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Author Topic: Money, the Fed, Banking, Monetary Policy, Dollar & other currencies, Gold/Silver  (Read 214181 times)
G M
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« Reply #950 on: October 12, 2017, 11:03:39 AM »

I just forwarded that to Scott Grannis. Let's see what he says.


I look forward to his response.
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Crafty_Dog
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« Reply #951 on: October 12, 2017, 11:07:12 AM »

________________________________________
The Producer Price Index Rose 0.4% in September To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 10/12/2017

The Producer Price Index (PPI) rose 0.4% in September, matching consensus expectations. Producer prices are up 2.6% versus a year ago.

Energy prices rose 3.4% in September, while food prices were unchanged. Producer prices excluding food and energy rose 0.4%.

In the past year, prices for goods are up 3.3%, while prices for services are up 2.1%. Private capital equipment prices rose 0.4% in September and are up 2.5% in the past year.

Prices for intermediate processed goods rose 0.5% in September and are up 4.3% versus a year ago. Prices for intermediate unprocessed goods declined 0.4% in September but are up 7.0% versus a year ago.

Implications: The impact of Hurricane's Harvey and Irma can be felt throughout today's report on producer prices. The most significant impact from the storms was on supply chains, where increased demand for machine and equipment parts, paired with a limited supply, pushed up margins to wholesalers. Meanwhile storm-related refinery shutdowns along the Gulf Coast led energy prices 3.4% higher in September, including a 10.9% jump in gasoline prices. Food prices, however, showed little impact, unchanged in September and down at a 0.5% annual rate in the past six months. Looking beyond food and energy, "core" prices rose 0.4% in September. In addition to higher wholesaler margins, most major categories of goods and services also rose in September. In the past year, producer prices have increased 2.6%, the largest twelve month rise since early 2012. This is certainly elevated in September by the hurricanes, but producer prices have been at or above 2% on a year-to-year basis in seven of the last eight months. And a look further down the pipeline shows the trend higher should continue in the months to come. Intermediate processed goods rose 0.5% in September and are up 4.3% from a year ago, while unprocessed goods declined 0.4% in September but remain up 7.0% in the past year. In other words, the "data dependent" Fed has clear evidence that inflation has met or exceeded their 2% target. In employment news this morning, new claims for unemployment benefits declined 15,000 last week to 243,000, while continuing claims fell 32,000 to 1.89 million, the lowest level since 1973. The temporary storm-related dip in employment looks to have passed, and we expect a very strong rebound in payrolls in October.
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DougMacG
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« Reply #952 on: October 12, 2017, 11:36:42 AM »

Or else?!  They will buy their oil from the US?  Venezuela (Venezuelan Bolívar)?  Japan, lol.
Maybe Russia, which of these countries needs a flood of Yuan for their consumer purchases?  Angola?

If they partner up with Iran, how 'bout we do the same with Taiwan?

Does anyone remember when over-reliance on unreliable oil sources was a finance and national security nightmare - for the importer?

http://dailycaller.com/2016/03/21/china-buying-lots-of-oil-from-saudi-arabia-iran-and-russia/
China surpassed the United States as the world’s largest net importer of petroleum in 2013. Within the next few decades, it is expected to buy roughly 70 percent of its oil from foreign sources, much of which will come from countries known for instability. Sudan alone provides 7 percent of China’s oil imports, and over one-third of Chinese oil imports come from Sub-Saharan Africa. Some of China’s largest oil suppliers are Angola, Sudan, Nigeria, and Equatorial Guinea, which are all known for political instability.

“Iran could also be a big supplier to Beijing in the months and years to come, as well as a partner that Tehran could call on to supply important loans, technology, and resources to develop Iran’s oil and natural resource sectors,” Kazianis concluded.

China is already heavily investing in Iranian oil, according to The New York Times and has been Iran’s largest trading partner for six years in a row. The two largest suppliers of Chinese oil, Russia and Saudi Arabia, are politically stable but are involved in Middle Eastern conflicts. China prefers to avoid being drawn into such confrontations, especially given recent tensions with its own Muslim minorities.

-------------------

Let's see what Scott G says.  It seems to me that:  a) none of these countries were using the US$ by choice.  They used it because it was in their best interest to do so.  If so, then switching makes them worse off.  b) Currency is a medium of exchange, doesn't change underlying fundamentals.
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Crafty_Dog
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« Reply #953 on: October 13, 2017, 12:18:58 PM »

Can’t see how this will make much of a difference. Money is fungible. The value of the dollar is determined not by transactional demand for oil, but for by the demand to hold dollars.

