Warning to China: You're About to Get Screwed

As the Czar can attest, I've long been a proponent of some radical central bank moves. I believe the Fed should continue doing what their doing, printing money at full capacity! Although I differ with the denominations we're printing, instead of 1's, 5's, and 10's, I think we should be printing 100's, and we need to bring back the Cleveland (that'd be 1,000 for all the youngsters out there) and print copious quantities of those.

But what should we do with all that fresh currency? Send it to China of course, in exchange for their T-bills, notes, and bonds. As much as I love the austerity measures the Europeans are currently implementing, it's not for me. I don't like high taxes (although I'm willing if we must such as times of war, or perhaps for a good cause), and I really could care less if we have a strong currency, in fact, I'd prefer a weak one. China currently has a currency that has been projected to be 40% over-valued. So by debasing the dollar, we'd really just be leveling the playing field with our Malthusian-limited brethren to the east.

I do not normally use this space as a soapbox, but there seems to be some recent traction to these ideas, so I thought I'd speak up and ride the wave. Bill Gross (CEO of bond giant PIMCo) seems to be of similar mindset when he stated:

"Unless entitlements are substantially reformed, I am confident that this country will default on its debt; not in conventional ways, but by picking the pocket of savers via a combination of less observable, yet historically verifiable policies – inflation, currency devaluation and low to negative real interest rates."

Rationally from his view, this is a bad thing, after all he manages billions of bonds. But I view it as a good thing, a bastardized cleansing of our national balance sheet, a way to start fresh in a way only the money-producing agency could do. Some ancillary benefits of this debasement:

1) Reduction in the real value of our national debt to a more manageable nominal value

2) Rapid inflation of the currency would cause the long-term fixed rate securities currently underwater to turn around, making mortgage payments more manageable for America's families, i.e. BUY LAND!!! But only if you can acquire a 30-year fixed note for less than 5%, notice I did not say homes, BUY LAND!!!(agricultural land)

3) Levels the playing field. America's wealthy have become too powerful, it's time for the proletariat to monetarily rise, or the bourgeois to comparatively fall, this would create new opportunities for the masses, hopefully. . . and

4) Our nations youth that is over-burdened by student debt would see a similar reduction in the real value of their payments (this effect is the one I care least about)

In order to prepare to the impending debasement and accompanying inflation, PIMCo has been “selling Treasuries because they have little value within the context of a $75 trillion total debt burden.” If this $75trillion comes as a shock to you, it is the (PIMCo Calculated) sum of the explicit and implicit federal government obligations. Some items this includes that you may not know about: Our implicit backing of Fannie and Freddie, Our explicit responsibilities to our underfunded entitlement systems, and many other items such as agency debt.

Anywho, I'll step off the soapbox now. Soon I'll blog about my spring break, I traveled, it was fun.

Arkanada

So we've had a fair amount of snow here recently. We received some 16 to 20 inches of the white powdery goodness on Tuesday. Here's the view from my apartment from then:



The snow (and that abominable snowman) have been greatly restrictive on my movement as of late. Next week holds promise though, and schedule permitting, I may even be able to golf!!

Evolution

I was reading an interesting article this morning about the economics of kitchens and stories like that have always intrigued me. It's absolutely astounding the amount of progress humanity has made in the last 110 years. It seems to me that we have progressed as a civilization more in this time than in all of human history combined. This was stoked by a Planet Money blog post a few months ago with the question: Would you rather be rich in 1900 or middle class now?

On it's face it's quite simple, I want to be rich, right? You could have servants, a massive ornate mansion, and take lavish vacations to the old country (Europe). However, you'd be without modern conveniences as flight, that trip to Europe would be by ship and take two weeks each way. Your maximum daily travel distance would likely be similar to today, but it would be by rail, and if you were travelling by some other form, you'd likely be limited to 40-50 miles a day. If you got sick, no penicillin and no modern hospital, but you would have leaches for blood-letting! Anyways, the point is, it's a really tricky decision. Personally I'd still go for rich in 1900, because I'm nostalgic. If you're feeling particularly plucky, comment with your decision and thoughts as to why.

Also, I love TED talks and I think I found my favorite this morning, it's from Dan Ariely, author of Predictably Irrational. The link is here.

The Weather Above Ground

Saturday: High of 72, blue skies, and golf.
Wednesday: Low of -3, clouds, and ice.

The one redeeming factor about the second line from above is that school does not happen when the temperature is low and precipitation is high. I haven't been to class once this week. All week I've had the yearning to do something substantial, perhaps it is because I haven't done anything, so I have a tendency to want to eradicate my sedentary behavior. Or more likely, I'm suffering some kind of nostalgia, armed with the knowledge this will likely be the last snow day of my life. So today, I'm going to get our, run errands, and be productive.

I'm off to be productive, and you should be too!

Interesting Tidbit

Russia (population 140,000,000) has roughly the same GDP as the US state of Texas (population 25,000,000). Imagine that, a country that was formerly regarded as the worlds number two power has the same GDP as our second most populous state. It's amazing how quick things can change.

Along those same lines, Shanghai in 1990 and 2010 (you can guess which is which):



And Afghanistan from 2010 and. . . 2010

It's Been a Long Time

So I know I haven't blogged in a while, and I'm not quite sure what that's a function of. School was ridiculously busy towards the end of last semester, and then I wanted some time off in between school and anything academic, and then the days just kept dragging on with no blogging, and more no blogging. It became the kind of thing where every day I would tell myself "I'm going to blog tonight", but it never happened. So now I'm back, and I believe I'll be back with a vengeance, perhaps blogging as much as 2 (two!!!) times a week. On Thursday supposedly there's an alumni panel/meet and greet with the next flock of MBA students, so I'll post a little about that, and we'll see how far down the rankings we'll fall thanks to this new inept batch of students (I kid. . . maybe, we'll see). I don't really have much to say right now, but I'll end it with something I discovered on my favorite economics blog (yeah, I have one of those, I also have a favorite finance blog and a favorite business blog if you're interested) Marginal Revolution, tip-o-the-hat to MR who thanked the blog Apollo for the post:


"The state of Wisconsin has gone an entire deer hunting season without someone getting killed. That’s great. There were over 600,000 hunters. Allow me to restate that number. Over the last two months, the eighth largest army in the world – more men under arms than Iran; more than France and Germany combined – deployed to the woods of a single American state to help keep the deer menace at bay. But that pales in comparison to the 750,000 who are in the woods of Pennsylvania this week. Michigan’s 700,000 hunters have now returned home. Toss in a quarter million hunters in West Virginia, and it is literally the case that the hunters of those four states alone would comprise the largest army in the world."

I know gun control is in the news after the unfortunate events this weekend, but I can't help but think having all these armed people roaming the countryside will keep our neighboring countries (I'm looking at you Canada!!!) at bay in the event of a diplomatic breakdown.

More to come later in the week!!