Discussing De-Dollarization with Da Jackass

153

A perceived acceleration toward the end of US dollar hegemony has been a hot topic here at TFMR this week. Thus, we thought it should be the primary topic for our holiday weekend Jim Willie discussion, too.

There's no easy way to summarize this conversation with bullet points. Instead, just notice that we began the call by discussing de-dollarization and then just let it flow from there.

I think you'll find this interesting and informative. Thanks again to The Jackass for so freely sharing his time with us!

TF

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streber
Sep 3, 2018 - 3:45pm

The Two Way Street Continues

(from onesong article about Royal Bank of India)
---

"The addition of gold to RBI's forex reserves is probably a diversification of assets for their deployment, keeping in mind both the buildup of reserves in 2017 as well as the evolving global risks, including market volatility and rising policy rates in the United States," said Saugata Bhattacharya, chief India economist at Axis Bank.

"Rising yields could trigger mark-to-market losses for the RBI's bond portfolio." No shlt Sherlock! .. lol

"Of the $405 billion worth reserves with the central bank, $245 billion were held in the form of bonds and securities as of June 30, data submitted to the IMF show."

AgstAger
Sep 3, 2018 - 3:32pm

Thanks streber

I'll take that under advisement.

streber
Sep 3, 2018 - 3:26pm

AgstAger

Good article but...
Never use the word Constitutionalist. It is a trigger word.

streber
Sep 3, 2018 - 3:21pm

Fellow Navy Pilot Bob Moriarity Looks

Looks Inside Today's Festering Pustule
----

The pustule known as FUSA (Former United States of America) is surgically lanced by the youngest Navy pilot in the Vietnam fiasco.

A lengthy, worthy read.

snip:
Exactly fifty years ago I was flying combat missions in one of those stupid wars the US starts every generation or so.

snip (on Ike's Farewell Address and the F-35):
Eisenhower actually used the term “Congressional, Military, Industrial Complex” in his draft of the speech but one of his staff edited out the term “Congressional” knowing that identifying them for what they were would piss them off. So it’s not really the MIC, properly it is the CMIC.

The CMIC has tentacles in every three-letter agency.

I was an F-4B pilot when I was twenty and flew the plane for 125 missions in Vietnam. I know fighter aircraft and combat. The F-35 is the most expensive and useless aircraft the US ever designed. It wouldn’t last five minutes in real combat. But with F-35 programs in 46 US states employing 32,500 jobs, it is viewed as too big to kill.

snip
There was Russian collusion during the election but it was on the part of the DNC, the FBI and Christopher Steele in the form of the Russian dossier. The FBI gang lied to the FISA court about the origin of the dossier and who paid for it. The Clinton campaign originated the document and paid for most of it.

snip
The US has participated in subverting the election process of every other country in the world since the CIA began in 1947.

snip
Obama tossed the entire Executive Branch into a blender in his administration. If it was OK for the best part of a dozen neocons to subvert our foreign policy on behalf of a foreign entity under Bush, then it also must be OK to use the FBI, DOJ, IRS, NSA, DNI, and CIA to be in charge of picking the president.

snip
Almost fifty years ago Robert Mueller was a young Marine platoon commander in Vietnam. When his unit in the 4th Marines were getting their asses kicked at Mutter’s Ridge, I was overhead at 1200 feet in a single engine Bird Dog providing close air support to save them. We have a lot in common.

As Marine officers we were required to take an oath to “support and defend the Constitution of the United States against all enemies, foreign and domestic.” I fought in Vietnam for almost two years believing as I was told that the Vietnamese were our enemies. Of course they weren’t but still I am proud of the risks I took to save the lives of fellow Marines.

I remember well my oath. Clearly Robert Mueller has forgotten his because he has turned into one of those domestic enemies of the Constitution.

We can survive fools as President; we had the village idiot in George Bush.He allowed the neocons to seize the government.

We can survive Presidents who can’t keep their peckers in their pockets. JFK was banging his girlfriends in the White House.

Bill Clinton made a far bigger payoff of $850,00 to Paula Jones for her charge of rape on his part. Contrary to his claims, records show he made 26 flights on the Lolita Express, five after ditching his protection detail. Are we really to believe that seventeen-year-old stewardesses don’t wear panties on other flights? He was flying with a convicted pedophile, does anyone actually think that those flights compared with Trump paying off a hooker? A hooker of legal age. Has the leopard changed its spots?

I don’t care if Robert Mueller likes Donald Trump. When someone is legally elected president that’s it until the next fool wins office. For the FBI, DOJ, NSA, CIA, DNI and MSM to take active measures to overthrow the legal government of the United States is clearly treason.

Much more in article.
This should be placed in The Smithsonian

https://www.321gold.com/editorials/moriarty/moriarty090318.html

Sep 3, 2018 Traitors within the Gate or the Basic Problem with Coups Bob Moriarty 321gold

www.321gold.com

321gold.com ...takes no prisoners!

onesong
Sep 3, 2018 - 3:07pm

Markets may be signaling rising recession risk: Fed study...

