What most mainstream economists have missed out in their analysis of global currency outlook with regard to the US dollar’s outlook is the political perspective.
The dollar bears have got their analysis right over the long term but over the short term of 6 months to a year, the US dollar index may rebound due to a stronger-than-expected recovery in the US economy, a hike in Fed interest rates, or the end of quantitative easing or some global financial crisis where flight to safe dollar havens resumes. So the dollar bulls may be right for the short term.(this has turned out to be true with the Greek soveriegn crisis and better-than-expected US economic data lifting the US$ in the first quarter of 2010)
The decisive factor that will lead to the demise of the US$ (be it through an outright collapse of 40-50% or a gradual annual depreciation of 10% over the next five years) is predicated on four factors:
1. The excessive and irresponsible printing of money (through the US Treasury’s creation of excess reserves) and the monetization of America’s rising debt burden.
2. The large holdings of US dollars by global central banks notably China, Japan and the BRIC countries. Nobody wants to be holding large amounts of a currency that will fall sharply in value. Their ongoing policies to buy US Treasuries to support the US dollar will eventually end if investors continue to abandon the US dollar due to its government's debasement/devaluation policy.
3. China’s policy response to the prospect of a weakening US dollar is to move its assets away from the dollar and into hard assets and other currencies.
4. The political drive by a group of globalists to engineer the emergence of a new global reserve currency. The latter will not happen unless the US dollar collapses. (In fact, many sound economists and central bankers have voiced their approval of a global currency to stabilise the global economy.)
The fourth political factor is the most important factor that is overlooked by economists presumably because (a) it appears to come from conspiracy theorists (b) a monetary union of the world seems more justifiable and noble than a political union under a one world government. But if you follow closely the actions of the US government and the statements and actions of many world leaders, the stage is already set for a new global reserve currency, whether by default, accident or through negotiation. The question is whether this move will be successful or will the US economy suddenly find its way out of structural decline through a technological breakthrough or resource discovery?
We live in interesting times not just because all well-known economic theories and policies (namely Keynesian and Monetarist) have failed to convincingly rescue the world from the current global recession, but a wrong policy move by governments can lead the world into a Greater Depression. The current global solution of piling up more government debt to compensate for the deleveraging of private debt is a short-term pain-killer that will not cure the patient of the root cause of his illness, which is too much debt in the first place.
This leads one to ask whether government leaders can be that stupid. They may act stupid and go against the interests of their electorate in favour of a vested interest group who put them in power. However, it is my view that there are certain prominent "global" leaders who may pretend to act selfishly for their lobby groups but who are actually setting up the stage for a one world government.
This could soon happen in the next 2-3 years when the current dosage of orthodox economic policies (flooding the economy with newly created money) leads into new asset bubbles and financial collapse. By then, global markets systems could be shut down and food shortages and civilian unrest will force governments to impose marshall law.
Tuesday, November 17, 2009
Wednesday, November 11, 2009
Hamlet, Atheists & The Msian Christian's Dilemma
I am a Christian. Though I may not be an exemplary one at times, I do not boast about myself but Christ in me.
In a simple analogy, Jesus may not appear to be the answer to how we decorate our houses but He is the answer to what foundations we build upon. There are many people who live successful and moral lives without believing in God and Jesus Christ. At the end of their lives, they will face an accounting for which their lives will be judged and weighed.
The confusion of this world and the tragic comedy of the human soul is caused by our lack of understanding of who we are, our position in this world, our purpose and final destiny. A world in which every man and woman act for themselves within the constraints of the law and human decency is destined for failure. If we build our house on the rock of Christ, we shall withstand every storm, every blow of circumstance and overcome the sting of death (i.e. we shall all die a physical death but will be spiritually redeemed and saved from eternal death).
In simple words, Jesus is the practical answer to every aspect of our lives. He is present in every suffering person, be the pain physical or emotional or spiritual. I personally know because I marvel at the way He rescued me many times from trouble even when I was not a believer in my youth.
My faith is in Jesus who died for our sins and took our place of bearing God’s punishment against man's sins, the faith that man can only be saved and have eternal life through giving our lives to Him.
In this sense, a Christian engaged in social or political works without the power of the gospel and the aid of the Holy Spirit is like an empty drum, making noise and having little impact in the harvesting of souls.
So I think the dilemma facing Msian Christians, post March 2008 shake-up in the political landscape, is not Hamlet’s dilemma of whether to be or not to be a man of action. It is precisely this limited choice that caused Hamlet to end tragically. Without the power of the Holy Spirit and the word of God, we won’t be able to contend with the enemy of this world, which is not flesh and blood but principalities.
In a simple analogy, Jesus may not appear to be the answer to how we decorate our houses but He is the answer to what foundations we build upon. There are many people who live successful and moral lives without believing in God and Jesus Christ. At the end of their lives, they will face an accounting for which their lives will be judged and weighed.
The confusion of this world and the tragic comedy of the human soul is caused by our lack of understanding of who we are, our position in this world, our purpose and final destiny. A world in which every man and woman act for themselves within the constraints of the law and human decency is destined for failure. If we build our house on the rock of Christ, we shall withstand every storm, every blow of circumstance and overcome the sting of death (i.e. we shall all die a physical death but will be spiritually redeemed and saved from eternal death).