On Oct 12, 2017, at 12:59 PM, Marc Denny <craftydog@dogbrothers.com> wrote:

https://www.cnbc.com/2017/10/11/china-will-compel-saudi-arabia-to-trade-oil-in-yuan--and-thats-going-to-affect-the-us-dollar.html
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DougMacG
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« Reply #954 on: October 28, 2017, 09:46:16 AM »

https://www.realclearpolitics.com/articles/2017/10/28/president_trump_needs_a_stable_dollar_along_with_tax_cuts_to_maximize_growth_135392.html

He compares Taylor and rules based monetary policy to Volcker.  This is not about high versus low rates; it is about getting it right.

"President Trump Needs a Stable Dollar Along With Tax Cuts to Maximize Growth"
...
" Taylor is working on a study that argues for a return to a rules-based international currency system. Several years ago, former Fed Chair Paul Volcker, who used gold and commodities as leading inflation indicators while appointed, argued for a rules-based monetary policy at home and new international currency cooperation abroad."
...
« Last Edit: October 30, 2017, 11:38:36 PM by Crafty_Dog » Logged
DougMacG
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« Reply #955 on: November 03, 2017, 12:07:46 PM »

I predicted Trump would pick Taylor and I was wrong.  Trump picked the less qualified alternative although he is already a member of the Fed Board of Governors.  The result of this pick will probably be okay, no worse than Yellen.  Powell was one who argued with Yellen to ease off of quantitative easing.  The Trump camp thinks Powell will be slower to raise interest rates, giving his economy continued, nominal and  artificial boost, like Yellen did for Obama, and not be too obsessed or pure with what is right and responsible for the dollar and interest rates.  Powell will be easier for the administration to influence, they think.

Drawbacks to this:
a) artificially low interest rates are killing off savings and have other bad effects.  
b) Instead of having the leading mind on monetary policy at the top, the new chair of this most crucial organization will mostly rely the advice of outsiders and underlings, aka the swamp.
« Last Edit: November 03, 2017, 03:27:11 PM by DougMacG » Logged
Crafty_Dog
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« Reply #956 on: November 04, 2017, 09:57:36 AM »

True digital currencies were more common in science fiction than in reality until quite recently. The big stumbling block for electronic money that doesn't have a physical form is the issue of ownership. How can you truly possess something of intrinsic value that can be effectively copied ad nauseam? In 2008, a paper published under a pseudonym, Satoshi Nakamoto, introduced the world to the digital currency bitcoin, a groundbreaking development in its own right. But more important, however, was the underlying algorithm that made the cryptocurrency work.
 
The technology that anchors bitcoin, known as the blockchain, was the truly revolutionary development. Commonly referred to as distributed ledger technology, blockchain is already considered to be a disruptive technology and will affect a number of different industries beyond the financial sector, including but not limited to shipping and logistics, aerospace and defense, retail, health care, and manufacturing.

Distributed ledger technology is a truly revolutionary development.

In the case of digital currencies such as bitcoin, which pioneered the technology, transactions are recorded in a shared public ledger — the ubiquitous blockchain. The currency (or contract or other exchange of information) is not controlled by a central entity like a bank but is instead managed by an online community. Members with powerful computers are encouraged to maintain the transactional register by "verifying the blockchain" — in other words, by solving complex mathematical equations and adding another "block" of transactions to the existing chain. With bitcoin, the process is known as "mining" because the verifier is rewarded with new bitcoins.

 
Ultimately, the key attribute of the technology is its ability to ensure and enshrine an often undervalued commodity: trust. The only way the protocol itself can be hacked and a false transaction entered is if a group of actors control more than 50 percent of the nodes verifying the blockchain in order to collude with one another.
 
To be quite clear, first-mover offerings such as bitcoin, Ethereum or Ripple that are popular today might easily die a quick death tomorrow. For now, the technology remains in its infancy and new applications are still being developed. There are a number of technological challenges to be surmounted as well as regulatory hurdles to overcome before potential sectors of the economy adopt this technology — or not, as the case may be.
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G M
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« Reply #957 on: November 04, 2017, 11:21:01 AM »

True digital currencies were more common in science fiction than in reality until quite recently. The big stumbling block for electronic money that doesn't have a physical form is the issue of ownership. How can you truly possess something of intrinsic value that can be effectively copied ad nauseam? In 2008, a paper published under a pseudonym, Satoshi Nakamoto, introduced the world to the digital currency bitcoin, a groundbreaking development in its own right. But more important, however, was the underlying algorithm that made the cryptocurrency work.
 
