China’s 9 dash lines and the demise of the $ (Part II)


By Chemrock

Nov 2016 I wrote on the high possibility of the huge US debt crashing the economy.  I went to great length explaining economics, money, the special strength of the $ as a world reserve currency, how the loans were affected through issue of Treasury Bills which have never ever been repaid as maturing issues are simply replaced by new issues, and how some countries are taking steps that will marginalize the use of the $. (See The Rube Goldberg machine). My conviction remains the same and in this article I’ll review it from other perspectives.

The $ is facing pressure from:

  • Another asset bubble
  • A colossal national debt
  • Junking of the $ in international trade



Normalcy bias is a psychological state of mind of denial by people faced with the possibility of a disaster. Those with a normalcy bias have difficulties reacting to something they have not experienced before. The defense mechanism kicks in and they tend to underestimate the chances of the disaster occurring or downplay the impact that it may cause. Something that has never happened before is unlikely to happen. This is a big problem for those managing disaster preparedness when they face resistance to evacuation orders.

And so it is with the precarious position of the $. The public is still largely unaware and unwilling to believe the almighty $ can topple. They have seen markets crash and each time the Fed has managed to nurse the economy back to health, or so they thought. The few who look at the bigger picture differently are deemed as over-reacting or as doomsday preachers.



The 2008 sub-prime crash was practically left unresolved. All the govt and the Fed did was to save Fanny Mae, Freddie Mac and the big wall street banks. The underlying problems were left unresolved. They simply kicked the can down the road, again.

What are financial bubbles all about? Basically, they come about from a wrong distribution of resources of production – too much money going into a particular asset. Prices build up to a point where there is nowhere to go but implode. Rightfully, they should have been allowed to collapse in 2008, along with all those institutions that didn’t do their job well. Out of the ashes, the system will rebuild and be stronger for that.

There was no reset, and the 2008 underlying problems were covered up like putting a lid on a volcano. The pressure was never released. Outside, everything seems well again, but inside, the active volcano pressure is building up again, and this time the energy will be many times more destructive.

Housing price levels are now back to pre-subprime crash status. The S&P Corelogic Case-Schiller US National Home Price NSA index shows the national average is now at 185 compared to 175 in 2008.

The Dow Jones Industrial Average was 14,000 in 2007 just before it popped. It is now in new territory at 20,1000.


The Industrial Production Index above shows the US has no interest in manufacturing. Money hasn’t been going into production of goods, but instead into building asset bubbles.

The Equity Buy-Back Funding chart is the most telling. All those QE (“Quantitative Easing”, by the Fed) and zero interest rates were meant to stimulate the economy. In times of high liquidity and cheap money, businessmen will borrow and expand their business, thus creating jobs, exports and help the GDP. That’s the theory. Instead, corporates capitalized on cheap money; they borrowed to buy-back their own shares. This has 2 effects — (1) It helps to push equity prices up creating an illusion of a boom. (2) Fewer shares in the market means their EPS (earnings per share) improves, creating another illusion of healthy growth. The reality is they have done nothing to improve cashflows. The crunch comes when interest rates start to rise. There is no cashflow to fund it. The Dotcom and subprime bubbles both exploded when the buy-back funding peaked and it is now peaking again.

From 2016 onwards, there is added pressure from pension fund problems. There will be more people cashing out than paying in. The demographics have shifted. The result is there will be much less cash holdings in the hands of mutual funds.



The asset markets capitalization is much higher than it ever was in 2008. The subprime 2008 crash was not allowed to go fullblown and thus it did not trigger problems in the derivatives markets other than the Credit Default Swaps and Collaterized Debt Obligations bundled with the housing mortgages. This time round, if the govt cannot contain it, the asset markets meltdown might be contagious and suck more derivatives into it. The derivatives market is mindboggling huge. The nominal value is estimated at $1.2 quadrillion in the US.

Easy money in the past several years has generated a huge build up of corporate debts. The corporate bond markets have seen a 275% increase since 2008 internationally. As $ interest rates rise, bond yields have slipped. There are about $10T bonds in the world trading at negative yields currently. Historically there has never been a bond market crash, yet there are many that fear a possibility of one in the works. A bond or an equities market crash this time round is likely to trigger a crash in the other.

All important international markets are concurrently having deficit problems one way or another. There are no other resource to call on this time. As big as the Fed is, during times of financial crisis, they too need international assistance. The 2008 crash required the Fed to utilize huge $ swap facilities offered by the World Bank, IMF, and various central banks around the world, particularly Bank of England, Bank of Japan, Monetary Authority of Singapore and the Deutsche Bundesbunk. These lines may no longer be there or sufficient to complete a rescue.

8 years of QE both in US and Europe have seen the central banks taking tremendous amounts of corporate bonds into their balance sheets. It may well be they have painted themselves into a tight corner leaving them with very little monetary ability left to contain the next market crash.



America is bone dry broke

These are the staggering statistics :

  • The national debt is now about $19.7 trillion.
  • The US trade deficit is about $540 billion per year.
  • The federal budget deficit is now about $1.3 trillion per year.

Every year the country needs another $1.84 T. Where are the savings needed to repay the debt?

In the Freddie Mac and Fanny Mae rescue package, the govt basically guaranteed all their bond issues. No one really knows what is the extent of the govt’s off-balance sheet liabilities. The cost of this is filtering into the Treasury’s books.

On top of this, many of the states are also bankrupt and there is no way the Federal Govt can fund the state deficits. In the 2011 budget, 46 states reported a total $160 B budget deficit. The Federal govt can print money to get out of jail, the states cannot do that. Some of the states have resorted to desperate moves like selling and leasing back state assets, reducing prison population by early releases, one state has instituted the takeout of dead person policies (if a person dies, the pension goes to the state), legalizing the sale of marijuana, etc.

To top it off, they need $60 B pension payout each year.

Is America bankrupt?

It is as bone dry as the sun-drenched skull of the longhorn in the desert sand.



Since the sub-prime crash of 2008, the Fed has been pursuing a policy of QE and interest rate decreases to ramp up the economy. QE is simply a fanciful word for printing money, or monetizing the debt, or inflating the debt away. QE pumps liquidity into the market and low interest rates encourage people to borrow and expand businesses.

After 8 years of QE, coupled with China dumping $1 trillion of their $ reserves, doubters are prone to ask why is there no inflation in the US, and why indeed is the $ strengthening? The economy has not grown so where did all the liquidity go? The answers to this puzzling situation are :

  1. Most of the money went right back to the same asset markets that caused the financial problems in 2008 — real estate, equities and derivatives.
  2. The $ has always been the refuge currency when world economies are in trouble. Right now there are serious problems everywhere — Japan has been in deflation for 2 decades, China is facing asset bubbles about to burst, Europe is in a mess, Brazil is in crisis, Russia is as broke as all the others, and India is having riots on the streets from a demonetization exercise. It is not a case that the $ is strong, but that the other major currencies are in equally bad shape. The strength of the $ is artificial and is on borrowed time.
  3. The govt is bending the data. The various economic metrics have been massaged to display a more favorable situation.

Take the unemployment figures. Previously, it used to be straightforward — if a person is out of work, he gets into the unemployed figure. Today, unemployment is based on employment benefits. If a person is receiving the benefits, he gets into the data. The moment his benefits expire, he drops out of the data, although he still has not found a job.

Still don’t believe? Take the CPI (consumer price index), where certain heavy items have now been omitted, like rents. So from 2009 to 2016, the reported official inflation rate averaged 1.8%, with the highest being 3% in 2010.

The Chapwood index is a private enterprise effort that collects data across 50 cities using a CPI with 500 items more reflective of ordinary things that people spend on. Their index for 2011 to 2015 showed a 5 year average inflation rate of 11.2%.

Who said there was no inflation!



A default will unleash a financial disaster that will have a domino effect throughout the world. $ interest rates will shoot North due to perceived increased risk and all currencies in the world will rise in tandem, bringing many economies to their knees.

All countries with monetary sovereignty (that is, countries that have the right to print their own currencies) will never do this. These countries have the advantage that EU countries like Spain, Portugal, Greece and now Italy, never have had, and for which their capability for monetary management is curtailed.


Technically, Greenspan is correct, of course. With fiat money, this has been the preferred choice of action taken by many countries before. History has shown that countries that take the “print money and inflate the problem away” route have never turned out well. In the past 100 years, Russia , Ukraine, Poland, Chile, Brazil, Austria, Argentina, Japan, Germany, Mozambique, etc, took the printing approach and got devastated. The result is always inflation and skyrocketing interest rates; the value of currencies diminish, and economies plummet.



If they feel the economy is too hot, the Fed will stop QE and raise interest rates to reel in inflation. Here lies the problem. Easy money from 8 years of QE and zero interest rates have created too much corporate debt. Increases to Fed rates will create a credit bubble because corporations do not have the needed cashflows. Furthermore, with a $19.7 T national debt, an increase of 100 basis points will add an additional interest burden of $200 B to the Treasury. The recent rate increase, the first after so many years, was a miniscule 25 basis points. Yellen has said there may be 3 more increases in 2017.

A hefty increase in rates in 2017 will pull the rug from under the feet of the equities market and precipitate a crash.



From President Reagan onward, the national debt began its spectacular climb. Obama alone chalked up almost $8 T in debts and on this basis alone, I see no way of ever judging him a great president. It became very apparent that protecting the value of the $ is critical to preserving the American way of life. With oil/gas being one of the biggest components in $ transactions, keeping the industry within US sphere of influence is key which in turn has heavily influenced American foreign policy. America will go to war to protect this interest. When looking at world events, the big picture always shows secret US objectives:

  • US invasion of Afghanistan in 2001 was portrayed publicly as going after the Talibans for sheltering Osama bin Laden after 911, but it was actually to protect the Turkmenistan–Afghanistan–Pakistan–India gas pipeline project. This ensures gas supplies into Europe do not need to use the Russian pipelines.
  • Gulf War II invasion of Iraq was supposed to be to destroy weapons of mass destruction that Saddam Hussein supposedly possessed. There were no WMDs. It was to topple Saddam because he was making arrangements to stop using $ to price Iraqi oil.
  • The Syrian civil war isn’t about toppling Assad, but frustrating the Iranian gas pipeline construction.
  • The Ukraine civil war is about delaying the Gazprom pipelines that will make Europe gas dependent on Russia.
  • Economic sanctions against Russia indirectly frustrates Siberian oil/gas from gaining a more prominent role. For example, to reign in bank risks, Morgan Stanley had to divest its huge and lucrative energy divisions. The Russian energy company Rosnett was in the bidding but eventually backed out in 2014 because US sanctions made it difficult to take over the Morgan Stanley operations. That takeover would have allowed the Russians to play a very important role in oil trading activities, including price fixing.

The real question is, what will an America under Trump do to further defend the $? Will it resort to some conflict and roll out the military complex to drive the economy? Is there any wonder that the Chinese now fear a war with the US is inevitable?  Do Chinese defensive moves in the 9 Dash Lines make any sense at all?



Most people do not realize that the US currency is not controlled by the govt, but by a small group of bankers who own the 12 Federal Reserve Banks. The shareholder banks earn a statutory 6% dividend on the capital invested, and all net earnings are transferred to the Treasury Dept. In 2015, the Fed transferred almost $100 B, clearly demonstrating no hanky panky as far as operations of the Fed are concerned. It is in policy decisions and rate fixing where one suspects conflict of interest will always see national well-being sacrificed, as has been the case over and over again, when big banks get bailed out in times of crisis.

The likes of Illuminati, Bilderberg Group, Commission of Foreign Relations, Trilateral Comission, Skulls and Bones are no longer in the realms of conspiracy theory. Proponents for a New World Order do exist. Some say it is as ancient as the Knights Templar and there is another suggestion that this had its roots from the days of the British Raj that once ruled India. Groups of people coming out of the experience of the powerful East India Company (that ruled India on behalf of the Queen) realized that whoever controls the currency is king. Remember, in those days, the British Sterling was the world’s reserve currency. This shadowy group of ultra wealthy makes Machiavellian moves that shape world events and wars. The family that seems to be deeply entrenched in this are the Rothschilds.

Apart from the NWO groups of old wealth, the modern world’s mega deals have created many new immensely rich people. These are people who today have such financial clout that they can take positions that impact the economy of a country. George Sorros’ $5B profit in one day in the foreign exchange market betting against Asian currencies in the 1997 financial markets crash is folklore. John Paulson made $20 B in the sub-prime crash 2008. Jacob Rothschild was rumored to have made $1 T betting against BREXIT. What I’m trying to highlight here is that there are people who have a keen interest on the status of the $, and there are some who game the $ at a very serious level.

Four US Presidents and a senator running for president were assassinated because they threatened the status quo of bankers.

  • Abraham Lincoln : When the banking cartel agreed to finance the Civil War at 24% to 36%, he was aghast at the greed. Abe passed a law that allowed him to print $400 million in treasury notes called “greenbacks” and financed the war interest free. Bankers from London and many European capitals saw the danger of a govt printing it’s own money, so they advocated for the destruction of America. After Abe’s death, money printing rights went back to bankers and ‘greenbacks’ were paid off.
  • James Garfield : He made a public statement “Whosoever controls the volume of money in any country is absolute master of all industry and commerce . . .  And when you realise that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.” Within weeks, he was dead.
  • William Mckinley : He advocated a gold-based currency. In 1900, he signed the Gold Standard Act, which formally placed U.S. money on the gold standard. With Mckinley out of the way, the Fed Reserve Act was passed in 1913.
  • John F Kennedy : He passed Executive Order 11,110, which effectively shut down the Fed. He printed silver-backed notes to replace the fiat Fed Reserve notes. When Lyndon Johnson took over, the silver notes were withdrawn immediately.
  • Robert Kennedy : The senator was in the presidential race when he was assassinated to prevent him re-instituting his brother’s action.

Donald Trump has mentioned during election that he will dismantle the Fed. He has billionaires and bankers in his cabinet so it’s not clear yet what he will do. If he advocates doing away with the Fed, he will be assassinated.



The big picture of the $ is this. In international trade, most transactions have been priced and settled in $ simply because its stability was trusted. So it took on a defacto world reserve currency role.  This means that, in addition to its own domestic requirements, America has to supply the currency to enable world trade. $ supply grew in tandem with the world economy in the past few decades. So America learned they have a franchise to print $ to finance deficit spending because international demand for $ is insatiable. Instead of manufacturing goods to sell to the world so they have the money to fund the budget, they ‘print’ $ by issuing Treasury Bonds which are snapped up by international buyers, in the process piling up the national debt because those bonds need to be repaid eventually. The wonderful thing is that all those $ that were created went into offshore markets, thus domestic inflation was not a big problem. (But enough of it entered the domestic market to cause asset bubbles and some inflation). Now the fairy tale is coming to an end. World trade is not expanding that much anymore, oil prices have tumbled, faith in the $ strength is diminishing (because of the national debt), govts and corporates are getting out of $ reserves or positions, countries are making all sorts of arrangements to avoid using $ in transactions — all this means the vast offshore $ will slowly find their way into domestic circulation. Crazy inflation is unavoidable and it’s just a question of when. Another problem is, if nobody is going to buy Treasury Bonds, where is the money to fund the budget deficits going to come from?

In the Rube Goldberg article, I detailed some of the steps various countries are taking to side-step the use of $ in international transactions. Here’s another — in 2009, China, Russia, Japan and Gulf Cooperative Council countries met secretly to agree on pricing oil in other currencies. They will use Euros, Yen, Rmb, gold, and a new common currency of the GCC countries they are planning, which they call ‘Bancor’. They will also create their own payment system similar to the SWIFT.

The Yuan is now in the IMF’s basket of currencies for the SDRs (special drawing rights).


The above chart clearly shows central banks are dumping their Treasury Bill holdings.  China used to be the country with the highest holdings in $ reserves — about $3 T. They have since disposed more than a $1 T.

Many central banks are building up their gold reserves. The gold refineries in Switzerland simply cannot cope with deliveries. The Chinese now have substantial gold reserves.

All those families with great wealth know that the only constant in the financial advice they receive is to move all assets out of $ based paper. And why would they park their wealth in $ earning zero interest? The likes of Soros, Rothschild, Paulson, etc, have taken huge positions in gold. Having done so, these scavengers will work against the $, and they can do serious damage.

Anti-trade moves by Trump (he has scrapped the TPP) will lead to lower growth, add to inflationary pressure, and hurt the $.



There are two wrong notions held by the public that the move to get rid of the $ as a world reserve currency is due to (1) a political move by China as it gains stature as world leading economy, (b) a conspiracy theory of a New World Order pushing for world dominance with one single currency that it alone controls. Both are nonsense.

In the 1960s, economist Robert Triffin pointed out that any country whose currency is used as a world reserve currency faces a conflict of economic interests that arises between their short-term domestic and long-term international objectives. This is because it must always maintain a huge trade deficit as it tries to supply vast sums of its currency to fund the rest of the world’s trade requirements. This is called the “Triffin dilemma”.

Actually, this problem was noted long ago by Maynard Keynes and he proposed a solution – the creation of a global reserve currency “Bancor”. The Bretten Woods council never took that up.

The Governor of Bank of China, Zhou Xiaochuan, in 2009 blamed the Triffin delimma and the non-adoption of Bancor for the 2008 crash. He proposed strengthening existing global currency controls through the IMF and the creation of a new world reserve currency.

In 2010, the IMF published a paper “Reserve Accumulation and Intl Monetary Stability” which called for the creation of a global central bank with a new international currency, Bancor.



Demonetize the Federal Reserve notes

Runaway inflation will cause the govt to withdraw the Federal Reserve notes and replace it with something new. Have you heard of the “Rainbow Notes”? The govt has already printed these; they are stored in 100 warehouses in the East Coast. They come with new security features and the official reason for the issuance is to flush out counterfeit notes. Really?

If not done properly, the country will explode. The Indian experience shows exactly what can go terribly wrong. There will be riots, people without access to cash will go hungry. In India, people died because they could not get hold of the new currency to buy food.

Capture the 401(K) and the IRA pension monies

Monthly payouts will be restricted to a small sum, or the govt might issue special treasury bonds where maturing 401(K) or IRAs will be forced to buy these.

Ban sale of gold

In the 1930s during the recession, the govt banned the purchase of gold bullion by individuals.This restriction was lifted in the 1970s. It may be re-imposed again.

Capital controls

Opening of foreign bank accounts may be banned and it may become more difficult to move funds overseas.

Homeland Security

They are already building capabilities to control people in times of anarchy.

Nationalize untapped natural resources

The govt may nationalize all those resources still in the ground — gas, oil , gold, silver, copper etc., so they may sell them forward to build up international reserves to back a new currency.

Wealth tax

Used as an excuse to strip cash from the wealthy to fund deficits.

National Deficit Bond

Similar to war bonds, the govt might create a special fund to help out with the deficits. It may be compulsory for everyone to purchase such bonds.


This is an ominous topic but public discourse is necessary. We need to know if our public officials are on top of things and have taken precautionary steps to shield the country from what’s coming. The Bangko Sentral’s build up of Rmb reserves not too long ago was definitely one such concerned move. For those countries with huge sovereign wealth funds, we certainly want more transparency to understand their strategies to protect the national assets. In America, the preppers used to be some nuts preparing for the anarchy that will cover the land after a natural catastrophe. Over the past few years, their rank has been swelled by upper crust society types preparing for a coming financial meltdown that they know is coming.


334 Responses to “China’s 9 dash lines and the demise of the $ (Part II)”
  1. edgar lores says:

    My normalcy bias is the economic theory “too big to fail.”

    No, the mighty US $ won’t crash. No, there will be no international financial meltdown.

    The reason is that the US $ is an outlier. It is not just the currency of one nation; it is the currency of all nations.

    The other reason is Greenspan’s (and Micha’s) monetary theory.

    The bigger other reason is that the US $ is a myth that everyone — well, almost everyone — believes in.

    Myths that are less universal — religions, Santa, unicorns, and girls don’t fart — are still extant. And money — in all its forms, from beans to shells, from paper to gold coins, to imaginary digits in bank computer storages — is a myth that serves humanity well.

    In this context, the US and the US $ are “black swans.” Not in the sense that the US $ situation is a sudden surprise, but in the sense that the reasoned projected outcomes of the situation are non-computable.

    If ever, the downfall of the US and the US $ will not be caused by economic cause-and-effect. It will be something else. All the countries mentioned that experienced economic devastation, together with their currencies, are still around.

    And what is that something else? Perhaps WWIII. Perhaps an asteroid. Perhaps ET.

    Sorry, Chemrock. I am normally logical and rational. Blame the summer heat.

    • chemrock says:

      Edgar, I can seldom find fault in your logic, but just this once — perhaps it’s too early in the morning.

      “All the countries mentioned that experienced economic devastation, together with their currencies, are still around.”
      You are wrong on 2 counts:
      1. If we look further back into history of world currencies (or currencies widely used in a vast expanse of ancient worlds), the country or empire is gone together with the fall of it’s currency. In more modern history, British Empire went with the fall of Sterling as world currency. See the image below of old world currencies.
      2. I’m talking about the demise of the $ and it’s role as an international currency. USA will most likely be around, but who knows what can happen — California is threatening breaking away due to Trump’s policies.

      Mainstream US media and in fact in most other countries, don’t pay attention to this rising problem. These 3 world bodies are calling for a new world currency:-
      – IMF, as i indicated above
      – the United Nations (see ),
      – World Bank , Chief Economist Robert Zoellick.

      • edgar lores says:


        Thank you for the reasoned response.

        Yes, your timeline shows that all dominant international currencies eventually become non-dominant.

        But your contention here is the US $ is in danger of imminent and catastrophic collapse due to the overextension of credit. The credit bubble will pop.

        There is no such parallel with the British Empire or with the other empires.

        The main similarity between the nation states in the timeline is that they were primarily mercantile and secondarily military empires. They were the pre-eminent economic and military power of their times. But some, like Italy and Netherlands, were only military powers in the lands they had colonized.

        With respect to the British Empire, I will contend the following:

        1. The Pound was not overextended.
        2. The demise of the Empire was not due to the collapse of the Pound but due to decolonization at the request of the colonies and the granting of those requests by the UK. But also, one could say, at the behest of the UK.
        3. The demise was not sudden. Neither was it violent for most colonies, like Australia, New Zealand, Malaysia, and Canada. And the demise was not catastrophic.
        4. The American Empire is not a real empire in the sense of owned colonies. It is more of an ideological empire.
        5. I will agree that the US $ will fade as an international currency “in time,” but I do not agree that it is in danger of “imminent and catastrophic” collapse. It will fade as people gradually realize the US is no longer the predominant economic and military power.
        6. Lastly, my point, the countries that “melted down” — and I was not referring to the UK but to your list consisting of Russia, Ukraine, Poland, Chile, Brazil, Austria, Argentina, Japan, Germany, Mozambique, etc — are still around. But so also is the UK.

        • psstbookblog says:

          the next stage after empire is ruin.

        • Micha says:


          If humanity has to continue its forward march, there is no other choice but for America to reform, rediscover the values from which it was founded, find its soul again and re-mount its role as a world leader.

          • Edgar Lores says:

            I keep saying America is an ideological empire. Of course, it is more than that. It is a technological, economic, and military empire.

            However, what impresses me most really is its ideology of human values. That’s why I forget the other characteristics. The country is not perfect. Far from it. It has practiced slavery. It has practiced torture. And it has conducted black ops against other countries.

            But, on balance, America is exceptional. I agree with you.

        • caliphman says:

          Just a quick comment because my time is short today. Chemmy, kudos for an economic piece of epic scale, breadth and perhaps analytical ambition. There are many disparate and although somewhat linked economic problems discussed in this piece but like Part 1, the attempt to tie them all neatly together in an overarching warning of the collapse of the US dollar and economy is quite a stretch in my humble opinion. I agree with Edgar that currency and economy aside, the fall of the US as the leading international power on many fronts be it on military, geopolitics, trade education, science, etc. Is not on the horizon but may not be diminishing. I do not think this is what you were alluding to in your conclusion.Although I must remark that the decline of Spain, Netherlands, Great Britain USSR illustrated in your chart has to do with the waning of their strength and reach of their colonial and geopolitical rule. In any case another great recession or even depression in the US or even a run on its currency due to its public debt burden may have adverse repercussions on the Philippines and the global economy, it is nowhere near like the sinking of an economic Titanic that the Philippines should be wary of and prepare for.

          But then my view should be of no surprise as I have mentioned here before that economic theory is deeply divided on the issues of the danger of very large national debt burdens and their global impact in the case where an established international transaction currency is involved like the US dollar.

          • chemrock says:

            I am cognizant of your view on the US national debt. You remain somewhat optimistic on the strength of the size of the huge US economy being able to sustain the debt. The US Debt to GDP ratio is now about 104% (2015).