SAN FRANCISCO (Reuters) - A narrowing gap between short-term and long-term borrowing costs could be signaling heightened risk of a U.S. recession, researchers at the San Francisco Federal Reserve Bank said in a study published on Monday.

The research relies on an in-depth analysis of the gap between the yield on three-month and 10-year U.S. Treasury securities, a gap that like other measures of short-to-long-term rates has narrowed in recent months.

Several Fed officials have cited this flattening yield curve as a reason to stop raising interest rates, since historically each time it inverts, with short-term rates rising above long-term rates, a recession follows.

The study, published in the San Francisco Fed’s latest Economic Letter, bolsters that view.

“In light of the evidence on its predictive power for recessions, the recent evolution of the yield curve suggests that recession risk might be rising,” wrote San Francisco Fed research advisers Michael Bauer and Thomas Mertens.

Still, they noted, “the flattening yield curve provides no sign of an impending recession” because long-term rates, though falling relative to short-term rates, remain above them.

The yield on the 10-year Treasury note US10YRT=RR on Monday was about three-quarters of a percentage point higher than the yield on the three-month note US3MT=RR.

That is a “comfortable” distance from actual inversion, which is the true signal of a recession, they wrote.

The Fed is expected to continue raising rates for at least the next couple of quarters, though markets expect it to raise rates just once next year, while Fed officials expect to raise them three times.

Other researchers both inside and outside the Fed have cited the build-up of bonds at the Fed and other central banks since the global financial crisis as one reason to doubt the signaling power of an inverted yield curve. That is because the large bond-holdings may be pushing down long-term rates.

Similarly, investor preference for U.S. debt, seen as low-risk, may also be driving down yields on long-term Treasuries and distorting the yield curve, making it less reliable as an indicator of a coming recession.

A recent paper from researchers at the Washington-based Fed board looked at a different part of the yield curve and found little cause for concern.

The debate is likely to continue, as rarely does one study settle any matter in macroeconomics.

streber
Sep 3, 2018 - 3:06pm

More on the Two Way Street

"Just this week I received several calls from business colleagues from ASEAN countries (specifically in this case Thailand, Singapore and Vietnam) who would very much like to see such an FTA come into being sooner rather than later, this year if at all possible.

Aside from opening up respective markets, one of the common and independently repeated themes was their overdependence on the US Dollar and the recently growing geopolitical uncertainties associated with trading exclusively in the dollar.

The trend seems is growing among many trade dependent countries to try to diversify from the greenback. It is worth noting former central banker Agustin Carstens, who confirmed a recent Bank for International Settlements (BIS) report that the US dollar makes up at least 80% of all the letters of credit outstanding, which are the means of settlement of international trade contracts.

It is an unsettling imbalance for any country to be involved in, and some diversification away from the US Dollar may alleviate the worst potential effects down the road. This is becoming a very real present-time concern for many nations especially when the US Fed is on a hawkish path, draining US Dollar liquidity on a monthly schedule."

full article...
https://theduran.com/eeu-and-asean-the-bridges-between-east-and-west/?mc...

onesong
Sep 3, 2018 - 2:59pm

India's central bank sells Treasuries and buys gold...

for first time in nearly a decade!

By Gayatri Nayak
The Times of India, Mumbai
Monday, September 3, 2018

https://economictimes.indiatimes.com/markets/commodities/news/rbi-buys-g...

MUMBAI, India -- The Reserve Bank of India has bought gold for the first time in nearly a decade, signalling that the metal could be in demand as a store of value when returns and capital values of fixed-income bonds are declining in a rising-rate environment.

The RBI added 8.46 metric tonnes of gold to its stock of holdings during the financial year 2017-18 ending June 30, taking the level of gold reserves to 566.23 metric tonnes, according to its latest annual report.

It last bought 200 metric tonnes from the International Monetary Fund to boost its reserves in November 2009.

Over the past nine years, the gold stock in RBI reserves was stable at 17.9 million troy ounces. But the RBI has started adding to its stock since December 2017, data submitted to the IMF indicate.

The RBI's stock of gold, as of June 30, amounted to 18.20 million troy ounces or equivalent to 566.23 metric tonnes, up from 17.9 million troy ounces in November 2017.

The RBI's decision to buy gold is significant because unlike many other central banks such as the People's Bank of China, the RBI does not regularly trade in gold, although the RBI Act permits it to do so.

Economists reckon that investing in gold is a prudent treasury move by the central bank at a time of rising yields. The RBI has already sold close to $10 billion worth of U.S. treasury securities between April and June, data from the U.S. Treasury Department suggests.

"The addition of gold to RBI's forex reserves is probably a diversification of assets for their deployment, keeping in mind both the buildup of reserves in 2017 as well as the evolving global risks, including market volatility and rising policy rates in the United States," said Saugata Bhattacharya, chief India economist at Axis Bank.

Rising yields could trigger mark-to-market losses for the RBI's bond portfolio. Of the $405 billion worth reserves with the central bank, $245 billion were held in the form of bonds and securities as of June 30, data submitted to the IMF show.

Diversifying reserves to include gold is a prudent measure at such times. The annual report points out that the RBI continued diversification of foreign currency assets with attention to risk management. The gold portfolio had also "been activated," said Bhattacharya.

