by Zero Hedge - November 9th, 2009 10:39 am
Courtesy of Tyler Durden
As Zero Hedge speculated recently, the latest participant on the gold bandwagon is now officially Russia, which last month was said to be considering a sale of up to 25 tons of gold. That posturing did not last too long. Not only that, but Russia is now also actively participating in the dollar intervention market, buying more than $1 billion of dollars to keep the ruble low. Due to moderating inflation and a rapidly appreciating ruble, the country is now considering diversification in the same way that India and China presumable are: by shifting into dollars. Look for much more upside pressure on Gold as more and more countries become disgusted with the way Bernanke is treating both American’s citizens and the country’s currency. Reuters reporting:
Russia’s central bank does not exclude further rate cuts before the end of 2009 and may buy gold from the state repository, Gokhran, the bank’s first deputy chairman, Alexei Ulyukayev, said on Monday.
"We will buy (gold) only if conditions are adequate," Ulyukayev told reporters.
Last month, Russian media reported that the government planned to sell 25 tonnes of gold, possibly on the local market, from the repository.
Separately, Ulyukayev said the central bank has bought more than $1 billion in November on the foreign exchange market to cap the appreciation of the rouble.
The vast majority of the purchases came on Monday amid increased interest from investors in the rouble and its instruments, pressuring the Russian currency to firm further.
And as for the most stinging critique of Bernanke’s attempt to force the US taxpayer to become the only holder of MBS in the world, the first deputy chairman of Russia’s Central Bank had this to say of just how much credibility the rest of the world has in the Fed’s balance sheet (which now soon will consist almost 50% of MBS and Agencies).
Ulyukayev also said the central bank had no plans to invest again in U.S. mortgage agency bonds.
"We have fully exited from them and we have no plans to go back," Ulyukayev said.
One by one, Bernanke is managing to alienate every foreign Central Bank.
Tags: Gold, russia, Zero Hedge
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by ilene - November 3rd, 2009 9:24 pm
Courtesy of Credit Writedowns
This article by Peter Tasker, a well-regarded financial analyst in Asia, comes via the Financial Times (hat tip Marshall). He sees an enormous bubble forming in China – and parallels to Japan circa 1987:
Emerging markets, it seems, have had a good crisis. In contrast to the debt-ridden G7 economies, they have quickly resumed their growth trajectory. No surprise, then, that US emerging market mutual funds are experiencing record inflows. The stellar performance of the Brics markets – Brazil, Russia, Indian and China – is due to continue into the distant future.
Such is the narrative now forming among investors. To anyone who has lived through the rise and fall of the Japanese bubble economy, it should set off alarm bells.
Remember that it was in the years following the 1987 "Black Monday" crash that Japanese assets went from being expensive to absurdly overvalued and the Nikkei’s dizzy rise to 39,000 forced the bears to throw in the towel…
But what you saw was decidedly not what you got. The crisis, far from leaving Japan unscathed, exacerbated its structural problems and laid the groundwork for a far greater disaster…
Interest rates have been far too low for far too long. If the natural interest rate is, as the Swedish economist Knut Wicksell posited, around the level of nominal GDP growth, then China’s interest rates should have been close to 10 per cent for most of this decade. Alan Greenspan, former chief of the US Federal Reserve, has been criticised for holding interest rates too low and setting off a housing and credit bubble in the US. But if US monetary policy was wrong for the US, it was even more wrong for the high-growth countries that "imported" it. The result could only be a massive misallocation of capital…
At the 2008 peak, the price-to-book ratio of the Shanghai stock exchange was over seven times, well above the five times achieved by Japanese stocks in 1989. After the turbulence of the past 18 months, the ratio has fallen to 3.3 times, still the world’s second highest after India, and residential real estate trades at multiples of income that make the US housing boom look tame…
What is scary is that the current frothiness of emerging markets,
…
Tags: Black Monday, brazil, bubble, CHINA, emerging market mutual funds, emerging markets, Indian, investors, japan, Peter Tasker, russia
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by ilene - June 15th, 2009 5:44 pm
Two grim assessments for the future of the dollar.
The first is from James Pethokoukis at Reuters (if you aren’t reading this guy’s posts then start to do so):
Great, great stuff from the great Andy Busch of BMO Capital Markets:
“According to the US Treasury, the two largest holders of U.S. debt are China with $768 billion and Japan with $687 billion. Brazil owns $126.6 billion and Russia owns $138.4 billion. Without question, markets were nervous over the actions by these players during the last auction period by the US government. While it may seem that they are going to continue to buy US dollars and buy US debt, they are telling the world they are actively seeking alternatives.
There may not be many alternatives now, but over long enough time frames there will be. More importantly, the BRICs are telling the world they want to find ways out of investing in a country that is fiscally irresponsible and unlikely (healthcare) to change their spending habits any time soon. Eventually, they will find a way.”
Up until now, China has been willing to hold her recycled resources in the form of lowest-yield U.S. Treasury bills. That’s still good news. But almost certainly it cannot and will not last.
Some day — maybe even soon — China will turn pessimistic on the U.S. dollar.
That means lethal troubles for the future U.S. economy.
When a disorderly run against the dollar occurs, I believe a truly global financial panic is to be feared. China, Japan and Korea now hold dollars not because they think dollars will stay safe.
Why then? They do this primarily because that is a way that can prolong their export-led growth.
I am not alone in this paranoid future balance-of-payment fear.
Warren Buffett, for one, has turned protectionist. Alas, protectionism may well soon become more maligned.
President Obama struggles to support free trade. But as a canny centrist president,
…
Tags: CHINA, Dollar, James Pethokoukis, japan, Paul Samuelson, russia
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