also right on cue

 

Leaked U.S. Cables Expose Tensions With China

http://online.wsj.com/article/SB10001424052748704584804575644031813953758.html?mod=WSJ_hp_LEFTTopStories

sort of amazing the timing of this Wikileaks dump, isn't it?  Given the Chinese spanking Obama at the G20, the 'mystery missile', the Korean provocations, China and Russia dropping the Dollar in trade settlement... and now this?  I'm sure it's a coincidence!!

right on cue

http://money.cnn.com/2010/11/29/news/economy/federal_pay_freeze/index.htm?hpt=T1&iref=BN1

let me emphasize the political strategy being employed here.  Dems/establishment ceding 'ownership' of economy to the Repubs/establishment in a setup for 2012.  In turn balancing the demands of foreign creditors with domestic political opposition.


also here...

Obama Proposes Freeze
on Federal-Worker Pay

Obama proposed a two-year salary freeze for all federal civilian employees, ahead of negotiations with Congress on deficit-cutting that are likely to dominate Washington next year.


and observe how the media is happy to play ball and push the 'deficit cutting' meme...

it's the labor/capital dynamic, stupid

07:06:24  ME : http://www.zerohedge.com/article/quantitative-easing-explained

07:10:31  *** FRIEND 2 acknowledged the chat request.

10:48:48  ME : http://www.zerohedge.com/article/albert-edwards-explains-why-bernanke-and-china-are-engaged-game-global-chicken-whose-downsid

10:49:02  ME : i think i beat him to this analysis

10:54:18  FRIEND 2 : I think as long as china artificially suppresses the value of their currency, they cannot complain too loudly.  They keep it low to create export jobs.  We need jobs too

10:56:43  ME : you're misattributing

10:56:53  ME : you’re looking at a symptom

10:57:10  ME : the factories would just roll out to the next impoverished place

10:57:18  ME : already happening

10:57:29  ME : roll out

10:58:13  ME : 'free trade' and 'international economics' are just dogmas

10:58:42  ME : void of any real foundational theory at least as far as they are currently constructed

10:58:57  ME : we live in an industrial./post industrial world

10:59:07  FRIEND 2 : we need freely traded currencies which reflect economic strengths and weaknesses.  Any attempt to artificially impact the value creates imbalances.  China is complaining because we are doing what they do

10:59:16  ME : where labor cost and regulatory environments are the main costs to production

10:59:52  ME : i object to the implicit definition of 'we' as a unified interest

11:00:14  ME : i object to the implicit definition of 'china' as a monolithic unified entity as well

11:00:19  ME : that is the misattribution

11:01:14  ME : international trade is based on arbitraging living standards on the labor force

11:01:25  ME : as well as seeking the lowest regulatory cost

11:01:45  ME : in effect rolling back the advances made by the historically democratic capitalist western economies

11:01:54  ME : and returning the world to plutocracy/serfdom

11:02:00  FRIEND 2 : we use the dollar.  they use the yuan.  I am not suggesting we are unified in the way we or they think, only the currency we and they use

11:02:21  ME : 'they' are doing this, 'we' are doing that

11:02:48  ME : the nation-state analysis is an obfuscation of the real dynamic in the world economy

11:02:56  ME : sorry to use such strong language

11:03:02  ME : it is not directed at you personally

11:03:18  ME : and i have been guilty of it as well

11:03:29  ME : buying into the soap operatic day to day piece of us and them

11:03:36  ME : as it plays out on the international stage

11:03:39  ME : with the various actors

11:04:03  FRIEND 2 : china was an emerging economy.  they will soon rival us for influence on a global scale.  does the US just sit by and watch, or stay strong by using the only policy tool we have left?  congress is impotent

11:04:31  ME : i suggest spending some time evaluating the causes of that last statement

11:04:49  ME : the U.S. has not sat by and idly watched

11:05:07  FRIEND 2 : no offense taken.  i get frustrated as the US sinks due to numerous policy mistakes we have made over recent administrations.

11:05:09  ME : the 'powers that be' here have in fact perpetuated that very dynamic you attribute to the chinese

11:05:11  ME : !

11:05:47  ME : it’s the classic labor/capital framework

11:05:55  ME : that is relevant

11:06:10  ME : the trade agreements are the most anti-democratic documents ever perpetuated on the world

11:07:19  ME : please refute my postulate!

11:07:39  FRIEND 2 : I am in the middle of a trade inquiry.  back soon

11:08:43  ME : it all ties together quite nicely

11:08:59  ME : the  electoral/campaign process has been completely coopted by special interests

11:11:32  ME : the special interests represent the big businesses that have 'offshored' u.s. manufacturing jobs enabled by the enaction of the trade agreements championed by the big business lobbies]

11:12:27  ME : profits have accrued to management, shareholders and the various chinese entities that had to be 'cut in' to the profit participation to have access to the proletarian chinese workforce/population

11:12:41  ME : mainly the chinese military and communist party officials

11:13:03  ME : the new faces of 'capitalism'!!

11:14:42  ME : in an effective quid pro quo, gov't incents the financial sector to create/provide credit to the american population in order to offset the income shock of the above

11:15:37  ME : and provide a put on asset prices when the inevitable ponzi scheme from that dynamic breaks down

11:15:47  ME : that's exactly what has happened

Nov 17 chat

11:04:21  ME : think about what we talked about last week

11:04:26  ME : this whole thing is scripted

11:04:34  ME : the letter to the fed

11:04:40  ME : the wsj thing

11:04:43  ME : and now todays thing

11:21:18  *** FRIEND 2 acknowledged the chat request.