            Per wikipedia there are 16 other countries with Debt to GDP ratios higher than the US. This ratio is a good indicator of financial health, but not always so because some countries have certain peculiarities that render this statistics not appropriate for them — like Japan and Singapore which have far higher ratio than US. Most of these 16 countries I have to beg ignorance of their financial status, but I’m familiar with the serious financial problems of these — Zimbabwe, Greece, Italy, Portugal, Iceland, Ireland, Belgium, and Cyprus. Spain has a ratio slightly lower than US, and it joins the list of countries in trouble.

            Is US so special that empirical indicators don’t apply? Consider this. If you look at a time series chart on the US debt, it’s curve has taken on the ‘hockey stick’ trend. It has rounded the curve and during the times of Bush Jnr and Obama the climb is now vertical. Going forward, with $1.3T annual budget deficit and compound interest on $19T (and rising) it’s going to be a chart shooting north 90% angle. The only saving grace in the past 8 years was the unnatural low interest rate and we are entering the stage of rising interest rates.. It’s going to be a runaway train that Trump can’t stop. Tell me at what level will your confidence be shaken?

            I appreciate your considered view is different from Micha’s. Her faith in the $ and US debt is anchored on her understanding of electronic money and the capability of the Fed to put digital cash into govt’s banking accounts at will. It’s something I can never comprehend. If that were so, every other country in the world could similarly do the same and get out of debt electronically, even non-monetary sovereign countries like Italy, Greece, Spain and Portugal can too because whilst their hands of their central banks are tied, surely the ECB can electronically credit the member countries central bank.

            Like Micha, Lance and just about everybody here, I prefer a strong US that is more cohesive, and one that harkens back to their FDR ideology days, to lead the world.

        • chemrock says:

          Regarding Britain — The Anglo-French-Isrealis invasion of the Sinai Peninsula 1956 to take control of the Suez Canal from a rising Eqyptian colonel Abdel Nasser is seen as Britain’s last imperialism adventure. After that, under Harold Wilson, Britain pursued the “East of Suez” policy which saw them withdraw from all their colonies. The reason – matter of economics, Britain was going broke. One thing I respect the Brits, they had widespread and genuine feeling that Britain had responsibilities in its diminishing empire, to protect its peoples from communism and other forms of demagoguery. After East of Suez, Britain still participated in some military actions, but that was more in support of existing local regimes.

          Churchill and Eden the 2 prime ministers after the war, never recognised a weakened Britannia. After them the Brits recognised after the WW2 that it’s a new world and their place in the world has changed.

          (6) I never say that economic meltdown means the a nation will physically crumble. But it could. especially in a federalism.

          • edgar lores says:

            Chemrock, thanks.

            The fact that some ex-colonies still (a) maintain constitutional monarchy as their form of government and (b) that the quadrennial Commonwealth Games (formerly known as the British Empire Games) are well represented and attended attest to the strength of the bonds between the UK and its former country-subjects.

            When I applied for Oz citizenship, my oath of allegiance was to the Queen — and to her heirs and successors. Thus: Prince Charles, Prince William and Prince George. 🙂

            • chemrock says:

              Your observation is quite right. The Brits coined the term ‘wogs’ — westernised oriental gentlemen (not to be confused with ‘wags’ – wives and girlfriends of footballers). We see ourselves as wogs, Yassay see himself as ‘little brown brother’. One connotes respect, the other at best a little condescending.

              The Queen is the head of state of Australia (of New Zealand too if I’m not mistaken). That’s the parliamentary system — subjects can hate and cuss at Turnbull, but should never disrespect the head of state. Just like we should never disrespect our parents. In presidential system, subjects cuss at Du30 or Trump and there is no national figure head that is above politics for people to love and respect.

          • Bill In Oz says:

            Chempo, the financial burdens of world war 1 & 2 was disastrous for the British empire. Britain financed the wars with borrowings.
            Also the British maritime fleet was also largely destroyed in WW2 – sunk by German submarines ! For a trading empire this was a catastrophe.

          • caliphman says:

            It was during the twentieth century that economic and industrial might surpassed miltary power as the crucial factor in global conflicts. The US involvement in WW2 assured the Allies of enormous production capacity to supply an entire endless stream of warships, aircraft, tanks and military material which in the end overwhelmed Germany and Japan.

            • chemrock says:

              You are right. In WW2 America supplied not just military materials but food as well to the Allieds who had no money to the US. So settlement was by gold reserves. That’s why all the gold went to US after the war.

              In ancient wars the conquerors confiscated everything from the captured territories to pay for their war effort.

  2. Micha says:

    Oh my gawd, this looks like straight out from an Alex Jones infowars.

    There are many reasons that the American economy could collapse. The $19 trillion national debt is not one of them.

    Any challenge to US dollar dominance will be met fiercely. Look at what happened to Qaddafi and Saddam. Both of this tin-pot dictators threatened to trade their oil in euro. You speak of replacing the dollar with Bancor and that is simply wishful thinking at this point as both the World Bank and the IMF are effectively dollar establishment protectors. The Russians have no economic muscle to leverage any dollar challenge. The Chinese, if they insist on making the renminbi a dominant currency, will face outright military confrontation from the hawks in Pentagon and their banking cartel friends at Wall Street.

    As sufficiently wikipedia well-researched as this article seem to be, the conclusion falls flat by falsely fear mongering on the dollar’s demise.

    You need a world war 3 for that to happen. And even if a full scale nuclear war between China erupts (highly unlikely), who’s going to bet against the American firepower?

    • chemrock says:

      I appreciate your views although I think the reference to Wikipedia research smacks of sarcasm. Strangely the only part that I referenced Wikipedia was on ‘normalcy bias’ — pyschology is never my strong point.

      China, Russia, Brazil, UAE, Saudi Arabia, Iran, Sorkor, Venezuela, Sudan, Japan, Turkey, India, South Africa — these countries are now invoicing their trades in currencies other than $ as much as they can. These countries together represent a huge % of world GDP.

      The yuan is now a major currency used in Africa.

      You are wrong on the sentiments of the IMF and World Bank. Since 2010 they have publicly called for a move away from the $ as world currency. Even the United Nations are joining in the same call.

      American firepower is still the greatest. Do Americans still have the stomach for another international conflict? Does the govt still have the financial capacity when they can’t even balance their federal budgets past 20 years? Oh yeah they can print more money, to a world that increasingly does’nt want it anymore.

      Jack Ma was once asked in a business forum for his views on the financial problems of the US. In his non-eloquent way he said the US had their opportunities to gain enormous wealth over past decades, but where did the money go? It all went into all those wars. That could perhaps be the epitaph for the $.

      • Micha says:


        Funny that I found your Triffin dilemma definition straight out from wikipedia. But you are correct, no need to sidetrack a fruitful discussion by the manner in which you took your material for this article. Apologies and moving on now…

        The countries you enumerated in your 2nd paragraph have one thing in common too : all are undergoing economic and/or political convulsions. Is it engineered by the secretive folks at Bilderberg group to advance their NWO agenda? Who knew. It doesn’t really matter if they trade in currencies other than the dollar (wild guess: renminbi?) Those are mere conveniences and will not, in any significant manner, dislodge the dollar from its throne. What we can agree on for that to happen (ceding supremacy) is the weakening of American institutions in particular and the American deep state in general. That is why the establishment in Washington sees the current teenage president as a threat and are seriously contemplating ways to remove him from office. The comedian-in-chief also surrounds himself with amateur advisers and it will be very interesting how will this all play out. Compounding this is the real threat posed by the effects of global warming which the teenager president also denies with his “alternative facts”. Tillerson, the Exxon Mobil honcho, has just been confirmed as state secretary.

        The yuan is now a major currency in Africa? How convenient that it should be in Africa.

        The IMF, the World Bank, the U.N. are all headquartered in what country again? You’d think these are not used as extensions of American hegemony? They might call for the adoption of another international currency but those are just symbolic gestures which will be readily vetoed by the host country. How much power does a U.N. chief nowadays?

        Do Americans still have the stomach for another international conflict? If it involves national interest, yes they do and yes they will.

        Does the govt still have the financial capacity when they can’t even balance their federal budgets past 20 years? Yes, yes, and yes! The current Pentagon budget alone is bigger than the defense budget of the top ten countries in the world combined. Balancing the federal budget is the least you should be worrying about and, frankly, it is actually harmful for the US economy to do so. This might again appear counter-intuitive to you until you study the tri-sectoral balance of a domestic economy.

        The rest of the world doesn’t want dollars anymore? Oh my gawd, I need to give my bank account number to the rest of the world so they could just wire their dollars to me. This is my chance to get rich quickly.

        Jack Ma is a successful businessman but he should know better that the wealth of America, for the most part, actually rests on waging wars. America doesn’t get bankrupted by wars, it gets even wealthier.

        • chemrock says:

          Thank you Micha, for a decent discussion.

          Yes Triffin dilemma is from Wiki, I forgot to mention.

          Those countries that move away from $ would most likely invoice in Euro, or in their counter-party currencies. I don’t think there will be many countries that will leave $ for Yuan — why leave a currency that they have lost trust into another that has not proven it’s trusthworthiness. They use Yuan because that’s the currency Chinese exporters want to invoice. African countries have less choice because they are now China dependent economically.

          You are right, US still hold sway in IMF and World Bank. But note IMF has scored one against US when they accepted Rmb in the basket of currencies for the SDR. As to UN, I’m not quite sure this body will play any effective role in the move against $. And also note we are in the curious state of strong globalist institutions like IMF and World Bank now facing an anti-globalist POTUS. Interesting where this will lead to.

          As I indicated, the state will go to great lengths to defend the $. But I think the American public is war -weary.

          “Does the govt still have the financial capacity….” we are on different planets on this, let’s just leave it at that.

          Juvenile is’nt it? If I don’t want my car, do I need to give it away?

          Do you know Obama had to cut back on how many military projects? Why did Obama close NASA?

          • Micha says:

            Thank you chemp.

            Just trying to humor you on that rest of the world not wanting dollars anymore. But seriously now, professed American rivals China, Russia, and maybe even Brazil conspiring to trade in euro is not a significant challenge to dollar supremacy because the eurozone is in every danger of dis-integrating too. Britain is demonstrating that with its own sovereign currency still intact, it will manage quite fairly to breakaway from the union. That will give a clue to those who are still in the zone hemorrhaging from the ill-advised austerity measures imposed by un-elected bureaucrats and bankers in Frankfurt to make a dash for the exit too. If Marine Le Pen makes a strong showing in the upcoming French election, the probability of a French exit is quite high. Italy, Spain and others will follow through. And that will be the end of the euro project which is unfortunate for those who want to see the demise of the dollar because the euro is the only credible challenger to it. Not the yuan, not the ruble,or for that matter, not the Brazilian real.

            I am not aware that Obama closed NASA. Maybe you meant it got reduced funding?

            There is a flipside way of looking at that $19 trillion debt . It is also the total private sector savings deposited at the Fed.

            When all or part of it matures, all the Fed has to do is send electronic instructions to the private bank of those savings account holders to mark up their checking account by corresponding amount and presto, the debt is paid. It’s no more different, really, than transferring funds from your, say, Metrobank savings account to your checking account.

            Stop looking at those $19 trillion figure as debt and start looking at it as savings and you’d feel much better.

            Guaranteed, or your money back. 🙂

            • chemrock says:

              I agree with your take on Europe and currencies Euro, roubles, yuan and real. At one time it did look like euro was primed for more important global responsibilities, even Greenspan once mentioned the possibility of Euro taking on world reserve ccy role. a/ct I have never advocated for $ be replaced by yuan because you cannot trust Chinese transparency.

              NASA — Obama just killed further moon projects. NASA is still around, with old technology Shuttlers.

              Your optimism on the $ the way you view debt and savings does not rub on me. I’m just wondering if I have no balance in my savings a/c how am I going to transfer to my current a/c. Treasury bills are issued and retired in big chunks. If it were simple electronic transfers why didnt they make all those previously matured bills go away but had to resort to rollover into new bills? In short, why keep the national debt balooning?

              • Micha says:

                Federal borrowing is a self-imposed constraint in the current budgeting process. It is certainly not etched in stone and the rules could change over time. Up until World War I, the U.S. government needed approval from Congress every time it wanted to borrow money from the public. Congress would determine the number of securities that could be issued, their maturity date and the interest that would be paid on them.

                With the Second Liberty Bond Act of 1917, however, the U.S. Treasury was given a debt limit expressed as a number, or a ceiling, of how much it could borrow from the public without seeking Congress’s consent. The Treasury was also given the discretion to decide maturity dates, interest rate levels and the type of instruments that would be offered.

                The practice of borrowing to fill in the deficit is a remnant of this budgeting routine when the US is still under the gold standard and they did not change the rule even after the NIxon shock of 1971 and is the main reason for continued borrowing or rolling over matured bills.

                Some beltway politicians and insiders in both the Fed and the Treasury Dept know this is essentially just a charade but they dare not speak of it in public for reasons that is more political than anything else. Maybe they fear, for one, that the public would then demand increased spending on welfare benefits undermining the Fed’s mandate to control inflation.

                Even Bernie Sanders whose economic adviser is Stephanie Kelton is not yet politically prepared to admit the true nature of federal finances publicly and has to resort to making all kinds of schemes on how to pay for the programs he proposes. Kelton revealed that inside the halls of Congress, the national debt is the wall legislators erect every time she proposes new insight into the true nature of federal finances. It’s a wall that can only be dismantled in due time I guess, in the same way that the Berlin Wall was torn down only after 50 odd years.

                As for the wall that Donald Duck is planning to build in Mexican border, I don’t know how much longer will it take for people to start shouting, “Mr. President, tear down this wall.”


    • a distant observer says:

      Micha, you speak of Alex Jones, the Bilderbergers and the NWO. Could you by chance tell me where Julian Assange is? 😉

  3. josephivo says:

    The only thing I understand is that in stable markets you only can make little money (or lose little money), in highly fluctuating markets you can make a lot of money (or lose a lot of money). Who wins? The best informed. Who loses? The uninformed. It is your guess who are the best informed, who is best connected. The prime example were the Hunt brothers and the silver price fluctuations in the early ‘80ies.

    The inequality is rising, the group of super-informed is getting smaller. The games are getting bigger and thus more risky. Trade deals stabilize, interdependency stabilizes, a “we feeling” stabilizes more than an “I first”… Are the policies of the new billionaire government in the US coincidence?

    Is it too late to reign in the powerful? Is the power gap between politicians and the 0.001% too big now? A new form of populism growing and a new revolt of the “losers”?

    Thanks for the article that gave more precise picture of the machinations at work.

  4. Bert says:


    America is bone dry broke

    *These are the staggering statistics :
    *The national debt is now about $19.7 trillion.
    *The US trade deficit is about $540 billion per year.
    *The federal budget deficit is now about $1.3 trillion per year.”

    Wow, chemp, all these stats and you said the dollar is about to die, America is crumbling down to the ground, all happening under the administration of former presidents Obama and Clinton. And yet, here we all are, rooting for the Clintons and the Obama, hating the new President Trump.

    something is wrong in the story.

    • chemrock says:

      I think Reaganomics started the heavy deficit spending path. Clinton was actually the one that managed to balance the budget and par the national debt down.

      I never rooted for the Clintons or Obama, but that does’nt mean I am pro-Trump.

      Reagonomics started the budget deficit binge, but Bill Clinton actually managed to balance the budget and par the deficits somewhat. Americans loved the return of Camelot during Bill Clinton’s time until a young chick by the name of Monica Lewinski came along. I fault Bill for the Gramm-Leach-Bliley Act which repealed some parts of the Glass-Steagall Act that led to the banking mess we see today.

      I think Obama was weak and too much neo-libertarian, moving America away from God. It’s during his presidency that politcal bipartisanship has reached irreparable state.

      I think Hillary is too complicated who will carry too much unnecessary baggages into the White House.

      I think Trump is strong but unpredictable, narcissistic, ignorant, and dangerous to have his fingers on the nuclear buttons.

  5. RHiro says:

    It would be most appreciative if the author would state what percentage of globals currency reserves are denominated in U.S. and Euro. Also the same goes for the percentage of whose global currency is currently being used for international trade settlements.

    • chemrock says:

      Sorry RHiro the data is hard to come by. I appreciate your sharp pick.

      I managed to source one chart from SWIFT, but it’s too way back 2011. Rmb was still miniscule in terms of settlements, but interesting to note the strong position of Euro then.

      The 2nd chart is also from SWIFT showing the use of Rmb in Letters of Credit. Rmb is still miniscule, but note the high % jump from 2012 to 2013. Not that this chart refers to LCs only. Roughly 80% of world trade are on open accounts.

      the 3rd chart shows Rmb denominated trade of China 2010-2011. Again it is the % change that is significant. 2011 fig represents about 12% of China’s trade, HSBC expects Rmb denominated trade will increase to 30% by 2015.

      The 4th chart is not about trade. It shows TB holdings of Central Banks warehoused at the Fed. There is now a 2 year downward trend.

      • RHiro says:

        Many tks for the alternative data. I had checked the IMF data last year and the U.S. dollar still the predominant currency for international settlement of trade..Close to 80%

        • chemrock says:

          Excellent point RHiro.
          Now we are getting into a bit more of the nitty gritty.
          For those interested in understanding the rising importance of Rmb in world trade, but wonder why it is not reflected in datas, may I suggest do take note of this comment here.

          RHiro, for the kind of data that you want, I believe BIS (Bank for International Settlements) is the rightful source. I believe the 80% you quoted came from BIS, as quoted in a IMF report. I don’t have the latest figures, but I have an old chart :

          This chart needs some explanation.

          1. For all cross border trades, 2 pairs of currency are required. E.g. if an Aussie company buys bananas from Philippines and invoiced in $, the buyer would first buy $ to pay the seller ($/A$ transaction). The seller would then sell the $ for pesos (Peso/$ transactions). That is why in the above chart, the % total is 200%. Because the $ is the predominant choice of invoiced ccy, the % for $ is excessively duplicated.

          2. The BIS chart is for currency settlements, which are inclusive of interbank portfolio trades not related to international trade. Interbank FX trading volumes are extremely high in relation to world trade. It cannot be relied on as the basis for determining the currency most used in world trade because of serious distortion from pure currency trading.

          3. This chart shows a gradual decline of % for $ from 89.9 % in 2001 to the 80% last year you mentioned. On the other hand, a gradual increase in other currency which is inclusive of Rmb.

          The $ duplication in (1) also explains for the need for a high % of $ reserves, as seen in the fig Micha provided.

          As I mentioned in my article,many countries are making arrangements to invoice in their own currencies, or Euro, Rmb, Yen, or even gold. China is trying to push for Rmb as the invoice ccy, as per HSBC they expect China’s billing will be 30% in Rmb by 2015. Now, as per my explanation above, they still can’t get away from the $ transaction to convert back to their own ccy. In order to bypass the $, China has to internationalise the Rmb. For this, they need to do 2 things :

          a). They need to go to all the central banks of their trading partners and establish Rmb Swap Facilities.

          b). They need to establish Rmb in major FX trading centres all over the world. In other words, they need to establish offshore Yuan markets to ensure fund availability, liquidity and convertibility. They need players who are prepared to offer direct Rmb quotes.

          These 2 steps can’t be done in 6 months. It takes a long time to internationalise a currency. But quietly and slowly, the Chinese have done just that. Rmb swap facility agreements have been signed with many countries. They have already established Rmb in many offshore money centres like Frankfurt, Singapore, Hongkong, London, Tokyo, NY and other centres.

          Since the homework has almost been completed, going forward, Rmb % in world currency settlements will increase markedly.

          What does it mean to have direct Rmb convertibility, why is it important? It matters a lot in terms of cost. Let me give an example. If you look at gasoline pump prices across the world, the prices vary. Of course there are lots of reasons — all sorts of different taxes, duties, closeness to supplier, transportation costs, different pricing models, etc. You will find the US pump prices is one of the lowest, if not the lowest in the world. And the difference can be very significant. One of the main reason is America purchases oil in it’s own currency. That means it has significantly less financial cost in terms of transaction cost, hedging cost, reserve cost. If US were to buy oil in a foreign currency, Americans will wake up to find pump prices 10-20% higher.

          • NHerrera says:


            The development on the Rmb and China’s efforts to internationalize that currency and its impact to the US is certainly known to the US. What then can you say, were you to put yourself in their shoes or rather in Trump-Bannon-Tillerson shoes? May this involve some military moves or posturing among others to arrest the development which has negative impact on them? Or rather consolidate US strategy with this item as one of the factors?

            I am just voicing a question. It may be a tall one; and a response need not be made.

            • chemrock says:

              I have no answer NHerrera.
              I think the US is used to using military solutions to economic problems so we should fear for the worse. With Steve Bannon speaking for Trump, be more fearful.

              • Bannon is a zombie, his spirit containing mean manipulations that demean everything kind people hold dear. He is creepier than a nest of snakes on Halloween eve.

              • Bert says:

                May I?

                chemp, just like NHerrera, wanting to be enlightened, my question:

                You have projected in this article of yours a very negative picture of the dollar and America’s standing in the world economic environment which happened, if not caused, by/under the administration of President Obama. The rise of other world currencies including the RMB against the dollar and the rise of China as a world power I believe has nothing to do and was not caused by Donald Trump or Bannon. And yet, here we are, fearing the new administration for what we think will be the new policy instead of thinking that maybe another administration similar to that of the administration of Obama could be more catastrophic? That is the question that bothers me so much.

                I’m sorry I can’t compose a clearer perspective of what’s in my mind but I hope you get the gist of what I am trying to say.

              • chemrock says:


                I don’t think it’s right to put the economic problems squarely on Obama. There are a whole host of problems built up from long ago that we can’t get into here, it’s just too wide a topic. Problems just snowballed over the years and past decade we saw almost all countries in the world living in a regime of slow growth with loose monetary policies.When all those liquidity are pumped into an economy that is’nt growing, what do we get – high debt levels, serious inflation, or low inflation in real goods and services, but inflated asset prices. Obama’s hand in all this is his huge budget deficits really exacerbated the situation, his admin seriously brought bipartisanship to irreparable levels, his neo-libertarianism has brought America further and further away from God, and he over-regulated America Inc.

                I think another Democrat in office – Obama, Clinton or Bernie S, with more or less continuation of Obama’s policies, could drive America over the cliff, slowly but surely.

                Of course Trump and Bannon had nothing to do with these old problems. But now the problems are low economic growth, loose monetary policies, and populist leadership. Dangerous concoction. He has taken action in 2 ways that are detrimental to the economy — scrapping TPP, roll back the Dodd-Frank Reform Act. Not very encouraging. The difference with a slow drive over the cliff under a Democrat, and a tempestuous Trump with a hard hitting fascist Bannon, the journey to the cliff could be much shorter.

              • Bert says:

                Yes, chemp, could be. The slow drive we’ve seen already…a given. On the other hand, the shorter journey to the cliff is still speculation at this time. The direction might even change and away from the cliff, who knows. I’m taking the positive aspect of speculation, chemp. If only for the sake of the survival of mankind..

            • chemrock says:


              As the blog writer, I think I owe a responsibility to respect commenters and try to respond to valid querries or their views, particularly if it’s directly related to the article. So I normally do a re-read of the comments. I think your tall question requires of me a better response.

              I’m no wise guy with all the answers. The US certainly needs to do lots of things. You know me, I’m a practical man so I will zoom in on one single most important issue. Balance your budgets. I think that is the Gordian knot. Once that is done, everything else may fall in place. Now I appreciate there are tons of economists that say austerity is exactly the thing not to do in a weakening economy. What do you do if you are having a cash crunch in your family? You will sell the car, move your kid out of private school to public school, less meals out, do away with the domestic helper, etc and at the same time see where you can make some extra money.

              My advice to Trump/Bannon is Balance the budget – top priority.

              When I was pondering your question, it strike my mind for a follow up article, that is if Joe can stomach another financial piece. If will not be that lengthy but I think I can explain the debt status in a very much clearer way, in a way I have never seen anyone explain before. This also came about as I have at the back of my mind my comment to Bill regarding the use of 2 separate sets of accounting for the $ to segregate domestic from offshore markets. I’ll submit to Joe soon.

              • Your writings are always welcome, on any subject. They generate lots of great discussion.

              • I second that, chemp. keep these financial articles coming, I’m a big fan, though I’m just digesting maybe 60% of it , but I gotta feeling the other 40% will become easier to see as things progress. Throw in BPO in there, chemp , LOL! 😉

              • Bill In Oz says:

                Chempo I would welcome a post explaining more on your idea on the USA having 2 sets of accounting books.

