The US dollar pegged to the yuan

[Atilla]

Hi Chump,

Thank you for correcting what I meant to say.

To clarify the situation I'll just rewind back a little

In an earlier reply Bizmanny posed the question;

"What factors make you believe Continent of Africa is gonna join the likes of China, India and Russia anytime soon. I am interested o know what is going on there apart from South Africa?"

Hence my replies, concluding that there is value in Africa other than SA and some countries have already starting investing there, hence money is flowing into Africa.

With respect to your points, I disagree with your view. I believe the World can cope with a significantly expanding Africa and any other economy providing it is matched with products or productivity growth. Africa will produce oil gas sugar and minerals. This will stifle inflationary pressures on commodities, helping economic trade move along. Subsequently, economic growth in Africa will create demand for other Western products and services, hence more trade. Here we'll have to agree to mutally disagree.

My sincere apologies if I have caused offence. To me this is what makes economics and current affairs so interesting - the challenge of minds and ideals in applying it to the real world.

Kind regards,

 

[TWI]

I am not sure that Africa will be allowed to expand too fast economically, the IMF/World Bank will see to that by keeping economies constrained by interest payments on all those high interest loans that were used to pay defence companies for their weaponary to keep the opposition and povery stricken populace in their place and aerospace companies for the chiefs new plane.
About the closest you get to a social success in Africa, outside of South Africa is probably Botswana and that is still in the dark ages at least it seemed that way last time I was there. Much better to keep Africa economically poor and let the multinationals pillage her mineral wealth, more profit in that than letting the nationalists take some of the western shareholder value away. Best bet is to invest in western companies actively involved in this exploitation.
Eventually I concede Africa will pull itself together and start to resemble the modern South America which through democratic process is now fighting back and indeed forming alliances which rapidly are removing political and economic influence of US and European multinationals.

 

[Atilla]

I am not sure that Africa will be allowed to expand too fast economically, the IMF/World Bank will see to that by keeping economies constrained by interest payments on all those high interest loans that were used to pay defence companies for their weaponary to keep the opposition and povery stricken populace in their place and aerospace companies for the chiefs new plane.
About the closest you get to a social success in Africa, outside of South Africa is probably Botswana and that is still in the dark ages at least it seemed that way last time I was there. Much better to keep Africa economically poor and let the multinationals pillage her mineral wealth, more profit in that than letting the nationalists take some of the western shareholder value away. Best bet is to invest in western companies actively involved in this exploitation.
Eventually I concede Africa will pull itself together and start to resemble the modern South America which through democratic process is now fighting back and indeed forming alliances which rapidly are removing political and economic influence of US and European multinationals.

I agree with your analysis in many ways but would suggest that is the old school theory.

Better to develop the continent and raise consumption and demand hence trade. Good for everybody.

Would Europe be better or worse off if we didn't have the EC?

Explotation is old school and much more difficult to administer in todays environments. Even South Africa had to ditch apartide and look at it now. Much better for it in my opinion.

One only has to look at Afghanistan with the Russians and Iraq with the US & UK. Very difficult to apply your desired regime.

Until we ditch the old school of thought colonial control dominant countries will continue to lose credibility and influence on the international stage.

 

[bizmanny]

I am not sure that Africa will be allowed to expand too fast economically, the IMF/World Bank will see to that by keeping economies constrained by interest payments on all those high interest loans that were used to pay defence companies for their weaponary to keep the opposition and povery stricken populace in their place and aerospace companies for the chiefs new plane.
About the closest you get to a social success in Africa, outside of South Africa is probably Botswana and that is still in the dark ages at least it seemed that way last time I was there. Much better to keep Africa economically poor and let the multinationals pillage her mineral wealth, more profit in that than letting the nationalists take some of the western shareholder value away. Best bet is to invest in western companies actively involved in this exploitation.
Eventually I concede Africa will pull itself together and start to resemble the modern South America which through democratic process is now fighting back and indeed forming alliances which rapidly are removing political and economic influence of US and European multinationals.

I have to disagree with you TWI on this one and at the same time totally agree with Atilla.

