• Matthew

    Just want to say thanks for your podcast and your interesting thoughts during my time listening to them. I look forward to your thoughts in the new year as we officially go into what is spoken about in the Chinese curse “May you live in interesting times”.

    To Tom and Roger and all the other contributors (I won’t try to get all you guys as I will most likely miss someone) Merry Christmas and a Happy New Year!

    Sorry for the mangled sentences and thanks for trying to work with them!

  • Matthew

    Just want to say thanks for your podcast and your interesting thoughts during my time listening to them. I look forward to your thoughts in the new year as we officially go into what is spoken about in the Chinese curse “May you live in interesting times”.

    To Tom and Roger and all the other contributors (I won’t try to get all you guys as I will most likely miss someone) Merry Christmas and a Happy New Year!

    Sorry for the mangled sentences and thanks for trying to work with them!

  • Chris S.

    I like to view East meets West as my Monday Morning “Current Events” club. Just as my coffee wakes up my body, I like to use EMW to wake up my brain. Though I don’t always agree with the views expressed, at it’s core EMW helps me to research and coalese my own views. I don’t think you need to change formats much at all.

    Concerning the whole ocean iron seeding thing. There was a History Channel program over the weekend concerning the “Little Ice Age”. It was a good examination of the period between the 16th and 19th century, and how it affected the course of human events. A leading theory behind what happened was vulcanism, which is totally natural. So, any idea about lowering global temperature by human means really scares me, in that any successfull reduction in global temperature could be compounded by an unforeseen natural event. I’ve even heard of ideas about intentionally causing volcano eruptions to lower the global temperature. This possibility might be a good question to ask you guest. If it works too well, is there a way to “turn it off”?

  • Chris S.

    I like to view East meets West as my Monday Morning “Current Events” club. Just as my coffee wakes up my body, I like to use EMW to wake up my brain. Though I don’t always agree with the views expressed, at it’s core EMW helps me to research and coalese my own views. I don’t think you need to change formats much at all.

    Concerning the whole ocean iron seeding thing. There was a History Channel program over the weekend concerning the “Little Ice Age”. It was a good examination of the period between the 16th and 19th century, and how it affected the course of human events. A leading theory behind what happened was vulcanism, which is totally natural. So, any idea about lowering global temperature by human means really scares me, in that any successfull reduction in global temperature could be compounded by an unforeseen natural event. I’ve even heard of ideas about intentionally causing volcano eruptions to lower the global temperature. This possibility might be a good question to ask you guest. If it works too well, is there a way to “turn it off”?

  • http://ankhzone.blogspot.com/ ANkh

    hey.

  • http://ankhzone.blogspot.com ANkh

    hey.

  • Matthew

    I re-listened to this and I want to make one point. That is I think there is a misconception that the value of a country’s money is determined by what the state of the economy is doing and at one level this is true (Iceland and their recent dramatic drop in the value of their currency) but at an another level this is not the case. Roger I think made a statement that the value of the currency is determined by the value of what the economy produces and while this is the theory it does not have any meaning practically to be meaningless. The reason why I say that is for the following reasons.
    1. There are people who speculate in currencies with such large amounts of money that they greatly influence the a) liquidity of the currency and b) the value of the currency. This was shown dramatically in the runs on the Asian and Russian currencies in 1997. This is also shown in that the USD and the YEN went up when this current crisis occurred as what is called the “hot” money (money that goes after the highest return or their risk profile) either went back to their home country or went to a safe haven country (USA). In regards to the Roger definition there is no way that this money should have gone to these countries given their economic structural issues.
    2. The conversion rate does not effect the people within a country, unless the country has an undue dependence on an imported item (e.g. gas). That is in a diversified modern economy the cost of items are determined by the amount that the market within the economy will bear (that is if it is not a necessity) and not necessarily on the amount that the import pays.
    3. It is a fallacy to think that the gold standard imparts some inherent value to the currency as the value of the gold is determined by supply and demand, as is the case for a currency that is floated. Gold and for that matter anything else does not have some inherent value other than what is determined by the market. That is demand, generated by people and supply, created by people determines the value. This same supply and demand works for a given currency.

  • Matthew

    I re-listened to this and I want to make one point. That is I think there is a misconception that the value of a country’s money is determined by what the state of the economy is doing and at one level this is true (Iceland and their recent dramatic drop in the value of their currency) but at an another level this is not the case. Roger I think made a statement that the value of the currency is determined by the value of what the economy produces and while this is the theory it does not have any meaning practically to be meaningless. The reason why I say that is for the following reasons.
    1. There are people who speculate in currencies with such large amounts of money that they greatly influence the a) liquidity of the currency and b) the value of the currency. This was shown dramatically in the runs on the Asian and Russian currencies in 1997. This is also shown in that the USD and the YEN went up when this current crisis occurred as what is called the “hot” money (money that goes after the highest return or their risk profile) either went back to their home country or went to a safe haven country (USA). In regards to the Roger definition there is no way that this money should have gone to these countries given their economic structural issues.
    2. The conversion rate does not effect the people within a country, unless the country has an undue dependence on an imported item (e.g. gas). That is in a diversified modern economy the cost of items are determined by the amount that the market within the economy will bear (that is if it is not a necessity) and not necessarily on the amount that the import pays.
    3. It is a fallacy to think that the gold standard imparts some inherent value to the currency as the value of the gold is determined by supply and demand, as is the case for a currency that is floated. Gold and for that matter anything else does not have some inherent value other than what is determined by the market. That is demand, generated by people and supply, created by people determines the value. This same supply and demand works for a given currency.