11:22:41  FRIEND 2 : I just retyrned from a meeting.  Which item are you refering to today.  I got lost with so many developments.

11:22:56  ME : the house republicans coming out against QE2

11:28:04  FRIEND 2 : Is it a unified opposition or just the tea party?

11:30:30  ME : led by the republican house leadership

11:30:35  ME : mcconnell and cantor

11:31:10  FRIEND 2 : I viewed it as an internal struggle ofr the direction of the party.  Just like the democrats are struggling with direction after the election defeat

11:31:46  ME : you're not nearly cynical enough about the rollout of 'memes' in media

11:34:14  FRIEND 2 : I am interested to see what new initiatives are undertaken before and after the new congress sits.  If nothing changes, the economy is toast.

11:34:31  FRIEND 2 : Tax hikes, expensive health care etc

11:34:35  ME : what changes do you want to see so that the economy is n ot toast?

11:34:47  ME : so deeper deficits are better?

11:35:26  ME : sounds a lot like choosing how to get executed - you can get shot or you can get hung...

11:36:41  FRIEND 2 : delay any tax hikes for 2 years, repeal the health care legislation so businesses are not afraid to hire, address the public sector pension issue by cutting entitlements (make them work more than 20 yrs before drawing a pension) etc

11:37:41  ME : but then you;d have to acknowledge things haven;t really gotten better

11:37:50  ME : despite all the claims

11:37:58  ME : which would spook markets

11:38:04  ME : creating more pessimism

11:38:11  FRIEND 2 : I think the Feda

11:38:13  ME : and more negative demand shocks

11:38:59  FRIEND 2 : The fed action was because fiscal policy was gridlocked.  If congress enacted pro-growth policies, the Fed action would not be needed.

11:39:48  FRIEND 2 : America is a nation of inovators.  Give businesses incentives to hire

11:40:00  ME : is or used to be?

11:40:45  ME : the degree of centralization of commerce is a threat to the type of innovation you desire

11:40:56  ME : maybe roll back all the concentrations of various industries

11:40:58  ME : then

11:41:02  ME : banking

11:41:04  ME : media

11:41:06  ME : etc

11:41:17  ME : military/industrial

11:41:25  ME : northrup grumman

11:41:27  ME : et al

11:41:34  FRIEND 2 : most job creation is from small businesses.  They are ones who can't get the credit now to expand

11:41:46  ME : despite banks being awash in liquidity

11:41:54  ME : which of coure indicts TARP

11:42:09  ME : key semantic change

11:42:25  ME : betraying the political nature of bernanke and the fed

11:42:36  ME : inserting the key phrase "credit worthy"

11:42:42  ME : well after the fact of TARP

11:42:45  ME : pre TARP

11:42:58  ME : "get the flow of credit running to borrowers again"

11:43:03  ME : 1yr later

11:43:08  FRIEND 2 : they are buying treasurys, which is why the fed is trying to make them seek other ways to invest/loan the money.  there is ample liquidity, but the banks just got crushed on lending

11:43:15  ME : "get credit flowing to credit worthy borrowers"

11:43:44  ME : if you ever thought banks would loan any new monies to private sector america, you are deluded!!

11:43:56  ME : what a laugh

11:44:38  FRIEND 2 : it is too profitable playing the roll down and carry game in risk free assets.  they need to lend, not buy govt guaranteed treasury debt

11:45:00  ME : so you agree TARP was a failur given its stated goals then

11:45:25  FRIEND 2 : take the profit out of the carry game, and they will follow their noses to other profitable areas.

11:45:41  ME : so you want a transaction tax?

11:45:46  ME : higher cap gains?

11:45:49  ME : what?

11:46:12  ME : how bout not give them no-strings-attached money to begin with????

11:48:10  FRIEND 2 : the profit motive is a powerful motivator.

11:48:18  ME : cruel joke it all is

11:48:25  ME : the rhetoric

11:48:32  ME : vs the reality

12:02:47  ME : http://www.zerohedge.com/article/republicans-boehner-mcconnell-kyl-and-cantor-send-letter-bernanke-blasting-qe2

12:07:05  ME : what do you think??

12:07:23  ME : rates wise

12:07:29  FRIEND 2 : I had not seen this.  Are they just trying to harness the tea party voters?

12:07:38  ME : remember last week

12:07:44  ME : think about the larger game

12:07:50  ME : you know, g209

12:07:53  ME : g209!

12:07:57  ME : we're on our way

12:08:12  ME : we just need north korea to agree to our preferred corruption scheme

12:08:19  ME : g20

12:08:25  ME : china downgrading u.s.

12:08:27  FRIEND 2 : I think the fed loses more credibility by reacting to political pressure than they could possibly gain.  They must be seen to be independant

12:08:34  ME : putting $1T of Treasuries on offer

12:08:44  ME : what a laugh

12:08:53  ME : that the fed is not a highly politicized entity

12:08:57  ME : given the last 15 years

12:09:00  ME : seriosul

12:09:04  ME : seriously

12:09:08  ME : come on

12:09:34  ME : asset prices are not under their purview on the way up

12:09:39  ME : but they are on the way down??