In simple words, Jesus is the practical answer to every aspect of our lives. He is present in every suffering person, be the pain physical or emotional or spiritual. I personally know because I marvel at the way He rescued me many times from trouble even when I was not a believer in my youth.
My faith is in Jesus who died for our sins and took our place of bearing God’s punishment against man's sins, the faith that man can only be saved and have eternal life through giving our lives to Him.
In this sense, a Christian engaged in social or political works without the power of the gospel and the aid of the Holy Spirit is like an empty drum, making noise and having little impact in the harvesting of souls.
So I think the dilemma facing Msian Christians, post March 2008 shake-up in the political landscape, is not Hamlet’s dilemma of whether to be or not to be a man of action. It is precisely this limited choice that caused Hamlet to end tragically. Without the power of the Holy Spirit and the word of God, we won’t be able to contend with the enemy of this world, which is not flesh and blood but principalities.
Monday, November 9, 2009
A Wide Disconnect Between Growth Targets & Reality
There seems to be a wide disconnect between what Malaysia's Ministry of Finance projected GDP growth (+2% to +3%) to be for 2010 and what the Prime Minister has in mind in terms of his long-term forecast of economic growth from today till 2020.
Notwithstanding the fact that he made an about-turn within a day from 9% GDP growth to 6% GDP growth, the PM's target of 6% real GDP growth does not seem to sit well with his objective to raise per capita GDP from US$7,000 to US$17,000 by 2020. Per capita GDP is always stated in nominal terms, so this implies an annualised nominal growth rate of 8.4%.
Assuming long-term inflation in the next ten years is in line with the historical average of 3% ( a fair assumption given that cost-push factors from energy and food inflation), then an 8.4% nominal GDP growth translates into a real GDP growth rate of 5.4%.
To see whether this is realistic, we need to ask three simple questions:
1. What was Msia's average GDP growth in the last ten years (excluding the recession year of 2009)?
Answer: 5.5%.
2. What were the global economic conditions for this type of growth?
Answer: The US economy was growing 2.6% while the Singapore economy was growing at an average of 5.6% amidst a credit boom in the US starting from 2003 to 2007.
3. What was the standard deviation of the growth rates of these three economies? In other words, how volatile are these economies?
Answer: The US economy had a standard deviation (SD) of 1.3% with the lower range of growth at 1.3% (average growth of 2.6% less 1.3%) while the Singapore economy has an SD of 3.9% with the lower range of growth at 1.7%. For Msia, the SD is 2% and the lower range of growth is 3.5% (higher range at 7.5%).
Given that Malaysia has a a fairly high correlation (R sq=79%) with the Singapore economy and the Sing economy in turn is correlated with the US economy (R sq=60%), then a period of sub-par growth in the US for the next ten years suggests that Singapore and Msia's economy will also be below their past 10-year track records. Unless either economy rebalances and realigns their economic structures towards new growth engines such as China and India.
My conclusion is that a long-term GDP growth rate of 3.5% for Msia is more realistic than the 5.4% implied by the 2020 goals of the PM.
Notwithstanding the fact that he made an about-turn within a day from 9% GDP growth to 6% GDP growth, the PM's target of 6% real GDP growth does not seem to sit well with his objective to raise per capita GDP from US$7,000 to US$17,000 by 2020. Per capita GDP is always stated in nominal terms, so this implies an annualised nominal growth rate of 8.4%.
Assuming long-term inflation in the next ten years is in line with the historical average of 3% ( a fair assumption given that cost-push factors from energy and food inflation), then an 8.4% nominal GDP growth translates into a real GDP growth rate of 5.4%.
To see whether this is realistic, we need to ask three simple questions:
1. What was Msia's average GDP growth in the last ten years (excluding the recession year of 2009)?
Answer: 5.5%.
2. What were the global economic conditions for this type of growth?
Answer: The US economy was growing 2.6% while the Singapore economy was growing at an average of 5.6% amidst a credit boom in the US starting from 2003 to 2007.
3. What was the standard deviation of the growth rates of these three economies? In other words, how volatile are these economies?
Answer: The US economy had a standard deviation (SD) of 1.3% with the lower range of growth at 1.3% (average growth of 2.6% less 1.3%) while the Singapore economy has an SD of 3.9% with the lower range of growth at 1.7%. For Msia, the SD is 2% and the lower range of growth is 3.5% (higher range at 7.5%).
Given that Malaysia has a a fairly high correlation (R sq=79%) with the Singapore economy and the Sing economy in turn is correlated with the US economy (R sq=60%), then a period of sub-par growth in the US for the next ten years suggests that Singapore and Msia's economy will also be below their past 10-year track records. Unless either economy rebalances and realigns their economic structures towards new growth engines such as China and India.
My conclusion is that a long-term GDP growth rate of 3.5% for Msia is more realistic than the 5.4% implied by the 2020 goals of the PM.
Subscribe to:
Posts (Atom)