  • http://www.loaf.org.uk/blog/ Chris H

    In some respects the assumption that a country’s currency reflect their economic performance is akin to assuming that a company’s stock price reflects its worth. The stock price (and the currency) are, to use a well-worn cliché, what someone else will pay for them. The whole premise of trading any security is that there is a disagreement between the buyer and the seller over the worth of the good. The buyer presumes the value is too high (and thus wants to get shot of it now), the seller presumes too low (and that the price will rise).

    A currency backed by gold doesn’t expand and contract with the market price – if gold drops in value, a government doesn’t start soaking up money from circulation and destroying the notes and coins … or does it?

  • http://www.loaf.org.uk/blog/ Chris H

    In some respects the assumption that a country’s currency reflect their economic performance is akin to assuming that a company’s stock price reflects its worth. The stock price (and the currency) are, to use a well-worn cliché, what someone else will pay for them. The whole premise of trading any security is that there is a disagreement between the buyer and the seller over the worth of the good. The buyer presumes the value is too high (and thus wants to get shot of it now), the seller presumes too low (and that the price will rise).

    A currency backed by gold doesn’t expand and contract with the market price – if gold drops in value, a government doesn’t start soaking up money from circulation and destroying the notes and coins … or does it?

  • Roger

    Matthew you bring up several good points but none of it alters the fact that currency value is based on the perceived value of the economy that issues it. That’s where currency speculators, whom I’m abhor with a passion… especially you Mr. Soros, come into it.

    I’m not sure what you mean when you say “…while this is the theory it does not have any meaning practically to be meaningless.” Are you saying the definition I provided is meaningless because it’s too broad, imprecise, or just incorrect?

    1) In response to your first point you’re quite right when you point out the structural flaws of the Russian and South East Asian economies. Any conservative or rational investor would have stayed away from those areas as investment opportunities but those willing to stomach the risk it was a potential for huge a return… ie Russia’s huge untapped natural resources, gas, oil, minierals and South East Asia’s growing middle class. But currency speculation like all speculation is a gamble. And as we all know gamblers like to push the limits. This of course excites other potential investors as they see global liquidity pushed into those markets and want “in” on the action. In others the market got overheated and created a bubble. Just like the sub-prime mortages in the US created a property bubble, and the real estate boom in Japan in the late 80′s caused a bubble. This is not contrary to the laws of economics since the value of items is not hard coded into various commodities. Rather it is the perceived value that makes something worth a specific dollar, yen, euro, rubble, peso amount.

    2) Conversion rates do in fact effect almost all countries and hence their populations around the globe. While it is true that if a nation or group of people lived in a hermetically sealed environment cut off from the global finance markets and commodities with the ability to provide everything it needs to function by itself then yeah currency conversion rates would have little effect.

    But the truth of the matter is almost every nation is touched in some way by currency conversion rates. Even countries like Iran that have done much to mitigate the effects of outside forces on their economies since key aspects of their economy is dependent on limited resources… ie oil. Iran is a huge producer of oil. So being an exporter nation it is subject to the rates at which crude is sold on the open market priced in US Dollars. As the dollar falls in relation the Iranian rial Iranians must either price their oil higher, which they might have trouble doing unilaterally as part of OPEC or absorb the exchange meaning they get less per barrel.

    Even in a diversified economy they are dependencies that they are subject too usually natural resources like petroleum, natural gas, wood, ore, and increasingly potable water.

    3) I agree.

  • Roger

    Matthew you bring up several good points but none of it alters the fact that currency value is based on the perceived value of the economy that issues it. That’s where currency speculators, whom I’m abhor with a passion… especially you Mr. Soros, come into it.

    I’m not sure what you mean when you say “…while this is the theory it does not have any meaning practically to be meaningless.” Are you saying the definition I provided is meaningless because it’s too broad, imprecise, or just incorrect?

    1) In response to your first point you’re quite right when you point out the structural flaws of the Russian and South East Asian economies. Any conservative or rational investor would have stayed away from those areas as investment opportunities but those willing to stomach the risk it was a potential for huge a return… ie Russia’s huge untapped natural resources, gas, oil, minierals and South East Asia’s growing middle class. But currency speculation like all speculation is a gamble. And as we all know gamblers like to push the limits. This of course excites other potential investors as they see global liquidity pushed into those markets and want “in” on the action. In others the market got overheated and created a bubble. Just like the sub-prime mortages in the US created a property bubble, and the real estate boom in Japan in the late 80′s caused a bubble. This is not contrary to the laws of economics since the value of items is not hard coded into various commodities. Rather it is the perceived value that makes something worth a specific dollar, yen, euro, rubble, peso amount.

