars on the side. they’ll be a good buy after they come out of bankruptcy and get rid of the union monkey off their back.

You can even buy US dollars right now if you think the current rise of the USD is going to be sustained (and have fun losing even more on that one)

.

I bought the Dollar against Sterling in August but sold out too early. You think the buck is going to keep going? I think Sterling belongs at around 1.40.

Take a look at the Aussie dollar to the US and tell me what amazing event went through the economy of either nation to create a massive turnaround mid-July?

Several things.

the US dollar was massively undervalued. Fair value against the the pound and the Euro was 30-40% from the dollar lows. Also the market was very surprised with the speed of the slow down in Europe, Japan and Oz. the expectation is the US will move out of its slumber faster than other other economies.

The US Dollar is still very undervalued on a ppp basis.

The Australian Dollar always does well when the world’s risk appetite jaws are open wide and does badly when the jaws close shut. Ask the Japanese housewife why she’s panicking.

I think you’re over egging your US doomsday scenario. Just remember that lots of people have lost their shirts trying the same thing.

Conrad I reckon that the Chinese have a bum deal if they are lending big money to the US and have a trade surplus. Essentially, they are sending goods to the US on hock. The US has the goods and the chinese have the risk.

That rather depends on what China’s objectives are. They are long-term thinkers: while making a profit is nice, it is a secondary concern to building up the nation as a whole. What builds a nation? Not money, and not goods either. Nations are built on people, technology, infrastructure and access to natural resources. China has made gains in all those areas: training their people, consolidating foreign technology, modernising their infrastructure and gaining access to resources from Aftrica, Australia and the Middle East.

Stand at a level crossing in Port Hedland while an ore train goes past. It’s an exercise in both patience and understanding just how much Australian soil ships to Asia every year.

If China never get repaid for their dodgy power drills, unsafe toys and cheap clothing then that’s a loss they can take on the chin, still smiling.

Meanwhile, America has bridges falling down, a shrinking manufacturing sector, and bugger all investment in educating their own people. Their oil supply is drying up, their technology is still good (but the relative gap between US tech and everywhere else is closing) their iron grip on South America is weakening and they have less supporters worldwide than ever before. I feel a John Kerry speech moment coming on:

The stakes could not be higher, because we do know what a McCain administration would look like: just like the past, just like George Bush. And this country can’t afford a third Bush term. Just think: John McCain voted with George Bush 90 percent of the time. Ninety percent of George Bush is just more than we can take.

Never in modern history has an administration squandered American power so recklessly. Never has strategy been so replaced by ideology. Never has extremism so crowded out common sense and fundamental American values. Never has short-term partisan politics so depleted the strength of America’s bipartisan foreign policy.

This is from the guy who not only went to Vietnam but actually obeyed orders (you know, team player, cares about his country).

The Tax foundations figures aint worth spit.
I wouldn’t bother with it.

I said the Tax Policy Centre. They give a very look at both camps.

You only use Fiscal policy when monetary policy is impotent such as a liquidty trap. I do not see that.
To adovate that is simply to be a barstard Keynesian!

Cutting taxes is fine if one is cutting expendiure as well but neither is really attempting to do that.

McCain is the one increasing the deficit more

And look that this astonishingly good stat released a few hours ago:

The Commerce Department reported Thursday that productivity, the amount of output for every hour of work, jumped 4.3 percent at an annual rate in the April-June quarter, a full percentage point higher than economists expected.

Not exactly what a bad economy dishes out, Rex.

I’ll translate for the normals out there: The corps sacked a bunch of people and jiggied their end of year reporting to make it look like they can run equally well without those people. The remaining workforce are cutting corners and skipping on routing maintenance in order to spread themselves thinly and cover the gaps. Meanwhile the company shrinks, and the senior management milk it as hard as they can (knowing that bailing out sooner is safer than waiting till the bitter end).

Hey, don’t let me stop any of you guys putting your money where your mouth is and buying up plenty of US shares. May I suggest the big auto makers might be an excellent choice if you enjoy losing? You can even buy US dollars right now if you think the current rise of the USD is going to be sustained (and have fun losing even more on that one). Take a look at the Aussie dollar to the US and tell me what amazing event went through the economy of either nation to create a massive turnaround mid-July?

There’s only one event… the election, and the figures are cooked. The US economy is sick and the US government think they can hide it for a few months more.

The Chinese are one of the biggest holders of US Agency paper if not the biggest. i bet they would be more than a little upset if Fred and Fannie died in a head on.

Not just the them. The Chinese government is evidentally sending some of their minions to get them to do the same thing.

http://www.bloomberg.com/apps/news?pid=20601080&sid=aslo2E01QVFI&refer=asia

Pedro raises an excellent point. Aren’t but a little inconsistent here. Wouldn’t you want a big gaping deficit if as you infer the US economy is in the toilet. Homes, you gotta work with us here. Help the kids out.

But that is not incompatible with my point :)

“Dan Mitchell, summed the future of the American tax burden up quite nicely:

No matter who wins, it’s going to grow.

Mitchell also offered a fair comparison of the two distinct tax proposals. Obama’s plan, according to Mitchell, means “higher taxes on work, savings, and investment.” He pointed out that politicians understand the economics at play when they tax activities like smoking: higher taxes, less smoking. Why then, he asked, would we want to increase taxes on work, savings, and investment?

As for McCain, Mitchell states that his agenda is much better than Obama’s at encouraging economic growth and development. McCain’s track record, however, left Mitchell unsure of the sincerity of this election season proposal.”

Cutting taxes is great for the economy. If the budget really is in crises then cutting spending is the way to go. But I would have thought a Keynesian like you would have been all for counter-cyclical pump priming and running deficits until the turn around comes.

Cutting taxes to the rich makes more money available for investment. Cutting taxes to the middle class essentially means small amounts of money widely distributed and likely spent on minor consumption. Though I will allow that a fair bit of that money would currently go on paying back debt. But I’d like to see your case that cuts lower down the tax tree are good for the economy as compared to cuts for the rich.

McCain is cutting mainly to the top 1% of taxpayers and comapny tax.

Obama is cutting taxes to midlle class types.

go and look at the tax policy centre

“The economy, as mentioned, is stuffed. Jobs and manufacturing are going offshore, and the USs economic advantage over its big strategic competitors is waning. Anyone arguing for a strong America must surely be fixing that first. Obama can offer something new here.”

gave me the impression Rex was looking forward to the economic miracle of higher taxes.

Homer, cutting taxes to more people (and coming from you I’d have to check if it’s true) is not as good as cutting taxes more.

McCain increases the deficit more and cuts taxes more whilst Obama cuts tax to far more people.