                I guess at the very least, the financial institution managing the international market for the $ would need more than just US managers.

                Balancing the budget is a catch cry of conservative political ideologues. However I do not think it fits the needs of the world.

                At a national level Keynes put forward that unemployment indicated an unused asset that occurred due to insufficient national demand for goods and services. Thus he said that a nation’s government should increase demand for goods & services by running a deficit in the budget.

                While international trade was a comparatively small part of a country’s economy this works.However we now have a world where trade & services between nations is huge. So a government running deficits effectively sees the extra demand for goods & services leaking to other countries. And these countries may in fact for their own national reasons be running budget surpluses.

                In the past national governments have responded by imposing restraints on international trade or services. Import tariffs are an example. They have the effect of confining the demand generated by increased government spending ( deficit spending ) within national borders and so improving the welfare of the nation’s residents.

                But it is a “Beggar thy neighbours” approach. It lessons demand for goods and services in other countries and causes unemployment. An example :When the USA& Great Britain imposed major tariffs in the early 1930’s it created economic chaos elsewhere like Germany, Japan Argentina France etc…

                There is the temptation among national leaderships to do this again. But we now live in a world with a global economy. And that economy needs to be managed to improve the welfare of everybody.

                At present the global economy is in a global depression. The first since the 1930’s. So many folks don’t want to use the D word for fear it will generate more economic evils. But it is a Depression. One that so far has not really touched the Philippines hugely apart from less demand for OFW’s.

                Following John Maynard Keyes logic, a global depression means insufficient global demand global. And it needs to increased by national governments & international bodies acting together in harmony to increase global demand.

                And it needs to global demand which also does not bugger us all by hugely increasing CO2 and changing the global climate totally .

                Is it beyond the wit and wisdom of humans to do this ?

              • I get your point Bill.

                Deficit budget per se is not bad. It should be used as short term engagements as a monetary tool to get out of a bad situation. 2 things need to be observed in deficit budgeting — is the money spent wisely, and is the debt serviceable.

                My point is that the US seems to have normalised deficit budgeting.

    • Micha says:


      2015 (Percentage of Global Reserves) :

      US – 64.0%
      Euro – 20.3%
      Pound – 4.7%
      Yen – 3.8%

      • RHiro says:

        Many thanks Micha, but pls inform where you got data from?

        • Micha says:

          It’s from the IMF COFER. They have an updated data for 2016 actually and the numbers vary a little bit from the 2015 data I posted above.

          • caliphman says:

            So long as we are on central bank fx reserves topic, it may be interesting to note that China is one of the biggest if not the largest holder of dollar-denominated reserves. In 2016 it held 3 trillion in FX reserves or about a third to a fifth of total world central FX reserves denominated in dollars. In 2015, China sold almost half a trillion of these reserves to prop up a softening yuan.Clearly in the near term, the dollar is in no danger of being replaced by the yuan. In the long-term the yuan prospects as the preeminent international transaction currency is clouded by the fundamental changes in the nature of China’s economy. In the past, the source of China’s economic growth were it’s exports and mercantile policies. International trade constituted roughly 30% of its GNP. This trade activity boosted the demand for and importance of the yuan internationally. With the vigorous growth and the increased wealth of its economy, domestic demand and markets is now China’s primary focus and it’s production capacity is geared to supplying growing local consumption. International trade is down to just 20% of economic activity and declining. It is the redback’s future as a leading reserve and transaction currency that should be in question, particularly if it is seen as not honoring laws and treaties it has signed to advance it’s territorial ambitions.

            • chemrock says:

              Very good my friend, you are on target.

              For the very reasons you stated in the final line, the Rmb is not a good choice for alternative world reserve currency. Furthermore, their old command economy instincts remain as evidenced in their recent support of the Rmb. When faced with the first sign of serious currency problems, they imposed capital controls, reminiscent of their old communist ways. (They did this down to micro levels– Chinese gamers in Spore casinos have some sort of cash-card that allows them to withdraw Yuans (in local ccy), they discontinued that link).

              China’s monetary problems escalated recently as the Rmb came under attack by hedge funds. Their inexperience in working like a capitalistic regime but still imbibed with a command economy mentality displayed itself as they struggled to stabilise the over-heated economy by trying to impose the UNHOLY TRINITY or the TRILEMMA. For those not versed in economics, this refers to the 3 controls available to central bankers — foreign exchange rate, capital flows, and independent or sovereign monetary policies. These 3 options can never go together. Central bankers can only have 2 out of the 3. It demonstrates very clearly, China is not ready to be the world’s central banker.

              What is even more worrisome is that the Politburo appears to be trying to create a cabinet level agency to oversee monetary policy making agencies. Politicians over monetary technocrats does not spell confidence.

              Having said that, the Chinese never advocated for the Rmb to replace the $ as world reserve ccy, they proposed an IMF initiative to create a new world ccy. Their initiative for the internationalisation of Rmb is for their direct trades with their trading partners. That’s non of our business.

              Regarding the dumping of the $1T reserves, it’s difficult to see how much of that was driven by the market operations to defend the Rmb and how much was in line with their goal of moving away from $ use. Perhaps it’s a case of killing 2 birds with one stone.

              China’s fear of the problems of $ basically took hold after the experience of the subprime crash of 2008. By then, China obviously understood their place in the world in terms of world trade and realised they will be held at ransom by American domestic monetary policies. That was roughly when they initiated moves to use ccy other than $ in their trade deals. I don’t think economists in other countries could not have seen the same problems of being sucked into American domestic monetary problems, it’s just that they could’nt do anything about it. China can, by the sheer size of their economy, and they are making their own initiatives.

              It’s ironic to recall that Trump the candidate was vociferous about a ccy war with China. He demanded China revalue the Rmb as an under-valued Rmb disadvantaged American exports, and here we are, Beijing is battling a devaluation of it’s currency.

              • caliphman says:

                Chemmy, the point I was trying to make is the likelihood of the dollar being toppled as the primary international reserve and transaction currency is premised on a viable alternative currency. The yuan by virtue of the volume of China’s international trading activity and the size of its economy was raised as a candidate currency but on further analysis, it is not for reasons I have cited. It’s inclusion as a component of a ‘manufactured’ or currency is a recognition of the yuan’s importance but that is no indication that this synthetic currency is anywhere ready to be accepted by the world as a dollar alternative. The SDR which is sponsored by the IMF, World Bank, and other international institutions was created a long time ago to serve as an alternative dollar so this idea is not new but has simply languished over the years. The Euro rose to prominence because the economy and trading volume of the bloc rivaled the US bur the Union itself is in danger of falling apart so it is not in strong contention any more.

                The reality is as I have said, the dollar is not on the verge of collapsing as the primary reserve and transaction currency although perhaps it as not as strong as it was in this role decades ago.

                As to whether China sold aa much as a half trillion of its dollar reserves to support the yen or as a as a political strategy to weaken the dollar, it is most probably the former rather than the latter purpose behind the sale. In the first place, supporting the host currency is the established role of central bank FX reserves and raising yuan interest rates as a tool to prop up the currency is rarely in the Chinese CB playbook. Finally, as one of the largest holders of FX dollar reserves, the idea of China weakening the dollar to promote the the strategic value of the redback is like cutting of its nose to spite it’s face.

              • chemrock says:

                Your considered points duly noted and we are in agreement on several aspects except on the tipping point of $ being dethroned as world reserve ccy, to be replaced by what we don’t know.

                You should note that China, and myself, never advocated for the Rmb to replace $ as world reserve ccy. I think China never wanted that role for the Rmb because they see the difficulties of the US trying to balance their domestic and international responsibilities in their monetary policies. China’s move to internationalise the Rmb and dumping of $ bonds is driven by national objectives to be $ independent, and not an attack on the $.

              • NHerrera says:

                Caliphman, chemrock:

                Thank you for the exchange of notes — they, in effect, answered the question I asked earlier re greenback versus red back. Meaning, if I am not wrong in my reading, that although the greenback is not in the best of health, it is too early for its demise; and that you experts believe that the red back is not too eager to replace the former; neither are you happy that the latter replace it. Thanks.

  6. chemp: “American firepower is still the greatest. Do Americans still have the stomach for another international conflict?”


    I’m not qualified to talk economics and/or banking , so although I’m reading everything written here , those two questions were especially compelling to me.

    chemp, Make America Great Again , is essentially a Ron Paul perspective ,but like Trump said We haven’t Won any Wars since WWII, so Make America Great Again is both domestic and international—– to fix the nation first, then to project power out… since WWII it’s been the latter, projecting power.

    Most American politicians (Republicans & Democrats alike) don’t understand that point, that you can’t save the world, if you’re dying, or dead, or sick , or broke. That’s because it’s not their money, for them tax payer money is .

    I totally agree with you that Americans don’t want anymore forays into the world, especially when it means we’re just throwing our money away and not getting anything in return.

    which brings us to josephivo’s question,

    It’s been said that the only difference in 2016 is that the billionaires (the donors) took the reins from the politicians , where before they were content to stay hidden. Which got me thinking, which billionaires are we then talking about,

    If it’s Elon Musk, the guy running Apple right now, the Amazon guy, Mark Cuban, Zuckerberg, Warren Buffet, Bill Gates, etc. then Trump’s Make America Great Again might just mean an American renaissance domestically, which will then somehow transfer or translate to a win for the world.

    If it’s the old industry type billionaires, like Fossil Fuels , Wall Street, etc. America might just wage war again ,

    but that’s where Trump himself (and Ivanka & Jared) come in. Trump’s a really frugal guy , well maybe not frugal, but he’s a penny pinching billionaire , which should seriously limit any further international forays, knowing full well that he cannot make Iran pay for the bombs we drop on ’em … without old school spoils of war (looting, pillaging, raping, etc.), for Trump there’s no point in going to war…

    Yeah, sure, that’s probably all the wrong reasons for NOT going to war, and I’m not gonna label my boy Trump a dove anytime soon (and award a Nobel Peace prize), but so long as he’s not itching for war , I’m good. 😉

    So IMHO in the international forays department under Trump, I’d be hard pressed to think of a scenario where the U.S. goes all Hillary or W. Bush on the world again, NOT anytime soon.

    chemp, my question to you is,

    If I was bangin’ Ivanka , and she whispered to me ever so softly while we spoon (she’d be the outer spoon 😉 ) that she can guarantee that daddy Trump will never go to war while he’s president and only focus on America, does that information (the guarantee) make any sort of difference in your assessment?

    • josephivo says:

      Sorry, should have added that there are 2 types of billionaires. The Steve Jobs type, inventing, building, marketing, creating income from labor and the speculative Goldman Sachs executives with income from capital. Inherited billionaires are mostly of the second type. Real Estate is mostly from the second type. Thriving on rent as Carlos Sims is form the second type. Dealing in commodities, oil…

      In the current cabinet the second type is over-represented.

    • chemrock says:

      I bet you must be using the silver spoon The Donald was born with, it’s antimicrobial and you get your perverted kick.

      No It will not change my assessment because he has no clue what to do about it. In fact, it may well be that he has been set up to take the fall for the collapse of the $. He has only mentioned this of the $
      – we can always print
      – if the $ is cheap and we know it’s going to fall, I’ll borrow lots of it so that when it falls, we have a bargaining chip
      – we will ask creditors to take less for the debts.

      His ignorance is on full display. He does’nt know of the $19.7T debt, the majority of it is owed to Americans. A display of not just ignorance, but total American irresponsibility and callousness, of conceit, attitudes that the whole world is dismayed at.

      His approach to the problem is based on his experience as a businessman, the deal maker. It’s all deal making to him. Break the company, so long as he himself suffers the least, or even benefits in some other ways. A POTUS can’t have his way like that.

      • josephivo, chem ;

        Good points all.

        I know Trump’s invited the West Coast Web 2.0 billionaires to Trump Tower , I dunno if anything will come out of it, and also Jared’s little brother I’d categorize as one of them … So I’m still on the fence with josephivo’s which billionaires are now running it, vis a vis which billionaires will run it ( I totally agree that Trump was once in real estate, but like the new movie “the Founder” , Trump like Ray Kroc , is not completely real estate anymore, hence closer to the new billionaires).

        I ‘m totally with you chemp, that Trump is out of his depths re finance , and seems to simply rely on his experience , borrowing money from these big banks as some sort of expertise, like playing the horses every other Sunday, and pretending to know breeding , etc. two different things , like knowing what goes on behind the curtains from watching a Broadway musical.

        But to jp’s point below , the fact that there’s a movement to divest from foreign markets, go off grid , and build smaller communities , this is bigger than Trump’s ignorance of the financial world , so long as he doesn’t go into more wars , we should be fine ; as for trade wars, IMHO, this will only enliven the movement that jp’s talking about .

        So his ignorance in financial matters, I don’t put too much weight on , because from my perspective , a decline of the likes you are describing, only serves to embolden the stuff me and jp are talking about. I ‘m a big fan of the National Parks, chemp , I’m usually camping thus away from people, but whenever I go into the old hotels, see the bridges, roads , tunnels, structures, etc. all basically constructed in the 1930s (or prior) as part of FDR’s new deal , some of the best stuff we built, were built during that time.

        Is an inward looking America so bad?

        (on a side note, I’ve printed out your 3 part series and will be closely monitoring the developments with your assessments, great series by the way! 😉 )

        • Looking inward affects other nations mightily. Bannon has evidently said war with China is coming. He has probably not considered the views of the Philippines regarding this. The PH resides in the likely battlefield. He has also in one half-hour phone call turned the whole of Australia (public opinion) against the US. [edited]

          • Bill In Oz says:

            Joe you said “He has also in one half-hour phone call turned the whole of Australia (public opinion) against the US.”

            No Joe that has not happened. There is a long standing small minority view that is hostile to Trump for ideological reasons. And there is an equally small long standing minority that approves of Trump including his recent executive decrees, again for ideological reasons.

            I suspect most Australians are simply bemused & amused by Trump’s antics it they are at all interested in the subject.

            And I find myself again thinking how fortunate we are in Australia not to have a Presidential ( elected king ) system of government as exists in the USA & the Philippines. In both places similar political systems have generated similar results.

            • edgar lores says:

              These things are hard to quantify. But my impression from the headlines is that Australia has been scathing with Trump and ambiguous with Turnbull — both at once critical and praiseful of his diplomacy.

              Here’s a comment in the Brisbane Times:

              MortlockFeb 3 2017 at 8:13am

              I’m no fan of Turnbull, but he has handled this situation fine. But it does mean now we have to think carefully about dealing with the US over the next (hopefully only) four years.

              Trump is a demagogue, and he demonstrates some quite extraordinary ignorance. I know some of the ‘Right’ in Australia have been celebrating Trump’s ‘victory.’ (including ideological ‘free-trader’ Bernardi – some hypocrisy in spades there!). They shouldn’t. This should not be a ‘right’ v. ‘left’ thing, but rather about democratic process versus authoritarianism. Trump is behaving like he was elected to be the US’s dictator, rather than elected to be its president. He’s dangerous – to the US and the World.”

            • It would be interesting to see surveys done, before and after the call, but I think the public reaction is more severe than the “small minority” you indicate. I was in Australia in 2004 when GW Bush was in office. People were decidedly cold to me, as an American, because of the Bush adventures in the Middle East. You may have the ability to intellectually compartmentalize Trump, but I don’t think you are a typical Aussie.

              • edgar lores says:

                Here’s a typical news item critical of Trump. This is not from the Murdoch press but from government’s news arm.


                I read a comment that said Trump is conducting his foreign policy on Twitter.

              • Bill In Oz says:

                Hey Joe, I cannot comment on how you as an American was welcomed here in 2004. Usually individuals visiting here are not treated & welcomed by the politic actions of their nation.

                Bush’s invasion of Iraq in 2003, with the Australian’s government’s support, was very polarising in Australia. Again there was a small minority strongly opposed for ideological reasons and a larger minority who were vaguely supportive.

                Media attention on Trump’s behaviour on the phone to PM Turnbull, is a result of the topic discussed. They discussed the deal struck last October between Obama/Kerry & and the Australian government to have persons who have been recognised as refugees,detained on Nauru & Manus Island in Papua New Guinea ( PNG ), since 2013, offering places in the USA refugee program.

                Most of these individuals are Iranian Muslims so Trump’s attitude is predictable.

                My own opinion is that Obama & Kerry set this deal up last year as a bit of a poisoned chalice for Trump if he was elected. And the Australian government was silly enough to sign onto it because of a desire to empty the detention camps on Nauru and Manus Island in PNG.

                All in all, a bit of stuff up.

                BTW : the quid pro quo was Australia accepting up to 3000 recognised refugees from Costa Rica in refuge camps there.

              • I am sure Obama and Kerry were confident that Clinton would be president, last year, so I find your rationale speculatively off the deep end.

                If you think Trump’s phone conversation was not a big deal, in international relations, we disagree on that, as well.

              • Bill In Oz says:

                Edgar the ABC is not & has never been the government’s news arm. That is a complete mis-statement of the facts. The ABC journalists usually have their own agenda – to embarress governments of a conservative persuasion.

                ABC journalists would like Turnbull to walk away from the deal so they can continue to exploit the boat people issue in Nauru & Manus Island in PNG.

              • edgar lores says:

                Fact: the ABC is funded by the government.

                As such, it is an institutional part of the government.

                Fact: The government has no power to direct the ABC on programming matters. Parliament has guaranteed this independence.

                Therefore my statement is accurate in terms of “ownership” and structure.

                I did not mean to imply that the ABC is a governmental propaganda machine.

                I am fully aware that the ABC has been at odds with governmental personnel and policy. I am also fully aware that ABC conducts commercial operations.

              • Bill In Oz says:

                Joe, you say ” I am sure Obama and Kerry were confident that Clinton would be president, last year”.. Mmmmmmm you a re probably right about this. I’m seeing plots where none were planned.
                I don’t think that the Trump /Turnbull phone call was not ‘a big deal’. I think it is a portent of how things might go in the future for leaders of other countries dealing with Trump. Australia is a valued ally of the USA and Turnbull got blasted. Care & consideration for Turnbull ? Zip. So what’s in store for folks that Trump does not like ? And bringing things back to the Philippines: what will happen in a Duterte Trump encounter ?

              • I get Australian news here, and CNN. Both led with the Trump phone call and the uproar it had provoked. I learned that the call did an amazing thing in the Australian government, united all parties in the belief that the United States needs to show more respect to Australia’s government. I learned that 77% of Australians favored Hillary Clinton for the presidency, and that there is considerable uproar in both Australian and US government and diplomatic circles. Americans are busy apologizing for their president, and Australians are very concerned about how Trump will handle affairs that affect Australia, such as in the sea dispute. Key Republican players in the US were falling all over themselves making sure they went around Trump to certify their respect for the alliance, doing major major damage control. Sorry, Bill. This was a very big deal.

                Duterte and Trump will get along fabulously until one irritates the other.

              • Bert says:

                “And bringing things back to the Philippines: what will happen in a Duterte Trump encounter ?”—Bill

                Will not happen. Just my opinion. President Duterte is being led by the nose by the Communist China’s leadership and I’m sure President Trump knows it. Trump’s paramount concern is freedom of navigation in the Atlantic Ocean/South China Sea and he will do everything to insure that no constrain of any kind emanating from China will threaten the free passage of transport whether commercial or military. The Scarburough Shoal area notwithstanding, the US military can do what it wants in that part of the world without even looking at the map of the Philippines, or at Duterte’s antics. My two-cents.

            • “Looking inward affects other nations mightily. Bannon has evidently said war with China is coming.”


              I think you and Micha are putting too much weight on this Bannon character. Trump’s a New Yorker, he’s not conservative and/or Evangelical (or religious for that matter) , so he needs someone who thinks like Bannon—– ‘needs’ being the operant word here.

              A ‘war with China’ is obviously not ‘inward looking’ , so take aside ‘war with China’ and Bannon for now, and just focus on inward looking , because I think this is central to chemp’s article.

              So again, without the going to war talk, is an inward looking America really so bad?

              As for Australia, remember this all started because Australia doesn’t want refugees period (its policy for them), where’s the public outcry towards Australia, where’s the discrimination, etc. why because Australia’s not exceptional? c’mon . As for the phone call I’m sure Trump’s just trying to squeeze Australia’s nuts , but Australia’s anti-refugees policy is the point 😉 .

              Why can’t America be more like Australia and Canada?

              • (Canada’s obviously refugees friendly, but my point was inward looking 😉 , Canada & Australia are night and day, but they share 1st world status without having to project power outward, works for them, why not for us?)

              • Bill In Oz says:

                Australia does not have an anti refugee policy. Currently Australia resettles 20,000 refugees a year. However all of them are people chosen by the Australian government department of Immigration & Border Protection. None of them are people who turn up in boats without visas. Refugees only get here if invited. And the ones who are invited get paid airfares, assistance with accommodation, education and language lessons

              • If we are putting too much weight on Bannon, we don’t stand alone. His publication, Breitbart News, was a horrifying read for me a few years ago, and now the architect of that angry, divisive, intolerant rag is in charge of the Nation’s security. I’d say anyone who downplays the significance of this appointment is the one wrongly shading emphasis.

                Yes, when America goes inward and disregards the interest of peoples around the world, it is doing a perverse form of nation-building, or tearing down. It is bad, bad, bad, and to portray it as innocent or benign is wrong-headed, in my opinion.

                Kindly don’t condescend with “c’mon” and smiley faces.

              • I totally get that, Bill, sorry if it seems like I’m hating on that policy, I’m actually envious.

                I wish the US, had something similar, instead of this open door stuff.

                But we should be able to pick the folks coming in, “invited” by us. Certain standards should apply. All those immigrants and refugees that Canada “invites” guess where they end up after a few years, yup here in America (nothing but snow and moose in Canada)—- so we’re also affected by Canada’s policies.

                My point was, how come no backlash on Australia?

              • My point here Bannon is that Trump already has a track record of firing people, and yada yada yada…

              • Joe, can I say yada yada yada still?

              • karlgarcia says:

                I think he fired the Attorney General because he went against him, it remains to be seen if Bannon will go rogue on Trump, and I wonderwhat policy could that be?
                But that firing stuff is for apprentices(as in the tv show), I get the impression that Trump is the apprentice of Bannon.

              • karlgarcia says:


                Lance, don’t tell me you also want a wall built on Canadian borders.

              • karl,

                People thought Trump was an apprentice of Sen. Sessions first before Bannon got popular, then it was Gingrich, etc. So far though he’s fired, or marginalized, 4 big names… Ailes, Gingrich, Guiliani and Christie ,

                Bannon has his finger on the pulse of Mid-West and the South , so he’ll be needed at least for another 4 years (to get Trump a 2nd term). As for Bannon’s craziness, Gen. Mattis and Pompeo will balance him off, Gen. Flynn not so much, but between Bannon and Mattis, Flynn will see things Mattis’ way.

                So there’s enough balancing forces to render Bannon influential but not monopolizing, IMHO

                re Canada,

                No not a wall up there, as their immigrants usually have become productive citizens when they emigrate to the US, the once who can’t hack it usually stay in Canada for all the benefits, ie. health care, etc. It’s mostly the ambitious that want to move to the US, so no wall needed , karl.

              • Bill In Oz says:

                Re “My point was, how come no backlash on Australia?”
                Ohhh bugger, there has been plenty from our own “Open Borders” socialist/anarchist ‘activists’, and from Amnesty International & UNHCR.. All basically wanting Australia to forget it’s own interests and open it’s borders to anyone who rocks up.The Greens party and a substantial part of the Labor party still demand this be done. But since 2013 after 5 years of Labor Government and 50,000 small boat arrivals without visas or passports, a new government was elected on a policy of stopping the boats. And that policy was implemented. All boats were turned around and sent back to Indonesia. The 1250 on Nauru & Manus Island in PNG, are from the end of the labor government time.

                I have read that a good number of these boat people on Manus Island have had their applications for refugee status rejected.

              • “All basically wanting Australia to forget it’s own interests and open it’s borders to anyone who rocks up.”

                If there was a big stink, I missed it over here, not much coverage here. Totally agree re own interests , I guess they thought that Australia could just settle ’em all on top of Ayre’s rock right, LOL!

                For all the stink the 7 countries ban got, I’d think the media should also blame Australia, if only to surface the very point you’ve made above re “own interests”.

                But most importantly, why do Australian women have this fetish for black and Hispanic Americans? Also all the movies I’ve seen lately, all have Australian actors, where’s the injustice stink on that? Start sending Australian actors to Canada, California’s full forchrisakes! Don’t you guys have your own film industry? LOL! but we’re keeping Olivia Newton John, LOL!

              • Bill In Oz says:

                Edgar, the ABC is not ‘owned’ by the government. That is what I am objecting to.

