Where is the safest place to ride out recession?

[allhatnocattle.livejournal.com]

First some facts...

China has dumped (sold) 97% of short term US dollars (Treasury debt) as the American future looks ever the more bleak.

China is the largest foreign creditor to the United States, holding more than $1 trillion (26.1% of foriegn ownership) in Treasury debt as of March. Which is nothing really as USA politicians are attempting to curb a deficit which is projected to reach $1.4 trillion this fiscal year.


(Just for comparison, Japan holds/held $907 billion, UK $325 billion, Switzerland $111 billion, Canada $93 billion, India $39.8 billion, Israel $18.3 billion in U.S. Treasuries Securities as of March.) If you look at those numbers from treasury.gov China has been steadily holding less and less US treasury since Oct 2010!!!

And as China sells US debt, what China is buying is gold ($1530/ounce on Thursday!!!). But China is world's largest producer of gold, mining 351 metric tons in 2010 followed by Australia, USA and Russia. So trading USD for gold is one thing. I would argue the real investment is in commodities that China doesn't have in great abundance (it certainly doesn't have much immigration, if people are a resource) like energy.

However the great energy exporters, Saudi Arabia and Canada, are not exporting to China in the quantities they could. For the most part it doesn't even go to whomever is paying the top dollar. Oil is sold through long term commitments. Saudi only sells 9.4% of it's petroleum to China and Saudi exports seem to be in a bit of a decline (peak oil?). (Nearly) all Canada's pipelines run south to the USA, although that could change in next few years hampered only by aboriginal and environmental objections.

New untapped oil reserves are few and limited. It looks promising in Afghanistan (possibly 1.5 billion barrels), Israel (possibly 260 billion barrels), and USA/Canada (North Dakota/Saskachewan with possibly 3.0 to 4.3 billion barrels)

China's 5 year plan is focussed on non-fossil fuel/renewable energy. If it works, and China has been very good at achieving it's goals, it will no doubt change the global dynamics.

The world is changing faster then ever. If USA defaults we`re told we are all screwed. If USA survives this year, there`s always next year or the year after to worry about. It`s make the 2008 mortgage crisis that sunk many banks and economies seem petty. Well supposedly. I`m not so sure but I gotta give some heed to the experts.

So where to ride out the coming recession/depression? Europe is an economic powderkeg bursting first in Iceland (not really Europe) to Greece, and seems to be extremely volitile. Africa is still a political/social mess. The Middle East has shown us how vulnerable it was under the supposed stability of dictatorships. Australia (like Canada) seems to have a whole lot of natural resources. I'm not sure what's going on in South America. Asia seems to have been emerging strong for a long time. Japan has ebbed and flowed a few times. India proceeds slow and steady. China won't have us as anything but toursts.

I'm very confident in Canada, especially Alberta. We have been boom or bust throughout our history but it's been boom time for quite a while. Energy is our chief export and high oil prices have been our golden egg. But unlike Saudi Arabia all of our eggs are not in one basket. We have rode out the last few market crashes remarkably well. I think if/when USA defaults we'll still keep our head.

Comments

[mrbogey.livejournal.com]

Someone should cut a Downfall parody with Hitler finding out about China dumping the debt.

[yahvah.livejournal.com]

diversify

[allhatnocattle.livejournal.com]

?

[allhatnocattle.livejournal.com]

No where to go but up?

[allhatnocattle.livejournal.com]

How's that? Nothing to buy?

[rick-day.livejournal.com]

I understand the dirt there is quite palpable if one is hungry enough.

[awdrey-gore.livejournal.com]

Well, yeah, it's palpable. But can you eat it?

[existentme.livejournal.com]

Well yes, of course, if you're a zombie, it is both palpable and palatable, infused as it is with Iraqi flesh.

[underlankers.livejournal.com]

Madagascar is the most isolated place on the planet. I for one welcome our new Madagascan overlords.....

[allhatnocattle.livejournal.com]

I hear it's better in Bermuda.

[airiefairie.livejournal.com]

It didn't look too isolated to me. =)
Except for Nosy Be island...

[fizzyland.livejournal.com]

Either a Chinese restaurant or my fortified Y2K bunker.

[underlankers.livejournal.com]

Nowhere. That's the shadow-side of the globalized economy. Welcome to the 21st Century.

[allhatnocattle.livejournal.com]

In the future, all restraunts will be taco bell.

[eracerhead.livejournal.com]

Agreed. I intend to ride it out in my armchair with a nice cigar and some cognac. If we actually are on the Titanic, we might as well chill out since everyone is in the same boat.

Meanwhile over the past three years I've diversified my 401K to include stocks on every major global exchange.

[malakh-abaddon.livejournal.com]

I have a nice coal mine in the backwoods of West Virginia, fully stocked with food, water, guns and bullets. I even have a generator keeping it a balmy 50 degrees, several thousand gallons of gas and fuel, and lots of bullets for that SKS Rifle.