The technology that anchors bitcoin, known as the blockchain, was the truly revolutionary development. Commonly referred to as distributed ledger technology, blockchain is already considered to be a disruptive technology and will affect a number of different industries beyond the financial sector, including but not limited to shipping and logistics, aerospace and defense, retail, health care, and manufacturing.

Distributed ledger technology is a truly revolutionary development.

In the case of digital currencies such as bitcoin, which pioneered the technology, transactions are recorded in a shared public ledger — the ubiquitous blockchain. The currency (or contract or other exchange of information) is not controlled by a central entity like a bank but is instead managed by an online community. Members with powerful computers are encouraged to maintain the transactional register by "verifying the blockchain" — in other words, by solving complex mathematical equations and adding another "block" of transactions to the existing chain. With bitcoin, the process is known as "mining" because the verifier is rewarded with new bitcoins.

 
Ultimately, the key attribute of the technology is its ability to ensure and enshrine an often undervalued commodity: trust. The only way the protocol itself can be hacked and a false transaction entered is if a group of actors control more than 50 percent of the nodes verifying the blockchain in order to collude with one another.
 
To be quite clear, first-mover offerings such as bitcoin, Ethereum or Ripple that are popular today might easily die a quick death tomorrow. For now, the technology remains in its infancy and new applications are still being developed. There are a number of technological challenges to be surmounted as well as regulatory hurdles to overcome before potential sectors of the economy adopt this technology — or not, as the case may be.

Digital currencies are just another fiat currency, and can be killed off quite easily by nation-states. I'm not adverse to using them, but I wouldn't store much in that format that I couldn't afford to lose.



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Crafty_Dog
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« Reply #958 on: November 04, 2017, 04:30:17 PM »

https://www.alt-m.org/2017/10/26/blockchain-gold/

=========================================

Also see:

Cyrptocurrencies aren't currencies. They have become speculative vehicles bought on credit. The growth rate of Bitcoin, or any individual "currency," is convincingly limited by the technology, but the number of "currencies" has exploded.

"All of this should make it very plain to buyers of any cryptocurrency that it’s greatest selling point, it’s limited supply, has been completely debunked and in the most preposterous way possible. In fact, the growth rate in the creation of new cryptocurrencies makes central bank money printing in recent years look utterly conservative by comparison."

The following article, of course, is now wildly out of date, having been posted about 35 days ago, but consider the arguments. The extremes have only become more extreme and the insanity more insane.

Tom



(Bold highlighting below is mine. Tom)

This is not the store of value you are looking for

Posted by Jesse Felder on 9/1/2017

[Omitting a lot of talk about Warren Buffett and Ben Gramham's thinking about bubbles]

Essentially, a bubble starts with a compelling premise and then the prices start going up and greed takes over. And I think this is exactly what is going on with Bitcoin today.It all started with a compelling premise. Out of the depths of the financial crisis a group of cyber punks came up with the idea of a decentralized, digital form of cryptocurrency with limited supply that could not be manipulated by any central authority. The idea really had its foundations a decade or so earlier but it took the financial crisis to precipitate its actual creation in early 2009. As central banks around the world began to pursue incredible amounts of money printing the premise only became that much more compelling. Then the price started to take off and greed took over.

Eight years later and Bitcoin is now worth nearly $100 billion. It has soared 20-fold to $4,800 per Bitcoin over just the past two years, since Buffett’s partner Charlie Munger called it, “rat poison.” To get a sense of just how overvalued this is, the Wall Street Journal surmised if Bitcoin took over the entire credit card transaction market, putting Visa and MasterCard out of business, it would be worth about $100. Even more egregious, the Bitcoin Investment Trust (GBTC) now trades at more than a 115% premium to the underlying value of its Bitcoin assets. Buyers here thus need Bitcoin to trade over $10,000 to begin to break even on today’s purchases.

Bitcoin is only part of the story. There are now more than 800 different cryptocurrencies with a combined market cap of $166 billion. “ICO Unicorns” are now a thing (companies whose initial coin offerings are now worth more than a billion dollars). Burger King introduced the Whopper Coin last week and Doge Coin, which was created as a joke based upon a popular internet meme, is now worth nearly a quarter billion dollars. There’s now a Dentacoin for patients to use in paying their dentists. There’s a Titcoin for porn and a Potcoin for marijuana.

All of this should make it very plain to buyers of any cryptocurrency that it’s greatest selling point, it’s limited supply, has been completely debunked and in the most preposterous way possible. In fact, the growth rate in the creation of new cryptocurrencies makes central bank money printing in recent years look utterly conservative by comparison. And all of this still ignores the fact that a bitcoin is even less tangible than a tulip bulb. There is literally nothing to it.