                It is not an arm of government.

                The Australian people ( including you Edgar as a citizen ) own the ABC. And that is why I think ( am in fact convinced ) that the ABC should in it’s broadcasting reflect the diversity of views in the Australian people not just a tiny segment of it who live in the inner suburbs of our big cities.

              • edgar lores says:

                If I google who owns ABC, the answer I get is “Government of Australia.” Try it.

                As I have said:

                o My use of the term “government news arm” is to distinguish it from being a private entity.
                o I did not mean to imply that it is a government propaganda machine. It is editorially independent.
                o I concede the ABC is politically and legally independent.

                I may even agree that I am a part-owner as a taxpayer, although I have never felt so.

                And I agree its productions and presentation are diverse and it reaches into the heartland of our vast country. It is our “aunty.”

              • NHerrera says:

                @Bill, @edgar,

                From your exchange of notes, I take it that ABC-News is worthy of reading because of independence, among others, hence of relative credibility, though Australian government funded. I have it bookmarked. Thanks.

              • Edgar Lores says:

                I just went to the ABC site. It’s headline is: “‘Mad Dog’ Mattis says US ‘won’t forget debt’ to Australia.” But he said this in a speech given in 2015. So you have to read the details.

            • Bill In Oz says:

              Edgar You say ” the ABC is funded by the government.As such, it is an institutional part of the government.”

              Duhhhhh ? How long have you lived here in Oz Edgar ?

              The Australian government funds lots of things. That does not make them part of the government.

              The ABC ( Australian Broadcasting Corporation is an independent incorporated body set up by act of parliament with it’s own Board and managing director. It is neither politically nor legally part of the government. Nor is the board responsible to the government as many ministers have been forced to accept.

              • edgar lores says:

                My initial statement that it is the news arm of the government was simply to differentiate it from a private entity.

                From Wikipedia: “The Australian Broadcasting Corporation (ABC) is Australia’s state-owned and funded national public broadcaster.”

                State-owned means “belonging to, funded by, and controlled by the government.”

                Belong to. Funded by. The government.

                However, I have stated that ABC, through its charter, is not “controlled” by the government.

                The government appoints the ABC board of directors, but, yes, the board is not responsible to the government.

                I will concede the ABC operates independently — as you say, politically and legally — of the government, but it was set up by the government, it is funded by the government, and it operates under a government charter. In other words, it is not private.

          • edgar lores says:



            • Hahaha, yes, that’s about it.


              Joe, why are we now responsible for the interest of peoples around the world (shouldn’t they be responsible for theirs?); I’m simply saying post-WWII American meddling has done more bad, than good , for the world, so why not stop all the meddling in “the interest of peoples around the world”?

              My perspective is simply that meddling is bad period; Trump’s of course is that our meddling hasn’t profited us at all—- two different perspectives, but both leading to the same conclusion.

              Let me flip it around, Do you think Australia or Canada should meddle more, like the US, why or why not? You said you got the full brunt of Australian ire when there in 2004 , I was there around that time as well but the only ire I got was when hot Australian girls all bee-lined to my black and Hispanic friends (right, Bill? what’s up that? 😉 )

              • karlgarcia says:

                What do you call it, reluctant savior?
                As a soldier, did you hate all your years serving abroad? Did you ask yourself, What the hell am I doing here? My government is dead wrong to meddle, they should have been inward looking.

              • karl,

                Exactly, why most military folks are pro Ron Paul , everyone’s sick and tired of these int’l forays, karl, under W. Bush, Obama/Hillary, and why most military folks voted for Trump, ie. no more int’l forays… either for oil or for human rights.

              • The world is small and interconnected. By not meddling, one meddles with the diplomatic balance that keeps people secure. There is something inherently wrong (‘unAmerican’) with discrimination and isolation that promotes suffering abroad. I’d prefer a US that is a global leader, not a self-absorbed rich nation telling desperate people to ‘fuck off’.

              • I’d add, a lot of military folks were also pro Bernie, not so much because socialism but his no meddling views,

                (when this all started) my preferred Presidents for 2016 was,

                1. Bernie
                2. Trump
                3. Rubio
                4. Jeb!
                5. Rand Paul
                15. Ted Cruz
                last, Hillary.

              • NHerrera says:

                @ Joe,


                I share that view on the the net effect the policy brings. But it is not a saleable idea these days. The rhythm of world politics; when will the cycle come to the other side?

              • NH,

                re cycle, you might be interested in the Archdruid’s take on this, (it’s also on his blog but for some weird reason it doesn’t link in WordPress)

              • chemrock says:

                Lance my guy in 2016 election was John Kasich.
                I just don’t understand why an America with such huge financial problems do not wish for a guy who balance 4 federal budgets.
                Reason — he is not colourful enough, like Mar Roxas.

              • chemp,

                I guess I didn’t know Kasich that much, and still don’t, but it was the whole non-meddling that was important to me. Fiscal stuff aside, Kasich struck me more as a hawk than dove—- or maybe he was just trying to out-Republican other Republicans, when the non-meddling was actually what people were wanting to hear.

              • “The world is small and interconnected. By not meddling, one meddles with the diplomatic balance that keeps people secure.”

                So we shouldn’t meddle with the USA if they are meddling? Just let them to their ‘job’ and that keeps people secure?

                CAPTION: Uncle Sam doesn’t need your help. He is THE help.

                Or maybe it is because it keeps the USA secure? Because they do get a cut of everything and that probably helps keep them afloat. And really now, if the fate of the world seems to largely rest on the shoulders of one country, well, that just doesn’t seem sustainable. If you don’t share power, you’ll also not be able to share the burden. So he is surely then bound to collapse sooner or later, again and again, until nothing changes.

              • Bill In Oz says:

                Joe you say ” I’d prefer a US that is a global leader, not a self-absorbed rich nation telling desperate people to ‘fuck off’.”
                I disagree Joe. I have visited the USA. And I even lived in in rural Virginia not 2 hours from Washington for 6 months. I traveled also and met Americans… I saw so much poverty in rural backwoods Virginia Joe and in West Virginia, New Jersey & Maryland and the Carolinas .. It’s clear from the way that the USA economy has evolved in recent years that poverty has now spread across Pennsylvania and Ohio and what used to be the industrial heartland of the USA, but is now the rust belt; I saw lots of poverty in Oklahoma and the Mid West as well – the ‘flyover’ states’.

                Trump won because of poverty in the USA with the electoral college votes of former Democrat party dominated states.

                And his policies reflect that. It looks like he is going to actually do something for those poor people.

              • Time will tell. The percentage of Americans who want Trump impeached has risen to 40%, it was reported today. Trump won because of many factors, poverty not being among them, as far as I know. Frustrated middle class, yes. Angry white men, yes. Hillary haters, for sure. There are pockets of poverty and homeless in every major city. It comes with the freedom to succeed or fail on your ability to compete for jobs. There is also great, widespread wealth. A bigger issue than poverty is the shift to technology, and jobs lost or incomes suppressed because of it.

              • ps, the quote you cited is my personal opinion. You can disagree, of course, but you can’t make it incorrect. It is based on my values. Yours clearly differ.

              • Bill,

                It’s not just the Rust Belt (and I saw the same things you saw in Pennsylvania, Maryland and Virginia) , in Cascadia too (which is Northern California, Oregon and Washington). In the mid-2000s Mexican cartels actually moved into the Emerald Triangle (3 northwestern most counties of California, where pots grown by hippies from the 60s, now the hippies kids), the DEA and local Sheriffs eventually cleaned up, so the bulk of their operation, are now concentrated around the I-5 corridor, prostitution and drug sales.

                What you probably didn’t see was drugs, by way of heroin and meth, from Mexican gangs. Where white bikers used to sell only meth, Mexican gangs are now slanging cheap heroin (made with synthetic stuff from China). It’s more nuanced, this whole epidemic, ie. pain killers, etc. But the Mexican connection is the tangible NAFTA side effect, it’s not just jobs going to Mexico and competition, it’s literally trucks upon trucks coming from Mexico bringing truck loads of drugs,

                most trucks from Mexico have tell-tale stickers, or other markers that represent certain cartels, to allow their transit undeterred within Mexico—– so American police departments are trained, but they’re constantly getting changed.

                But my point is these truck loads of drugs (not to mention money laundering operations set up stateside that harms local businesses, like restaurants, groceries, etc.) are due to NAFTA, open borders right? I say forget about ISIS and al-Qaeda for now, hit the pause button, let the Middle East countries handle that stuff, we should focus on Mexico. yeah, it’s that bad.

              • Drugs are a problem, but I fear you mischaracterize American society. This is the same fact slanting Duterte has used to justify EJKs.

              • I just checked, US unemployment rate is below 5%. Jobs exist. They just don’t pay enough to meet people’s ‘needs’.

              • So when Trump says, Build the Wall, he’s not describing something abstract, people in these marginalized towns of America, are actually seeing Mexican gangs, drug dealers and Mexican businesses, which tend to do well, even when no ones coming or going, hmmmmmmmmm… that’s probably money laundering. (the Mexican money laundering operation is more a Southwest operation though, but folks in rural, small town America are seeing victims and criminals when they say, Build the Wall).

              • I’m sure the drug problem here isn’t as bad as over there, Joe, every prostitute and cab driver I met was hopped up on shabu there mid-2000s.

                No it’s not as bad here, I’m just explaining that when Trump says Build the Wall (invoking the failures of NAFTA) , rural and small town America have personal knowledge of the drug problem, which (ie. trucks) is closely associated with NAFTA.

              • I’m not versed on NAFTA and can’t discuss it with any authority. I think the US is better off working with Mexico than against the neighboring state. I think the American failure to build relationships in the Americas is a huge historical problem, and continuing in that same arrogant vein, to me, does not make much sense.

              • Bill In Oz says:

                Joe, whatever one thinks of Trump, it seems like he has made a good choice in Defence Secretary with former general James Mattis. Here is what the ABC is saying about Mattis


            • NHerrera says:

              @edgar, re your graphics:


              This post is rather half-baked (a tenth-baked, if you insist).

              Statements made such as on Iran and China is rather unsettling if one considers:

              – that at this stage there is no doubt that the US has the fire-power second to none and that given another decade the inequality equation becomes a parity;

              – there is thus, the temptation to pre-empt, not necessarily on a nuclear-war basis but conventional-war basis;

              – for example, through its submarines, aircraft carriers, blast to smithereens the artificially built islands;

              – then what will China’s response be: go nuclear on the US; respond in a conventional way from the fire-power on these newly-built islands; or fold-up the poker hand; and wait for another day?;

              – will Russia just stand-bye while the US lords it over; or say Okay new-friend, that is the right thing to do;

              – the thing about this Bannong-Tillerson combination is that even a RAND type of analysis, of the hawk-type, may support this in the light of “in-depth-game-theoretic-analysis” which has the usual defect that the game tree is simplified and payoffs or numbers attached cannot possibly include other “unquantifiable” to make the analysis amenable to the maths;

              – and so, such analyses can be used by the likes of Bannon and Tillerson to support their views and say to the Boss — see all this top level analyses supports us, so let us go for this Boss.

              End of my idea “baking.” I am scared of the cake I baked.

              • Keep an eye out for USS Maine in Havana harbor and USS Maddox in the gulf of Tonkin -type incidents (fabricated aggressions justifying wars for the US), NH.

                Also USS Liberty (Israeli aggression) and USS Pueblo (N. Korean aggression) , similar to Maddox/Maine but wherein wars/violence were actually averted.

                it’d be cool if you can quantify posturing talk , in the animal kingdom the more talk the less action; less talk is when action happens—- so long as everyone’s talking, diplomatically or bluster, same same IMHO , but remember and keep in mind those 4 ships, those 4 incidents.

              • NHerrera says:


                We hope, the classic paradigm illustrated by

                talk = noise

                remains. But aren’t we in a different world now? With an entirely different set of dramatis personae with superegos ?


              • NH, seen historically, not so different from the times when fake news essentially brought us the Spanish-American war, USS Maine in Havana harbor. Teddy Roosevelt was a bigger ahole than Trump, he bankrolled his very own military outfit to go to Cuba, recruited the ‘hugest’ personalities at that time.

                There’s nothing new under the sun, NH, all same same from before, did you read that Archdruid article?

              • NHerrera says:

                Nope, I didn’t visit the link, the paragraphs you captured above is enough for me. Lazy today, you see. I rather enjoyed the to-and-fro posts here.

              • edgar lores says:


                Now you are scaring me too. 🙂

        • josephivo says:

          Inward looking??? Is their nuclear arsenal just defensive? Can they stop climate change too at the wall? A power that can destroy the planet, nuclear or ecological can never be just inward looking.

          (The largest player has some influence on the economic playing field too. One “red meat” tweet and the Mexican peso tumbles, cheaper Mexican products, less American jobs. And one executive order results in big savings for ISIS on its recruitment budget)

          A inward looking bully or a inward looking sheep?

          • I’m not saying isolationist, josephivo… and I get you, inward looking can be romanticized, as that time during FDR’s New Deal and right before WWII ,

            So by inward looking, I mean fully aware still that if you go isolationist, another Nazi or Rising Sun can sprout. So not at all Chamberlain-type, ostrich ‘s head in the sand, inward looking, but still with a very kick-ass military, police and intelligence apparatus ,

            inward looking means prioritize the home front before anymore int’l forays, wars or otherwise. Go back to FDR’s New Deal , but keep the lessons of WWII.

            So, josephivo, not a bully , nor a sheep, but more like an inward looking smart jock… works out, studies, fights back, is prepared for a fight, but for the most part minds his own business. 😉 basically what Trump laid out in his inauguration speech.

            With that definition, is inward looking so bad?

        • chemrock says:

          Lance, I’m honoured at your printng the articles for your file.

    • Micha says:


      You’re assuming here that Daddy Trump is actually in charge. No, siree.

      Trump is merely the brand. Bannon, the ultra conservative, ex-Goldmanite racist is the brains.



    We are often asked if we are preppers because we designed and constructed a food forest, a large kitchen garden, and a few livestock shelters. We are teaching ourselves basic homesteading skills and plan to retire in a home that is about a fifth of what we are living in now. Are we prepping for the coming financial meltdown? No. We are going to try out a different lifestyle because we’ve been there and done consumerism/materialism and we are ready for simple living. I find a lot of educated and well-to-do people opting for a simpler life because they have realized that happiness is not contingent on money and material things. They want to pursue a more examined and meaningful life. The material trappings are baggages they want to unload.

    Even young Americans are embracing simpler life now-a-days. They are opting for tiny houses instead of the McMansions. They are conserving their money for experiences instead of spending it on the latest fads and fashions and big mortgages.

    Americans who are preparing for anarchy or financial meltdown are just a handful. They take prepping to the extreme because of paranoia. They often spout conspiracy theories that induce eye rolls so they are often socially disconnected.

    To conclude, there is a changing mindset in most of America. If the financial market collapse in the near future, a lot of Americans are ready with their self-sufficiency skills and are going to assist those who fall on hard times. We are not worried. We will take care of each other.

    • chemrock says:

      I marvel at what you are doing. This is going back to Lance’s ‘salvation by austerity’. Actually this was sort of my initial idea when I came to Phils, but it has’nt worked the way I wanted mainly due to my under-estimation of security threats.

      I guess materialism and consumerism up to a point, satiates the appetite.

      • I had a long response , basically outlining why I agreed with jp, and how this phenomena, whether homesteading, survivalist, hippie or just plain paranoia , will great ease any sort of downturn for the U.S.

        At this point, this idea is the greatest export America has vis a vis Global Warming , ie. Goal Zero, tiny homes community , off-the-grid mentality, small batch manufacturing, etc. etc.

        (Was it just me or was there something wrong with WordPress last night? I thought it was just my internet connection. But then I couldn’t post it for an hour or two , then it was bed time. )

        either way, I ended it with the question , is —– the U.S. IMHO opinion will be fine, going back to the 1930s FDR times —– but is the world ready for a second Canada?

        • I think I know what happened now, why my comment wasn’t going thru…

          I was sharing a link to the Archdruid Report for jp , and since it’s a blogspot for some weird reason WordPress didn’t wanna link it, really weird (jp, are you familiar with this blog? )

      • gerverg1885 says:

        Security threats are for people living in highly urbanized areas. This is true in all places anywhere in the world where material wealth is seen by people who does not want to work honestly for a living as a bait for them to acquire a part of it in any way they can, mostly nefarious.

        I have met expats/retirees living here in this country for years now who had enjoyed their stay in rural areas where they said they found peace and contentment with real people who do not consider them as superiors and whom they treat as equals in return.

        My Dutch brother in law who had been in Cebu since the 70s is a good example of how people learned and liked their stay here because they knew how to blend with the locals as if he did not come from another part of the world.

        • chemrock says:

          On the contrary Gerverg.
          I have no problems living in Makati condo. I move around in the vicinity past midnight regularly with no fear. It’s in the barangay areas and province where danger lurks. I get the strong sense that a foreigner who goes native and live in non-gated residence in NCR or worst still the province, sooner or later he is a marked man or his home is marked.

  8. Just want to share MLQIII’s take on the US/Japan/PH/China realpolitiks because it is very informative. It appears that PRD is a China apple-polisher.

  9. NHerrera says:


    A guy from the boondocks asked his companion: see that big thing up there; my cousin from the city says it is an airplane carrying hundreds of people; it should fall shouldn’t it; why does it remain up there?

    A = what the guys know about things
    B = the airplane should fall

    A –> B

    But then there is a C such that A taken together with C does not cause that big airplane to fall, or symbolically,

    A -/-> B.

    Thanks chemrock for the article and the commenters for the exchange of views (meaning, the A and the C arguments). Learning something today.

    (Time for me to get those few green bucks from deep inside my mattress? 🙂 )

  10. R.Hiro says:

    This piece is a prime example of what Fukuyama said of the POST FACTUAL WORLD we live in today. Full of partial facts intended to support the opinions of the author.

    The entire world system of finance is based on the U.S. sponsored multilateral system agreed on in 1944 and adjusted for in 1972/73.

    it was agreed on by most of the world’s governments. A system of shared sovereignty ruled by the G-7 plus China today.

    Naturally as in any group the powerful get to call the shots.

    Our small and humble country is part of the group but since we are a micro economy we go with the flow.

    Please note that the word capital comes from the word cattle or heads of cattle. Today that has evolved to mean much much more.

    One must not forget that the economy (economic activity) has two sides—–


    The size obviously of the activities dependent on the economic assets the country possesses.

    The size of the U.S. debt goes up and down as a % of its annual output over the years.

    It may be a little complicated to write about without looking at the power relationships that come with those with the control of wealth and those with little of the wealth.

    • chemrock says:

      Thank you RHiro, your valued comments always appreciated.

      If it’s a post-factual effort it’s an honour to have IMF, World Bank and United Nations sharing the gist of this article that the continued role of $ as world reserve ccy is untenable.

      May I point out an etymological error. You got it the other way round, “Cattle’ came from the old latin ‘capitale’ which refers to money.

      I think your economic equation is not an equilibrium. Perhaps it should look like this :

      supply/income/revenues < demand/consumption/expenditures = debt

      • karlgarcia says:

        I read somewhere that measuring debt to GDP ratio is wrong because the government does not have access to all national income and what it only has access is tax revenues.
        So the author proposes instead of debt to GDP it should be debt to tax revenue ratios.

        I hope I paraphrased the author correctly, but does it make sense?

      • RHiro says:

        Kindly note that since 1972/1985/1997 and 2008 there have been calls from the multilaterals to reform the financial architecture of the planet.

        The present idiot savant in the WH is not saying something new. In 1972, then treasury head Connelly told the Japanese and Europeans that the U.S. might start charging for military protection and that the dollar is “Our currency but your problem.” The U.S. then got Japan and Germany to agree to revalue their currencies upward. They told the French to forget the reimbursement in gold provision and simply settle for U.S. IOU’s.

        In 1985 Reagan did it again in the Plaza and Rome accords and forced the Japanese and Germans to revalue their currencies upward.

        However after the WTO came in and China was given access, China was not obliged to have an open account and open capital account since it was still developing.

        Well today it still follows the same policy and the U.S. under Trump is gonna try to do to the Chinese what the U.S. did to Japan and Germany in the 80’s. Threaten punitive tariffs to try to get the Chinese to revalue their currency upward.

        You used the word untenable. The reason being that the U.S. is living off the savings of the world. Your piece if full of untruths. How can inflation be 11% in the U.S. as at this rate prices would double in 6.5 years. Even your data on budget deficits is warped to suit your opinion. Look you obviously do not have clue as to what comprises national income of the country. It comprises items produced and sold and includes indirect taxes in the final figure.

        Please note that the guy who came up with this metric of measuring said that this does not form a metric of national welfare.

        Economic accounting differs widely from business accounting. Hence the massive confusion.

        Current Account and balance of Payments are the basic forms of a country’s financials.

        Countries that have the Privilege of issuing international payments have an advantage over others. Hence the U.S. is now mostly owned by finance capital from outside. You could check the Commerce departments data.

        Look at Trump… He is a billionaire because of the foreign capital that took up a lot of his condo projects. The U.S. remains the safe haven still because of its economic size, military and legal systems.

        Look the saying is you put your money were your mouth is.

        The U.S. government can borrow for 30 years at under 3 %. Rationale human beings are voluntarily lending this to the U.S. government.

        Why has the author not heard of – Globalization?????
        Economic integration led by the dollar issuing country the USA.

        • chemrock says:


          There’s a lot to chew here, but worthy of responding.


          Sure, and you could actually go further back. World circumstances change and adjustments became necessary. The circumstances are not necessarily the same each time and certainly very different now.


          Talking of post-truth, my understanding of the Plaza Accord is slightly different. In the 70’s Paul Volcker pursued very high interest rates to battle high inflation brought about by petrol dollar and the Vietnam War. This caused the $ to strengthen against most currencies. From 1981 to 1985 it rose 50% against Yen and some European ccy. The strength of the $ slowed down world trade as developing economies can’t compete. The US had extremely high current a/c deficits, whilst Japan and Germany had extremely high current a/c surpluses but negative GDP growth. Basically, Germans and Japs were buying $ bonds to fund American deficits — sounds familiar. Trade protectionism reared it’s ugly head. So the G7 met and agreed to cooperate and make some adjustments by controlled and publicly announced monetary management thus avoiding public panic. America agreed to devalue it’s currency and other G7 undertake certain changes like tax reform, opening up of Japan’s markets, plus other sacrifices. Concerted effort by the G7 central banks in open market operations resulted in Yen, French Frank and Deutsche marks appreciating 50% by 1990. It was a sacrifice by US exporting growth to G7 and developing countries.

          You made it sound like the US bang their shoes on the table and got Germans and Japs to comply.

          I don’t know about the Rome accord, unless you mean the Treaty of Rome which is about the foundation of the European Union.


          I think Trump will find the Russians and Chinese are made of different stuff. Currency revaluation is not the cure for US’ ills. In did’nt work for the US after the Plaza Accord, it would’nt work now. Don’t wish to digress getting into this.


          I did’nt cook the inflation fig. It’s from a respectable private enterprise. Did you check it out? The budget deficit of $1.3T is google-able, I did’nt cook that either. Thank you for your lesson on national income, GDP was what I learnt from my economics teacher, considering I got a “B” in the econs paper which I think is fairly respectable.


          You may be an economics expert and I respect that, but I think you are missing some banking perspectives. Not all those bond purchases are investment decisions. Big chunks of it are for $ reserves where countries have no choice $ being the international ccy. Another big chunk is financial institutions buying in relation to their interest rate management strategies. Yet another chunk is purely short term paper trading to make some quick bucks.

          That’s the gist of my article — that the tide is turning.

          “Why has the author not heard of – Globalization?????”

          My understanding is globalisation benefitted the Chinese as companies set up shop in China helping it to become the factory to the world, bring jobs, capital and technology transfers. Globalisation destroyed America as their corporates migrate offshore transferring capital, jobs out of the country. And my current understanding is we are living in a paradox — the most capitalist country in the world is making anti-global trade policies whilst a communist country is championing globalisation.

          • “Globalisation destroyed America as their corporates migrate offshore transferring capital, jobs out of the country. “

            That’s exactly the point of Make America Great Again, chemp. But I think because it comes from Trump and that cheesy god-awful truckers cap , it doesn ‘t get any traction, BUT if you super impose FDR’s image, that’s essentially what it is.

            • See the ‘must read’ item regarding impacts on the Philippines. Link in right column.

              • Bill In Oz says:

                This is a real problem for the Philippines. The BPO industry in the Philippines is a major driver building the Filipino middle class while simultaneously building connections between the Filipino people and other countries. .