12:09:40  ME : huh??

12:09:51  FRIEND 2 : but if they reverse course now, in response to politicians who have spent the past 10 yrs pumping up the deficit only now find religion?

12:09:59  ME : the most massive expansion in credit EVER (inflationary!)

12:10:02  ME : MONEYT CREATION

12:10:09  ME : was either

12:10:10  ME : 1)

12:10:12  ME : flat out missed

12:10:14  ME : or

12:10:15  ME : 2)

12:10:16  ME : ignored

12:10:23  ME : because of political consideration

12:10:27  ME : either way

12:10:34  ME : complete indictment

12:11:00  ME : how can you talk in dulcet tones about fed credibility now??

12:12:04  ME : all that there is left is the ability of the sell side to credibly say 'fed credibility' with people not erupting in laughter or populist fury

12:12:17  ME : that's all there is left

12:12:41  ME : you know, the people cashing the bernanke put checks

Nov 16 Chat

09:09:53  FRIEND 1 : interesting markets

09:11:16  ME : yeah, the time between large events is very short now

09:11:21  ME : remember dubai?

09:11:37  FRIEND 1 : so true

09:11:44  ME : now you get europe cracking the week after

you get the u.s. rout

09:11:51  FRIEND 1 : its a rolling crisis

09:12:20  ME : i heard china offered to buy irish and greek

debt in exchange for cooperation on their currency issues

09:12:29  FRIEND 1 : really

09:12:33  ME : which shows you they are very long the status quo

09:12:38  ME : yeah

09:12:46  ME : and i think that is right

09:12:51  ME : china is very long the status quo

09:12:59  ME : which makes last week a lot of brinksmanship

09:13:18  ME : ultimately, the effect on the market is

treasuries are a buy

09:13:21  FRIEND 1 : they also have a great of leverage

09:13:24  ME : they do

09:13:35  ME : but they have n o desire to pull the plug on

the dollar

09:13:42  FRIEND 1 : no,

09:13:43  ME : and the international global macro framework

09:13:51  FRIEND 1 : that does not help them

09:13:52  ME : meaning they need to buy dollars

09:13:58  ME : and treasuries

09:14:20  FRIEND 1 : I guess we know who will bail us out

09:14:23  ME : and it has had its desired effect

09:14:45  ME : you get an establishment drone like bob

corker cming out and adopting a 'curtail the fed' message

09:15:01  FRIEND 1 : what was that

09:15:11  ME : senator bob corker from tennessee

09:15:20  FRIEND 1 : I know

09:15:21  ME : supportin glegislation to end the fed's dual mandate

09:15:27  FRIEND 1 : very stupid comment

09:15:31  ME : he's a tool

09:15:44  ME : though i am indeed anti-fed

09:15:46  FRIEND 1 : good description

09:16:02  ME : they've done a terrible job

09:16:07  FRIEND 1 : they are out of control

09:16:11  ME : whatever your attribution of why

09:16:40  FRIEND 1 : QE2 not having desired affect

09:16:45  ME : we can't have deflation from unwinding a

credit bubble but we can have credit bubbles?

09:16:53  ME : crazy

09:16:59  FRIEND 1 : good point

09:17:09  ME : asset prices aren’t under their purview when

they're going up

09:17:18  ME : but they are when they're going down??

09:17:25  ME : huh??

09:17:58  ME : what a joke

09:18:40  FRIEND 1 : yep

09:45:35  ME : crazy move in gold

09:43:33  ME : but i think its right

09:43:41  ME : the possibility of deflation far outweighs inflation

09:43:54  ME : hyperinflation

09:43:57  ME : i guess that is

09:44:18  ME : there is very little political will for a

monetary solution

09:44:31  ME : stemming frmo the populist outrage

09:44:42  ME : seeing it as the tax it is

09:45:20  ME : so i think the japan scenario does play out

despite the key differences between the U.S. now and Japan in the

early 90's

09:52:47  FRIEND 1 : nope

09:52:58  FRIEND 1 : US is different animal

09:53:30  ME : but the creditor nations will support the currency

09:53:39  ME : and fund the current account deficit

09:54:22  ME : no?

09:54:57  FRIEND 1 : yes

09:55:54  ME : and i think you'd have to grant the fed is a

highly politicized entity

09:56:01  ME : given our above discussion

09:56:11  FRIEND 1 : without a doubt

09:56:28  ME : so money printing ad infinitum is not an option

09:56:48  ME : meaning asset prices have tremendous

deflationary pressure

09:56:51  FRIEND 1 : of course not

09:57:03  ME : since they do not have the bernanke put

09:57:17  ME : and have lots of room still to drop to

correct for the unwind of the credit bubble

09:57:32  ME : how do you not directly go to insolvency of

the financial system?

