If USD collapses

[JBmurc]

I think you are right JB . . . It will be interesting to see how all this affects the NZD. I guess it depends if it's an orderly or disorderly decline in the USD.

personal believe the NZD will also fall badly on a worldscale but prob not as bad as the USD longer term as we have a fairly solid commondity backed currency now if National would allow more Gold mining ,Oil & Gas development etc we could be a much stronger $$$ I think the biggest negative for the NZD is a longer term low OCR and the massive overseas debt we kiwi's have so we can buying non-productive assets sure I read how NZ was the 2nd worst in the OECD for overseas dept.

[Mick100]

NZ is running a current account deficit of 8-9% GDP (worse than the US)
Can't see the NZD stengthening in a hurry

[Aussie]

NZ is running a current account deficit of 8-9% GDP (worse than the US)
Can't see the NZD stengthening in a hurry

I don't think the RBNZ or the NZ Government want it to either. I'm no currency expert, but it seems to me it depends on what traders focus on and if they think they can make a buck one way or the other. The USD looks to have topped to me. Traditionally the NZD has moved up as the USD moves down although that may be muted if traders are given any reason to focus on negative NZ fundamentals.

[Aussie]

. . . I read how NZ was the 2nd worst in the OECD for overseas dept.

That's because New Zealanders have had to borrow to maintain their lifestyles because the during "the Cullen years" the government was getting rich with surpluses by over taxing while the people were getting taxed into the poor house - or should I say the debt house. The surpluses are now gone . . . wasted on a socialist agenda that was all about creating bigger government and buying votes rather than building a more productive economy and real wealth.

In my humble opinion, this country lacks capital because it lacks savings. Savings (in part) comes from lower (smaller) government costs, lower taxes and savings incentives.

Real investment capital can only come from savings, investment creates new businesses, new businesses create jobs, jobs create confidence and more savings as well as increasing tax revenues . . . its called the cycle of prosperity.

To my mind, the keys to getting things straightened out are tax and savings incentives which reduce borrowing needs, combined with substantially smaller and more efficient central and local government.

[Aussie]

Richard Russell dons the tinfoil hat, again!

To all; if the banking and financial systems were not so vitally important to our quality and way of life, what is beginning to happen now in Washington and on Wall Street would be comical. I wrote almost a year ago that Wall Street would begin to "eat their own", to some extent this has already happened on a corporate level, it is only just starting on a personal level. A "split", or rift, is becoming noticeable amongst the CNBC so called journalists regarding the lies that are starting to pop up like "green shoots". Public figures such as Paulson, Bernanke, Greenspan, Geithner, etc. are all taking incoming fire to some extent.

Former Secretary Paulson, it is now learned, told the banks that even if they refused TARP money, their regulators would demand they take it, and thus they would "wrapped up" in the TARP whether they liked it or not. Several groups have filed FOIA requests of Treasury and Fed discussions, only to be stonewalled, delayed, and "redacted". Theoretically, no, in reality, every Dollar that Treasury spends is OUR money, OUR tax money, or OUR future obligations. They have apparently "forced" many healthy institutions to take TARP money in their bid to control, (read socialize) the banking system. If I were "King", and knew that I must devalue my currency, I would certainly want to have control of as big a percentage of the banking system as possible before devaluing. When someone "owes" you, you tend to have a greater control or leverage over them, I believe this, along with "looting the Treasury" is the underlying motive behind the bailouts. They are transferring as much capital to favored banks while keeping their thumb on top of as many "rogue" conservative institutions as they can before the declaration of bankruptcy through currency devaluation as they can.

The Fed has also received FOIA requests, they simply say "bug off", we are not a government entity and don't have to reveal anything to anyone, EVER! The Fed has obviously blown their balance sheet up like a balloon, what has not been talked about is the amount of "off balance sheet" garbage they have shoved under their cashmere rugs. We may never find out, but I would not be shocked to see it in the tens of $ trillions.

