Saturday, July 24, 2010

Saturday Rock Blog: She's Gone


chintan shah said...

very interesting view on how US may have hyperinflation in long term.

pythagoruz said...

Hey chintan, interesting stuff.

I'm no economist but it seems to me like it will be a while before we see any significant inflation due to overall economic and credit contraction.

But certainly interest rates will be going up at some point, and when they do, they will go up fast!

chintan shah said...

As fed prints more money dollar must weaken against other currencies but thats not happening and reason is very simple - dollar is used as fx reserve by many nations so because of this demand of dollar its not declining.
But IMF and other organizations are right now contemplating about alternatives.
So once dollar lost its status as a major reserve currency then we can expect significant decline in usd against other currencies.

My guess is some sort of derivatives can solve this problem like currency basket futures which can be used for reserve currency.
otherwise alternative currency etc dont make much sense as major commodities like oil are traded in dollar which gives USA relative advantage and US can import oil cheaper compared to other nations.So yankees are not gonna trade oil etc in non dollar alternatives.

There is massive corruption in my opinion in federal reserve as all the hot shot chitterc*cks like greenspan,bernanke,krugmann etc.. are busy in making huge fortunes via consultancy etc...
why fed didnt convert MBS into equity swaps to inject liquidity?
If it had done so then wall street banks might had post huge losses.But american middle class might had been saved by further implications.
Instead fed bailed out everything via printing money which can reduce the purchasing power of dollar but it will allow banks to make huge profits once housing market revive.
This practice is called "Privatizing profits and socializing losses"
banks will make huge profits but it will make quite difficult for avg americans to meet two ends as a bread which cost 1.4$ now will be around 2$ in future.while wages wont rise.

If things get start worsening u can hedge ur dollar denominated family savings via derivatives.

Dont you think I have learnt a lot since we first started talking.??
before 2 years I was avg joe who was asking you in which masters program i should enroll and now i am wanna be hedge honcho.

FYI: I like when people praise me as it encourages me to improve my self further.;)

pythagoruz said...

Hey Chintan, good to hear from you, sorry it took so long for me to publish the comment. I've been traveling and trying to avoid anything market related for a while.

But yeah, inflation seems inevitable but fortunately US currency has become one of the most stable and safe places to store equity world wide. It seems like they will happily take dollars pretty much anywhere these days as a form of payment. So the fed can basically do a lot of debt monetization before the US dollar slides much. It is a reason to be optimistic about the global economy i think.

On the other hand, we know the markets are all about investor psychology and if somehow the perception of the US dollar were to make a sudden shift things could get nasty.

But yeah, you seem to have learned a lot since we first became acquainted a few years ago. So did you get a job lined up? What are your plans for this year?