              • Joe,

                I’ve been on record here on the negative effects of the BPO industry and agriculture industry (based on non-food needs of the West, ie. palm oil, etc.).

                Now maybe Bill’s right that the BPO industry is creating or growing the middle class there in the Philippines, but it’s a demand manufactured in the West, essentially dependent on how the West, in the case of BPO, feels one year or the next.

                BPO industry , that party was eventually gonna close down, either thru AI or other technology , I guess it just so happens that time came sooner than later.

                But in mid-2000s I met these fresh college graduates excited they were working in some BPO gig, either customer service (excellent American English) or technical side , I personally thought it was kinda sad that these kids were excited over a call center job—– over here that’s what aspiring actors do, or people who can’t find jobs do, in between gigs.

                BPO is still essentially young Filipinos getting exploited only they get to stay in the Philippines and don’t have to send money home. But I’m pretty sure this wasn’t the Comparative Advantage that Adam Smith alluded to.

                the BPO industry should’ve also been thought of, as some stepping stone to something better, but instead, instead, working in a call center became prestigious—- Why?!!! Same with palm oil, there’s nothing to be proud of.

                As for remittances, I’m sure other means to send wealth abroad will spring up, like , or just send more goods. It’s ironic because we all know, all that money from outside the Philippines, eventually get stolen by politicians there, and brought back over here… so there’s double taxation going on.

                But on the flip side, if money’s made over here, then when it’s transferred outside the US, like outsourcing, someone should pay. I’m on the fence re remittances, Joe… but BPO it was bound to end eventually, why Filipinos didn’t see BPO as actually beneath them, I’ve never understood, instead they saw it as a legit profession,

                oblivious to its temporary nature.

              • For a nation of little industry, a job that pays P20,000 a month is precious. I tend to think that only spoiled rich folk from spoiled rich lands would look down their noses at people who find pride in the work. As for how long the BPO industry would last, I fear that all is conjecture aimed at selling the audience on the biggest pig’s ear on the planet, the idea that Donald Trump actually knows what he is doing.

              • chemrock says:


                BPO pays relatively well. That’s the number 1 attraction.
                BPO is a very lively environment, all colleagues around you are millenials — lots of common geeky, gadgetry interest. You should see groups of them going out for their meals — jolly boisterous and lively. I think they have lots of social activities. Friday gimmicks is a blast. It is the same in India. It became sort of cult like environment. Proximity brought promiscuity. The Indians, they had boy-girl funs under their desks.
                It’s fun in the BPOs.
                Why should we look down on BPO jobs Lance? There is no luxury of choice to Filipinos. Labour mobility is low here.

              • Bill In Oz says:

                Hey lance, I agree with Joe & Chempo here….BPO is professional work whether for Filipinos or Indians or South Africans. Relatively well paid, predictable and dependable up to the present time.

              • ” There is no luxury of choice to Filipinos. Labour mobility is low here.”

                that’s EXACTLY the point I’m making here, chemp!

                maybe this labor mobility should be the priority, don’t sell BPO as something more than pigs ear, it was never seen as something more over here, so why is it sold as something more over there? you guys see my point here? it’s (to use Joe’s favorite phrase) pigs ear over here, people who use to do call center work over here was for people who were in between jobs , so why did it all of the sudden become some sort of profession there…

                I agree being conversant in English is a skill and having technical knowledge to be able to walk people thru their tech problems is great, shouldn’t that be somehow converted to actual professions, instead of this dead end called BPO, then somehow celebrated as something tremendous? I understand it pays a lot, but see how dependent it is to other forces outside of BPO? wasn’t that what the whole article was about, Joe, about how BPO can just disappear?

                Why it was promised as something permanent from the very start, should anger everyone here, especially those in the BPO industry.


                I’m not looking down, Joe. I’m saying Filipinos should look down at this work, as we over here did before it was outsourced there—– because that’s the truth about that work, it’s not a career. So who’s selling pig’s ear over there, is my point.

              • You seem to be selling. I’m not buying. BPO is a respectable livelihood and only someone trying to downplay possible harms to the PH from Trump’s self-centered ‘America First’ policies would paint it otherwise. We have trolls by the thousands here dealing slants such as this, and you seem to me to be just one more.

              • You’re essentially taking these bright kids (not too many Filipinos speak English fluently these days) and telling them, this is the pinnacle… BPO —— so is it just me or am i the only one here really seeing the sad injustice in that?

              • You are the only one with the agenda that would impel you to see it so.

              • Bill In Oz says:

                No, no , no Lance ! Remember the BPO industry puts educated Filipinos in direct salaried connection with people in the Anglophone world.. There is a huge learning, training process involved which is & will be great for the Philippines’ future.

                Purely in the language area, Tagalog does not afford much future professional employment except in the Philippines. It isolates rather than connects. The capacity to understand and be understood in English is a big professional work opportunity.

              • “There is a huge learning, training process involved which is & will be great for the Philippines’ future.”

                Is there then an actual Filipino strategy in place to harness this experience from BPO, to convert it to something else? Like there is a strategy in China, forcasting the next generation Chinese to be out of the factories and into white collar jobs (or high paying jobs)? I’ve never heard of such talk. BPO, at least from my understanding, is never seen as means but an end.

                If there are other industries set in the Philippines to catch all that learning from the BPO industry in place, then perfect, i stand corrected… but I just don’t see that, Bill, unless you have articles on this or personal knowledge, explaining this wider Philippine strategy; BUT IMHO, the Filipino leadership politics and private sector, just doesn’t strike me as forward thinking types. I could be wrong, so please correct me here.

              • Joe,

                You do remember how call centers jobs were over here, correct? Did people doing call center work ever thought they were gonna make a career of it ? or work call center til they were 65 yrs old? NO! That’s my point! the very nature of the work was TEMPORARY.

              • This is not America, a fact that you overlook in your need to troll the matter. Pinnacle? No one says that. Opportunity to have a real life? You damn betcha. What I find sad is how you diminish earnest, working people out of political need to defend Trump. There are millions of kids in the Philippines with no where to go, and you insist in diminishing what a good many are doing to make a life for themselves and their families. Your dense, unfeeling view astounds me . . except that it confirms your amoral political purpose here. You’ve had your say, I’ve had mine. Editorial directive: move on. Don’t even respond to this comment.

              • chemrock says:


                You take a myopic view of BPO.
                Firstly, call centre is but one aspect of it. There are backoffice transaction processing which is more high end. Good if Philippines can get more of these.
                Secondly, 3rd world country with high unemployment and big population base should go for high labour industries. BPO is a darn good fit.
                Thirdly, you discounted the multiplier effect of BPO. It has significant impact on house rentals, it helps keep lots of 711 and ministop and other fastfood outlets open 24hrs.
                Fourthly, this is basically an export industry. $27B foreign exchange earnings a year.

                Why dwell on the niceties. That can come later.

              • “That can come later.”

                BPO just seems to me like fool’s gold, chemp.

                Instead of producing more engineers, lawyers, doctors, bankers, you know real professions (the types Singapore focused on), it’s diverting/siphoning Filipino potential to an otherwise untenable industry (it’s very precarious)… young Filipinos who could be doing medicine, research, etc. are instead settling for this work.

                chemp, I understand there’ s other facets to BPO, but in essence it’s work big multi-nationals can outsource in the 3rd world, so although on surface its lucrative , I don’t see much difference from BPO’s manufacturing cousin, like clothing, assembling, etc. Factory work at least it’s the low skilled getting the work, BPO is taking the brightest of a country and settling them for less , IMHO.

                If it’s seen and handled as something temporary, a stepping stone, then yeah I can see BPO’s purpose in the long term. Without the understanding that it’s temporary, it’s essentially a black hole. And those touting this, politicians there, the private sector, should be more honest.

                Joe, sure i’ll move on. But you’re being unfair here, you directed me to a link and when I posted my opinion on it, you denigrate it———- an opinion I’ve had way before Trump, BPO = Brain Drain, i’ve been on record here questioning BPO.

              • I denigrate your obtuse persistence in denying what people are telling you, and the arrogance of judgment from afar, that oh so common foreign arrogance I try to avoid like the plague. The universities here produce thousands of engineers, doctors, lawyers, and bankers and there is no economy in which to place them ‘over here’. The doctors go to the US as nurses (or used to), the lawyers do notatrizations for a living, the engineers become OFWs, and the bankers get paid horseshit wages. BPO is a respected industry. As for the honesty of politicians here . . well, they are politicians, and behave much like your republicans.

              • The point of the article is that Trump policies are likely to hurt the Philippines in the two areas of economic strength, BPOs and remittances. It did not moralize about the profession of BPOs or honesty of politicians. You did one of your typical diversions of argument on it and it for sure seems to me you are trying to blame the Philippines for Trump’s willingness to throw other nations to the dogs so you Americans can horde your goodies.

              • Also, in good humor, I added another article to the ‘must read’ section.


                Joe, that’s not what i’m doing at all !!!

                But i do agree with your summation: “The point of the article is that Trump policies are likely to hurt the Philippines in the two areas of economic strength, BPOs and remittances [from OFWs]”

                And this is what I was criticizing, Joe.

                Even without Trump, the un-tenable nature of the BPO industry was already apparent. As far as remittances go, where before the Philippines was kept afloat by OFWs , now the BPO workers are the new national heroes, keeping the Philippine economy afloat.

                Now I’m not a big fan of OFWs either, Joe, essentially the policy of sending your most skilled workers & brightest abroad, whether 1st, 2nd or 3rd world, is just bad period.

                BUT at least, at least, in the case of OFWs revenue , OFWs represent different sectors, from different countries, so there’s variety , which means if one country kicks out or taxes certain OFWs, it’ll still withstand some losses… OFWs although from a myriad of industries, when taken together , represent a steady stream of revenue for the Philippines.

                BPO by its very nature is dependent on just one country. That’s my point, Joe.

                Let’s make this relevant to chempo‘s article. Let’s forget Trump for now, hell let’s go to another dimension, and say Hillary won, Joe. And chempo being chempo was right all along, the mighty Dollar tumbles, the US goes down, what do you think happens to the BPO industry, Joe? Will it be able to pivot towards China? NO!

                The fact that BPO represents a bigger chunk than OFW revenue now, should be a worry. Hence un-tenable. So the issue isn’t Trump and his policies, it’s the industry itself, at the core, because it’s an industry that’s waaaaaaaaaay too dependent on just one country.

                My issue is WHY did the folks who set up this industry there, not make any contingencies for something so obvious and predictable? This isn’t like chemp’s article, or RHiro’s points, or caliphman’s comments or edgar’s logic , my point’s very simple (I’m just a Google PhD 😉 ) ,

                Why place all your eggs in just one basket? That’s the essence of my argument here, Joe—- I’m not judging BPO workers, but I am very critical of the bigger minds at work that placed all these eggs in one basket (kinda like palm oil, Joe).

              • “Also, in good humor, I added another article to the ‘must read’ section.”

                Did you want me to comment on that also, or will you be telling me to knock it off? 😉

              • Hmmm, I see it did not post. Will have to retry. It is about Bannon, the guy you say is immaterial. Authoritative. Washington Post.

              • BPO industry:

                Trump sneezing:

              • Kindly don’t condescend with “yada yada yada”. 😉

                (Do you want me to comment on that Bannon article when posted? YES or NO.)

              • As edgar has explained, yada yada yada is not condescending, but a reasonable response to a commenter who is trolling a circular conversation and adding nothing new to the discussion. You seem to be under the delusion that you can demand an answer from me on a question that need not be asked. Trump’s foreign policy is relevant to the Philippines, and Bannon appears to have a major say in that policy. Now whether or not you are here to teach and learn, or troll, that is up to you. The latter will get you tossed back into the moderation box. It is my editorial judgment that matters on that, and you are tripping lightly right now on the very edge of the box.

              • OK,

                I read the Washington Post article, Joe.

                Though I agree that Bannon is the nationalist guy on Trump’s team; his security guy is Flynn,





                Flynn obviously is simply taking Obama’s “restrictions” further, to a “ban”. So it’s not an immigration issue, if anything it ‘s simply an admin issue that will be clarified in Appeals, re “the executive order’s lack of procedural clarity and confused implementation” (from Washington Post article).

                Now the Fed judges in California and Washington , the appeal will go up the 9th Circuit Court in San Fran. Whether or not this court will nip this “procedural clarity and confused implementation” issue in the bud (so it doesn’t have to go up to SCOTUS), remains to be seen, otherwise it’s the Supreme Court.

                But as President, as the Commander-in-Chief, like Obama did Trump can restrict travelers from said countries, in the end Trump has this power, that’s his National Security mantle. IMHO, once there’s clarity in procedure and implementation (remember this was my issue originally),

                then Trump’s restrictions will prevail (just as it did for Obama)… because it isn’t about immigration , but national security. It’ll simply add to what Obama already had. As far as constitutional stuff, I’m pretty sure the Constitution only applies to Americans, this should just be at the 9th Circuit Court, but since that court is know for crazy rulings, it’ll go up to Supreme Court, and

                IMHO simply confirm the President’s powers to restrict travel on grounds of Nat’l Security. The fact that it’s essentially Obama’s list, will help greatly.

                Bannon’s head might pop up in other issues, but on this one in particular, this is all Flynn, Joe. 😉

              • My father used to give his kids excellent advice in the form of simple wisdoms. For example, when we were learning to drive, “son, always know where your wheels are.” Or when I wanted a toy, “son, what you want and what you get are sometimes two different things”. I share these wisdoms with my own son, and am adding one, for the social media era, “son, beware of those who peddle pig’s ears in the guise of knowledge.”

              • NHerrera says:


                Thanks for the link on Bannon must read: lots of items there to warm the hearts of anti-Trumps and even those in the middle — Bannonite the Trumpeteer doing the disruption he reportedly relishes while Tillerson is relatively silent on the scope of the “ban” EO affecting his State Domain; and the legal aspects of the EO not well-studied, resulting in Federal Judge’s restraining order which may result in a win for the Judge on the legal merit.

                What a way to start Trump’s first four days. Also, that SEAL action on Yemen did not result well for first such foray by the new Admin. Of course, one may say, that is just a small-time Yemen. We hope they handle the bigger ones better. Meaning those with nuclear arsenal.

              • Tillerson has the tough job of putting disorder back into order, and is one guy who will likely earn his pay, just in effort. The judge, as I understand it, is not some radical left wing malcontent, but a conservative more aligned with republican ideals, at least those that are law abiding. I would also note that, nine days in, President Trump took off on a vacation. Furthermore, it is evidently going to cost the taxpayers $400,000 per day to let his wife live off premises from the White House, in New York’s Trump Tower. What a riot. What a guy.

              • NHerrera says:

                WISDOM FROM THE FATHER

                I like the trio nuggets from the father, but I re-quote,


                because it may apply soon enough to Trump.

              • Hahaha, yes, indeed. The problem with him, from the citizen perspective, though is “what we don’t want, we are getting!”

              • chemrock says:

                This discussion on BPO is actually interesting, if you folks just keep your cool. I won’t go into details within this blog but just add a few points that’s been brought up.

                1. Lance mentioned why bet heavily on a sector of economy that is basically short term. I thing an industry just evolves and you can’t control that. Businessmen goes where the money is. From the govt point of view of course they want to go according to their economic map. But if the govt is not producing the results, business will just evolve. Good or bad is a different issue. Did the US plan Silicon Valley? Of course not. It just took off on its own logical path.

                2. Waste of resources, having intelligent millenials in a sector with no future — what’s the alternative for 1 million folks? What’s the alternative, right now, don’t talk of what can be done? Plus there’s a few more millions of unemployed intelligent millenials.

                3. Lance mentioned Spore where we are picking the brains sector. Hey, we did’nt start off this way. Faced with huge unemployment prospects following the withdrawal of British troops, jobs was the priority. We took in low-tech, high-labour types. However, back then we did a few things — prepare a workforce that’s required for the industries we try in bring in — the technicians and machinists. When the foreign companies came, we partnered them to set up training centres. We ended up with an upgraded skilled labour forces — the QCs, the tool makers (backbone of industries back then, today 3D printers has more or less taken over). After a couple of decades, when we restructure our economy to go high end, we say bye-bye to these types of economy. The lesson to Philippines re BPO? — Walk first, don’t run. Lance suggest hit the ground running.

                4. Here is an example of a 3rd world country who try to run before they can walk –
                VP Habibie of Indonesia want to go high end to leap frog into 1st world economy. Sometime in 2000 he went into aviation and started a company to build jet planes. He had only one order from a friendly Mahathir of Malaysia for 8 planes which were never delivered to this day.
                would you buy a jet plane made in Indonesia? Don’t mean to insult them, but that’s the reality.

                Let’s be grateful and keep the BPO for now.

              • It is ironic that the following photo came across my twitter feed in the heat of this discussion.

              • I think the discussion is insane, the idea that the BPO industry is somehow beneath the Philippines.

              • NHerrera says:

                Sorry, but just jumping-in right here:

                Would we rather go to the high-growth funeral parlor business? Some creative high-tech thoughts may be needed there instead of patiently giving out information and appeasing the complaining customers — a job well suited to the educated, intelligent, patient and kind Filipinos — a premium trait appreciated the world over for the care of wards or patients. 🙂

                (If not appropriate, scratch this one out pronto, Joe.)

              • A few months ago, I explored the feasibility of doing a crematorium service locally, but discovered the expense for the incinerator that does a thorough job of capturing the ashes of the deceased is very high, and it is unlikely that people would pay . . . here in the provinces . . . the fees needed to pay for the machine. Therein lies the reality of the Philippines that illustrates why the BPO industry is important. It is a wretchedly poor country. So overlaying it with rich man’s thinking is rather like saying the price of an incinerator is irrelevant, it is the best process, and therefore should be done.

              • Joe,

                I totally understand that the article focuses on Bannon, I’m simply saying the most obvious is that it is Flynn’s. These are powerful folks, Joe, each with their own turf, are you implying that Flynn will just bow to Bannon (that will never happen in DC, especially considering Bannon’s status as outsider). This is Flynn’s. But most importantly, it was also Obama’s list. My take is that these restrictions will just become more specific, but they will continue.

                Between Bannon and Flynn , this is Flynn’s.


                I see your point re walking vs. running , and I guess in a way i’m arguing running, but the crux of all this is actually , the notion that kids who would otherwise be pursuing better professions (the bright English speaking Filipinos) , will end up settling for an industry that should be seen as temporary, but sold as permanent there.

                I know without BPO those kids would still be opting to leave the Philippines. So back to my eggs all in one single basket question , is there really just BPO in the Philippines? Look at Thailand, with their hospitals and inviting the world to get their medical care there, why couldn’t the Philippines have done that first?

                I’m sure there are other more promising industries, not as dependent to the US, that the Philippines can pursue … together with BPO.

                the Philippines has a lot of lawyers, the most Western legal tradition in Asia, can’t they also copy that medical industry in Thailand, and set up some sort of legal industry (ie. the 3rd World’s lawyers?). the Philippines already has plenty of doctors and lawyers, etc. the way BPO monopolized the Philippines should be very suspicious.

                But my point here is that the Philippines shouldn’t just rely on one industry, hence my question to Bill, is there a bigger strategy here that we are missing to discuss or account for?

                Let’s expand this talk instead towards this bigger strategy (stepping stone) and other industries aside from BPO that can take-off like the BPO industry (resources, human, that the Philippines already has). But I agree, chemp, this is an interesting topic, and I would add one very relevant to your article, yes?

              • I’m reminded of a quote I saw earlier on twitter, something about people shaping facts to fit an argument, with the argument fit to an agenda. You have zero credibility with me, I’m sorry to say, so your declarations sail gently, gently into the West Philippine Sea.

                The Philippines does not rely on one industry, with ag being prominent, and manufacturing of piece goods, and retailing, but BPO was a drink of water in an economic desert and you are telling the thirsty man not to drink it because it is not champagne. That’s why your credibility fell to zero.

              • “Therein lies the reality of the Philippines that illustrates why the BPO industry is important. It is a wretchedly poor country.”

                It’s cultural, Joe, look at how Bali, Indonesia and Hindu India cremate their dead, they still make do. Both are poor countries, they still cremate. So i’d wager the crematorium was the foreign concept. 😉



                I don’t know if you’re a fan of Chuck Norris, he did a movie based loosely on This one happened under Pres. Carter… these kinda failures is tricky. Especially this one, sounds like the raiding party were the ones ambushed, if you’ve seen “Zero Dark Thirty”, there’s usually eyes on target way before the raiding party arrives.

                That 8 yr old little girl that died, would be American (for all intents and purposes), just like Joe’s son is American. We’ve already talked about Awlaki and his teenage son (born in the US) who were targeted a few years back. I think that would be a better subject re Constitutionality vs. National Security. But looks like no one wants to cover this story, as far as the constitution goes and terrorism, the death of that 8 yr old is central, especially when taken in context with her dad’s death and her older brother’s death (both separate targeting)


                Don’t take my word for it, Joe, it’s simple group dynamics, one you should be familiar with re your time in the corporate world, why would Flynn surrender his turf to Bannon?

                If you’re coming from the Bannon as the Sith Lord conspiracy theory great, you’ll try to fit it accordingly, and I can totally respect the Sith Lord theory ,

                but knowing Flynn and Mattis (not personally mind you…)

                I don’t have that luxury of the Sith Lord theory, Joe. Flynn and Mattis, being generals, one from Spec. Ops and the other Marine, will not surrender their responsibilities to Bannon.

                You can apply that Sith Lord theory maybe on others under the Trump administration, but the generals that Trump tapped are no jokes, Joe. Flynn would take ownership, period.

              • It is not just me who says Bannon is unduly influential. It is a common perception, I think, outside the community of white supremacists:


              • “The Philippines does not rely on one industry, with ag being prominent, and manufacturing of piece goods, and retailing,”

                I already mentioned palm oil, and this whole ag as non-food philosophy, but let’s leave that argument for another day.

                Where do these other industries actually stand, Joe? Because if BPO surpassed OFWs, and OFW revenue essentially kept the Philippine economy afloat, I ‘ll wager those other industries pale in comparison,

                But I’m trying to compare apples and apples here, not apples and oranges , what other industries could those BPO kids have been part of aside from BPO, English and technical know-how the underlying skill here.

                There’s quite a lot of nursing students in BPO, for example. Apples and apples, what beside (or in addition to) BPO could have been stood up.

              • You are welcome to explore those matters, and it is good that you are so interested in the well-being of the Philippines. The point of the article that started this whole gross divergence of the discussion was that Trump foreign policies risk doing comparatively severe damage to the Philippines, hitting at two important economic vulnerabilities, BPOs and remittances. I have read nothing from you that tells me that this is wrong. The America First policy is a hideous distortion, as it reflects a choice by America to hold itself, like China does, above the well-being of other nations. The good intentions of America in the past have turned grossly selfish. It is despicable foreign policy, in my eyes. Flynn, Bannon, apples, oranges, who cares? The MORALITY behind it sucks.

              • I am putting you back into moderation to restrain you from dominating the discussions here. I tire of going round and round the roundabouts searching for an exit that seems not to exist.

              • The morality is a mirror of Bannon’s white supremacist view of the stacking of humans by worth, in case it is not clear what I mean.



                I know this is different from BPO, but since I’m the blog’s Soylent Green proponent, might I suggest you copy Bali’s example (India, seems to use different woods);

                bamboo! There’s a couple of bamboo that grow really fast, Google fastest growing bamboo , but yeah, the Balinese use bamboo, which is totally sustainable because it grows like grass (really fast… because it is grass!).

                Balinese cremate their dead in the open, funeral pyre, as a Catholic country you’d probably want a brick oven, to cover the body, tons of designs available, i suggest you Google masonry oven.

                I say continue with this venture, just go with bamboo and brick oven— simple, natural, cheap. And then once you get that going, maybe also do Viking funerals.

              • NHerrera says:

                Adding another to this long thread:

                Hatching something, or just saying Hello?

    • karlgarcia says:

      Am I mistaken that a few years ago you asked the hypothetical question of is it time to move away from the dollar?
      The world is different today than 8 or 9 years ago, so I understand that opinions change.

      • karlgarcia says:

        Forget it , I forgot where you said it, it might be NYTimes comment section or somewhere else.
        In TSOH you have been consistent thst it would take the remnimbi years to be the currency of choice,

      • RHiro says:–el-erian-2017-01

        “First, because they issue the world’s main reserve currencies, the advanced economies get to exchange bits of paper that they printed for goods and services produced by others. Second, for most global investors, these economies’ bonds are a quasi-automatic component of portfolio allocations, so their governments’ budget deficits are financed in part by other countries’ savings.”