Anyone looking to sell a good 1911a1, I need a 45 to go with the 9mm and .357 revolver.

[allhatnocattle.livejournal.com]

Sorry to hear about your small penis. I hear having a pitbull helps.

[rasilio.livejournal.com]

I'm not sure I want to know why you think Pitbulls make your penis get bigger.

[squidb0i.livejournal.com]

lol, win

[anfalicious.livejournal.com]

Ask their owners, that's where the perception comes from :P

[anfalicious.livejournal.com]

I think guns are pretty sensible equipment for one setting up a post-apocalyptic wasteland sanctuary. I know I'll be getting guns once I have somewhere safe to store them.

[kylinrouge.livejournal.com]

Germany.

[allhatnocattle.livejournal.com]

Germany has shown unprecedented resiliance. But it should have listened to James Dean's dad in Rebel without a Cause when he said, "choose your friends, don't let friends choose you" for I would think Germany will follow it's associates down the road to ruin.

I think EU should resolve to kick out members not holding up to certain standards. That's the only way such an association will work. Portugal, Italy, Ireland, Greece, Spain should all be quietly escorted to the door.

[peamasii.livejournal.com]

They can't kick them out, because the EU banks hold their debt. They don't want the PIGS to default on the debt. Have to keep them in the game.

[dwer.livejournal.com]

Here, after the debt ceiling is properly raised.

[allhatnocattle.livejournal.com]

For how long? When the new and improved debt ceiling is reached, what then? How long before this new ceiling is reached? The US debt ceiling is $US 5.95 TRILLION, set on August 5, 1997. So 14 years ago. So maybe another 14 years but it will likely be reached alot sooner then that.

This is an awesome (supposedly live) breakdown view of various American debts (http://www.usdebtclock.org/) What happens when USA engages in another expensive war or even a humanitarian disaster relief mission? A nuclear meltdown, a volcano eruption, or even the collapse of water infrastructure would not only cripple effected geography but tie up all the new money printed forever. But it's simpler prediction then some what-if's...

The reason I started off my post about China dumping American debt is to show that major investment has already lost confidence. More then the expense of a war, nat.disaster, terrorism... loosing investment will kill the American economy very quickly.

Why should the world invest in USA? Resource production is down, manufacturing is down, purchasing is down, exports are down, so what have you got left to give us confidence that USA is a great investment?

[dwer.livejournal.com]

Innovation is something we're still pretty good at. And without raising the debt ceiling, confidence will be utterly lost.

[allhatnocattle.livejournal.com]

True and true.

But let`s be fair. Confidence is already lost, otherwise the USD would be stronger.

I always say USA's best asset is marketing (in a very broad sense). Not just touting what's good and great, but turning a falsehood into something believed. That's Hollywood, that's broadway, that's fifth avenue, wallstreet, and Washington DC summed up in a nutshell.

I'd also say that creative financing (banking/investing) is along those lines of America's marketing genius. What bought us the dot com bust, the S&L collapse and the mortgage crunch was perfect salesmanship of faulty products.

USA has been great at telling us that the Euro is a bad currency of trade and the world should stick with USD for translations of world trade. OPEC really would like to move to the Euro. Lately Russia has been suggesting a global standard currency backed by gold (http://www.nytimes.com/2011/07/08/business/global/russia-sells-gold-as-world-prices-rise.html), which again USA says is a bad idea. Why? Because USA couldn't pay to play.

[dwer.livejournal.com]

I don't disagree with any of this.

[eracerhead.livejournal.com]

The alternative to raising the debt ceiling is raising revenue to cover it. We all know what that means.

[squidb0i.livejournal.com]

KOMMUNIZMZ!

[johnny9fingers.livejournal.com]

I recall having a discussion on this matter in a thread in a post now alas long gone.

Good post.

[peamasii.livejournal.com]

BRIC countries (+emerging markets), commodities, metals

[mikeyxw.livejournal.com]

I don't see why you would rule out the US or our suburb Canada. There is still a great deal of confidence in the US, as the 10 year T-Bill prices indicate. The current debt load is sustainable, it's the year to year deficits that need fixing, which isn't something that is impossible.

That said, it's certainly possible to relocate to China... I've done it.

[anfalicious.livejournal.com]

I've got several friends who have done it for various amounts of time, and my dad lived in Shanghai for four years, so I know heaps of Westerners who live there through him.

[eracerhead.livejournal.com]

I don't think it a lack of confidence. China is just diversifying its portfolio. If China has sold US securities at a loss, then it is their loss.

All of this will come to a head when the US public finally realizes that we just don't have and will never have enough income to support our own infrastructure unless taxes are raised at least to the equivalent of other developed nations.