What you are suggesting is surest way of losing influence and credibility not only Africa but also to the rest of the world. It will also greatly accelerate influence of India, China, Russia and Brazil in Africa. I have to agree with Atilla on this one that is not way of doing business in this day and age.

It is better to develop Africa for the benefits of Both Africans and investors (multinationals). In this case everybody win. You can see the result of trying to pillaging Africa resources while keeping local poor in Nigeria.

Good example is what BP and Shell encounter everyday in Nigeria. The oil production has been reduced by 25% by sabotage activities.Kidnaping is almost on weekly basis. Sometimes it result in death to the westerners. Also the BP and Shell they have to repair pipelines often because of the sabotage activities by the locals. Add increasing cost of putting extra security and paying ransom.

All this occur because the local people live in abject poverty. Most of these multinationals have realized that and now have started building school, hospitals and employs locals. They are also asking government to spend money (percentage of what they pay in tax) on infrastructure on those areas.This is essential for longterm survival of these companies in region. If multinationals work with African population they will have important ally on their side. Otherwise as Atilla point out stronger alliance will be formed between Africa and China /India/Russia/ South American and try to keep Westerners out.

It is also not good for the image of the multinationals. When people see negative image associate with a company they might decided to boycott the product. Especially when there is evidence of exploitation because consumer is getting smarter. Also because of competition multinationals with better image will have much better chance to win contracts.

Economically and morally it make sense to have better relationship with locals. When they see multinationals are doing something positive to their cause the foreseeable future of multinationals will be much more secure in those areas. What happened when the president who support these multinationals is toppled? You only have to look to Venezuela Bolivia, other south American countries and Russia. Nationalisation is normally adopted and new friendly investors invited. It might be the end of these multinationals on these countries and in come companies from Russia China, Brazil and India.

Few of oil and gas companies in Latin America have been or are in the process of being nationalised Because the locals didn't see the benefits to them. Hence huge support for the nationalistic government in South America.

 

[Atilla]

At the risk of boring you to death I'd like to support the point I have been making by posting this ;

"The lessons learned in the 1930s (but subsequently forgotten by many nations) included a realization that the use of currency as a tactical economic tool invariably causes more problems than it solves.

The situation was summed up well by Cordell Hull, U.S. secretary of state from 1933 through 1944, who wrote:

“Unhampered trade dovetailed with peace; high tariffs, trade barriers, and unfair economic competition, with war... If we could get a freer flow of trade ... so that one country would not be deadly jealous of another and the living standards of all countries might rise, thereby eliminating the economic dissatisfaction that breeds war, we might have a reasonable chance of lasting peace.”

It's very clear that China , Japan and via them other Eastern economies are playing a very dangerous game at this point. In effect they have been buying their economic development using the capital of the West and those same now matronly nations have on the one hand benefited from lower prices and yet have paid a cost in the lower 'REAL' growth they have been able to achieve. In effect we have had to buy growth at the expense of our fixed income groups.
Now you can get away with that when employment numbers look good. However , when you get a cyclic slowdown ,or even worse and the employment numbers stop looking so good you are going to see huge political pressure to sanction the perceived 'enemy' and that is the point I am making. The lessons are there in history to be learned ,but unfortunately humans have the collective attention span of a gnat and are inclined to make the same mistakes over and over again.

It's very much a US - Western point of view. Disagree very strongly with your point of view.

Here is a good read for anyone who is interested in the last 100 years and the US as a super power...

Rogue State: A Guide to the World's Only Superpower by William Blum

PS Some of it is quite disturbing (Torture techniques). An eye opener really.

 

[Atilla]

Attila,
You're thinking with your heart ...don't trade with it !

Thank you for your kind words but I was thinking with my head.

I would say the devil you know is better than the one you don't. Not sure about what Russia or China will be like if they ever get to SuperPower status. However, I do feel we need balance.

Unfortunately, I believe it will take 20 - 30 years to undo the PR fiasco US has led it self into in the middle east. When people stop drinking coke it utlimately hits your bottom line.

Nice to see dollar easing off the £1=$2 mark but is this a retracement before the next big surge?