        “The advanced economies’ final key advantage is voting power and representation. They command either veto power or a blocking minority in the Bretton Woods institutions (the International Monetary Fund and the World Bank), which gives them a disproportionate influence on the rules and practices that govern the international economic and monetary system. And, given their historical dominance of these organizations, their nationals are de facto assured the top positions.”

        “These privileges don’t come for free – at least they shouldn’t. In exchange, the advanced economies are supposed to fulfill certain responsibilities that help ensure the system’s functioning and stability. But recent developments have cast doubts on whether the advanced economies are able to hold up their end of this bargain.”

        It is about power….

  11. Ben B says:

    Was 9/11 used as a pretext to start the wars from Afghanistan all the way to Syria and Yemen? America has been at war since its creation but 9/11 escalated everything. Was 9/11 an inside job then?

    • chemrock says:

      I have normalcy bias when it comes to the conspiracy theories on 911.
      The reason is simple. A cardinal rule of conspiracy is to have a minimum number people in the need-to-know group. 911 would have required 10,000 co-conspirators.

  12. p says:

    This is NOT out of topic in ANY blog discourse or intellection. The Universe is the big and ONLY chessboard of eternity. Leaders of the world are MERE pieces with different roles sustained by their levels of power. War is the name of the game of the white against the black pieces not the checkmate. Game gawkers and watchers are either inductive or deductive, vociferous or asleep on the strategies and gambits. Earth is world as speck of the universe. Demographics of any color, shapes or size or smell, the have and have nots should discard the “eche boche-che” of self-interest and subjective inputs; re-read and re-digest the message of the Sermon on the Mount. And then “in cold blood” read and comprehend the link below. Du30 and Trump, etc are not mere “eche boche-che” but a lot more to the lives of demographics. Three past wars namely, I and II and the long Cold One did not have the benefit of E-science and technology. Run, but go figure. In this paragraph every sentence could spark or merit discussion– be the subject of non-fiction book.

    • popoy del r cartanio says:

      “Everyone who voted for the Orange man should be required to be on the front line”



      “Why not…for God and Country. Are you lady boys going to cower in the closet?”

      Please read on or join the conversations at the end of the link, because the quotes are starters not biased selections. I always try to finish entire conversations by commenters of media’s pieces of interests. This is the first time, honest never before, that I read (never heard) about Bannon. Were there Bannons before WW I and WW II ? Were there gossipers and pundits of war that time?

      • popoy del r cartanio says:

        I just started reading the conversations without finishing the news on the POTUS and Australia’s Prime Minister phone talk. On the refugees Australia accepted then offered to send some and allegedly accepted by President Obama; where President Trump demonstrated extreme disgust: Americans might see it in different ways.

        It is politically correct to interpret it that for the sake of friendship, one can accept to share the refugee problem of a friend, after all what are friends for? On the other hand, a friend of another kind can reject and abhor the offer if he thinks it is bad for him and his people. But he should be nice, diplomatic and even silent about it.

        I think JoeAm’s bloggers can discuss this MEAT (not deviations) of the two leaders conversations WITHOUT the “eche boche-che” spin and discombobulation of the fair and truthful US media.

        The conjecture is that the three above posts are not incursions but salient and relevant to any topic because it is about earth war most people are starting to talk about. It is not “about economics, stupid” so says some politicians who can’t be wrong all the time.

        • popoy del r cartanio says:

          HEADLINE: PH not a ‘country of concern,’ says US State Dep’t

          MAY BE not about China BUT THIS:

          MANILA – The US State Department today clarified that the Philippines has not been marked by US authorities as a “country of concern,” which means Filipinos can continue their travels to and from the US, or benefit from residing and working in the United States.
          Last week, US President Donald Trump signed an executive order denying US entry to citizens of seven countries, namely, Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen.
          The order also covers everyone with a visa from these countries, including “green card” holders who left the US and plans to come back. They will undergo scrutiny and might be prohibited from re-entering the US.”
          But do read on please:

          • popoy del r cartanio says:

            Reading conversations at the end of the news. — On the UC Berkeley exchanges of jabs, left hooks and right hooks, straight or below the belt punches; this selection of three quotes are subjective choices in search of objective viewpoints.

            “Judith Stevens
            I have to wonder why so many are opposed to an alternate way of thinking? You either go to hear the speaker or you do not. You can go with open ears and open mind and listen to someone who may not think the same way you do, and thus assess what you have heard. Take some of it, dwell on the varied thoughts presented, or dismiss it entirely. If one is an adult with intelligent forethought, they would be open to hearing views, opinions and thoughts diverse from their own. Does not harm anyone, what are you thus afraid of? We are all very unique individuals with numerous mind sets. All higher learning is suppose to open our minds, expand our ideas, offer us varied opinions, how else does one learn. Learning to get along with any individual, simply by agreeing to disagree in an adult intelligent manner, using thoughts opposite your own can result in having in depth conversations. Why would anyone who wishes a higher learning experience wish to attend any school which only offers a one sided education?”

            “Nancy Schenk Presant
            I certainly don’t approve of violent riots and destruction of property, but since the vandals were masked, how does anyone know if they were students or an outside group of leftist militants? the articles I have read said a peaceful protest was going on, with people carrying signs, chanting, etc when these masked rioters appeared , pulled fireworks, bricks etc from their backpacks and started throwing them at police, broke through 2 fence barriers, smashed windows, and set a mobile police light pole station on fire– is there any identification yet of who these people were?”

            “Dave Neal · Works at Retired
            As someone that has studied history for some time I would like to say that these protesters are acting exactly like the facists under Mussolini and the nazis in their quest to rid germany of the Jews from WWll. They are exactly like them, from the slogans to their speeches. What has become of the America that promoted freedom and free choice? It is really sad what is happening today because some people didnt get the candidate that they wanted.
            Maybe a civil war is what they want and if so it is one they cannot win.”

            The Link if you like:


      • “This is the first time, honest never before, that I read (never heard) about Bannon.”


        When you think of Bannon , think Chris Christie, Newt Gingrich and Rudy Giuliani 😉 . But she’s the Mother of Dragons:

        • popoy del r cartanio says:

          The guys Christie, Gingrich and Giuliani had impacted American lives;
          Will this lassie too impact the lives of her detractors. Dragons are creatures
          of business, not of public administration. That’s the gal my unfinished drawing.
          (sorry don’t know, can’t copy and paste the drawing here)

          • karlgarcia says:

            Manong Popoy,
            Ask Manong NHerrera about the IMGUR app, I see he can post drawings here.

            • popoy del r cartanio says:

              Thanks Karl. This I would like to share. Being old, one has a wide and deep friendly and learning environment. There was an Herrera, a Mason who was a colleague in teaching farmers rice culture, another one buddy a soilsman, another one a former president of OFW Pinoy Org in a South Pacific country, a UP Chancellor whose wife became pristine Justice of the Supreme Court and more Herreras can’t recall at the moment. They benignly touched my working life.

            • NHerrera says:

              Karl, popoy:

              I hope this procedure helps:

              1. You may go to the previous blog of Paul Lazo “DU30 may be right after all” and click on the image or picture I posted there. (By the way that is how the website imgur got its name, a rewording for imager.)

              2. You need to sign in. If new, you will be asked for the usual details in signing in.

              3. The site will give instructions on how to post pictures. When you click the item on posting a picture, you will see a panel. By clicking Browse, it will go to your files. Go to the folder where you have the picture and click on the particular picture you wish to post.

              4. Your picture will then appear. On the right panel, you will see one of the option is for privacy of post. Click that and click save. You will see your picture. On your right you will see the URL link to your picture. Click copy. The URL link is copied.

              5. The URL link copied is what you post in a blog such as JoeAm’s.

              6. It all sounds so complicated. But once understood and tried several times, becomes rather routinely easy. But please the important note next para.

              7. IMPORTANT. It is important that you click the privacy item, because the pictures and all those you want private to yourself can only be accessed by you or through your post in JoeAm’s. Otherwise your pictures becomes a global one — used in imgur family of pictures: you will see a lot of funny pictures there like cats, etc. 🙂

              • karlgarcia says:

                Thank you manong NH,
                I hope manong Popoy took note, I saw his art posted here at the main page of TSH before that us why I thought he might be interested in imgur.

              • NHerrera says:

                Welcome, karl.

              • popoy del r cartanio says:

                Thanks Karl and NHerrera—addressing you straight without the courtesy of being Kuya or Ate, Manong, Tatang or Dad should be the privilege of old men both with the hoe and the pen—for helping out to post my (un)magnum opus. The help may be I can still follow but in it there was a red flag and unusual things came too, to mind. Like I am thinking if young Karl got the guts to post his image why can’t I still an alive looking septuagen? Red Flagg: Internet thereabouts issued warnings about signing in unless one is so safe certain. I don’t sign in anymore when asked my name, email, and password; not even from Microsoft for updates and safety and security. So now No Mas, NO MORE after failing to post my Ivanka drawing. Thanks NHerrera, I copied and filed your written help as future ref.

                Come to think (forget) of it, How did I (or JoeAm) do it to have posted here long ago lots of my paintings when D & A (dementia and Alzheimer) experts say recent memory is the first to go, cobweb memory much much later. Well, it is both perhaps for lots of overdue book worms.

              • Authors of the blog can upload photos to the site and link to the html address there. It is not a public service, but can be used for appropriate PH related topics.

              • NHerrera says:


                Use of “NH” is good enough for me. No Manong and all that are needed.

                On safety of an internet site, Microsoft usually issues that pro-forma note about not giving personal info (email, etc) or proceeding unless one knows the site to be safe. Yes, I agree, prudence is best.

                (By the way the password that you submit when asked is not necessarily the one you use to open your email. That is, your email is opened by you, say, using %^&*abc, but the one you submit for purpose of imgur, say, may be Seiuy@avB.)

                Re “imgur” site, I see from some of his graphic posting that @edgar lores of our TSH also used imgur. And edgar is computer/ internet savvy compared to me.

                Thanks for you note.

              • karlgarcia says:

                Sirs, I will now refrain from calling you manong.

                I am sure that would have been a beautiful painting.

  13. thanks for the think piece chempo.

  14. Rank Merida says:


    Simply because their printing was in relation to their own economy. More money in circulation for the same amount of goods and services in the local economy would naturally mean inflation.

    But from the viewpoint of the US, the globe is mostly part of its economy because the dollar is THE (not a) “legal tender” of the world. For Janet Yellen, the world is her oyster.

    So Greenspan was correct.

    BTW, great piece, Chempo.

    • chemrock says:

      Thanks Rank

      Yes the offshore economy of the $ allows the Fed to keep printing. But I don’t think it’s an infinite economy out there. Sooner or later the tipping point will be reached. My contention is that point has arrived.

  15. RKL says:

    I only believe in the numbers. Show me the numbers. Numbers don’t lie.

    • chemrock says:

      Right RKL, numbers don’t lie. Several numbers and charts have been thrown in both the article and the comments side. You are free to parse it anyway you like. Perhaps you have some specific numbers you wish to see.

  16. NHerrera says:


    I know even giving a link that disparages or makes a joke on a profession is in poor taste that should not be posted here. But this is about a Judge’s sense of justice on deciding by the merits of the case. I hope lawyers hereabout will pardon.

    A judge met with two opposing lawyers in his chambers. “So, gentlemen,” he began, “both of you have sent me a bribe.” Both lawyers squirmed uncomfortably. “You, Attorney Diaz, gave me P75,000. And you, Attorney Perez, gave me P50,000.” The judge reached into his folder, pulled out a check, and handed it to Diaz. “Now then, I’m returning P25,000, and we’re going to decide this case solely on its merits!”

  17. Bill In Oz says:

    (Hi Joe, I am posting this comment here because WordPress seems to be mixing up the sequence of comments making it hard to follow easily )

    1 : I note you said that unemployment is now 5% in the USA. But Chempo made a point of noting that these figures are unreliable in this post above. He stated that unemployment now only reflects the numbers receiving benefits NOT the total number of unemployed. Perhasp Chempo can clarify this.

    Here in Oz th bureau of statistics pulls a similar trick. Anybody who has worked 1 hour a week is not unemployed. Plus if unemployed persons give up searching they are also not included.

    2 : How big a deal is this fracas about Trump being abusive on the phone to Turnbull last weekend ? I do not watch CNN much – too much USA focussed ! But the ABC TV gave it 7 minutes out of 30 in the TV prime time 7.00 pm news here in South Australia. That was followed up by a 10 minute interview with a government minister in the 30 minute “TV 7.30 Report”. So it is big in the media. But not a single person I have spoken to or contacted over the past 5 days has brought the subject up.

    3 : Each day I log onto a web site here called “the Conversation” ( It has just 3 articles on the whole Trump/Turnbull fracas in the past week.Two of them are by the same author, Tony Walker. His 2 articles have generated a total of 124 comments over the week. The third article is new and has generated just 6 so far. So this whole business has 130 comments in a week. And so of them are by non Australians. There are 24 million of us here in Oz Joe. So I think that 130 comments are an indication of not much interest in this issue generally among us.

    PS The Conversation is a good academically sourced website. And not just on politics, but science, health, education sustainability etc. I hear there is a US based sister web site.

    • The technicalities of the employment rate are beyond me, but I think you will discover, if you dig through it, is that job creation in the US has been strong under Obama, and the problem is not widespread poverty, but prices for things like homes being driven above what people can afford, creating frustration. Unequal distribution of wealth is the main issue, and Trump figures to fix that, I guess, by keeping low-end workers out of the US, along with skilled workers with the wrong religion.

      • Bill In Oz says:

        And I imagine, deporting undocumented illegal low skilled immigrants from where ever. And maybe beating Obama who deported 3,000,000 in 8 years.


          Neither am I , Joe, just that NAFTA on the ground looks like more suspicious Mexican businesses, in the Southwest; and truck loads of drugs under the guise of Mexican businesses to the rest of small town America (re open borders).

          It totally makes sense to be neighborly period, doesn’t have to be in business. But if that neighbor is 3rd world -type, especially a narco-state , we shouldn’t treat them the same as say Canada, more vetting is needed.

          I don’t notice any significant spike re drugs in California, I think the police here, know all the tricks , hence much of the drug dealing is out in the Mid-West and rural America. What I do see here are more Mexican establishments that are really suspicious, local cops I don’t think have the means to investigate money laundering.

          But if you talk to armored truck drivers, there’s a difference, between say Stater Bros. grocery and Vallarta groceries, the cash they pick up tend to be significantly more when it comes to Vallarta. Same with Mexican restaurants. So Narco-state, NAFTA, the US’ naive belief in the open market, all get mixed up and the businesses supported by drug money trample

          other legit mom and pop shops. This I’m sure is connected to poverty, you and Bill are discussing.

          Poverty here, of course, doesn’t look like poverty in the 3rd world, at the end of the day, there are food pantries, churches, missions, etc. So no kids on the streets like the Philippines, and people don’t go hungry or thirsty if they want food, same with shelters (most homeless don’t go to shelters, because they don’t want to get preached to and also shelters tend to be crime infested, so you’ll see ’em under freeway underpass, etc.).

          But you can see the damage to the middle class, Joe. Like I said it’s no poverty, the way the rest of the world understands poverty (which is no food, no water, no shelter) , but you see communities get drug and crime infested, closed down business , etc.

          Growing up in Norcal, I used to spend vacations, up in Oregon, Redwoods nat’l/state parks up north and Mt. Shasta area. I don’t know if you ‘ve visited that area of late, but towns which used to be nice looking and middle class, ie. Redding and Red Bluff, etc. Are Tweakervilles now (meth/heroin infested).

          South of Sacramento on the Highway 99, that’s always been a crummy place, BUT the I-5 corridor north of Sacramento I remembered it fondly as beautiful, now it looks pretty much like Highway 99. If you take Highway 101 from Eureka all the way up to the southern part of Olympic National Park , it’s pretty bad, lots of drugs (but that’s more a logging thing); Highway 395 from Mammoth all the way to Washington, it’s bad, towns are getting deserted (ranching).

          Sure maybe it was Reagonomics that did all that, or that it was NAFTA that was the last straw that broke the camel’s back, Joe, but many many people don’t feel like America’s a “rich nation”, Joe. Sure in the city and fancy small towns, maybe it does, but the rest of the countryside looks down trodden, Joe.

          Maybe these folks have never left and seen the 3rd world, and when you say poverty I think of kids sleeping on the streets in the 3rd world, but poverty was definitely at play in the 2016 election (Bill’s spot on) , the sense that a lot was lost in the 90s and 2000s—- so in that sense it is poverty, losing instead of gaining, being worst off, instead of better off.

          • A nice profile. I suspect a lot of the blight is from people seeking opportunities in the cities, a negative side of the positive job creation elsewhere . . . plus the impacts of technology and big box retailing on mom and pop retailing. It is more transitional poverty than abject poverty found in the PH. Clearly, Americans have lost touch with a compelling reason for doing what they do, and want something better. I’m not sure they know exactly what that ‘better’ is.

  18. Bill In Oz says:

    Chempo, You quote the The Chapwood index as measuring real inflation in the USA far more accurately than the official inflation rate.
    Is there a Chapwood index for Australia ? Here prices are constantly rising but the official inflation rate is low at about 1%. House prices in Sydney, Canberra & Melbourne are a major example. Huge rises in the past decade ! Which means the cost of housing for 50% of the population has risen hugely .But zip official inflation

    • chemrock says:

      The Chapwood index is US-centric. I’m not saying it is the real rate they show, but the contention is it’s govt independent and their composites of 500 articles seem fair and wide, also 50 cities data seem fairly representative of national average.

  19. Bill In Oz says:

    Chempo, I remember you mentioning briefly in your post, the impact of the US dollar being a de facto world currency : it became greatly over valued and other currencies like the Yen, the Yuan, the Mexican Peso, and the Won, became under valued.

    So imports from these countries became quite cheap. And exports from the USA became expensive. This amounts to exporting jobs from the USA.

    Trump is saying he will put tariffs on imports from Mexico. But the implication of this logic is that he will put tariffs on imports from any country which he thinks has an under valued currency.

    Or is there another way ?

    • chemrock says:

      In a world of free floats, exchange rates go up and down all the time for various reasons. The way out for govts is to tackle the underlying causes. Unfortunately, most often than not, protectionism always rears its ugly head in such situations. Imposition of tariffs is an easy way out for populists. But more often than not, tariffs is a double-edged sword. If Trump impose tariffs on Mexican products, American citizens end up paying more. And Mexico will hellbound retaliate with some other measures.

      RHiro brought up the Plaza Accord of 1985, and this is a very interesting thing, not in the way RHiro intended in his comment above. The world was facing a somewhat similar of economic discontent and protectionism was imminent. (see comment above). In that situation $ was way too over-valued and suffocated world economic growth. G7 countries set down and crafted a way out which required sacrifices on all sides. Amongst other things, they agreed on an adjustment to exchange rates, or rate re-alignment. This was executed through central bank open market operations and they did it in a concerted, timed, and publicly announced manner. I think it was over a period of 2 years. It was a success in terms of what they want to achieve and no panic was created despite the $ depreciating by 50% against DEM, YEN and FRF It resulted in the devaluation of $ and Fed was able to lower interest rates and world economy improved.

      The Plaza Accord demonstrated something very important. It was the first time that central banks made such concerted moves for a common objective. It says that co-operation is the way to work out such economic problems and actually set a sort of format for solving future world economic problems. Fast forward today, we have G20 — the bigger, the more problematic at the tables. We also have populist leaders, instead of leaders with cool wise heads.

      Back to US specifics. I’m no economist so I don’t really have anything that can pass any economics textbooks. I just have these 3 general points :

      1. America has to deregulate and move away from Wall Street and back to places like Detroit. It has to downplay the finance industry and rebuild it’s manufacturing backbone. Nothing is going to work if you don’t have anything to sell to the world. How are they going to have an internationally competitive manufacturing industry in a very matured economy is something they need to figure out. They need some serious restructuring for sure. For one, their cost of doing business is extremely high, it’s not just the tax, but lots of regulations to comply.

      2. Their domestic monetary policy objectives play havoc with not just their economy but the entire world. They have to do something with the huge budget deficit and national debt. Let me explain this way. What is interest? It is simply the reward for capital. So a normal interest rate would imply a certain portion to absorb inflation and a certain portion representative for the risk assumed. That’s what interest should be. But instead the economy is held to ransom by an artificial rate dictated by the Fed. In other words, the interest rate becomes a monetary tool, not a measure of reward for capital. And that tool is used to battle inflation of which the huge budget deficits and national debt are causal factors.

      3.Allow me my musing here. I think maybe they could devise a way to decouple American domestic economy from the world economy such as to physically segregate $ into a domestic and offshore markets. Nothing innovative here. 3rd world countries like India and China initially had dual currencies, one for residents and one for foreigners. It requires the Fed to maintain 2 sets of books, one for domestic markets and one for offshore markets. With 2 sets of big data the Fed will be better placed to pursue domestic economic policies better without affecting the offshore markets. The offshore $ essentially is the international ccy and so eventually it can transition into a world currency. Call it ‘Bancor’ then. Under a microscope, this idea needs to answer a few thousand questions. I have no idea about the details, simply inspired by Singapore’s ACU Asian Currency Unit and throwing out here for discussion.

      • R.Hiro says:

        Firstly my apologies as I had earlier mentioned Rome accords when it should have been Louvre accords……

        I hope you allow me to provide a link from a paper done by Harvard on the Plaza accords and subsequent Louvre accords.

        Trade deficits with Japan continued after devaluation in 1985. Hence the need for the Louvre Accord of 1987…..

        Kindly note the history of the change in policy of the Reagan administration in the early years as compared with the later years.

        Your piece on the plaza accords is simply a piece of pure fiction.

        • chemrock says:

          Thank you for the links RHiro.

          If anything, the Harvard paper supports my notion that it was the other G7 countries that pressurised the US to devalue the $ and not a case of US dictating the Germans and Japanese to revalue their currencies as you mentioned. Leaving the Reagan details out, my Plaza Accord is in line with reality.

      • Bill In Oz says:

        Chempo, thanks for the detailed & informed response. I like your last suggestion a lot. I think that would work. And avoid a lot of traumas globally. What are the chances of getting Trumps team to study your suggestion ?

        By the way in the period 2009-14 the Reserve bank of Australia, for reasons completely beyond my understanding, pursued a high interest rate policy..around 4.5% This lead to massive influx of foreign currency and an overvalued Au $. And that lead to a flood of cheap imports, massive increases in offshore tourism and a collapse in Australia’s manufactured exports and the export focused services sector ( education services especially) It also lead to an over valued housing sector.

        I suspect the Reserve bank here was operating on some out of touch with the real world ‘economic’ ( ? ) ideology. But to be frank they were a bunch of idiots.

        • Bill In Oz says:

          PS : The AU$ over the past 30 years has mostly traded in the range A $0.68 to 0.78 compared to the US dollar. In 2011 to 2014 it was trading above parity to $1.05 – $1.10. It caused massive distortions in or economy.

        • chemrock says:

          Thanks Bill for the ego boosting haha.

          I would’nt go idiotic on the reserve bank there. Perhaps we just don’t know what they were trying to achieve in their monetary policies.

          • Bill In Oz says:

            I suspect they were over influenced by local financial industry suits who definitely benefited heaps from this stuff up.

  20. Bill In Oz says:

    Edgar, I Googled just as you suggested and got yhe answer you said you got.

    But is Google right ? No !

    I think this is an example of an American working in an American privately owned corporation getting it wrong. The ABC was set up in the early 1930’s by the Commonwealth Parliament by a special /dedicated Act of parliament.

    Think on this : the government is ‘answerable’ to the parliament.

    The ABC is also ‘answerable’ only to parliament via annual reports and via summoning the Chairman of the Board or managing director to select committees or senate standing committees. But there are hardly ever ministers present.

    It is not answerable to the government. The government could try to introduce an act to try in some way control or dominate the ABC.But I doubt that it would be ever passed, or even get a hearing in our senate.

  21. Bill In Oz says:


    Yes, It is very independent of government…It is my own first choice of information & news. But it is also progressive or leftish in it’s general outlook..And that can lead to some bias on some issues….But no doubt there are lots of more conservative news outlets which you can access to balance things up.

    Unfortunately for reasons which escape me, the ABC has no focus on the Philippines and no resident correspondent like it does in Indonesia, Hong Kong, China, Singapore, Japan, Papua New Guinea & Thailand etc. etc ! My complaints about this here have gone unheeded. I guess no money & there are English speaking, USA journalists here already

  22. a distant observer says:

    This is a colossal article chemrock and certainly hard to digest. You mention the “normalcy bias” which is a concept rather on a meta-level and very important to keep in mind when we think about the future. From my own experience, I can certainly state that reality is stranger than fiction. This axiom is true for the positive as well as for the negative sides of life.
    I had to read again the sentence in unbelief that the nominal value of the US derivatives market is now at over 1 quadrillion Dollars. I was always inclined to say “let them fail” in 2008, but as you describe, the Fed was rather out for combating the symptoms instead of the root causes.