09:57:48  ME : nationalizations or quasi nationalizations

09:58:00  ME : low to negative growth

09:58:02  ME : in gdp

09:58:28  ME : but not a currency collapse

09:58:28  FRIEND 1 : hmmm

09:58:44  ME : since the creditor nations desire a

perpetuation of the status quo

09:59:13  ME : to me, equals long slow grind

09:59:29  FRIEND 1 : not 10yrs

09:59:31  ME : there will be no miracle jobs recovery

09:59:36  FRIEND 1 : nope

09:59:44  FRIEND 1 : i would say 3-5yrs

09:59:47  ME : 44% of americans aged 25or older have a high

school degree or less

10:00:04  ME : but the marginal unskilled job is created in

china or elsewhere in the third worls

10:00:06  ME : world

10:00:33  ME : current govt obligation have us on a massive

structurla deficit path

10:00:39  ME : constraining fiscal policy options

10:00:47  ME : to 'employ the people'

10:00:52  FRIEND 1 : good point

10:01:38  ME : so i think the current economic environment

continues for 10 years

10:02:16  FRIEND 1 : I think we both agree on major issues its just

the duration where we differ

10:02:26  ME : yeah

10:02:36  ME : and the political impetus is with the tea party

10:02:57  ME : to the point establishment drones like bob

corker are adopting anti-fed positions

10:03:45  ME : so where does your recovery come from?

10:03:52  ME : not asset price based wealth effect

10:03:59  ME : not from fiscal policy

10:04:02  ME : expansion

10:04:25  ME : not from massive change in global economic structure

10:04:28  ME : structure

10:04:41  ME : tat creates the marginal job in more

impoverished places

10:04:45  FRIEND 1 : wow

10:04:46  ME : so... where???

10:04:52  FRIEND 1 : your killing me

10:04:56  ME : yeah guy!

10:05:03  FRIEND 1 : haha

10:05:39  FRIEND 1 : I think we will have 3% growth in 2011

10:06:12  FRIEND 1 : not great but adequate to create some job growth

10:07:56  FRIEND 1 : corporations have healthy balance sheets which helps

10:09:28  ME : no top line growth

10:09:39  ME : and meets/beats on earnings by cutting labor costs

10:09:52  FRIEND 1 : true,

10:09:56  ME : not a healthy macro dynamic!!

10:10:14  FRIEND 1 : I think type line growth will return

10:10:20  ME : how?

10:10:33  ME : top line won’t return without jobs

10:10:38  FRIEND 1 : hopefully the weak dollar helps exports

10:10:39  ME : jobs won;t return without top line

10:10:57  FRIEND 1 : and we realize we need to employ the 44%  of americans

10:11:04  ME : so we're going to start selling things to

the mythical chinese/indian middle classes?

10:11:05  FRIEND 1 : without college degrees

10:11:10  FRIEND 1 : yes

10:11:20  FRIEND 1 : lets build America

10:11:21  ME : SELL EVERYTHING!

10:11:44  FRIEND 1 : this will need to happen over the next 5-10yrs

10:11:55  FRIEND 1 : this imbalance has taken 20yrs

10:12:03  ME : that kind of collective action will take a

deeper dislocation

10:12:06  FRIEND 1 : will take long time to unwind

10:12:13  ME : yes

10:12:21  ME : ok, so you're off 3-5 years

10:12:24  ME : ?

10:12:26  FRIEND 1 : haha

10:12:28  FRIEND 1 : I guess

10:12:31  ME : ok

10:12:42  ME : i am comfortable with 5-10

10:12:57  FRIEND 1 : fiscal policy needs to promote this change

10:13:03  FRIEND 1 : not QE@

10:13:04  FRIEND 1 : 2

10:13:36  FRIEND 1 : QE2 is acting as fire wall

10:14:04  FRIEND 1 : structural change will need to happen

10:14:46  FRIEND 1 : maybe someone with some foresight can convince

the politicians that we must change

10:14:52  FRIEND 1 : this is unsustainable

10:14:52  ME : lol

10:15:12  FRIEND 1 : and dangerous to our very sovereignty

10:15:21  FRIEND 1 : and way of life

10:15:35  ME : you are very sanguine!!

10:15:42  FRIEND 1 : yes,

10:15:56  ME : terrifically optimistic about the intentions

of the people in positions of power

10:16:02  ME : in the face of all the evidence!!

10:16:15  FRIEND 1 : change agent is coming

10:16:24  ME : dude

10:16:27  FRIEND 1 : Senator Young of California

10:16:28  ME : where?

10:16:33  ME : From what party???

10:16:43  FRIEND 1 : which ever you prefer

10:17:07  ME : but to be viable in the current system (very

early on) you have to sell out your beliefs

10:17:16  ME : under the D or R label

10:17:19  FRIEND 1 : rand paul

10:17:22  ME : so I need a billionaire backing

10:17:27  ME : maybe

10:17:34  FRIEND 1 : yes

10:17:45  FRIEND 1 : it can be done

10:17:49  ME : it can be done

10:17:57  ME : believe me, i do think about it

10:18:05  ME : part of the larger, where do i belong motif?

10:18:12  FRIEND 1 : I here you

10:18:24  FRIEND 1 : you have great ideas

10:18:38  FRIEND 1 : need to channel

10:18:39  ME : thanks

10:18:41  ME : yes

10:18:46  ME : into what?

10:18:53  ME : getting a hedge fund gig?

10:19:01  ME : becoming a blogger

10:19:03  FRIEND 1 : the greater good of YOU

10:19:04  ME : talk show host

10:19:18  ME : or involved in government

10:19:28  FRIEND 1 : so how

10:19:30  FRIEND 1 : yes

10:19:31  ME : there is such a thing as the greater good

10:19:38  ME : and enlightened self interest

10:19:39  FRIEND 1 : I think so

10:19:47  ME : enlightened self interest seems to have

died in the last 20 years

10:19:51  FRIEND 1 : yes Grass Hopper

10:20:10  ME : sometimes you have to leave a few seeds in

the ground!!!