Which leads me back to the rift that is starting to appear, we have been the recipients of lies to cover lies to cover lies, and just now, even some journalists can't stomach it anymore. They are starting to ask some real questions (imagine that?). Some want to know about the strong arming by Paulson of the banks, others are up in arms about the setting of pay levels at financial institutions that had the balls to "just say no" to TARP money, the "nationalization" of the auto sector is another one. They ask, how can senior debenture holders be considered "speculators" by the President, and why are there legal rights being trampled on? There has apparently been a group of bondholders that in their words were "threatened by the White House" if they got in the way of the Chrysler or GM deals. Some even want Fed transparency, GASP! I guess you could say that some of the Muppets are dissenting.

But, the debate and "discovery" of what happened to the Madoff monies has gone nowhere yet. It may, but I don't think we can be allowed to know since they did business with so many giants and purportedly the NY Fed, this would be pulling the skirt up too high. In any case, I sense the boiling level rising, the lies so pervasive, and the arm twisting to the point of breakage, that they can't hold the tent up much longer. When all is said and done, I believe we will find out that every market, everywhere, has had the fingerprints of government upon them. Whether it be on the butts of the Dollar, Treasuries, and stock markets to hold them up, or around the throats of Gold and Silver to suppress them, it has been everywhere. All those whacked out "tinfoilers" are beginning to gather some followers now that the manipulation, lies, blackmails, frauds, etc. have emerged everywhere and are too obvious to hide. Heck, I even remember when Richard Russell considered manipulation to be preposterous and conspiratorialist, well, for the third time now, he has come out declared market manipulation by the government is rampant.

THIS is a big deal! Mr. Russell is the original, most widely followed and respected, most on target financial writer alive (possibly in history). It took him a while, but I'm glad to see Mr. Russell wearing his new bright and shiny tinfoil hat proudly. Welcome to the club Mr. Russell!

Regards,

Bill Holter

[Aussie]

A Dangerous Lunacy

Loop back for a moment to the beginning of this issue and the BIS report of a global shrinkage of “bank claims” totalling $US 1.8 TRILLION in the final quarter of 2008. Add in the combination of debt guarantees from the US government and its financial “authorities” since the start of the financial crisis. As reported in the Global Report the whole “package” adds up to $US 29.1 TRILLION. All of these guarantees have been made to artificially maintain the “value” of the paper instruments of indebtedness of all descriptions on which the system is built. Without them, that system would already have crashed.

Now look at the state of the REAL world as reflected in the crash dive in tax receipts which have been suffered by governments all over the world. Consider the fleets of merchant ships at anchor despite the fact that the cost of transport has plummeted to levels at which every container is carried at a LOSS.

In the middle of all this stand the financial markets, clinging to the illusion that the real capital necessary to create and maintain a productive and prosperous society can be run off a printing press or “guaranteed” by an entity which produces no wealth of any kind but merely confiscates and/or redistributes it. Markets have clung to this illusion many times in history but the contrast between “green shoots” and economic reality has never been as stark as it is today.


Permission hereby given to
quote short excerpts - provided
full attribution is given:
© 2009 - The Privateer
http://www.the-privateer.com
capt@the-privateer.com
(reproduced with permission)

[JBmurc]

Geithner enriches speculators in "sham" bank bail-outs
13/05/2009 | By Ambrose Evans-Pritchard in Doha | finance

“It’s a sham. The banks are insolvent. The US government is trying to sedate the public because they are down to the last $100bn (£66bn) of the $700bn TARP funds.

"We’re going to see a catastrophic increase in the number of LBO’s (leveraged buyouts) going into default because they’re knee-deep in debt and no solution exists since they can’t refinance.”

“The US government has thrown 29pc of GDP at this crisis compared to 8pc in the early 1930s. The Fed’s balance sheet has risen from $900bn to $2.7 trillion to bail out the system. America has to do it because the only way out is to debase the currency, but that is going to lead to some very high inflation three years down the road

[peat]

but the end of the article also says

Matlin Patterson, however, has missed the Spring rebound, the most powerful rise in equities in over 70 years. “We shorted the equity rally because we thought it was lunatic. We’ve kept adding positions seven times, and we’re still holding,” he said. Ouch!"