    Where is the inflation? Yes the Fed manoeuvred itself into the infamous liquidity trap. This trap that economics students are always warned against. But the Fed did it anyway, practizing the things that every school book on economics considers as dangerous. Since then, the exceptional state has long become everyday life. And in this “new reality” the broad public resembles a person that falls from a skyscraper, and while falling, he tells himself: “so far, everything went well”. We all practice ourselves in collective denial, hoping that the warning prophets (such as you) are wrong and everything will be fine. Yes, so far, everything went more or less well in the last few decades. But will this fragile “global peace” be able to endure a failing and desperate hegemon?

    Yes these are the uncomfortable questions we have to ask, and there might be no easy answers to them…

    You also mention the four assassinated US presidents, these elite groups who are said to have a “NWO” agenda, the “Rainbow Notes”, and the capabilities of the US Homeland Security. As you say, it is an ominous topic, and much of it can be only discussed with a considerable amount of speculations. As for now, I can only highly recommend to read the book Foucault’s Pendulum from the brilliant Umberto Eco. It really influenced my thinking about these so-called “conspiracy theories”.

    a distant observer

    • chemrock says:

      Liquidity trap — it’s not just the US, but the same scenarios have been played out in so many developed and developing countries all over the world in the past several years. Low economic growth and loose monetary policies created the same economic malaise in so many countries. Perhaps it should be called the ‘fiat money trap’.

  23. caliphman says:

    The general tone of the blog and discussion has been negative on the status of the US currency and economy, as well as the correctness of the government and Fed stewardship of its fiscal, monetary and trade policies. While it is true that there are systemic and long running problems with respect to all these areas, compared to those faced by other leading developed nations and the world at large, I disagree with the notion that any of these problems have reached a critical stage.

    Yesterday there was continued good news on US employment and signs that the economy is steadily emerging from a long and deep recession that has China, Europe and large swathes of the global economy in its grip. The dollar remains strong and should continue to strengthen not only against the Euro, the yuan, and most other currencies principally because the US economic recovery should allow the Fed to raise interest rates at a time other countries cannot in order to try and revive or stimulate growth. Prospects for more controlled government spending, a tax and regulatory environment more friendly to business and incentive, and a respite from the political gridlock that has frozen Washington from enacting legislative, institutional and budget reforms. Granted that Trump very much like Duterte is a loose cannon and possesses a personality unfit for the power and responsibilities that go with the presidency of a representative democracy and in the case of the US, the leading military and economic in the world. That’s the bad news. The bad news is also the good news because unless Trump triggers a constitutional crisis or international hostilities, his administration maybe the disrupting force needed to shakeup the government as usual approach by US political leaders that has benefited but the richest and narrowing sliver of US society.

    • caliphman says:

      In short, there is a leader at the helm voted into power apparently due to the lack of a normalcy bias and that makes him a great agent of change. The only catch is there us no impending disaster.


        It’s , but done with the knowledge that at this point in time, there are enough checks in place. Personally, i think Trump will be impeached , but on his terms. What’s going on though is that individual states (particularly those that went for Hillary) have now felt empowered, the re-balancing of state power vs. Federal, is on track now.

        • chemrock says:

          Your observation is spot on re re-balancing of power of state vs federal. I hope Filipinos in Legislative and Executive are paying great attention to what’s going on and draw on the US experience as Alverez et al are mulling on the federalism project.

    • What are the policies that will redistribute wealth? Removing regulations on banks for sure is not in that direction. Nor is blocking immigrants as far as I can tell. Nor is gaming trade markets. Trump is the fat cat’s fat cat, it seems to me, but I stand open to being educated as to his policies for better wealth distribution.

      • Bill In Oz says:

        Joe, you said that gaming trade markets will not redistribute wealth. But you are wrong here. In so far as it generates jobs it redistributes wealth. So will measures that devalue the US $ against it’s major trading partners. As Chempo has so ably demonstrated the dollar is way over valued because of it’s de facto role as the global currency.

        Once upon a time before WW1 the British pound was the de facto global currency. And as a result the Pound became way over valued and the exports that built industrial Britain disappeared.

      • caliphman says:

        Joe, if the policies for achieving more equitable income distribution under the Trump administration are predicated on some version of trickle down economics, I too would question how a bigger pie just leads not only to bigger slices for the rich and powerful. The biggest concern I have is Trump mainly drawing from his Billionaire Boys club to run the government. Like him, it’s not his ability to run the huge government organizations to achieve results but that those results may not be primarily intended for the benefit of the general public the government is supposed to serve. Right now though, his clumsiness, will fullness and pettiness is as concerning as his cabinet appointments and declared policy prescriptions.

    • chemrock says:

      Well crafted comment Caliphman, although I may disagree in some respects.

  24. caliphman says:

    Chemmy, disagreement is many times a good thing specially when it results in understanding differing perspectives sharing new information, and provoking deeper discussion and thought. Your article and responses have done all of the above.

  25. edgar lores says:

    All work is honorable.

  26. R.Hiro says:

    It is becoming very clear that the author of the piece knows a lot and writes really well but understands very little about what money really is. At the core is everyone’s shared expectations of material value…. Every since the world got of the gold standard and state sponsored currencies came into being things got harder to understand…..

    Therein lies the basis for the saying that he owns the dollar rules.

    “The other day, Peter Navarro, the head of Trump’s new National Trade Council, charged Germany of using a “grossly undervalued” euro to “exploit the US and its EU partners”. On Tuesday morning Trump said, “You look at what China’s doing, you look at what Japan has done over the years. They play the money market, they play the devaluation market, and we sit there like a bunch of dummies”.

    “The US dollar index fell 1 percent on those comments, which for the currency markets is a relatively large move. The reason is that traders know that the power of the US government to put currency-exchange rates at any number they desire is almost unlimited. So, where is the peso-dollar exchange rate headed? It will depend on what actions Trump intends to take against those nations he perceives as unfairly manipulating their currencies.” Business Mirror

    The authors contention is that in 1985 (Plaza Accords) the major trading partners of the U.S. forced the U.S. into a massive devaluation and not the other way around. In other words they gave up their competitive advantage over the U.S. from the goodness of their hearts. The process was simple: they together flooded the markets with dollars increasing the supply thereby driving the price of the dollar down vis a vis their own currencies. The Fed like you mentioned did not have to resort of open market operations.

    No political pressure from the U.S. then. We should all remember those times, banking crisis in the U.S. due to the default of emerging market debt, huge budget deficits, and trade deficits. Remember the fall of Marcos.

    30 years after Plaza Accord, nations’ currency goals evolve
    SEP 22, 2015

    “Thirty years after the implementation of the dollar-weakening Plaza Accord, the purpose of joint currency interventions has shifted significantly as enormous global markets have become increasingly resistant to coordinated sovereign influences.”

    “The historic 1985 deal between Britain, France, Japan, West Germany and the United States brought a sharp depreciation of the dollar against the yen and other currencies.”

    “But as market size has expanded rapidly since 2000, joint interventions have had limited impact and have become a means to soothe market turmoil at times of crises.”

    “The Group of Five “agreed that exchange rates should play a role in adjusting external imbalances,” the accord said, referring to a “large and growing current account deficit” for the United States and “large and growing current account surpluses” for Japan.”

    “At the time, Japan was meeting increasing criticism for the trade surplus advantage it was gaining from the weak yen, while the United States, saddled with a massive trade deficit, faced the need to protect domestic industry.”

    “In view of the present and prospective changes in fundamentals, some further orderly appreciation of the main non-dollar currencies against the dollar is desirable,” said the statement released on Sept. 22, 1985.”

    “The substance of the statement was decided swiftly, and much of the discussion was devoted to specific means of joint intervention,” said Tomomitsu Oba, Japan’s vice finance minister for international affairs who attended the meeting at the Plaza Hotel in New York.”

    “At the closed gathering of the G-5 major economies, the U.S. government handed out a confidential, never-released document called the “non-paper” that included the planned amount of intervention and a targeted currency rate, according to Oba.”

    “Following the discussion, the figures in the non-paper were revised to aim for a 10 to 12 percent fall in the U.S. dollar rate through dollar-selling intervention worth $18 billion, while deciding on a share of dollar selling by each country.”

    “The concerted intervention changed the tide of the currency market. The yen, which was traded at around ¥240 per dollar, surged to the targeted level in two months and its value nearly doubled in little over two years.”

    The Japanese however being always proactive had already started transferring production facilities to the U.S. and Europe and to other Asian countries. WTO was born in the early 90’s and the Soviet union collapsed and the Washington Consensus was born. China joins the WTO and NAFTA happened. EU was formed and the Euro was born in the late 90’s.

    The Asian Supply chain was born and China became the vanguard. S. Korea got a huge boost from the massive revaluation of the yen. They became Japan jr. Off course the emergence. of the third wave of economics started with the semiconductor revolution. Jobs and Gates became household heroes.

    Guess who was the lead vanguard in all of this….. U.S.A. The dollar became the main currency of globalization. From Somali pirates to the Abu Sayaff dollar ransom became the norm.

    • R.Hiro says:


      I hope the author understand what the term governance means. quality of state institutions play a huge part in the convertibility and portability of currencies. Hence the dollars status as a safe haven ….Will Trump destroy this and will the legal systems of the U.S. allow him to do so?

      “But the reality, again, is that these steps are more about symbolism than substance. The PBOC’s renminbi swaps are almost entirely unused. Designated clearing banks have not exactly been flooded with business. Offshore renminbi bank deposits are falling. The proportion of China’s merchandise trade settled in renminbi has been declining since mid-2015. And there is no sign that where the Polish government has so boldly ventured, other governments will soon follow.”

      “The fault, to paraphrase Shakespeare, lies not in the stars but in China’s own financial markets. Since mid-2015, the country’s stock market has been on a rollercoaster. Every international organization worth its salt, from the IMF to the Bank for International Settlements, has been warning of problems in China’s corporate bond market. And if defaults on loans to corporations are widespread, as these organizations predict, the implications for the banks could be dire.”

      “The problem is mistaken tactics by the Chinese government. The government and the PBOC believe that relaxing capital controls and allowing financial capital to flow more freely in and out of the country will force financial market participants to up their game. Companies will have to upgrade their accounting standards, and banks their risk-management practices, to cope with the faster pace of financial transactions. The result will be more liquid and stable financial markets, in turn making the renminbi more attractive as a unit of account, means of payment, and store of value for residents and foreigners alike.”

      “Unfortunately, assuming a result doesn’t make it so. If Chinese banks and firms are slow to adjust, liberalizing international capital flows will lead only to more volatility, fewer offshore deposits, and less reliance on the renminbi for settling merchandise transactions – exactly as has been the case recently.”

      “Chinese policymakers must now put the horse before the cart. The most important steps they can take to foster renminbi internationalization are to strengthen domestic financial markets, modernize regulation, and streamline contract enforcement. If China wants to transform the renminbi into a first-class global currency, it should pay less attention to renminbi trading in New York and the currency’s weight in the SDR basket, and more to the development of deep, liquid, and stable financial markets at home.”

      • R.Hiro says:

        In the past 90% of americans were used to feed the country. Today only 1% are required.

        Manufacturing is going through the same process.

        Amazon has unveiled a store (brick and mortar) that requires no people to service its customers.–bradford-delong-2017-02

        Trading in Trump’s Lies

        “BERKELEY – In a recent Vox essay outlining my thinking about US President Donald Trump’s emerging trade policy, I pointed out that a “bad” trade deal such as the North American Free Trade Agreement is responsible for only a vanishingly small fraction of lost US manufacturing jobs over the past 30 years. Just 0.1 percentage points of the 21.4 percentage-point decline in the employment share of manufacturing during this period is attributable to NAFTA, which was enacted in December 1993.”

        “A half-century ago, the US economy supplied an abundance of manufacturing jobs to a workforce that was well equipped to fill them. Today, many of those opportunities have dried up. This is undoubtedly a significant problem; but anyone who claims that the collapse of US manufacturing employment resulted from “bad” trade deals is playing the fool

        “The facts about the declining US manufacturing employment are plain; there are no “alternatives.” The primary culprits are productivity growth and limited demand, which cut the share of nonfarm employees in manufacturing from 30% in the 1960s to 12% a generation later. That share fell further, to 9% because of misguided macroeconomic policies, especially during the Reagan era, when deficit spending and overly tight monetary policy caused the dollar to soar, undermining competitiveness. After this period, the US abdicated its proper role as a net exporter of capital and finance, and less developed economies became net sources of investment funds. Finally, China’s extraordinarily rapid rise pushed the employment share of manufacturing down to 8.7%; NAFTA took it to 8.6%.”

        • R.Hiro says:

          A more nuanced factual explanation of budget deficits under Obama….

          Should we blame past U.S. governments since 1776 for the total debt of the U.S.A?

          The fed owns almost $3 trillion of the debt. When this comes due this debt paper will simply be turned over to the treasury…

          “Depending on who you ask, President Obama added anywhere from $983 billion to $9 trillion to the national debt. Who’s lying? None of them. That’s because there are three ways to look at the debt added by any president. ”

          “The first, and most common, method is to subtract the debt level when he took office from the debt level when he left. The second, and more accurate, method is to add together his projected budget deficits.”

          “The third method is the fairest but also the most complicated. It’s to add only the deficits created by the president’s specific initiatives.”

          “Review these three methods below. Then, you’ll be able to win any argument made about how much President Obama added to the national debt. “

          • R.Hiro says:

            Lastly China is not communist state. It is a state run by the only political party allowed the Communist party.

            There are a thousand private individuals who are billionaires. A lot of them are transfering part of their wealth overseas and as such the government has tightened capital leaving the country.


          • Thanks for simplifying the debate. I’ve always thought that people attributing economic malady to Obama miss the point that it was on the strength of his confidence, a confidence welcomed by investors, that the crash of 2008 ended and the long, slow climb back to full employment began. One can attach “thankless” to those being critical, in my judgment.

      • chemrock says:

        Thanks for the data dump. Caliphman and I have been over this. In lesser sentences our mutual conclusion is the same, China is not ready to be a world central banker.

    • chemrock says:


      The other day I went to an asylum (a place for mentally sick people, not immigrants) and I met a patient in a room. The doctor switched off the lights and in the total darkness he shone his torch up and we could clearly see the beam of light going to the ceiling. The doc then asked the patient to climb up to which the patient chuckled and said ‘No, you’re not going to trick me’. The doc was pleased but intuitively asked “Why?”.To which the patient replied “Ah, I know your trick. When I climb up halfway, you will switch off the light and I’ll fall”.

      The doc was disappointed and said the patient is not ready for discharge. I walked away and marveled at the patient. He may be wrong about the ray of light, but certainly his logic of falling was’nt wrong.

      “Therein lies the basis for the saying that he owns the dollar rules.”



      Peter Navarro and Trump seems strange to me in light of the above quote. Why then the sabre rattling?


      Firstly, I said the G7 countries concerted effort in central bank open market operations. The US was a member of G7 was it not? Perhaps my loose reference of ‘central bank’ confused you as I did not specifically mention Fed.I think they were able to move the market in those days because of 3 main reasons – (1) it was a concerted effort, (2) it was a planned and announced move, so market players moved in tandem, and (3) those were days before the huge hedge funds and big time individual players, those people could have taken big positions and frustrated the central banks, or at least made it extremely costly for them. George Soros taught the world in the Asian currency crash — no one, not even a government, can play against the market.

      “from the goodness of their hearts’…. the world would be more co-operative and a better place with a little less sarcasm. The world faced negative growth with the over-valuation of the dollar and protectionism was rearing it’s ugly head. It called on sacrifices all round. $ devaluation was a sacrifice on the part of US. As I mentioned, it was world co-operation at it’s best, you choose to look from a different perspective.

      • josephivo says:

        And there will always be (a) Switzerland. In WWII the Germans needed rare metals for special steel and only the allies could supply. Solution? Send (stolen) gold to obtain Swiss francs, buy the minerals at a premium price from a neutral country you can pay in Swiss francs. The neutral country could then safely exchange at a good rate its Swiss francs into gold. And the Swiss just moved with a smile the gold from one rack in their cellars to another.

        Whatever the crash or impossible situation, those with the means will benefit.

        • Bill In Oz says:

          Yes..Wolfram is the outstanding example of this. It was mined in Portugal and purchased by both Germany with gold & the UK with sterling. via Switzerland.

  27. josephivo says:

    The world is complex and trying to involve every aspect in every discussion will result in just saying nothing at all. But. This article is mainly about government debt. What about government assets (land and minerals, constructions, financial papers, others)? And what about private debts and private assets (7 times the national GDP)?

    A government has different task and needs money to perform them. What are those tasks and how to perform them in the most economical way? A government as “the night watch”, guaranteeing law and order and safeguarding the borders? Or additional social tasks as assuring education, health, pensions? Economical tasks as stimulating innovation, providing start-up capital…? And where does the money comes from taxes or bonds? Bonds are preferred by the (rich) bond holders, it is money that generates returns, taxes on the other hand is money lost. On top the risk on bonds is zero, defaults will be paid by the tax payers. Capital is very fluid and thus not taxable as tax-heavens exist everywhere. (in the US, for the South capital as land and slaves – and later oil – were supreme, the North had more social values)

    Pickety has some interesting statistics on these phenomena. Just looking at national debt as a financial issue is too small, it is part of a larger economic issue too. Attitudes towards the task of governments, the financing of governments and inequalities are just as important as international political stands.

    And I don’t have the answers, just an uneasy feeling.

  28. caliphman says:

    With all due respect, RHiro, I am not sure after reading your lengthy recitation of assorted international monetary historical events that you have proven your contention that the blog author knows, very little of what money really is. It is not enough to brandish one’s apparent familiarity with these selected events but it is necessary to demonstrate logically and clearly how these support the author’s claimed ignorance of the subject matter that he has researched, presented, and discussed extensively here. I say this not in order to defend the author who is fully capable of defending himself but am curious as others here may well be to see if you can express succinctly and clearly what it is you know about money that the blog author is ignorant about so that we all may benefit from this knowledge which goes to the very heart of what the current blog is all about. Otherwise one could say your extended posts mirror back the same allegations about the author: that he knows many things but very little about money, the very topic he writes about.

    • RHiro says:

      Simple rationale logic. If there was a run away from the U.S. dollar by the U.S. foreign creditors who would benefit? Off course the U.S. economy. A massive loss of faith and confidence in the American dollar would mean higher costs for imports of goods and services for the U.S. economy….U.S. debt paper obviously would lose value and be severely discounted.

      All currencies including gold and oil would rise in value against the U.S. dollar. But the United States is a major industrialized economy. Massive import substitution of goods and services will ensue. Even the high cost of oil extraction in the U.S. due to massive devaluation of the dollar could bring the cost at parity with formerly cheaper sources of oil.

      Even BPO’s in the Philippines would see a massive rise in their operational costs in dollars as the peso strengthens against the dollar. It would probably ensue in equilibrium in costs between operating in the U.S. and the Philippines.

      Currency valuations have a direct effect on physical trade in goods and services and also the price valuation of resources in the ground in the country that devalues its currency.

      Look at the policy pronouncements of the Trump government. Deregulate all aspects of the fossil fuel sector. Gut the EPA. Forget about climate change. Drill, Drill, Drill!!!!!!

      His government is getting ready to remove all regulations of the financial sector.

      His people are supply side ideologues on sterriods.
      Fact or fiction….

      The U.S.A. is preparing for economic warfare vs the world. Is the U.S. food and energy self sufficient and prints its own currency?????

      Let us look at the STEM qualities of the U.S. Science,Technology, Engineering and Mathematical resources of the U.S.A.

      The simple definition of economics is the study of the resources of man and its allocation to human needs.

      Humans invented, since man wore loin cloths, a physical item to represent value that was shared by the expectations of all. So today the quality of governance is a exchangeable commodity reflected in the forex rates of major economies. Money is also an existential commodity.

      Today broadband access is as necessary as highways.

      So what will a country like the Philippines do when its production of goods and services become too expensive for the U.S. market vis a vis a massive run away from the dollar. During the Quantitative easing of the Fed our BSP went on a buying spree of dollars to prevent the peso from gaining too much strength on the dollar meaning it increased the supply of pesos in the system….

      The U.S.A. is the primary export market on the planet.

      Trump is moving the chess pieces against its major trading partners. FDR devalued the dollar vs gold. Nixon did the same and moved gold from the dollar for debt settlement.

      Trump has also drawn the line in the M.E. The U.S. and Israel will defend the Sunni dominated Arab states against Iran and the Shia dominated States in the M.E.

      Iran supports Hizbollah the ongoing Palestinian insurgent group in Lebanon and the only operating insurgent group with outside State support.

      Why do you think Trump has to make nice with Putin’s Russia. She has become a powerful broker in the region, since she is a major producer of oil and gas and knows how to use both tactical and nuclear arms. Russia is also well versed in warfare…Most especially on land. Geographically she lies in the immediate area of the conflict.

      A fraction of one percent of individuals of the planet own the productive assets of the planet. They meet every year in Davos and wherever the IMF-WB holds its annual meetings.

      Also all foreign holder governments of the U.S. debt are briefed annually by their U.S. banks about Fed and treasury policy and the state of the U.S. economy.

      All countries that are members of the IMF WB undergo monitoring and surveillance audits.

      Do you understand the meaning of mutilateral government institutions?

      That means a world political institution that oversees the global macro-economic system in place.

      Please also note that there is a vast difference between risk and uncertainty.

      Will Trump the Barbarian move away from the institutional framework in place since the end of the last great war to prevent economic and political warfare.

      Or as Marx had predicted the Second wave of Imperialism and globalization will result in the massive destruction of productive capacities due to economic collapse and warfare…

      Seig Heil my good friends for the rise of the New Fuehrer and the renewed ideology of ethno- nationalism spread at the speed of light.

      • RHiro says:

        To repeat myself— Fiscal and Economic Policy====MACRO-ECONOMIC POLICY

        To make an analogy with our resident Fuehrer here in the Phils. His only pronounced policy is the anti drug war he calls it.

        He had to depend on the institution tasked with implementing laws even with the use of deadly force.

        However this institution is no better than the law breakers they are bound to apprehend. Worse the justice system here are woefully inept and as corrupt.

        Result well his total ignorance about the quality of the justice institutions cant be used as an excuse. It was total idiocy and may have resulted in the deaths of thousands who were innocent.

        So what happens…The truth really hurt most especially when the last victim was a foreigner. It was like something out of the Godfather movie series.

        Let us look at Trumps early actions against terrorism…

        Nothing against the Sunni led states that are primarily responsible for the ongoing global insurgency vs the West.

        His target is the most powerful Shia state that is fighting the Sunni insurgents. Obviously it is for regaining dominance in the area since once Iran is destabilized Israel can rule the M.E. with their main sponsor the U.S. The single state solution will be imposed.

        Gunpowder, Iron/Steel and Steam….

        So please advise why a run away from the dollar would be bad for the U.S. economy??????

        • R.Hiro says:

          More for the esteemed Caliph, blessed is his name…

          “Most disturbingly, Trump and Bannon’s agenda seems likely to entail policies to weaken, destabilize, or even ultimately dismantle the EU. No motive other than ideology can explain Trump’s open hostility to the bloc, his bizarre ambassadorial appointment, or his notorious question to EU President Donald Tusk: “What country is next to leave?”

          Trump the Disruptor clearly has a strategic goal… destroy and dismember the only trading bloc that is a threat to the U.S. It is clear in the actions of the appointed ambassador of the U.S. to the E.U.

          The EU under Merkel still have a chance to save the Euro and the EU. Integrate the banking system under the EU and give the states leeway in their fiscal policy with the aim of uniting fiscal policy with the ECB support.

          That would give pause to the aim of Trump who wants the U.S. on top of everyone once again to enable it to take on China.

          More later

          • RHiro says:

            Why are the economic milestones I mentioned important in the rise of the dollar led empire after the fall of the S. Union.

            From my personal experience in the market for sovereign debt. Treasury Sec. Baker was responsible of the Plaza Accord and Louvre Accord while sec. Brady was responsible for the securitization of emerging market sovereign debts. I representing my principals was offered Philippine debt paper during the 80″ crisis for $0.30 on the dollar by a major foreign bank creditor of the republic.

            The WTO combined with the Washington Consensus pushed for the opening up of emerging market capital accounts to allow the flow unimpeded of portfolio investments in emerging markets equity and bond markets.

            Emerging markets could now float dollar denominated sovereign debt. Emerging markets corporate entities could also access dollar denominated debt.

