[MrBill]

$this->bbcode_second_pass_quote('MOCKBA', '')$this->bbcode_second_pass_quote('MrBill', '
')I like coal and railways, too. That is why I bought Consol when it was looking cheap back in August.

[patience]

MrBill,
I copied my post-question below from the Housing Collapse thread, thinking it may fit better here.

QUOTE:

"Armageddon,
What does the M3 tell us? I ask because I've read a lot of conflicting ideas about it, regarding the relative impacts of M3 as it is measured not including the effect of "shadow banking credit".

The credit, or loan-created-money, is said to overwhelm the M3 in size, and thus makes M3 less useful as an currency valuing tool.

So, what can I infer from M3 going up? I SEE prices going up on about everything I buy, but I'm told that the ongoing credit contraction is deflationary, in re: overall money supply, of cash + credit.

I'm just trying to figure out indicators for what to expect next. Am I seeing govt attempts to reinflate the bubble, and that effort being deflated away, thus housing can't be fixed that way--and at the same time, supply/demand issues cause other goods to go up in price? The Dollar Index is still hovering around 76. WTH?"

What's your take on this?

[setag]

Good question, Mr. patience. Are you trying to anticipate inflation vs. deflation?

[heroineworshipper]

Housing was deflationary in the past, taking money out of foreign economies & putting it in mortgages. Then foreigners stopped lending us money because dollars were falling too fast. Now the money supply is being increased to make up for the loss of foreign investment.

[pogoliamo]

Iranial Oil Bourse Starts Trading

[patience]

Setag,
Yep. I see that the FED has begun to contract money supply.

http//www.garynorth.com/public/3118.cfm

And, we have huge credit contraction, with all the IB mess, failing CDO's, bank failures beginning, credit cards and HELOCs being capped, et al.

At the same time I see my retail costs high, and business costs for imports (machine shop tools) going up. Is this overshoot of inflationary pressures past? Commodities are running up, at least grain is, and the steel I buy is still high--up 30% wholesale compared to last Fall. Commodities are fickle, and probably headed for a bust. I think.

So, how to hedge the future? Depends on your thesis. I'm trying to figure out business decisions, to stock up now, or wait for a drop. Home building material prices are flat to down a bit, I've read, and retail is dead for me at the moment, so won't steel and hardware follow it all down shortly? They don't, always, but if this is a major bust, they will.

All leading indicators for retail seem to be headed for the drain, if you look at J69 and available credit. Am I missing something that says inflation/expansion to come? M3 isn't enough to tell me that, right?

[RdSnt]

What do you manufacture?
I would suggest adding another perspective to your decision making. How local is your client base? I would say you should start looking at shrinking it.
What kind of service work do you do?
How about considering relying on re-cycled metals for a part of your work?
Consider your areas of expertise and compare that to what your community may need. As conditions get worse and the ability to buy new is reduced, there is going to be a rapidly growing need to maintain and repair everything. As supply lines shorten, where are you going to get your supplies? Can you maintain your own equipment? Are you in a position to take over other local shops that fail?
This would be a prudent way to gather an inventory of equipment, plus add additional expertise to your staff.

$this->bbcode_second_pass_quote('patience', 'S')etag,
Yep. I see that the FED has begun to contract money supply.

http//www.garynorth.com/public/3118.cfm

And, we have huge credit contraction, with all the IB mess, failing CDO's, bank failures beginning, credit cards and HELOCs being capped, et al.

At the same time I see my retail costs high, and business costs for imports (machine shop tools) going up. Is this overshoot of inflationary pressures past? Commodities are running up, at least grain is, and the steel I buy is still high--up 30% wholesale compared to last Fall. Commodities are fickle, and probably headed for a bust. I think.

So, how to hedge the future? Depends on your thesis. I'm trying to figure out business decisions, to stock up now, or wait for a drop. Home building material prices are flat to down a bit, I've read, and retail is dead for me at the moment, so won't steel and hardware follow it all down shortly? They don't, always, but if this is a major bust, they will.

All leading indicators for retail seem to be headed for the drain, if you look at J69 and available credit. Am I missing something that says inflation/expansion to come? M3 isn't enough to tell me that, right?

[patience]

RdSnt,
Right on! We are going exactly that direction!