That hasn’t stopped investors from buying in, however. More than 50 hedge funds have been formed to take advantage of the crypto gold rush. And it’s not just high net worth, folks, either. NBC news ran a story recently carrying this headline: “Middle America Is Crazy In Love With Bitcoin.” The first line reads, “If you’re not buying Bitcoin, you’re not keeping up with the Joneses.” And when you run a google search for “buy bitcoin with” the first suggested result is “PayPal.” The second is “credit card.” Middle America now famously has no savings to speak of so they are buying Bitcoin in their credit cards.

If this doesn’t fit Mr. Buffett’s criteria of a bubble, I don’t know what does. Much of this is just your standard bubble greed but it’s interesting that the premise, the story of Bitcoin, has resonated with people so much. They are clearly buying into the proposition that central banks have gone nuts and they need something to act as a store of value amid the madness. It’s just another signpost in the anti-technocrat, anti-elitist movement. Sadly, these folks have been deceived as to the merits of their chosen store of value.

And it’s terribly ironic that the store of value they have chosen is simply a bad knock-off one that has been around for as long as humans have needed one. I am, of course, referring to gold. In fact, one of the early predecessors of Bitcoin was called Bitgold and it was essentially a digital currency that attempted to mimic gold’s virtues. Think back to the Bitcoin premise presented at the beginning of this discuss: “a decentralized, digital form of cryptocurrency with limited supply that could not be manipulated by any central authority.” The only difference between Bitcoin and gold is that the latter is not digital or encrypted; it’s tangible. Oh, and unlike cryptocurrencies it’s supply is truly limited.

It’s almost as if, in the aftermath of the financial crisis, investors went looking for gold, stared directly at it and then were somehow hypnotized into thinking, “this is not the store of value you’re looking for.” A painful bear market, like that we have witnessed in gold since 2011, can have just that sort of effect. And the most powerful bull market in history in what is plainly a digital pyramid scheme played a not insignificant role, as well.

Still, the popularity of the Bitcoin premise will eventually be very bullish for gold. When the bubble in the former bursts (which will likely coincide with a bursting of the bubbles in other risk assets), investors will realize their error and rush once again to the latter, understanding that it is the genuine article and truly fulfills the promise of a “store of value.” At that point, prices will rise and we will start to see greed at work again in the gold markets.
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Crafty_Dog
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« Reply #959 on: November 14, 2017, 11:57:32 AM »

Data Watch
________________________________________
The Producer Price Index Increased 0.4% in October To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 11/14/2017

The Producer Price Index (PPI) increased 0.4% in October, well above the consensus expected rise of 0.1%. Producer prices are up 2.8% versus a year ago.

Food prices rose 0.5% in October, while energy prices were unchanged. Producer prices excluding food and energy rose 0.4%.

In the past year, prices for goods are up 3.2%, while prices for services are up 2.4%. Private capital equipment prices rose 0.3% in October and are up 2.7% in the past year.

Prices for intermediate processed goods rose 1.0% in October and are up 5.0% versus a year ago. Prices for intermediate unprocessed goods were unchanged in October but are up 7.7% versus a year ago.

Implications: Producer prices rose much faster than expected in October, with nearly every category moving higher. Prices for services led the way, rising 0.5% in October as margins for fuel and lubricant dealers surged 24.9% (it's not unusual to see large swings in this category from month-to-month). In fact, nearly every category in today's report shows inflation pressures that are likely to flow through to consumer prices in the months ahead. Goods prices rose 0.3% in October, with pharmaceuticals and industrial chemicals leading the way. Food prices rose 0.5% following three months of flat or declining prices, while energy prices (typically one of the more volatile components month-to-month) was unchanged in October. "Core" producer prices – which exclude both food and energy – rose 0.4% in October and are up 2.4% in the past year. That represents the fastest twelve-month rise since early 2012. There may still be remnants of hurricane impacts in the pricing data, but that's starting to subside, and producer prices have now been at or above 2% on a year-to-year basis in seven of the last nine months. In other words, prices were moving higher well before the storms touched down in Texas and Florida. A look further down the pipeline shows the trend higher should continue in the months to come. Intermediate processed goods rose 1.0% in October and are up 5.0% from a year ago, while unprocessed goods were unchanged in October but remain up 7.7% in the past year. Given these figures, it would be difficult for the "data dependent" Fed to cite current inflation trends as a reason to hold off on continued rate hikes. And with employment growth remaining strong, Chairwoman Yellen, and her successor Jerome Powell, look to have a clear runway for gradual but steady rate hikes into 2018.
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