            Huge flows of portfolio investments distorted currency valuations of emerging markets and it caused the overvaluation of the same. First Mexico crashed, then Thailand Malaysia, Indonesia, Philippines, Argentina then Russia and Brazil. All suffered serious balance of payments problems. Massive devaluations happened.

            The result more serious medicine from the IMF-WB. Export your way out of the problem. This time the emerging markets learned the hard way and started accumulating large dollar reserves and the new kid on the block started accumulating forex reserves of almost $ 4 Trillion from a measly $300 billion in 2003. Philippines did its part by exporting more people and the IT revolution gave us the BPO’s. Result we have a lot of dollars….

            So all these reserves had to be parked in the issuing countries banks. The result cheap money and asset inflation. Credit boomed and issuance’s of mortgages boomed…

            Former economist of the IMF Rajan warned that bankers were taking on too much risk because their pay depended on issuing more debt paper. They laughed him out of a meeting in Jackson Hole.

            Off course the curse of a highly overvalued dollar effected by an enormous savings glut from emerging markets and even frontier markets raised asset valuation which resulted in the worst banking crisis since the Great Depression.

            Too much money chasing too few assets so the genius’s in Wall Streets created fake assets to meet the enormous demand of investors.

            So now almost ten years to the crash in 2008 nothing much has changed except there are barbarians at the seat and gates of political power.

            The reason why multilateral institutions were put up was to prevent massive competitive valuations to solve economic problems in countries that had industrialized. Hitler solved his unemployment problem by expanding the German army and moved German industry to war production. All supported by a fiat currency.

            Churchill saved England by moving the RAF to the countryside and allowing the Germans to bomb big cities. The Germans simply did not have enough ships to invade England.

            Goering was like Trump…An idiot. He thought he could cause an English surrender with massive bombings of English cities. The RAF eventually wore him down .

            He swore that no German city would be bombed but the British made him look the fool. So he concentrated on cities instead of airfields.

            So today we could be facing a repeat or the echoes of the past.

            Dollar default, bring it on. I would gladly short the dollar to help…

      • Bert says:




        With that, it looks to me a patriotic move on the part of the US president.

        As to the statement that the US dollar losing its value good for the American economy my simple mind just cannot grasp the rationale of that argument. Isn’t that like saying that a valueless peso good for the Philippines, or, for that matter a worthless pound sterling good for the UK, etc?

        This topic of money talk certainly boggled the mind of a certified mountain brown red neck like me so next time I think would serve me better if I just stick to planting camote.

        • RHiro says:

          When one talks of currencies losing its value in the international financial markets it would concern values against other currencies.

          Simple rational logic: Dollar loses 75% of its value against a broad spectrum of currencies. Included in this is the Philippine peso. Please note the unit of account in the Philippines is the peso value of goods and services. So if Bert were a retired American expat living here with his family and was earning $10K a month from his U.S. pension and investments in the U.S. The revalued peso against the devalued dollar of 75% will yield Bert Php 15k per month instead of the Php 50K before the peso revaluation or dollar depreciation. That is assuming he is living here well and investing his proceeds in peso assets. The amount of pesos from his dollar income is much less…

          It would probably give him pause as his standard of living will be seriously affected by a dollar devaluation.

          He could however switch to importing more American goods for consumption and sale most especially goods with a high American content since the goods would be far cheaper than the goods produced in the Philippines with high Philippine content.

          For a rich Filipino individual who always wanted to buy an apartment in Manhattan but the price of $1M or Php 50M would be too high. If the U.S. dollar we to lose 75% of its value vis a vis the peso it would only cost the rich Filipino individual less than Php 15M to buy the apartment previously worth Php50M.

          The U.S. dollar is also the unit of account of an economy whose size is almost $20 trillion in today’s dollar values per year. We are not talking about the personal, business and government assets that are utilized to produce and distribute the goods and services concerned. What is the dollar value anyway of the Golden Gate bridge or the Brooklyn bridge.

          The largest single market in terms of volume traded daily is the foreign currency markets.

          So which currency is the most traded?

          Please note that the role of a Central Bank is monetary and price stability. Applying that to the Philippines whose economy is dependent on foreign savings to fund its consumption what would happen to the Philippine economy? The domestic economy would be wiped out. It would become prohibitively expensive to produce here.

          Outside of a major natural calamity or war the probability of such an event happening is extremely low.

          That is the reason multilateral and domestic political and economic institutions exist.

          • Bert says:

            A weak peso against a strong US dollar will be good for Filipino exporter, bad for Fiipino importer. I hope I got that right. Imported machineries/equiptments needed by the local manufacturing sector will cost more so local manufactured goods will cost more as a consequence, thus the Filipino consumers will suffer from higher price of goods made in the Philippines. The price of imported goods will rise as well as a result of a weak peso..

            The Filipino exporters and the OFWs will be happy but the bulk of the populations suffer.

            So RHiro, please tell me again how a weak currency is good for a country like the Philippines, or for the US for that matter?,

            Heheh, actually I’m not sure if I’m making sense with this post.

            • RHiro says:

              Bert we have to defer to Goldilocks as far as economic and monetary monitoring and surveillance. Not too hot, not too cold or not too strong, not too weak. Credit creation is money creation.

              The BSP main mandate by law is price stability and regulatory oversight over the creation of credit or debt whichever way you want to look at it.

              Since we live on a planet with states with differing stages of societal development with their own currencies, we need an arbiter working for us to manage the differences.

              The BSP has many differing tools to use in exchange rate management. They must make sure the peso is not too weak nor not too strong in line with the stage of the economic business cycle and in conjunction and coordination with the fiscal managers of the executive department and legislative laws re fiscal policy. All this however is aligned with our commitments to the IMF-WB.

              All this to promote growth. BSP or other Central banks function as the primary arbiter/regulator in the volume of the issuance of credit. Private banks are deputized to issue credit under very stringent reserve requirements. The era of free banking under the gold standard ended in the 1930’s. Hence though the power to issue new money the BSP can buy forex and accumulate them into reserves to guarantee forex for imports for up to year. Naturally the action of buying reserves moves to weaken the peso in favor of a stronger dollar in line with the targeted forex rate.It is a balancing act as when dollars leave the country the BSP sees to it that the withdrawal does not affect the lower peso rate too much as it has reserves to sell dollars to temper and serious flight. All a balancing act as the peso dollar ate has a direct correlation with the prices of goods and services in the country.

              Example in the early 1980’s when inflation reached double digits in the U.S., The U.S. Fed went on a massive program of destroying credit creation and caused the contraction of the money supply to destroy inflationary expectations and create a recession deliberately to bring down inflation through massive interest rate increases.The Opposite when deflationary expectations set in and the industrial economies Central banks go on a credit creation binge by drastically lowering interest rates and even printing new money to infuse into the financial system to create inflation.

              “In the case of money, we are dealing with something which is handled in our generation by methods that are extremely different from those in vogue a century or half century ago. we have now reached a stage where something universally needed – namely money, or credit which does duty for money – has become in effect a monopoly.”



              Archbishop of Canterbury William Temple in 1942

              • Bert says:

                Ah, weak but not too weak. Agreed, RHiro.

              • karlgarcia says:

                Goldilocks calls it, “Just Right”.

                In the comment I cut and pasted from mlq3, William Temple was also invoked, actually it was the same quote from Temple.

              • chemrock says:

                The William Temple quote is interesting. But we should not fall prey to the idea that every such quote of some good names hold the infallible crucible from which springs forth the ultimate answer to our economic ills. Economics after all is both science and art. And many economic advocacies in the past have created mayhem from good intentions.

              • NHerrera says:

                Thanks chemrock, my friend. I saved your note above for keeps. I thought it is just my geriatric mind and economics keeping a healthy respect but good distance from each other.

                I read your post as — try to understand but retain some healthy skepticism. For after all, isn’t the following a joke by an economist himself:

                If there are 10 economists making an analysis or opinion on an economic topic, there will be at least 11 opinions.

                Of course, that is rather gracious of that economist. Won’t there be 20 opinions because of all those two-handed economists? 🙂

              • karlgarcia says:

                On the other hand…….😉

              • NHerrera says:

                Et tu karl? Two-handed? 🙂

              • karlgarcia says:

                The left and the right. 🙂

  29. Bill In Oz says:

    Joe, the lance corporal said one thing in that long back & forth discussion which makes sense.;


    In May last year I spent a week in Chinese General Hospital under the care of Dr Patrick Ley, orthopedic surgeon, and his medical surgery team, the lovely nursing staff and best of all my own lovely lady who is a nurse. After being discharged I had to return for consultations and for physiotherapy. It all went so well for me and I am so grateful for their care. The folks at CGH were professional competent, caring and gentle.

    But I did not see a single other ‘Kano’ while I was there. And I have thought about that fact in the months since. Why ?

    I was covered by travel insurance. And when I spoke to a high up person processing my claim here in Oz she said that the cost was far less than it would have been in Australia or many other countries.

    Sooooo there is a big opportunity there for the medical trained people in the Philippines to help & heal people from other countries just as Thailand has been doing. I hope someone reading this comment will take up this opportunity. The Philippines would benefit greatly and so would a whole heap of people need health care

    • popoy del r cartanio says:

      Bill in Oz . . ANECDOTES GALORE! I missed and fell (why must it be always the last step of a stair?) in the afternoon cared for by a big Canuck (who as child was nannied by a Pinay who also became Nanny to his kids) in ambulance to a hospital. A few tests and a taxi ride to another hospital and by 7 p.m. put to sleep for a quadricep tendon repair surgery. Woke up at 9 p.m. taken to a private ward, woke up again may be 2 a.m. to see a short person hovering over me. Groggy, thought I was dead and the guy looks like an angel. He said I am Dr John, I am to observe and watch over you tonight because of what they saw on your ECG. Never saw him again even after dismissal from the hospital after paying C$12.00 for the taxi fare paid for by the hospital. Underwent PT care for several weeks which cost my wife Tim Horton’s donuts and coffee (reluctantly accepted) by an Italian lady PT. All because not as a citizen but a PR I pay income tax and goods and services tax to the Canadian government. Twelve dollars and a little more for Tim Hortons against being crippled? For the lucky few, este me, it is a beautiful world. Eh.

    • The PH has a medical tourism initiative out of Subic. I suspect the target market is Asia, like Korea, China, etc. There may be initiatives elsewhere, like Cebu, but I’m not briefed up on it. I don’t know how they market the services, or the success/failure. It is not big business, I think.

      • Bill In Oz says:

        Karl, thank you for searching this out. Having read the article I am perplexed by one thing. It does not mention Thailand which is well known here in Oz as a medical tourism destination.
        But perhaps the hospitals involved in this business in Thailand have not bothered with getting registered and certified. Instead they offer specific medical procedures/operations to meet s specific demand.

        • karlgarcia says:

          I checked other sources and some ranked Thailand as number 1 world wide (2009), but the culprit for 2016 is the dreaded Zika virus.

          • Bill In Oz says:

            That link is really interesting Karl. Firstly it mentions that
            ” the medical tourism segment maintained its record of strong growth, with local media reporting foreign patient numbers up 10.2% year-on-year (y-o-y) to 1.8m ”
            This represented 6% of total arrivals in Thailand in 2015.

            It also mentions that medical tourism in Thailand is now having to compete with new tourist focused medical clinics in the UAE. And I suspect that these clinics in the UAE are being staffed a lot by nurses and doctors recruited from the Philippines ..

            Thanks for the link. Karl..
            I hope that there are folks reading this discussion in the Philippines who are involved in the medicine ?health sector.

            And maybe this is worthy of a separate article Joe ?

  30. popoy del r cartanio says:

    This is OOT (out of topic) maybe even OOP (out of place) or SBI (salient but irrelevant) in this Chemical Rock, economics piece of intellection; it might be crazy but not mental imbecility to connect two distant dots of politics and war across calm and stormy seas; nay not so for thinker bloggers who trade word blows for contradictions. Read on or delete if you please.

    Mid-1960 sunrise
    awed by the Tablas tides
    I never thought
    Politics was like the sea
    So smooth and quiet
    Though death lurks underneath
    It’s a black mirror reflecting
    by noon the mighty sun
    when it was calm and flat
    when ships like knives
    slice its surface of
    perfect chocolate cake.

    Seafarers knew however
    Mesmerizing, beguiling but scary
    sea that’s white bubbles of beauty
    which tell not of outcomes
    since nobody knows
    of enormous tragedies
    twice only to continents of peace
    when seas of the world
    restless and angry
    became howling tsunamis
    exploding deaths and destruction.

    Truly far fetch it is
    To think of past world wars
    As politics and seas
    As love and wars
    where all is fair and inevitable
    unreasoned metaphors.

    So worry not
    you clueless clever sages
    Who sleeps and dreams
    In the pancit eatery
    Like it or not it will come
    When it is time
    Even to places that never sleep.

    I wouldn’t have stopped and wrote the anecdotal paragraphs to explain Tablas Strait my forgotten baptism of fire in the public service and make it a well read piece like before in TSOH. Like wine it comes with age to know it’s not only the bucket list, but the taste of desist of no longer doing that and this.

    I saw last night not in NETFLIX but in YouTube: China versus US this quote for thinkers: “Politics is War without bloodshed, War is Politics with much bloodshed.” I was tired and sleepy and turned off the TV to slumber in the pancitan. Hey did I not say here (look for the post) that if there’s a repeat of martial law it will be triggered overseas? Lies in the news do not lie. No obvious connection with my untitled poetry for those “Who sleeps and dreams In the pancit eatery.”

  31. Bill In Oz says:

    Hi Joe, back on the morning of the 3rd. of Feb. I said
    You replied that

    I have checked the dates. This deal was concluded on November 13, 5 days after Trump won the USA presidential election. I suggest the honourable and diplomatically proper procedure for Turnbull to have adopted would have been to sign the deal subject to its ratification by the President-elect when he took office.

    Why am I bringing this up again now ? Because the actual facts are important. And each of us had got the date of that ‘deal’ wrong. And so I suggest it is not ‘speculatively off the deep end’ to voice an opinion of what Obama & Kerry were attempting with this deal.

  32. Estliana says:

    Great article on the subject of currency and assets. However, Gold is the only Real money as it has kept value notwithstanding price where fiat currencies worldwide is busy collapsing as it is worthless and only a transferable commodity. Bitcoin and Cryptocurrencies is the future currencies in this new world of the internet and value.

    • karlgarcia says:

      Though cryptocurrency was not yet vogue 9 years, ago here is a lecture from RHiro about the gold standard.
      August 4, 2008 at 2:07 pm (UTC 8)
      I am beginning to suspect that we have a ten year old pundit amongst us.

      Which is the positive polarity?

      Dollars priced in gold or gold priced in dollars.

      Ã¢â‚¬Å“In the case of money, we are dealing with something which is handled in our generation by methods that are extremely different from those in vogue a century or half century agoÃ¢â‚¬Â¦.we have now reached a stage where something universally needed – namely money, or credit which does duty for money – has become in effect a monopolyÃ¢â‚¬Â¦
      Ã¢â‚¬Å“This is not in any way to censure the banks or bankers. They have administered the system entrusted to them with singular uprightness and ability and public spirit. But the system has become anomalous, and, as so often happens when anomaly has persisted through a long period of time, the result is to make into the master what ought to be the servant.Ã¢â‚¬Â Archbishop of CanterburyÃ¢â‚¬â„¢s William Temple in 1942
      When the Federal Government of the U.S. took over the direct management of the U.S. economy simply by taking over the banking system through rigid regulations. They in effect took over and monetized the credit system of the U.S. to facilitate trade and industry.

      When Johnson and Nixon took the U.S. off the gold exchange standard they reneged on their debt in gold to countries that had wanted to exchange their dollars for gold at the price of $35 an ounce to $1,

      That means there would be a physical transfer of the gold then to France that was wanting an exchange.

      The dollar simply was a derivative representative of gold bullion.

      Bretton Woods was based on gold or dollars backed by gold.

      The U.S. was worried then that the other countries would start a run on the gold bullion of the U.S. by exchanging their dollars also for gold.

      President Johnson had expanded deficit spending to pay for the war instead of increasing taxes. That was what started the inflationary wave.

      You remove that limitations imposed by gold bullion then government can simply print money over and above their bullion.

      Banking was entirely based on leveraging bullion assets.

      At the least the leverage was based on physical volume of gold.

      Without gold as the physical red line banks simply leverage the IOU’s of government which they keep as reserves.

      Simply a faith based currency based on the political standard of the state.

      That means the world is operating based on a faith based currency.

      What is worse is the application of the dollar standard being used as a unit of account like kilos or tons. Dollar like all other currencies are only abstract ideas of value.

      If it is not pegged to a physical good whose value is shared by the broad majority of the planet’s inhabitants then it is only a nominal representation of “value”

      Anyone who has bought gold certificates that are sold by reputable gold bullion smelters and recognized by financial institutions worldwide know what I am talking about.

      The Republic of the Philippines like other countries probably has gold deposits with the Fed which serves as the basis for some of the reserves of the BSP. The rest are IOU’s issued by the U.S. Treasury that form the bulk of the BSP’s reserves.

      If anyone would have bothered to read what Rogoff had written. It is simply that it does not matter on whether it is the Euro or dollar that oil is priced in.

      The world would be better off if the Saudi’s used their own currency to price their oil.

      In essence junking the dollar and asking everyone to buy their oil in their currency.

      Prices then would revert to actual production. That would mean that the Philippines then would be forced to produce goods good enough to be accepted for international trade apart from bananas, mangoes and people.

      The rule is simple Never, never, never trust government with the power to create money out of thin air like now.

      They create inflation which is the worst form of taxation.

      Most people on the planet still do not know this.

      • Bill In Oz says:

        History tells us this sort of talk is dangerous Karl.

        This sort of ‘economic’ thinking dominated economics back in the 1900’s to the 1930’s.It’s the sort of ideology which created the Great Depression. And the Depression lead directly to some countries deciding that what could not be gained by trade , they would take by force. Germany, Italy & Japan & World War 2 !

        Any system of economic theory has to be evaluated and judged and if needed junked, depending on the consequences when it is applied.

        A second historical note : Winston Churchill ( the hero of World War 2) as Chancellor of the Exchequer, in line with this economic ideology put Great Britain back on the gold standard in 1923. He unleashed economic, political & social chaos with mass unemployment and a general strike.

        ‘Winnie’ was at that time a fuckwit ( yes strong language, but entirely appropriate ). His personal ‘punishment’ was to lose his job as a government minister and remain on the backbench in the UK House of Commons until 1940 even though his party was in government almost all that time. In 1940 he became Prime Minister. And as PM in WW2 there was No talk at all of the Gold standard. Just do what’s necessary to survive & win the war against Nazi Germany.

        • karlgarcia says:

          Thanks Bill,

          It is always good to listen to as many views as possible.

          • And the moral of the story is that even fuckwits like Winnie can achieve redemption if they apply themselves, or need demands it.

            • Bill In Oz says:

              Yes indeed Joe, I agree. He learned and in some respects changed and really helped the Allies win war. But in May 1945 Britain went to a general election and the Conservative party under Churchill lost. A Labour government committed to ensuring full employment and a nationalised health system was elected. The people remembered & feared the Conservative Party’s lack of commitment to full employment.

            • karlgarcia says:

              I had a quick read on Churchill.Indeed he was in political limbo,as Bill said; until the Nazi threat came, then he redeemed himself big time.
              Through luck or hard work, as long as it works.

              • Bill In Oz says:

                I think it helped that his mother was American. He played on this with FDR in the period before the Pearl Harbour attack to gain US support for Britain against Germany.

              • karlgarcia says:

                Yes Bil, that (Churchill having American blood) could have been the reason why the US became a major ally.

        • chemrock says:


          I could’nt believe this :


          Did I see a proposal for a government to be the biggest commercial banker in the land?

          • Bill In Oz says:

            Chempo, yes very, very bizarre..I don’t think he has any understanding of macro-economcs. Does he want bank nationalisation as well ?

            • Bill In Oz says:

              Ahhhhh H’hererra, I recommend buying a coffee plunger. You will be coffee proofed against all economic collapses !

              • NHerrera says:

                Bill, it sounds like the coffee plunger type of coffee brewing uses the least coffee for the brew strength one likes. Will read some more about it and probably buy one to be economy-collapse proof. 🙂

                One always learn something new here.

              • Bill In Oz says:

                Coffee plungers : Invented by the ever frugal Dutch..Bodem was the original Dutch brand.I think…And plungers have the virtue of being power saving and thus generating less co2…There are glass ones and aluminium ones..But after breaking 405 glass ones, mine is stainless steel..

        • RHiro says:

          China, India, Germany, Switzerland and the Philippines all operate with differing degrees of state owned banks.

          Most states on the planet also operate with reserve Banks owned or operated by the State.

          Is there any country on this planet operating on a commodity standard? North Korea.

          Which countries are listed whose currencies can be used as banking reserves to facilitate international trade.

          U.S.A., U.K., Japan, EU and the PRC—–

          Fiat currency is simply an IOU issued by the State. Hence on a wholesale level a sovereign debt paper is a debt obligation of the state guaranteed by the taxpayers of the State. The owners of debt papers are institutions and wealthy individuals.

          So who guarantees the full faith and credit of the U.S.A. government. Its institutions or a single individual like in Zimbabwe or a single political party as in China.

          Do you think Trump or Duterte or Bill in Oz who forgets the role of the U.S.A and the Russian Red Army in the defeat of Nazi Germany.

          • Bill In Oz says:

            R’Hiro, I gather you arr asking did Britain win WW2 all on it’s own ? Actually no I do not. The Red Army 1943-45 was decisive. But USA & Britain played a major role in supplying the Soviet Union with food & munitions from 1942-45. It was done via convoys to Murmansk. And large numbers of ships in these convoys were sunk by German submarines. Many, many thousands of men drowned or died of wounds, in the cold North Atlantic on ships sunk in these convoys. Not a pleasant fate !

            These convoys were protected by USA navy & British navy ships. many of these were sunk on convoy duty. But they did their duty anyway. For without these supplies the Red Army would have been severely handicapped in defending the Soviet Union. And these supplies were provided at no money cost to the Soviet Union.

            The USA army also played a major role from 1943. It started with the campaign in North West Africa, then Italy, then southern France and then after D Day in June 1944. Britain was part of these campaigns but on a lesser scale.

            The war was fought not just on land but in the air and on the seas. The Soviet Union had negligible air force and almost no navy. Germany lost the war in the air after 1943 due to US and British dominance. This dominance lead to Germany not having any real ability to fight the Soviet Union from the air or indeed know what the Red Army was planning to do. Lack of control of the air meant that the USA & British air forces could bomb Germany at will after 1943.Germany’s military production and indeed it’s capacity to produce industrial or agricultural goods was very limited. Without this dominance in the air, Germany was facing the threat of starvation. Indeed many millions in Germany were starving as the war ended in May 1945.

            So who made the bigger contribution ? It’s complicated mate. But all played a major role

            • chemrock says:

              I saw a movie once where there were scenes of Soviet troops attacking a German defence line. The Soviets had men but not enough weapons. So they had their men assaulting in 3 lines. First line were men with what looked like Mk4 riffles. Second men line carry a few rounds of ammo and no weapons. They pick up the weapons of fallen first liners and continue the assault. The 3rd line does’nt attack. They stayed back, their job was to shoot any comrades in front who flee back.

            • RHiro says:

              Yup agree all played a major role.

              But was more interested in the role of state banks in the discussion. Up until 2008 the worlds biggest bank based on deposits under management was the Postal Bank of Japan.

              Another example of state run bank.

      • NHerrera says:

        I am debating with myself at this time of my life, if it is still worthwhile to devote some of my time to the honest-to-goodness subject that I am still at a great loss — the subject of money, gold, credit, printing of money and all that. With no guarantee that I will finally understand the subject. This is the winner: just continue to read about it here and take a deep breath whenever it becomes too deep — as it often does — or when it points to the collapse of the money system, so I cannot even buy some decent ground coffee to feed my old Bialetti coffee maker. 🙂

    • chemrock says:

      Churchill’s leadership style is best suited for war times. In peace times, he could not rally the troops in cabinet.

      The Brits cultivated FDR to drag him into the war. They knew FDR was on their side but the American public wanted to stay out. There were many Americans who had dealings with Nazi Germany and it was in their interest for US non-involvement in the war. One of these was the US ambassador to UK Joseph Kennedy, father of JFK. It took lots of persuasion and some deceit by Churchill’s team in US to finally bring the US into the war.

      The US learnt a lot from the British in the WW2 collaboration in the areas of intelligence and counter-intelligence. J Edgar Hoover with the FBI was a bit of a pain in the ass for Churchill’s team back then. It was from the Brit experience that the US went on to create the CIA.

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