We have a small farm repair shop, 100% solvent, and strictly a family business, 3 of us. We don't manufacture anything in the traditional sense. We use all the recycled materials possible, and indeed we are in the business of "recycling" farm equipment that without repairs, be destined for scrap.

We do welding, machining, light sheet metal work, and a small amount of mechanics and electrical. About half of our steel comes from the scrap yard, or pre-scrap yard. We keep about a year's worth of supplies and materials on hand. More than that in steel and some consumables, but are limited to about 4 to 6 mo's. supply of welding gases.

Toward future problems, we have a complete blacksmith shop of the traditional kind, and about 3 to 5 years worth of coal for the forge on hand. If I can't get conventional welding supplies, I can do it in the forge, with more labor, but I CAN do it. This is a heavily forested area, and I can also use wood charcoal in the forge. We have crank operated drill press, grinder, forge blower, foot powered sheet metal shear, lever shear, hand operated 20 and 50 ton presses. Enough hand tools to make most anything small of wood (used to restore antique furniture) and plastics. Have enough solar electric that some could be diverted for small machine work. We make our own machine repair parts, gears and all. Crucial cutting tools are stored in great depth, and in worst case, can be forged of salvage materials.

Our client base is all local, farmers, loggers, sawmills, individuals, and some for the city (county seat of 5,000). Most other local machine shops are auto industry based, and going bankrupt. We attend their auctions and buy tools and supplies for 10% to 20% of new price. Most of their equipment we don't need, but it goes cheaper as time goes on. The CNC stuff often doesn't get a bid.

We don't plan to expand at all. That decision is based on the outrageous red tape and high cost of employees. The market isn't that big anyway.

We recently did some restoration parts for a local historic grist mill, and quoted a centrifuge for recycling used motor oil. Everyday business is often buidling farm stuff to replace the crappy commercial stuff--feeders, gates, hay equipment, etc.

I've done aluminum casting, and made replacements for rare parts, but cast iron is not feasible for us, without changes in environmental laws. Brass/bronze, lead, zinc and Babbitt we can do.

What we do is whatever the "conventional " shops say can't be done, or isn't feasible. Not a lot of money in it, but it's a living, and more sustainable than many things.

My background is in auto plants, production machining and automation design and build, with some electrical, machine controls, etc. Been thinking about a sustainable life since the first OPEC oil embargo, and working toward it. We have farmed and logged with horses, and now have a lot of Amish customers.

We're on the same page, for sure!

[patience]

RdSnt,
Your avatar is a Lister, right? Or "Listeroid?
Jerry

[RdSnt]

Wow, you very much sound on the same track as myself, although I don't have a shop meant for customers. I'm very much an old fashioned, bailing wire type of machinist/fabricator/welder/.......etc.

The avatar is a Listeriod, but I should switch it for the one I actually have. A Lister/Blackstone mid 50's, 1800lbs of pure diesel. I love it and it's hooked to a 10kw generator. It's the last internal combustion engine I'm willing to buy. I'm after a stationary steam engine next. External combustion is the way to go and I have experience with the engines and boilers. I just haven't found the right engine yet, somewhere in the 5-8 hp range for my shop. Smaller stationary engines just weren't all that plentiful here in Ontario.

$this->bbcode_second_pass_quote('patience', 'R')dSnt,
Your avatar is a Lister, right? Or "Listeroid?
Jerry

[seahorse2]

Now Russia starting to move its oil trading out of dollars to the ruble. Slow process, but the trickle has started.

I found this quote from Greenspan interesting:

$this->bbcode_second_pass_quote('', 'G')reenspan comments on oil

Alan Greenspan, the former Federal Reserve chairman, said Monday that high inflation in Gulf states would fall "significantly" if the oil producers drop their dollar pegs, Reuters reported from Jeddah, Saudi Arabia.

[LoneSnark]

The dollar has already become rediculously cheap. We know this because imports are slowing and exports are booming, so further substantially devaluation is unlikely regardless of whatever russia or the gulf states do.

[Micki]

$this->bbcode_second_pass_quote('', 'T')he dollar has already become rediculously cheap. We know this because imports are slowing and exports are booming, so further substantially devaluation is unlikely regardless of whatever russia or the gulf states do.

[Micki]

Let's re-visit the CIA page again.
I love this one.