10:20:17  ME : usually

10:20:19  ME : in fact!

10:20:29  ME : haha

10:20:43  FRIEND 1 : ha

November 10 Chat 2

06:54:02  ME : morning

06:54:07  *** FRIEND 2 acknowledged the chat request.

06:54:37  ME : obama meeting with jintao at g-20 meeting in korea

06:54:43  FRIEND 2 : good morning

06:54:48  ME : to "try to stabilize financial markets"

06:55:13  ME : i stand by analysis yesterday

06:55:20  FRIEND 2 : China has been letting the currency move,

so hopes are for a comprimise

06:55:35  ME : we'll see more 'fiscal responsibility' talk

06:55:52  ME : i think we'll see that by letting the tea

partyt folks carry the ball

06:56:26  ME : the political calculation for obama and the

dems is that without the gov't spending , the economy falters again

06:56:47  ME : giving a clear counterpoint for 2012

06:57:03  FRIEND 2 : Paul Krugman is the cheerleader.

06:57:09  ME : but it balances the demands of the creditor

nations and the political opposition domestically

06:57:20  ME : what's he saying?

06:57:27  ME : i don;t pay attention to him

06:57:30  FRIEND 2 : spend, spend, spend

06:57:36  ME : what a joker

06:57:45  ME : what was he saying in 2005/2006?

06:58:03  ME : guys like him and tom friedman have zero credibility

06:58:08  ME : in my eyes

06:58:14  FRIEND 2 : agree

07:00:32  ME :

http://www.cnn.com/2010/US/11/09/california.contrails/index.html?iref=NS1

07:00:37  ME : what do you m ake of this?

07:02:20  FRIEND 2 : scary.  our military must have tracked it,

but isn'y saying anything.

07:02:40  FRIEND 2 : sounds like a warning.

07:02:46  ME : it does

07:02:56  ME : jet contrails break up

07:03:03  ME : so that story doesn;t m ake any sense to me

07:10:06  FRIEND 2 : I am surprised it has not attracted more attention

07:10:30  ME : dude, our mainstream media are ore

propaganda than pravda back in the day

07:10:35  ME : more

07:10:46  FRIEND 2 : this could be a serious breach of our defense

07:11:00  ME : or is it really ours?

07:11:11  FRIEND 2 : i liked living in london because the news

was reported so much differently

07:11:32  FRIEND 2 : why launch near the shore?

07:15:09  ME : so its not actually an act of war?

07:15:23  ME : just a reminder we have the technology and they don't?

07:15:39  FRIEND 2 : could be.  why is it not of more concern?

07:16:09  ME : but just because it's not being reported

doesn't mean anything

07:16:44  ME : either way

07:16:54  ME : i mean 'yes, nothing to see here'

07:16:59  ME : approach

07:17:26  FRIEND 2 : scary

07:18:19  ME : so the grand bargain is china lets CNY rise

further in exchange for more power at IMF?

07:18:29  ME : thats being reported on bloomberg tv

07:19:03  FRIEND 2 : Goldman saying so.

07:40:06  ME : what i postulate is already happening!

07:40:19  ME : news of gingrich out there adopting the anti-fed talk

07:40:24  ME : what a shill

07:40:31  ME : these guys are a piece of work

07:47:20  ME : who emerges as 2012 contenders?

07:47:26  ME : palin and gingrich are has beens

07:47:37  ME : christie?

07:47:45  ME : rick perry in texas?

07:48:19  FRIEND 2 : romney is my bet.

07:48:30  ME : ugh

07:48:39  FRIEND 2 : not the right guy, but palatable to the voters

07:48:51  ME : he doesn;t stir the passions of the tea party folkks

07:48:57  ME : he was in favor of tarp

07:49:03  ME : i believe

07:49:51  FRIEND 2 : i don't know, but i do think the tea party

influence will diminish as other issues demand attention

07:50:18  ME : like what?

07:50:28  ME : economy is the main issue

07:50:48  ME : here's a good for instance

07:50:49  ME :

http://www.ft.com/cms/s/0/54a44c3e-ec7c-11df-ac70-00144feab49a.html?ftcamp=rss#axzz14tYaXCN2

07:50:55  FRIEND 2 : for now, but other issues such as war,

education will resurface

07:51:14  ME : the establishment calling for the death pof

the dollar as reserve currency

07:51:31  ME : but then desiring to continue the policy

regime that got us into this quagmire

07:53:19  FRIEND 2 : the party in power always continues the

policy regime.  otherwise it is suicide.

07:53:29  FRIEND 2 : politically speaking

07:53:39  ME : it is suicide because the entire structure

is now akin to laying on top of a live grenafde

07:53:47  ME : can't get up off of it

07:53:54  ME : or the whole thing explodes

07:54:20  ME : so we will continue to lay on top of the grenade

07:54:30  ME : as the foreign troops advance on us

07:54:32  FRIEND 2 : yes.  growth is the only anwer.  the

question is "how do we get enough of it?"

07:54:37  ME : which way do you choose to die??