 

[bizmanny]

The success stories in Africa have been South Africa , Kenya and Morocco. Whilst the first two have had their share of problems all three share one common denominator. They are probably the most politically stable countries in Africa in which to do business

Over 20 years ago my brother set up and ran a blue chip pharm in Kenya. After that it was Morocco and finally Egypt. The bottomline (and it's objective not personal) is this. The markets are very thin (not surprising) and the kind of almost culteral work ethic that makes for stable operations is damned hard to implement. Other than that local customs(for want of a better description) are a constant source of difficulties. Without political stability with all that that implies the aforementioned "difficulties" are barely financially worthwhile except on a exploitation basis which you might think of has colonialism.
Colonialism seems to have a bad taste these days. However , it was a business and as a business there was an exchange , or I should say a potential exchange. In effect colonialism brought the political stability that was necessary for the effective use of resources. When colonialists left political anarchy resumed and forward development virtually ceased.
Am I defending colonialism ? I don't have to , it was just a fact and asa fact it is associated with other facts. These facts are easily identifiable by just crunching financial numbers.
Africa is it's own worst enemy and only education can bring about major change there.

Unfortunately just as in trading education can be painful and lengthy. At this time some African countries might be making relative progress ,but it's very slow. A lot of corporate money could flow in that direction and end up being poured down a hole without any meaningful return because basically they are not ready politically and culturally to make the most of it. Hey , we have the same problem here except the money is not corporate , it's called the social security system !.

I agree with you Africa some of African problems come from within. But also some of its problem can traced to external factors.

Yes colonialism may be did provide political stability because any opposition to the system would have decisively put down by any means neccessary. But i don't think ther was much benefits for indigenous people.Of course colonialism was there as the source of cheap raw materials. No attempt was made to build any infrastructure, manufacturing or processing plants in most countries. After political independence some African countries were doing marginal better until they start to follow IMF and World Bank plans.

Plus most of the vicious wars started because of natural resources, guns and ammunition in exchange of natural resources and some western sponsored military coup.

In 1980s, socialist ideas were abandoned throughout almost the entire continent and capitalism was adopted as the route to development. By 1990, Almost all of the nations of Africa had agreed to follow rigorous IMF restructuring plans. IMF recommendations saw the continent's currencies drop by at least 50%, the selling off of government-owned industries, and the slashing of government spending and massively job losses. After more than twenty years, however, these methods have seen as little success.

Only a handful of African states reached new levels of wealth, and many others became poorer over the course of the 1990s. It was a bit like Russia when they started to follow IMF. Most of essential and important companies were bought by elites few and western companies for peanut. Which did make few people very rich with little benefit to the general population.

While the developed world has insisted that Africa open its markets and eliminate public subsidies, this has been one-sided as the developed world has not opened its markets to agricultural goods from Africa nor has it eliminated agricultural subsidies. At the GATT free trade talks, the African leaders repeatedly request that the developed nations abolish the subsidies they provide their farmers and open their markets to African agricultural goods. It has been argued that the abolition of the subsidy would have following beneficial effects for the developing world and Africa:

The developed nations would produce less food locally, therefore providing a larger export market for developing countries. Food prices would rise without the artificial subsidy and therefore would increase profits for food exports from the developing world. The developing nations could adopt a more balanced agriculture policy, producing food and grain for export; this would provide a surplus that would shield countries from famine.

On the continent future,The few points to consider is Africa will become more important as demand for natural resources intensify To take just one example, the West is keen to tap energy sources outside the volatile Middle East. The Gulf-of-Guinea countries in West Africa. Nigeria, Equatorial Guinea, Sao Tome and Principe, Chad, Cameroon, Gabon, Congo-Brazzaville and Angola--form a region dubbed the New Middle East Gulf because of its immense untapped petroleum resources. The United States has declared African oil a national strategic interest that is predicted to provide 25 per cent of US oil by 2015.

China will increasingly depend on African oil as Middle East and South America oil is still dominated by US. India is forecast it will importing almost 87% of its oil in the next 2 decades. Both of these countries will be on the lookout for all sort of natural resources to cope with their expanding economy. Where best to look than the least explored continent.

I can see in the next 20 years or so Africa will become strategically important to the world because of the above factors. Which might help the continent to become stable. After all, the middle east itself was on almost on the same Level as Africa recently as the 1960s, when few could imagine the importance it would attain over the next 30 years.