The RBI did not say where it bought the gold from or the reasons for such transactions. But economists say that the central bank might also want to create a buffer to meet the redemption needs of Gold Bond Schemes through which it sold bonds worth more than ?4,000 crore.

The RBI has to redeem the three-to-eight-year bonds at the prevailing price of the metal and keep an extra stock of gold in its kitty to hedge against price risks.

AGXIIK
Sep 3, 2018 - 2:26pm

RIckshawETF As I recall in my studies, virtually everything

returns to its mean.

UST rates return to 6%; that would be calamitous for those holding $20 trillion in UST but good for PMs and cryptos as storehouses of asset value.

FIAT and debt returns to their mean values. Zero. That would be calamitous for holders of FIAT but great for those holding debt paying 1 cent per dollar of debt. Even better for those holding PMs and cryptos as storehouses of asset value

Real estate returns to its mean value. 25-50% of the present prices. That's on a good day with a tail wind supporting mi casa'a inflated valuations.......I hope.

I feel sorry for those who don't see the logic of assets value returning to the mean or assets rebalancing their values relative to their sister assets, seeking historical norms such as historical norms can become rebalanced with time. PMs and cryptos should do very nicely during the reversion periods.

There's one main risk in adopting this price arbitrage (if that's the connect word) A person might have to wait a long time to see the correctness and wisdom of their action It's a good idea to have a day job and nice stack of cash while waiting for reversions to make themselves known

RickshawETF
Sep 3, 2018 - 1:57pm

Crypto Ratios

AGXIIK posted a great thread on his logic in converting gold into silver at the present time, while the Silver-to-Gold [price] Ratio was at about 82 to 1.

With the PM markets closed, and things pretty quiet on the financial sites in general, I spent some time looking at cryptos. I track prices and ratios weekly, and look for trends and anomalies. There is an interesting situation currently between Bitcoin and Litecoin.

For those who don't follow cryptos, Litecoin was created by a [former] Google engineer, Charlie Lee in 2011. Charlie saw the promise of cryptos, but quickly realized that Bitcoin, for all of its dominance, was going to evolve into something too slow, and with too high transaction costs, to ever be a practical means of payment for everyday transactions.

He set about to create a more practical alt coin (he calls Litecoin the "silver" to Bitcoin's "gold"). He created Litecoin as a 4X clone of Bitcoin. That means that, like Bitcoin, only a finite amount of Litecoin will ever be created -- 4X (84 million Litecoin vs. 21 million Bitcoin). Litecoin is also 4X the speed of Bitcoin (a transaction is validated on the blockchain in 2.5 minutes vs. 10 minutes for Bitcoin). The transaction costs, as of yesterday, was just over $0.62 per Bitcoin transaction vs. just under $0.06 per transaction for Litecoin, for a greater than 10X differential.

Litecoin has also been involved in preparing itself for greater practicality down the [crypto] road. It has been active in developing the Lightning Network, which is attempting to address the problem of scalability (as transaction volume increases, the network slows down). It is also active in developing "Atomic Swaps". This is a form of cross-chain trading. At the present time, if I hold Bitcoin, but owe you Litecoin for a transaction (I bought a Lamborghini from you, that you advertised in Litecoin) , I would have to buy Litecoin through a crypto exchange, using my Bitcoin for the purchase, and then send you the Litecoin payment. Using an Atomic Swap, I would just send you Bitcoin, instructing the network to convert it to Litecoin at the other end. It is very cool!

So, where were we? Ah, yes -- the crypto ratio. With Litecoin created at a 4:1 ratio to Bitcoin, shouldn't it sell for 1/4 the Bitcoin price? Crypto "experts" feel that Bitcoin's dominance and acceptance probably means the price will never approach that 4:1 ratio (more likely 5:1), but Litecoin is working diligently to make itself more practical and useful than Bitcoin for everyday transactions. That could give Litecoin an edge in usefulness, which could make Litecoin more desirable as a means of payment . . .

And that brings us to today's (actually, last week's) ratio. Is Litecoin selling for 1/4 of Bitcoin's price? 1/5 the price? On August 24 (I track weekly closing prices), the ratio between the price of Bitcoin to the price of Litecoin hit an all-time high 0f 116:1 !!! Folks, that means 1 Bitcoin can buy you 116 Litecoin. Does that seem like a reflection of the true value of Litecoin? I would argue that that ratio will drop far, and fast, once the Lightning Network and Atomic Swaps are fully implemented.

If Bitcoin returns to its [recent] price of $12,000-15,000, and the Litecoin ratio drops to even 20:1, that's a price of Litecoin around $600-750. And we're talking about a coin selling today for around $65! As I pointed out recently [regarding the Silver to Gold Ratio] to AGXIIK, what do you think is a more likely scenario:

A) Silver goes from $15 to $150 (3X its former all-time high) in spite of suppression

or

B) Litecoin goes from $65 to $650 (2X its former all-time high)

Do your own due diligence, but I feel this is worth looking into . . .

Libero
Sep 3, 2018 - 1:46pm

Happy Labor Day to turdville

and the fight/need for higher wages!

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