07:54:50  ME : but we are not going to grow by laying on

top of the grenade!!

07:55:11  ME : just a slower death

07:56:17  ME : median income in the U.S. is down over the

last 30 years

07:56:29  ME : while the economy has doubled??

07:56:40  ME : incredible

07:56:52  ME : then there's this

07:56:53  ME : http://research.stlouisfed.org/fred2/series/EMRATIO/

07:57:21  ME : so... lets outspource some  more jobs?

07:57:30  ME : thats the answer??

08:24:56  ME : do you work tomorrow?

08:31:56  FRIEND 2 : No.  Bonds off, stocks in

08:32:26  ME : ok

09:12:43  ME : yen is the safe haven currency

09:12:48  ME : love it

09:12:55  ME : ?

09:13:06  ME : or is dollar still the safe haven?

09:13:15  ME : yen off 1% today

09:14:17  FRIEND 2 : euro off on ireland, and yen yields to low.

09:15:17  ME : do we get a g20 statement today?

09:15:39  ME : look at bloomberg TOP

09:15:42  ME : ist already happening

09:15:50  ME : Hoenig to speak to house republicans

09:18:16  FRIEND 2 : I think the statement comes out friday or saturday.

09:18:53  FRIEND 2 : thanks i did not see it.  new mood in washington

09:41:10  ME : in what scenario does a sustainable dollar

rally happen?

09:47:04  FRIEND 2 : a) if the euro implodes or b) when organic

growth takes hold.

09:47:11  ME : haha

09:47:18  ME : b)

09:47:19  ME : haha

09:51:09  FRIEND 2 : b may take a while!

09:51:19  FRIEND 2 : a could happen tomorrow

10:03:08  ME : doh

10:07:17  FRIEND 2 : 5 vs 30's back at record wides.should see buying

10:24:28  ME : did you watch the video??

10:26:33  FRIEND 2 : yes.  I saw it on the news last night.

looked like a rocket.  1 vapor trail.  not 2

10:27:30  ME : you're telling me with the g20 mwwting,

china openly threatening the dollar's reserve role, lowering usa

credit rating and potentially putting $1T treasuries on offer that its

not related???

10:28:06  FRIEND 2 : do they have a sub capable of evading our defenses?

10:28:16  ME : i think its our missile

10:28:20  ME : not theirs

10:28:43  FRIEND 2 : why would we shoot it from LA?

10:29:04  ME : what good does it do if you don;t get the

world talking about it?

10:29:07  ME : even to deny it?

10:30:11  FRIEND 2 : although, most big nations must have the

ability to spot it even if fired from the middle of the pacific

10:30:24  ME : unless this is them even saying 'we have

moved ahead of you technologically'

10:31:08  ME : then there was this over the summer

10:31:09  ME : http://www.youtube.com/watch?v=YnszlJC8iGs

10:31:21  ME : some kind of multi-stage device

10:31:34  FRIEND 2: .  i will have to view from home

10:31:50  ME : its a very interesting video

10:32:14  ME : people thought it was a ufo

10:32:28  ME : but it looks like some kind of multi-stage

rocket technology

10:32:38  ME : launched from hangzhou, china

10:33:43  ME : i'm not a rocket expert

10:33:52  FRIEND 2 : china is the single biggest threat to the world.

10:34:15  FRIEND 2 : followed closely by the us congress.

10:58:59  ME : right on effing cue

10:59:00  ME :

http://www.huffingtonpost.com/2010/11/10/debt-commission-report-social-security-medicare-_n_781606.html

11:12:34  ME : quite a day

11:20:28  FRIEND 2 : yes.  the liberal paul krugman was already

complaing about extending the retirement age.  anything short of

raising taxes on the "rich" is not goood enough for him

11:21:18  ME : whats your sense of positioning ahead of the holidays?

11:21:26  ME : holiday

11:22:31  FRIEND 2 : I think we are ok.  1st buy back is friday.

 we thought monday, so right away.

11:23:27  FRIEND 2 : stocks are happy again

11:24:23  ME : i thought the auction went well given the

spector of armageddon with $1T china treasury holdings on offer

11:25:25  FRIEND 2 : agreed.

11:53:37  ME : "in a surprise move"

11:53:38  ME :

http://money.cnn.com/2010/11/10/news/economy/fiscal_commission_prelim_report/index.htm?hpt=T2

11:53:56  ME : makes the above chat pretty priescent, no?>

November 10 chat

G. D. Young

show details Nov 10 (7 days ago)

06:56:23  *** FRIEND 1 (XXX SECURITIES (USA))  is in the room

06:56:23  FRIEND 1 : good morning

06:56:32  ME : morning

07:38:56  ME : what do you make of this

07:38:57  ME :

http://www.cnn.com/2010/US/11/09/california.contrails/index.html?iref=NS1

07:39:18  ME : i think its a related event

07:57:28  FRIEND 1 : let me take a look

08:00:22  FRIEND 1 : this is really bizarre story

08:00:43  FRIEND 1 : smells like a cover up

08:02:59  ME : seemed like we were stabilizing, what drove

the market lower here?

