Archive for the ‘Economy’ Category

Upon reading the news about a proposed barter deal where Thailand would trade rice and other agricultural products for high speed train components for its high speed rail megaproject, it occurred to me that this is another example of bypassing the petro-dollar. There are already a bunch of China currency swap deals aimed at bypassing the US dollar in international trade. Barter deals are another way to achieve that end.

Instead of buying agricultural products in the traditional way, which involves currency transactions that end up passing through the USD, they would barter agicultural goods directly for train components. The amounts involved are fairly significant. They are talking about more than one million tons of rice and 200,000 tons of rubber per year for the next five years. Price per ton for rice varies quite a bit depending on the type and quality (see the Thai Rice Exporters’ pricing page here), ranging from USD400 to nearly USD1200 per ton currently. Let’s just take the average as USD800 for arguments sake. That would be USD800 million per year for rice. Maybe they will hit a billion USD or more per year with the combined agricultural products. Not bad.

A couple years ago China and Iran were talking about a barter deal so Iran could sell oil without being hamstrung by U.S. sanctions. There are also deals or proposed deals between Iran and India and South Korea. These bartering deals, especially involving big ticket items like oil, could add to the erosion of the petro-dollar’s strength.

List of China currency swap deals

Posted: October 19, 2013 in Economy

I saw the news that China and the EU have now signed a currency swap deal, the latest in the big move by China to cut the USD out of their global commerce affairs. I keep reading one story after another about these deals so started searching for a list of which countries have entered into currency swap arrangements with China. I read that as of October 15 there were 24 currency swap arrangements but I could not find a consolidated list so here is my attempt.

Countries with currency swap deals with China:

  • EU
  • Indonesia
  • South Korea
  • UK
  • Australia
  • Iceland
  • UAE
  • Malaysia
  • Nigeria
  • Chile
  • Singapore
  • Vietnam
  • Brazil(?)
  • Taiwan (still in talking stage)

What are the rest of the 24? Some stories I read sounded like the deals were not fully implemented but still in the trial stages. So I’m not sure of the rest. Most of them are in the range of a few tens of billions of US dollar equivalent. Small change taken individually but a few billion here and there adds up after a while. And of course if things go well the swaps will grow in size as time goes on.

I saw this amazing chart over at ZeroHedge.com. It shows the Labor Force Participation Rate in the U.S. for the last 30 years. It just hit a 30 year low. The number of people not in the labor force has now risen to 88,419,000. Those are two pretty amazing statistics and really make the government look retarded for touting the modest drops in the official unemployment rate. Check out the chart:

Labor Force Participation Rate hits 30 year low

From ZeroHedge.com

I guess I am a contributor to that drop that started accelerating around the beginning of 2002 because that’s when I exited the U.S. labor force. The drop has been really steep since 2008 and looks to be headed well lower. That can only accelerate the approaching financial collapse of the U.S. economy.

My take on Occupy Wall Street

Posted: November 2, 2011 in Economy

I have watched a number of videos from the Occupy Wall Street and Occupy Whatever events. It would be easy to dismiss most of them as staged or edited to make the protesters look smarter or dumber than the true overall average. You do, however, get a feel for a lot of the thinking of this group and I must say that many of the comments from protesters are so idiotic it is hard for me to relate. Like many people I recognize that the Fed and the incestuous relationship between government and the financial sector is pure evil. But some of these demands – guaranteed jobs, forgiving of student loans to name a couple – what?

It’s because of my personal story that goes like this. When I graduated from high school my family did not have money to send me to college so I went to school on a student loan. I chose a major that was marketable, electrical engineering, so that I had a good chance of getting a job when I graduated. I would have rather majored in something more fun but obviously there is a difference between a hobby and a career. After I graduated I worked hard and paid off my loan. Of course I enjoyed some splurges now and then but I exercised enough self discipline to save a little every month and after a while it started to add up – funny how that works. As I advanced in my career I was able to save more and start to invest. I made the most of tax advantaged investments such as IRAs and 401(k)s. I didn’t make any risky bets, mostly just boring but regular investments. I didn’t blow all my money on the latest gadgets, cars and partying, just enough to be happy. I ended up underwater on my second house but stuck it out for 12 years and ended up selling at a gain, no big windfall just a decent profit. And then I retired at age 45 with zero debt and enough cash and investments to never have to work again.

This little rage comic sums up how I feel about Occupy Wall Street.

OWSWTF

2010 investment recap

Posted: December 31, 2010 in Economy

Reading the usual sources of financial news I see a number of those “best and worst” investments of 2010. Got me thinking. When they are waxing on about how strong U.S. equities performed I have a bit of a chuckle. The S&P 500 ended up all of 12% for 2010. Compare that to this chart of the SET100 (Stock Exchange of Thailand 100 index):

Yeah, it finished up 40% for the year. Add to that an 11% appreciation of the Thai baht versus the dollar, which you might consider if you happen to have dollar denominated investments. So I made 50% on my Thai equities investments (measured against the U.S. dollar) versus 12% on my U.S. equities. It is unfortunate that I still have dollar denominated investments. I have just been too slow dumping the failing currency.

My slow but steady approach has served me well over the years. Because of it I was only partially invested in equities when the market collapsed. At the time I was largely in cash. So I ended up looking like some kind of guru and suffered only a minor hit. But the steady decline in the value of the dollar ended up hurting me this year.

Then there is real estate. It’s such a different world here. While U.S. home prices continue to drift lower and something like 22% of homeowners are underwater on their mortgage (an amazing statistic), our land in Thailand doubled in value again this year. Demand has been strong and steady since we bought here six years ago. The western housing market collapse is truly in a different world. So a 100% investment performance for our real estate holdings. Again, it is unfortunate I didn’t dump more dollars and pick up more Thai real estate this year.

The future is always uncertain but it is pretty well expected that the U.S. economy will remain depressed next year and plenty more banks will fail along with unemployment above nine percent, while the Thai economy is expected to grow around 8% and the Thai government fights to keep the Thai bath from getting even stronger against the dollar.

Quantitative easing explained

Posted: November 14, 2010 in Economy

Confused about this whole “quantitative easing” thing? Suspect it’s nothing but a bunch of double speak for another government scam? Here’s a great little video that sums up the situation in a brief six minutes.

Hidden inflation in the U.S.

Posted: August 20, 2010 in Economy

I keep reading stories like this one that glibly mention the U.S. inflation rate is below one percent. Disingenuous at best is what those statements are. You don’t run the money printing presses wide open without causing substantial inflation. They’re just measuring it in a way that is politically convenient.

I’ve been wondering what the real U.S. rate of inflation is and how would one measure it. For me at least, this chart is a good measure.

That’s the exchange rate for U.S. dollar to Thai baht for the past year. It shows a seven percent drop. Does that seem about right for what the true U.S. inflation rate is? It seems about right to me. It certainly hits me as inflation, making everything I buy cost more when I transfer dollars to pay for it. Thailand didn’t have a big bubble pop or experience much exposure to the collapse of the financial scam giants. It just suffered from a slow down in exports when the U.S. economy imploded which has been fairly modest since exports remained pretty strong to the world’s number two economy China. So the Thai baht has been a fairly strong and stable currency over the last few years, and useful for measuring dollar weakness against it.

The U.S. government is inflating at a pretty high rate with all these bail outs and cooking of the books, all the while talking about risk of deflation. Mustn’t let housing prices decline or the stock market turn south. It’s go go go, growth growth and more growth. I wonder what end game the planners have in mind? Endless growth? That’s not an end game.