[LadyRuby]

Actually kind of optimistic after some kind of crash.

Bridgewater's Big Picture

$this->bbcode_second_pass_quote('', 'F')or a qualified member of the Wall Street Establishment, Bridgewater has an unusually radical view of the world. It's arresting but not impossibly apocalyptical -- at least if you remember the 1970s, which in effect Bridgewater thinks we are repeating.

In other words, the American economic system can survive -- give or take a few fortunes.

Recently, I wrote about Bridgewater's view that a U.S. dollar/debt crisis was looming. (See my May 18 and May 11 columns.)

Just in the last few days, Bridgewater has discussed more aspects of its analysis. It thinks that U.S. households are particularly vulnerable right now, saying:

"U.S. households have fewer calls on future wealth (fewer assets) than ever before, but thanks to the high valuation of the assets we do have, due to an abundance of liquidity and low interest rates, we think we are wealthier than ever. The cycle will reverse itself when the secular liquidity and interest rate cycle turns."
Which (whew!) is not just yet. Bridgewater says:

"...the recent sell-off in assets is not the beginning of sustained move in this direction now, but we do believe that a bubble-bursting market action that looks something like this (though with dollar weakness and hard assets like gold rising) will occur in one to two years....Households in the U.S. have spent tomorrow's earnings...the squeeze on households will be extreme."
...

"...But if/when this tightening translates into a relative weakening of economic conditions, the dollar will be vulnerable to severe balance of payments pressures.... "

This is a potential problem because Bridgewater expects a big bump when the U.S. government can no longer finance itself by foreign borrowing.

Also a factor, in Bridgewater's view: the distortions created by China's exchange-rate mercantilism -- pegging its yuan to the U.S. dollar. The service comments:

"...in the past ten years China has gained market share in 100% of the countries that they export to. The U.S. is at the bottom of the pile. They have LOST market share in 93% of the countries that they export to. This is just one more example of the absurdity of the [yuan] peg to the U.S. dollar....Maintaining these currency valuations has required massive intervention, about $1.5 trillion in U.S. bond purchases by foreign central banks over the past three years, producing overpricing of both the dollar and U.S. bonds."
This is serious -- but (see above) not ultimately fatal, any more than was the collapse of the earlier Bretton Woods fixed exchange-rate system. Bridgewater writes:

"The inevitable price adjustments may initially hurt the U.S., but over time will enable the U.S. to benefit from the expanding global pie."

[Fergus]

Man, this is so confusing.

I dont know wether to horde money/gold or go out and blow it and get what i need now. Ultimately we have decided to put the money in the house and get as much equity built up as possible. But this only works if there is a housing market when we are ready to sell.

I just wish someone would come out and let us know whats the real situation is. So many false figures and scenarios from doom and gloom to rosey for 180 more years.

Ackkk....I am gunna go bald from pulling my hair out. Everytime I make a decision and start to run down that road, I see something that makes me think is the wrong road and I end up and the starting point again, unsure what way to go next. Man, I am gunna be caught standing in the middle of the oad looking for a way to go and get run over by the masses leaving town. Oh this is getting frustrating.

[spudbuddy]

But how does this all figure into an energy-critical future?
My son (who is an economics major) seems to think that long-distance shipping can go on as it does for a long time, because the cost of super-cargo tankers reduces cost per pound of commodity down to something so low that even a considerable increase is acceptable within desired profit margins.

I argue on the other hand, that regional and localized economy is the way to go.
It's hard to imagine what of value America can export to the world anymore, except entertainment - and much of that based on a kind of "mythology" that has been carefully re-created for some time now.

Corporate thought still embraces the concept of gigantism, because it promotes economies of scale (one of the most important tools of monopolization.)
If you do everything as big as you can, your cost of production can be drastically lowered, and you can undercut competitors.

For example: A giant earth-moving machine. The thing maybe cost 10 million to make, and consumed diesel at the rate of 10 gallons per minute of operation - but it is perhaps the size of 25 or 30 large dump trucks - and all their drivers. So with one machine, operated by one driver - you have replaced a whole fleet.

This sounds like a win-win situation, until one considers the repercussions in the market.

I don't imagine that a truly middle-class living wage will ever level out to the same amount when comparing North America and China...or India, for that matter.

Given what we're faced with in the future, I fail to understand how any responsible government anywhere can be considering continuing a giant global game of chess - for a global piece of pie, when this involves long distance trade in hard commodity.
Seems to me the cost of transportation will greatly inhibit this kind of thing.

That "expanding global pie" only rushes us to the brink of energy depletion all that much quicker.
China exports cheap goods, to be sure - but nothing of any real quality.
We can have strawberries in January, but at what true cost?

[emersonbiggins]

$this->bbcode_second_pass_quote('spudbuddy', 'B')ut how does this all figure into an energy-critical future?
My son (who is an economics major) seems to think that long-distance shipping can go on as it does for a long time, because the cost of super-cargo tankers reduces cost per pound of commodity down to something so low that even a considerable increase is acceptable within desired profit margins.

[MattSavinar]

$this->bbcode_second_pass_quote('Fergus', 'M')an, this is so confusing.

I dont know wether to horde money/gold or go out and blow it and get what i need now.

[LadyRuby]

Hmmm... actually I think the uber-rich peak oil guy I was thinking of was Rainwater. Bridgewater, Rainwater.... Anyway this guy seems to have some interesting thoughts I guess.

[LadyRuby]

Woah. And some more recent quotes from Bridgewater Associate:

[url=http://www.marketwatch.com/News/Story/Story.aspx?guid={DA520BF5-1170-4CF0-8381-8EEF45655B05}&siteId=google]Bridgewaters Disturbing Predictions[/url]
$this->bbcode_second_pass_quote('', '"')...Now you've got a new, academic, waffling Fed chairman, a falling dollar, a falling bond market, rising gold and commodities prices, and an underperforming stock market all with a giant current account deficit ..."
Its caustic conclusion: "Bernanke is rapidly losing control."