08:03:36  FRIEND 1 : this feels like a bond concession

08:03:54  ME : i'm getting toasted here

08:04:04  FRIEND 1 : you and many others

08:04:13  ME : yeah

08:04:24  ME : i feel like hanging on

08:04:40  FRIEND 1 : not many traders positioned for this move

08:05:09  FRIEND 1 : I think everyone is doing the same which makes

it very dangerrous

08:05:21  ME : i think the analysis from yesterday holds though

08:05:32  ME : this is a game of chicken between the u.s. and china

08:05:38  FRIEND 1 : 126-03 is key resistance level

08:05:50  FRIEND 1 : sorry, support

08:05:56  ME : well, keep me updated

08:05:57  FRIEND 1 : in 10yr future

08:06:02  FRIEND 1 : will do

08:06:42  ME : huge back up

08:06:53  ME : so we're at 126 11 now

08:07:03  FRIEND 1 : yes

08:07:51  FRIEND 1 : 5s have backed up nearly 30bp over the last week

08:07:56  ME : yep

08:08:06  ME : totally unwinding QE2 rally

08:08:30  FRIEND 1 : yes

08:08:37  ME : what drives bonds lower from here though?

08:08:47  ME : what happens to asset prices if no QE2?

08:08:54  ME : lower, right?

08:08:58  FRIEND 1 : decent data

08:09:06  ME : i'm a seller of better data

08:09:10  FRIEND 1 : there is chance fed does not buy all 600bn

08:09:15  ME : right

08:09:22  FRIEND 1 : thats the risk

08:09:24  ME : they have no credibility

08:09:35  FRIEND 1 : and market starting to talk about it

08:09:39  ME : can’t turn around on wednesday, 1 week later!!

08:09:57  ME : Fed surprised by the G20 reaction

08:09:59  ME : has to be

08:10:09  ME : and I'm surprised at the lack of coordination

08:10:12  FRIEND 1 : and the markets

08:10:17  FRIEND 1 : as well

08:12:16  ME : you think a sustainable recovery is underway

without fed/gov't intervention?

08:12:23  ME : http://research.stlouisfed.org/fred2/series/EMRATIO/

08:13:06  FRIEND 1 : let me take a look

08:13:21  ME : just a graph

08:26:53  ME : here's the circularity

08:27:02  FRIEND 1 : go

08:27:06  ME : china sells treasuries, pulls the plug on the dollar

08:27:15  ME : cny rises precipitously

08:27:16  FRIEND 1 : keep going

08:27:30  ME : raising the cost of all imported goods into the us.

08:27:43  ME : eg, most manufactured stuff

08:27:51  ME : immediately reducing economic activity

08:27:56  ME : lower volume

08:28:01  ME : at a higher price

08:28:08  FRIEND 1 : yes

08:28:11  ME : negative 'wealth effect'

08:28:19  ME : via the currency mechanism

08:28:35  ME : casting serious doubt on the solvency of the

entire system

08:28:41  FRIEND 1 : yikes

08:28:43  ME : banks, sovereigns, et al

08:28:44  ME : no?

08:28:56  ME : ok

08:29:03  ME : maybe lets break that down

08:29:15  ME : at the very least casting serious doubt on

'the recovery'

08:29:31  ME : changing the inflation/deflation probability ratio

08:29:56  FRIEND 1 : interesting

08:30:10  ME : the natural forces in the economy want to

reset prices lower

08:30:22  ME : median income is down in the u.s. over the

last 30 years

08:30:27  ME : think about that!

08:30:32  FRIEND 1 : good point

08:30:33  ME : the economy has what, doubled?

08:30:39  FRIEND 1 : so asset price revert

08:30:40  ME : the technology boom

08:30:42  ME : etc

08:30:48  ME : nothing has accrued to labor

08:31:01  ME : long form narratives are resolving here

08:31:04  ME : the rise of china

08:31:08  ME : the debt boom

08:31:20  ME : the technology boom

08:31:33  FRIEND 1 : your into something

08:31:39  ME : yeah

08:32:04  ME : it needs more elaboration and refinement

08:32:20  ME : but i think treasuries have to rally

08:32:38  ME : after the inital sell off that we've seen here

08:33:40  ME : or does the fed actually come out and say

'we won;t let the bankers go out of business, we'll print as much

money as we have to?'

08:33:55  ME : literally bringing on hyperinflation?

08:34:03  ME : we have to choose between deflation and hyperinflation

08:34:09  ME : they have to choose

08:34:16  ME : the creditors want deflation

08:35:00  ME : the goldlocks 'we'll print just enough money

to offset the n atural deflation from a credit bubble collapsing' is

being met with serious opposition frmo the creditor nations

08:35:11  ME : i m ean, apparently

08:35:30  ME : remember, stocks were dropping

08:35:36  ME : pre QE 2 rumblings

08:36:05  ME : add in the European sovereign crisis issues

08:37:29  ME : time is the enemy

08:37:35  ME : given the debt overhang

08:37:57  ME : the current situation is structural deficit

08:38:03  ME : meaning the hole just keeps getting bigger

08:42:02  FRIEND 1 : yes, it does

08:42:41  ME : so what do the chinese want?

08:43:11  ME : deflation  collapses the financial sector, doesn;t it?

08:43:49  ME : meaning they don't get paid back

08:44:23  ME : hyperinflation collapses the dollar

08:44:29  ME : meaning they don;t get paid back

08:44:51  ME : isn;t the fed attempting to pursue the

strategy of preserving the creditors??

08:44:58  ME : meaning what's best for the chinese??