Rank Country Current account balance
1 China $ 363,300,000,000
4 Saudi Arabia $ 88,890,000,000
5 Russia $ 74,000,000,000
47 Gabon $ 1,626,000,000
63 Tuvalu $ 2,323,000
80 Burundi $ -137,300,000
87 Haiti $ -184,800,000
114 Senegal $ -1,034,000,000
127 Ethiopia $ -1,851,000,000
159 Australia $ -50,960,000,000
161 UK $ -111,000,000,000
162 Spain $ -126,300,000,000
163 United States $ -747,100,000,000

Total list: 163 nations


CIA rankorder

[LoneSnark]

Who said the U.S. fixed exchange rates? Currency traders devalue currencies all the time without government assistance.

The fact that foreigners are trading in their US paper for real goods means the trade deficit is falling, reducing the need for devaluation.

[FoxV]

Came across a nice little anecdote, with huge implications.

My brother-in-law is a Sales rep for a very large US based IT sales company. He sells the software side of things to the private sector and quite often deals in 6 figure contracts.

Well at his yearly convention/rally he heard from a few of his counterparts that work the government/public sector side that the Canadian government is settling contracts in US funds (which never occurred in the past)

This is tantamount to an under the table dollar dumping. I must admit I'm glad to hear of it because our reserves are way to heavily weighted in US dollars (50% at last check). It also means that things are much worse than they appear and the moving to the exits has begun

[MrBill]

I would be very wary of bureaucrats speculating on future foreign exchange movements with taxpayer's dollars. Even if they are Loonies! ; - )

[RdSnt]

To be honest I wouldn't read that much into this. The government's use of various denominations for transactions will be based on best advantage. They shift which currency to use as markets indicate a meaningful benefit. All governments do this.
It's only noticeable right now because it has been some time since the $C has been above the $US.

[seahorse]

Latest warning from US to US that its entitlement programs are going broke.

[url=http://www.marketwatch.com/news/story/trustees-issue-warning-medicare-finances/story.aspx?guid={09DCB619-6FD6-470A-83D1-BF133A40957C}&siteid=yahoomy]Medicare and Social Security Bankrupt[/url]

This is why David Walker recently resigned as head of the US GAO (five years early), bc no one would listen to him. Unfortunately, he wasn't exaggerating, and his successors are still sounding the alarm.

These Gov't institutions are begging for Congress and the American people to come up with a different plan to save them, but will they? No. Americans expect entitlements and are not willing to make any reductions. Take the subprime meltdown for example. At the first sign of crisis, instead of everyone tightening their belts and allowing bad loans to go bad, instead of allowing bad banks to go bad, instead of allowing homeowners that bought too much house to lose that house, Congress passes a stimulus bill so people will spend more and the Federal Reserve saves the failing banks etc.

Look at the farce of U.S. war spending as another example. The U.S. war spending is carried as an "off budget" item so that it won't have the apparent effect of increasing our yearly budget deficit. Get real.

Is it no wonder that the dollar dropped again today with this news about our entitlement programs? Any predictions as to what the value of the dollar be in 10 years with the war costs projected to be over $3 trillion? With PO upon us? With Medicare running in the red by then? Come to think of it, we'll be lucky if the dollar has any value left in 5 years.

[seahorse2]

I posted this a few places. Read and weep America. It is our future. Even our "allies" are starting to shun US debt, its not just our enemies anymore.

$this->bbcode_second_pass_quote('', 'T')he pension fund has $24bn in overseas assets with $7.2bn in foreign equities. But it plans to diversify its portfolio and boost returns because it faces a shortfall in funds due to the country’s ageing population.

A manager at the NPS’s overseas investment team said: “The Fed continues to cut interest rates. We are still making profits from the Treasuries that we bought in the past but we think we’d better dispose of them and had better buy higher-yielding European-government debt.”

Central banks from 16 Asian countries said last weekend at a meeting in Jakarta that they might invest more of their $1,000bn of official reserves in one another’s sovereign bonds instead of US Treasuries, given the dollar’s volatility.

“[The Korean decision] is symptomatic of the times and the problems that the US is facing,” said David Cohen, head of Asian economic forecasting at Action Economics in Singapore.

“This is the sort of pressure the US is facing after running this big current account deficit for years. Lots of people have said it’s unsustainable.”