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Morning Notes For November 11th 2010 at Trader’s Narrative

Morning Notes For November 11th 2010

The following is a guest post by a buy-side analyst working in a US asset management firm. The author’s comments are in italics. I welcome your feedback in the comments:

  • A Gold Standard, which can prompt brutal economic adjustments and exacerbate inflationary/deflationary forces via accelerated capital flows, is incompatible with the demands of modern economies, most critically a fractional reserve banking system and open capital accounts. – Roubini Global Economics – most would agree that the gold standard exacerbated the great depression by handcuffing monetary policy.
  • Greenspan oped – says China is continuing to suppress its currency while at the same time the US is pursuing a policy of currency weakening. The twin weakening of both the yuan and the dollar is causing a firming of exchange rates in the rest of the world. Greenspan says “we should discourage reserve accumulation whose sole purpose is to suppress exchange rates”. Greenspan calls on the IMF to initiate a set of rules that limit the accumulation of reserve assets and sterilize capital inflows. FT
  • President Barack Obama asked G20 leaders to shift global demand away from US consumption and borrowing and called for market determination of exchange rates to reverse undervaluation, but analysts remain skeptical as to what can be achieved at the November 11-12 G20 Summit. – Roubini Global Economics – the old model of building an efficient manufacturing base, which exports goods to US consumers is probably unsustainable. Countries that relied on that model for growth will likely be disappointed and are better off shifting ‘global demand away from US consumption.’
  • Stephen Roach, Morgan Stanley’s non-executive Asia chairman, said Asian cur¬rencies will strengthen and U.S. jobless benefits should be expanded. – Bloomberg
  • Deutsche Bank CEO Josef Ackermann said quantitative easing is the right approach for the US, which has limited tools to stimulate its economy. – Bloomberg
  • Francesco Garzarelli, chief interest-rate strategist at Goldman Sachs in London, said a bailout of Ireland and Portugal through the European Financial Stability Facility would resolve current market tension and not lead to contagion. – Bloomberg – Irish sovereign debt continues to sell off, resulting in a spike in yields and, thus, borrowing costs.

Ten Year Ireland Sovereign Debt Yields
ireland sovereign debt 10 year Nov 2010

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One Response to “Morning Notes For November 11th 2010”  

  1. 1 LetUsHavePeace

    Here are the most important rules for ridiculing even the idea of a Gold Standard:

    (1) In all cases, limit your discussion to the period following the Great War when no country other than the United States had restored its promise to holders of paper currency that their cash could be redeemed for gold at the legal tender exchange rate.

    (2) Do not refer to Article I Section 8 of the Constitution of the United States of America; no mention should ever be made of the essential Constitutional right created by those provisions and restored by President Grant’s signing of the Redemption Act - the right of holders of legal tender currency to demand that paper be swapped for gold at a fixed standard that only Congress and the President could alter by legislation

    (3) Always attribute the ruins of the 1920s and 1930s to the ravages of “the brutal economic adjustments and inflationary/deflationary forces that resulted from accelerated capital flows”; never mention the hideous destruction of savings. lives and incomes from World War I itself and the terrible influenza pandemic that the war created. Under no circumstances mention that the destruction of that Great War was only made possible by the repudiation of the right of holders of marks, francs, and pounds to demand gold from their national banks and treasury and the use of mass propaganda by all governments including the United States to equate a demand for specie with treason.

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