08:45:11  ME : but they want more

08:45:20  ME : feel like they should get some equity

08:45:31  ME : so they actually want a restructuring scenario

08:45:41  ME : making moves in a different game

08:45:46  ME : so... what?

08:46:01  ME : bloomberg reporting more power in the imf

08:46:18  ME : china wants/is getting

08:46:31  ME : probably resource availability

08:46:42  FRIEND 1 : gotha

08:46:43  ME : pipelines/oil servicing contracts?

08:47:00  ME : taiwan too

08:47:04  ME : you'd think

08:47:25  FRIEND 1 : yep

08:47:43  ME : imf gets involved in sovereign crisis scenarios

08:47:58  ME : which will be focused on western world in

the foreseeable future

08:48:08  ME : so china wants power in that body

08:48:10  ME : makes sense

08:48:20  ME : imf and world bank have always been tools of

the empire

08:48:35  ME : they are asserting their claim to leadership

08:48:48  ME : which in turn puts the rocket launch in perspective

08:48:51  ME : here

08:49:03  ME : doesn't it?

08:49:09  ME : am i crazy?

08:49:16  FRIEND 1 : nope

08:49:33  ME : we're saying - you can sell as many

treasuries as you want

08:49:41  ME : you don;t have any real power

08:49:48  ME : you don;t have the weapons systems

08:50:08  ME : nor the troops positioned around the world

08:50:21  ME : in a world where fiat currencies collapse

08:50:30  ME : what else matters but control of the

physical resources>

08:50:39  ME : checkmate

08:51:04  ME : so go ahead and collapse the dollar

08:51:19  ME : which throws all fiat currencies into play

08:51:28  ME : it doesn;t matter from a global power positioning

08:51:46  ME : they are a loong way away from usurping the u.s.

08:52:05  ME : its laughable when you remove the financial

microcosm viewpoint we inevitably have

08:52:27  ME : so its stupid for them to overplay their hand here

08:52:30  ME : are they stupid?

08:52:33  ME : i don;t think so

08:56:51  ME : the CNY has rallied 20% since 05, hasn;t

materially changed the structure of trade

08:57:24  ME : whats the big deal over 5% more right now?

09:08:22  ME : so what happens at 126 03??

09:08:58  FRIEND 1 : next stop is 125-16

09:09:10  FRIEND 1 : these are technical levels

09:10:21  ME : catch a falling knife

09:10:33  FRIEND 1 : yep

09:10:38  FRIEND 1 : its very dangerous

09:11:36  ME : what flows are you seeing / hearing from cb's?

09:12:45  FRIEND 1 : rumor of selling however don;t think they

would sell ahead of g 20 meeting

09:13:36  ME : weird weird action

09:13:42  ME : dollar up

09:13:45  ME : gold down

09:13:49  FRIEND 1 : yep

09:13:55  ME : bonds crushed

09:14:01  FRIEND 1 : seems to be proft taking

09:14:18  ME : inflation down

09:14:24  FRIEND 1 : on trades that performed well over the past month

09:15:43  FRIEND 1 : this can all reverse once the fed annocues buy

back at 2pm

09:15:52  FRIEND 1 : can some say wipsaw

09:16:01  ME : Hoenig to speak tio house republicans

09:16:04  ME : its already happening

09:16:22  FRIEND 1 : we know where he stands

09:16:28  ME : and Bowles, Simpson to release Debt Panel Proposal

09:16:36  ME : bloomberg TOP stories

09:16:46  ME : its like scripted

09:16:56  ME : creditor nations complain

09:17:09  ME : roll out the 'fiscal responsibility theme' stuff

09:18:36  FRIEND 1 : everyone talks a good game

09:19:07  ME : we're at 126 03

09:20:26  FRIEND 1 : and for you, a new set steak knifes

09:20:40  ME : great

09:20:48  ME : my old ones wqere getting pretty dull

09:20:58  ME : very hard to 'cut that meat!'

09:22:21  FRIEND 1 : yep

09:22:35  FRIEND 1 : haha

09:41:00  ME : in what scenario does a sustainable dollar

rally happen?

09:45:04  FRIEND 1 : increased economic growth in the US and the

fed stopping QE2 earlier then expected

10:03:01  ME : doh

10:04:47  FRIEND 1 : ugh, everyone is running through the door at once

10:59:08  ME : right on effing cue

10:59:09  ME :

http://www.huffingtonpost.com/2010/11/10/debt-commission-report-social-security-medicare-_n_781606.html

10:59:17  FRIEND 1 : let me take a look

11:03:02  ME : what a day

11:03:10  ME : grit your teeth and hold on

11:03:54  FRIEND 1 : here come the whipsaw

11:04:00  ME : I'm long!!

11:04:02  ME : woohoo!

11:04:08  FRIEND 1 : nice

11:54:06  ME : "in a surprise move"

11:54:07  ME :

http://money.cnn.com/2010/11/10/news/economy/fiscal_commission_prelim_report/index.htm?hpt=T2

11:54:22  ME : makes the above chat pretty priescent, no?

11:55:04  FRIEND 1 : it sure does

11:55:25  ME : and i can't buy my way into a strategy seat...

11:55:28  ME : crazy

11:55:33  FRIEND 1 : hhaha

11:55:53  FRIEND 1 : you have had some good calls