 

[Atilla]

I agree with you Africa some of African problems come from within. But also some of its problem can traced to external factors.

Yes colonialism may be did provide political stability because any opposition to the system would have decisively put down by any means neccessary. But i don't think ther was much benefits for indigenous people.Of course colonialism was there as the source of cheap raw materials. No attempt was made to build any infrastructure, manufacturing or processing plants in most countries. After political independence some African countries were doing marginal better until they start to follow IMF and World Bank plans.

Bizmanny, I agree with this article and your previous comments whole heartedly.

I also think the war in Afganistan had three objectives. 1. Get even with Osama Bin Laden. 2. Put a claim to rich oil and gas resourcers around the Caspian and have some influence in the area. 3. Sorround Iran with a potential to attack from the rear. I suspect the anticipated attack on Suriye and Iran has now been shelved as Iraq the weakest of them has been too much to digest.

It's all gone horribly wrong as we see it unfold ( 600,000 dead people for what? ). Last year the Chineese and Russians carried out joint exercises to send a signal to the US that Asia is their back yard.

As you point out the rush for resources is creating these attempts. A broad picture is essentially the US relying on force and the Chineese on good relations, investment and economic influence. Hence the failings of the US and the rise of Chineese influence in Latin America and Africa.

Coming back to economics - the broad trend in a macro view - the fall in the $ is ultimately a sign of weakness in the actions & the economy and the likewise the rise of the yuan sign of strength in the actions & eocnomy of the Chineese.

You really to have your finger on the pulse and think you should write a paper and submit it to the US Congress so they can reflect on opportunities missed in action.

 

[dcraig1]

Central America , Chavez , he's going to abolish the current rules for El Presidente and create a lifetime rule and the people will buy it ...now that's magic , no longer wil the gringo screw them they'll get to be screwed by one of there own and they'll actually like it ..for a little while anyway.

No he's not going to unilaterally abolish the present rules. If it happens, it will be by referendum to allow presidents to hold office for more terms than currently allowed. It's called democracy. And quite frankly this is the business of the people of Venezuela and nobody else.

Those large numbers of people that never had access to health care and education but now do are really getting screwed aren't they ? I'm waiting to hear how this would have happened without Chavez and his Bolivarian revolution.

The DJ Venezuela Index is up 58% YTD. Doesn't look like a flight of capital to me.

http://www.djindexes.com/mdsidx/?event=showTotalMarket

 

[Atilla]

Ok , I think I see the problem now ...it's that heart stuff again ...you two are talking about a world that you would like to see , a world that you would like to live in where people's first desire was to treat with each other equitably etc etc.

I'm talking about the world that we actually have .Always have had , a world where people defend their interests first and consider the interests of others on a secondary basis. Doesn't sound nice does it ,but when you separate out all the fluff that distinguishes what people say and what people do then that is what you are left with alongside a bunch of hypocrites who would prefer to hide their intentions.
In your world the guy in the UK stops driving his car so the guy in Zimbab ok lets pick an easier one to spell , Ghana , get's to work in a factory powered by the oil the UK guy did not use etc etc .

Look through history since mankind got up on two legs the strongest of it's kind has been taking itself into the territory belonging to the 'weaker' of it's kind and basically taking what is there and allocating it along the lines suggested above , first and second (even a very poor second). Along the way in the fullness of time territories and differences have blurred and the 'weaker' that didn't actually perish got dragged on and 'up' for want of a better description. It's called evolution , but it's slow , it takes time and it takes cooperation. Being will ing to take a smaller slice until you become strong enough to take a bigger slice , see .
The Romans did it
The Greeks did it
The Babylon....s did it
Big leap forward ....Attila did it ,but not very well that's the problem with doing it on horseback
The Spanish did it
The French did it
The Italian did it
The Russians did it
The Japanese (bless 'em) would have liked to have did it ,but their little legs were not quite long enough.
The English did it ,but we forgive them for giving us a universal language that makes absolutely no logical sense at all (Bow & Bough). Problem with exploiting in English is you don't know whether you're being asked to bend over and or go get the firewood.
Finally the US did it and we all hate them for doing it right now while we are alive to see it albeit we are all still tucking in to the benefits that our nations reaped when they did it alongside picking up our crumbs that have fallen off the US table

Look save me from this hypocrisy. If you're not personally willing to empty your bank account ,stop driving your gas guzzler , give up your time to rush over to the nearest destitute country then at least be honest and acknowledge what makes the world go around and the benefits you enjoy from that right now.

