Tag Archives: economy outlook

Oil: The US is in for a Bumpy Ride.

If the current price regime continues for years into the future than the value of the big agreements made last year might be impacted but the thing is that China and Russia are dealing in yuan and roubles, not in dollars. This means that the dollar’s fluctuations are not relevant and the price of the rouble and yuan as a pair will be much more stable than rouble – dollar -yuan will be.

China has devalued slightly, but the currency, due to its link to the dollar, is still very over valued. They could move another 20% to get to the ‘correct’ value. Of course by doing so they’d kick the US in the nuts such that they’d not be getting off the floor for a while.

For them cheaper energy is worthwhile but is not essential. It was the decline in China’s energy consumption early last year that told us what was happening globally – that consumption of Chinese goods was falling. The Chinese knew this too, before the energy figures gave he game away. That led them to move ahead with moving toward the internal market which has a huge amount of room to grow – just as the US market did from early in the last century when they were already the world’s largest economy (since about 1870).

It is obvious that the Chinese devaluation was a signal to the IMF and US. As many do not understand, a currency pegged to another, as the yuan and dollar are, are not freely traded. For inclusion in the IMF basket the yuan needs to be unpegged, either fully or almost so.

This is a signal to the IMF that China is willing to do what is needed.

The US is being told that China will no longer support the dollar as it has been doing.

Whilst events may seem to be coincidental they are probably less coincidental than we might imagine. China is making foreign policy moves, in concert with Russia. Saudi Arabia is making its own moves. The target, on the whole, is the US.

The goal is to force the dollar into appreciation against as many significant currency pairs as possible thus weakening the US freedom of action across the globe and in the internal market.

Remember, having a ‘strong’ currency is often not the best option, especially when the holders of that currency have been spending the past 6 years trying to devalue it, without success.

The big issue facing all of us is this: it is quite possible that the global economy can no longer afford to pay as much as it is for oil. If we can not afford to pay then we will not and the price will fall further. This WILL result in a fall in oil output from all but the cheapest sources – this means the US will cease to produce almost any oil. Only the cheapest producers will be viable and only the cheapest producers with manufacturing infrastructure will be able to maintain anything like current standards of living. Continue reading

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Why the US Economy is Finished. The Managed Decline of the USA by Russia & China.

We should hope they will succeed. Not because of any ill feeling towards America, but WW3 started on the back of economics to save a country hopelessly in debt will embroil much of the world. I think what we are seeing with Russia, China and others is a long, slow, managed decline of America to a regional power. The dollar, at one time America’s strength, will become the tool to create that managed decline of influence. Like I said before, America will go down kicking and screaming. And that is what may cause a war. Continue reading

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2013 Musings from Togliatti, Russia: Cost of Living, Money and Finances

People have said for a long time that to replicate a western lifestyle in Russia costs more than at home. And it does.

When you subtract the stuff that is laughably cheap, what remains is way overpriced. But its true that if you just go about your day, have lunch somewhere, take a few taxis, have dinner somewhere, buy a few provisions from a grocery store, maybe take a boat trip or do something each day, you will be surprised how the money just drains from your wallet.

Those prices quoted above by mhr7 for Ukraine are how it used to be in Estonia. Then they joined the EU and everything shot up almost overnight.

In Russia, if you look at locals, many of them are tooling around in BMW, Audi and other imported cars. Those cars cost almost twice in Russia than they do at home. And we know few will be on finance. That means the bloke in the BMW jeep likely coughed up close to £50k for that car. Well, he isn’t on £200 a month is he? Local oligarch perhaps? Five years ago you saw the odd one and you may think so. Now go to a decent restaurant or the yacht club and these cars are lined up outside.

We took a boat trip for a couple of hours down the Volga. Tickets were maybe £5 each. The guy ahead of us brought three pals, a big pizza and crate of beer so he and his buddies could chill out. So tickets £20, pizza and beer maybe another £15. So this average bloke spent £35 for a two hour chill with his pals. So he isn’t on £200 a month either.

I would recommend any visitor budgets for £100 a day, excluding accommodation. And have a back up card in case he runs out.

Anyone who can live in Russia on £200 a month rides the bus, shops in the cheap market and eats only home cooked cabbage and potatoes. Whilst many do live like that, what I guess we can call the middle class is growing quickly and noticeably. People are buying the new houses as they are built, people are buying new cars, both local ones and imported ones. People are dining out more. People are remonting their dachas. People are holidaying abroad. People are spending money, so that money is coming from somewhere.

The only explanation is that the economy is starting to work as it should. Government is spending money on improving infrastructure. That money eventually filters down the food chain to the baker, the butcher and the candlestick maker. Continue reading

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The Weak, Collapsing Pound against the Euro and Dollar.

Grasping Gordon Brown’s government are not too worried about the situation we think. Consider it from their point of view: Anybody with savings in foreign currencies is moving their cash back into sterling right now at happy rates. (Assuming their bank has not gone bankrupt already.) People who fled Gordon’s high tax regime and those with second homes are selling up and coming back to England to ride out the storm – bringing their Euros with them. That’s a lot of extra cash flowing into Gordon inc. to be taxed and a few possible voters for him coming home. [He hopes] Continue reading

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