[allhatnocattle.livejournal.com]

Diversifying is one thing. China cutting back 97% of all short term US treasury investments says something else. That's not just covering all the angles. That's certainly saying that they've lost 97% of their confidence in USA... at least short term. Long term they've lost only marginal confidence... and yeah maybe that's diversifying.

Google keywords US, optimism (http://www.google.ca/search?q=us+optimism+polls&rls=com.microsoft:en-ca:IE-SearchBox&ie=UTF-8&oe=UTF-8&sourceid=ie7&rlz=1I7ACEW_enCA344CA344&redir_esc=&ei=JmMaToiSG4XkiALmosDRBQ#q=us+optimism+polls&rls=com.microsoft:en-ca:IE-SearchBox&oe=UTF-8&rlz=1I7ACEW_enCA344CA344&redir_esc=&um=1&ie=UTF-8&tbo=u&tbm=nws&source=og&sa=N&hl=en&tab=wn&bav=on.2,or.r_gc.r_pw.&fp=a800f4f5eb0c1ef2&biw=1366&bih=663) and see that there's not a lot of confidence in USA even domestically.

My investments are in skills, gardening tools, firearms, long-store food.

[squidb0i.livejournal.com]

Also, vintage synthesizers.
Anyone want to buy an SCI Prophet 10?

Re: My investments are in skills, gardening tools, firearms, long-store food.

[anfalicious.livejournal.com]

I. Just. Don't. Have. The. Space.

The main reason I'm looking at buying property is so I can put a shed on it for my instruments and books. I don't have a synth collection, just a Casio CZ1000 (with some random modulator) and a Roland MC505, but they're really just toys from when I was a kid (I've only learnt to play piano this year). Guitars and guitar like instruments, however... There's a dozen in this house as it is (and a few more in storage).

It's a huge old beast for sure.

[squidb0i.livejournal.com]

Sounds like fun, best of luck with your music. =]

[nevermind6794.livejournal.com]

Australia is doing pretty well selling various mined products to China.

[sealwhiskers.livejournal.com]

Sweden's economy is pretty solid. They recovered from the crisis in the 90's and learned from it, thus being able to have slow growth now, in the midst of chaos.

[anfalicious.livejournal.com]

Australia has really diversified mineral exports, we're amongst the largest exporters of coal, bauxite, iron ore, gold and uranium to just name a few. This means we can ride out crashes in one market. If all mining fails we're also one of the world's largest cotton, rice, wheat, beef, wool and lamb exporters (again, just to name a few).

The big problem here at the moment is the rush to buy the second strongest currency in the world. The dollar went from $0.65c to $0.92c in ten months in 2009. It's currently up over $1.05. This has the effect of making overseas stuff cheap here (destroying local manufacturing) and making our stuff overseas expensive (ie non-competitive). In addition, the amount of labour the mining industry is pulling out of the cities to power the boom is having some serious knock on effects in the economy. Firstly, it's almost impossible to get trades people now, everyone who worked with their hands has gone North. Those you can find charge ridiculous amounts (trades generally charge over $100 an hour for labour now). Secondly, because large parts of the country are earning stupid dollars (seriously, wages in the mines are 4-10 times what you can earn in the city), this is inflating the economy. This has the effect of devaluing the wages that people are earning, further increasing the problem. The big buzz here is around how we deal with our "two speed economy".

There's a reason Donald Horne called this the "Lucky Country"; he didn't mean lucky as in we are awesome, but lucky as in "woah, we just fell over arse backwards into a pot of money, what do we do???"

Our problems for the future are going to be a) where is the water going to come from? and b) will we have spent the money now to develop a post-boom economy, or are we going to do an Argentina and become a banana republic. Luckily, we've been extremely well governed for the last 30 years (economically), which I think is a result of having left wing governments during the fiercest days of Thatcher/Reaganism; I think our deregulation was done far better than it was in the UK or the US, followed by a government that whilst morally reprehensible, did the major reform that was left to do (a GST) and saved a bunch of that mining boom cash so we had reserves to get through the GFC.

[allhatnocattle.livejournal.com]

Sounds much like Canada.

Australian mining companies have been investing here more and more. We're the among the largest producer of everything from asbestos to zinc. But the real money is in oil.

Yeah, $100/hr is pretty average for a tradesman. I'm a plumber. Of course I could make alot more money faster if I went up north to wor in a camp. It's a lure that's hard to resist, but be careful of both the gonorrhea and delirium tremens. With so much money made so fast, and so easy, people who work up there usually get a case of one or the other. But I hear the pawn shops have real nice toys... ferrari's and boats.

Yeah our CDN$ has been hovering around par with USA for a few years now (5yr?) and while going to USA is now cheap, the bad side is they're not visiting as much. Buy American is cheap, but makes buying Canadian more expensive. Etc.