The African countries will get their bite of the cherry just as soon as their turn in the pecking order arises. They can help themselves massively by making themselves more effectively exploitable..stop shooting each other ,stop electing govt's that are both venal and stupid and do what we do and elect govt's that are venal and smart enough to understand that the parasite that kills the host is also a dead parasite. When an African country looks juicy enough to cooperate in the exploitation and development process they'll have to fight the money off with a stick. That's the bottomline , African countries have not yet figured out how to make themselves look juicy enough.

Central America , Chavez , he's going to abolish the current rules for El Presidente and create a lifetime rule and the people will buy it ...now that's magic , no longer wil the gringo screw them they'll get to be screwed by one of there own and they'll actually like it ..for a little while anyway.

Sounds like you should get off your high horse dude?

You have a chip on your shoulder or something?

We are discussing geopolitical economic scenarios and thank you for your history lesson?

So what is your prediction for the $?

Are we likely to see interest or tax rises?

Will there be a soft or hard landing?

Coming back to the thread - what will be the impact on the $ and the Yuan?

 

[dcraig1]

"The DJ Venezuela Index is up 58% YTD"...you have an habit of looking at what has happened right behind you and jumping to the conclusion that this is an happy ending. If history was so kind then 50% of the worlds wealth would not be in the hands of 2% of it's population.

I did not forecast what was going to happen. My point is that the polices the government in Venezuela which are well known and of some years standing are not generating a flight of capital as evidenced by stock prices.

In any case the well being of the majority of the population has been significantly improved by the policies of the current government. A fact that some would like to ignore.

 

[Atilla]

I did not forecast what was going to happen. My point is that the polices the government in Venezuela which are well known and of some years standing are not generating a flight of capital as evidenced by stock prices.

In any case the well being of the majority of the population has been significantly improved by the policies of the current government. A fact that some would like to ignore.

That sounds like a fact to me as quoted by dcraig1 - "The DJ Venezuela Index is up 58% YTD"

You chump have a habit of not answering questions and going off in tangents if you don't mind me saying so?

Did I not ask the right questions? How stupid of me?

 

[dcraig1]

I'm well aware that facts could change tomorrow. Some event could trigger a 3K fall in the DOW - certainly possible. Any number of 10 Sigma events or 2 Sigma events over a longer period could well change things.

And no doubt excess liquidity is a factor but ...

My original points are still valid

1. Many many people are much better off now in Venezeula due to Chavez than they would have been under any alternative government. If you had no access to health care previously and now you do, then that is an immeasurable improvement. Likewise education. Tell these people about ill defined forecasts of doom sometime in the future because their country chose to hold American empire at arms length.

2. Chavez is proceeding though democratic means. Tough if you don't like it - it's not your business.

3. There is no evidence of impending economic disaster - sure there are plenty of economic problems, but whether they would be any less under an alternative government is a moot point. Liquidity or not, if there was a perception of impending expropriation of private property on a large scale, private capital wouldn't touch the stock market with a barge pole.

 

[Atilla]

The point I was making when you say I don't ask the right question for you to deem worthy to reply to is that you are patronising me. So I thought I play along with your thoughts which you have indicated.

However, I'm still in the dark as to what are the right questions to ask?

 

[chump]

"However, I'm still in the dark as to what are the right questions to ask?"

Yes, you are ,but if I told you what you are in the dark about wouldn't that be "patronising" . Would I not in effect be saying , I must do this guys thinking for him ,as opposed to you thinking about these questions for yourself ?

Look no offence , but I've seen dozens of threads like this just wind down into personal exchanges and the like and I'm not interested in being aboard another so I'm just going to leave you guys to it. It's why I don't bother posting much anymore.
Best wishes.