And of course that was a week ago and we know what happened last night... so ouchey ouchey ouch!

[Aussie]

Have China watchers never heard of a decoy?

By Adrian Douglas
Sunday, May 17, 2009

What amazes me is how financial journalism is at the level of sixth grade in terms of analytical thinking. Even so-called market analysts are not much better.

GATA put out a dispatch today citing this Agence France-Presse article published by the Sydney Morning Herald in Australia, "China Keeps Buying U.S. Bonds Despite Concerns":

http://news.smh.com.au/breaking-news...0517-b757.html

This article is a prime example. It reports that China was recently expressing grave concerns about its massive U.s. bond holdings is still buying more such bonds.

The simpletons in the press and financial world don't have a clue. What are these sleuths looking for? A $500 billion sell order posted with a New York broker on some rainy Monday morning? Have they never heard of a decoy?

The U.S. Treasury reports each month on foreign holdings of U.S. Treasuries. The Chinese would have no more than 30 days to dispose of almost a trillion dollars in Treasury debt before their selling would be public knowledge. Do these China watchers seriously think that the China's diversification strategy is going to involve unloading U.S. debt on the debt market?

You don't have to dispose of an asset to realize its cash value.

Didn't these people learn anything from the mortgage crisis? For bankers the best collateral in the world is U.S. Treasury debt. That is likely to change soon, but if we deal with the facts of today, the Chinese are holding what bankers perceive is the most liquid and highest-quality collateral. Do you think that this characteristic of U.S. debt has escaped the notice of the Chinese?

I would bet that the Chinese have been busy using their Treasury debt as collateral against FIXED-interest-rate loans. They will have used this money to buy real assets. We know they have bought at least 454 tonnes of gold. They are importing 70 percent more copper than they consume. They are filling up a strategic petroleum reserve. They have been going around the world making deals for raw materials and acquisitions of small-enough companies that they fly under the radar. (The Chinese learned their lesson from trying to buy Unocal.)

The interest rate on these fixed-rate loans will be partially offset by the interest paid on their U.S. bonds. When the bonds go tapioca, the Chinese will have two options. They can sell some of the assets they bought but at prices much higher than what they paid and so pay off the loans with worthless dollars, or they can simply default and lose their collateral of now-worthless U.S. bonds.

Just to obfuscate what they are doing, they make some complaints about U.S. debt one day and then buy some more a few weeks later.

Financial journalists should read the biography of Jesse Livermore to know how you can fool even the best traders.

The Chinese have a $300 billion sovereign wealth fund. If that is properly positioned in commodities, it alone will hedge China's entire bond portfolio.

The notion that the Chinese have accumulated this massive U.S. debt portfolio and only now are wondering what to do about it is so naive it doesn't warrant serious consideration. I have dealt with Chinese in business and they are the sharpest knives in the drawer. My guess is that China has already diversified most of its dollar holdings.

Now, like magicians, the Chinese keep the eyes of the China watchers fixed on the hat, because we all know that is truly where the magician has hidden the rabbit, right?

The Chinese have no interest in collapsing the U.S. Treasury market, but if you think that the Chinese strategy to protect themselves against such an eventuality is to sit tight, buy more, and keep their fingers crossed that everything will work out fine, then you shouldn't go out in public alone.

The Chinese have vault-loads of intrinsically worthless Treasury bonds that they no doubt have used as collateral to buy intrinsically valuable assets. In contrast, Western central bankers had vault-loads of gold they have loaned or sold to buy intrinsically worthless interest-bearing government debt.

I bet Confucius would have had something to say about that.

[JBmurc]

Good outlook for real assets IMHO

http://email.thefinancialarena.com.a...=131&L=457&F=H