 

[counter_violent]

Atilla / dcraig1 / bizmanny,

The big question here is this. Will you be investing in Africa and Venezuela?

C V

 

[bizmanny]

Bizmanny, I agree with this article and your previous comments whole heartedly.

I also think the war in Afganistan had three objectives. 1. Get even with Osama Bin Laden. 2. Put a claim to rich oil and gas resourcers around the Caspian and have some influence in the area. 3. Sorround Iran with a potential to attack from the rear. I suspect the anticipated attack on Suriye and Iran has now been shelved as Iraq the weakest of them has been too much to digest.

It's all gone horribly wrong as we see it unfold ( 600,000 dead people for what? ). Last year the Chineese and Russians carried out joint exercises to send a signal to the US that Asia is their back yard.

I thought the planning for peace was very poor. If you gonna dismiss the entire army over 500,00 men and whole government and it's department. You better have replacement ready. Otherwise absolutely chaos is invertible. The final bill for US taxpayers is estimated to reach 1trillion dollar. Over 3000 US soldiers dead. A lot of Iraqis dead and displaced (refugees).
I hear you can die in Iraq by being Shia, Sunni, Kurd, Doctors, teacher, proffesor, living in the wrong neighbourhood. People without job, plenty of guns, old score to settle, unhelpful neighbours, twisted ideology and fundamentalists from all over the world mixing all these together the result wouldn't pleasant. Anyway that is for another topic.

As you point out the rush for resources is creating these attempts. A broad picture is essentially the US relying on force and the Chineese on good relations, investment and economic influence. Hence the failings of the US and the rise of Chineese influence in Latin America and Africa.

I can definitely see tension rises between US and China This is inevitable as China must find new sources oil and others resources to sustain its economy in the long run. I see China as scavengers looking for resources which are still available wherever they are. The truth is US and Europe have already taken up the best oil suppliers in the world. Hence China will do deal with regime like Sudan,Iran and countries which have poor relationship with US and Europe including US backyard Latin America. I think what is needed is US, Europe, China and India to work together and put a lot of effort to try to find alternative to Oil.

Having said that China will still need US and Europe to sustains its economic growth for a long time to come. An average income in China was $1100 in 2004. So its for China Interest to see strong and prosperous US and Europe for foreseeable future. That make it essential for all parties to work together.

Coming back to economics - the broad trend in a macro view - the fall in the $ is ultimately a sign of weakness in the actions & the economy and the likewise the rise of the yuan sign of strength in the actions & eocnomy of the Chineese.

I agree with your analysis.

You really to have your finger on the pulse and think you should write a paper and submit it to the US Congress so they can reflect on opportunities missed in action.

Thanks for the compliments. As for writing writing paper to Congress! . On the serious note I enjoy reading your posts as well i just find that your are well informed even if sometimes we disagree. In fact the whole thread and contributions of everybody so far has been very interesting. Different point of views is what make any discussion much more interesting.

 

[bizmanny]

Atilla / dcraig1 / bizmanny,

The big question here is this. Will you be investing in Africa and Venezuela?

C V

C V,

You could have ask the same question about India, China, Russia, and many eastern Europe countries as early 10 years ago. China, US, India and Europe companies are increasingly investing in Africa. The biggest investor in Venezuala is still US companies.

 

[bizmanny]

Hey guys, let's try to discuss issues not personal exchanges. All different views are ok as long as there is no personal attacks.

 

[Atilla]

Atilla / dcraig1 / bizmanny,

The big question here is this. Will you be investing in Africa and Venezuela?

C V

I will follow developements and invest in companies in one form or another and use these as inputs in reaching decisions to make informed investment decisions.

China has invested billions and India has doubled it's investment in the last year.

If I was decision maker in US or Europe as I have outlined before I would be warming relations and investing in these countries (er... that's not overthrowing or undermining there governments)

Why is it such a BIG question whether "I" invest in these countries. I don't think I'm that important really. In chasing masquitos you may get sat on by an elephant. Think SMALL questions and you may understand it a little more.

I think we should move away from the "YOU's" and discuss non-personnel current events and our views on them how they reflect investment decisions. This is afterall a trading website.