    2) Conversion rates do in fact effect almost all countries and hence their populations around the globe. While it is true that if a nation or group of people lived in a hermetically sealed environment cut off from the global finance markets and commodities with the ability to provide everything it needs to function by itself then yeah currency conversion rates would have little effect.

    But the truth of the matter is almost every nation is touched in some way by currency conversion rates. Even countries like Iran that have done much to mitigate the effects of outside forces on their economies since key aspects of their economy is dependent on limited resources… ie oil. Iran is a huge producer of oil. So being an exporter nation it is subject to the rates at which crude is sold on the open market priced in US Dollars. As the dollar falls in relation the Iranian rial Iranians must either price their oil higher, which they might have trouble doing unilaterally as part of OPEC or absorb the exchange meaning they get less per barrel.

    Even in a diversified economy they are dependencies that they are subject too usually natural resources like petroleum, natural gas, wood, ore, and increasingly potable water.

    3) I agree.

  • Matthew

    On a lighter note here is a story about a couple that was visiting New York during 9/11, London during the July 7 and recently in Mumbai and they give some of their impressions.

    http://www.smh.com.au/travel/couple-caught-in-three-separate-terrorist-attacks-20081223-73wx.html

    Roger I will give you a more detailed response later but the one thing you are missing is that people are not rational and so as in any market Currency is affected by what a British Finance person once said as “Momentum”. That is people exhibit a herd mentality and so currency values maybe determined in the long term trends by what you are talking about but in the short term (i.e. in the time periods people live in) the other factors swamp it.

  • Matthew

    On a lighter note here is a story about a couple that was visiting New York during 9/11, London during the July 7 and recently in Mumbai and they give some of their impressions.

    http://www.smh.com.au/travel/couple-caught-in-three-separate-terrorist-attacks-20081223-73wx.html

    Roger I will give you a more detailed response later but the one thing you are missing is that people are not rational and so as in any market Currency is affected by what a British Finance person once said as “Momentum”. That is people exhibit a herd mentality and so currency values maybe determined in the long term trends by what you are talking about but in the short term (i.e. in the time periods people live in) the other factors swamp it.

  • punterjoe

    OK, I’m posting this while I wait for the download to seep thru the tubes (no complaints – we all love archive.org). I just want to throw in with those who say agree or disagree, you always make me think, and help me trace the process you used to reach your opinion, so even when I disagree, I respect your viewpoint.
    Happy and safe holidays to the whole ragtag bunch of eastmeetswesties. Christian, Muslim, Jew, Athiest, Tarvuist, Pastafarian or whatever… we’ve made it through another year, and that alone is common cause for celebration.
    To paraphrase Tiny Tim: “[diety or physical law of your choice] bless us everyone”

  • punterjoe

    OK, I’m posting this while I wait for the download to seep thru the tubes (no complaints – we all love archive.org). I just want to throw in with those who say agree or disagree, you always make me think, and help me trace the process you used to reach your opinion, so even when I disagree, I respect your viewpoint.
    Happy and safe holidays to the whole ragtag bunch of eastmeetswesties. Christian, Muslim, Jew, Athiest, Tarvuist, Pastafarian or whatever… we’ve made it through another year, and that alone is common cause for celebration.
    To paraphrase Tiny Tim: “[diety or physical law of your choice] bless us everyone”

  • cliff

    Happy Holidays to all!

  • cliff

    Happy Holidays to all!

  • Techpriest

    Happy Holidays All!

    Strange thing that Oil is Cheap Again! On the one hand, this is bad, because all the “we’re doing an electric/ultracapacitor/hydrogen fuel cell car! Me too! Me Three!” talk has dropped off the map, but on the other hand it means people can save money on fuel bills. It was barely 6 months ago, Oil hit $140 Per Barrel, and now the low point (within the last two weeks) was $35 Per Barrel. No matter how hard Opec has tried through production cuts, Oil has continued to fall. Is this is a good thing?

    Also, the current value of the Dollar, according to leading market analysts (drink! but just for once, i’ll take the times of london’s word that they are “leading market analysts”) is due to three things:

    1: “Barack Obama Syndrome” : Barack Obama is seen in some circles as the next FDR, and will “magically fix everything!”, so speculators have traded on the assumption that the US national debt will fall and the economy will right itself

    2: “Look Over There!” : The most recent Bank Failures and Crashes (with the exception of the Madoff Pyramid Scheme Fiasco) have all been away from the USA, meaning the Dollar is seen as a “relative” safe haven and hence investors have flocked there. This is another example of how the markets are ruled by human emotions, and not by logic.

    3: “Playin by our rules” : Like it or not, the US economy (and government) can do things that the rest of the world can’t. Simply because it is seen as :playing by more conveninet rules”, the USA and the Dollar is seen as better than the rest of the world and their currencies. Investors still continue to think that the USA will continue to get the influx of ideas, intelligence and foreign investment that is supposed to keep it afloat in troubled times. In short, The USA is seen as being able to leave beyond it’s means and get away with it, whereas the Rest of the World has to play by normal rules.

  • Techpriest

    Happy Holidays All!

    Strange thing that Oil is Cheap Again! On the one hand, this is bad, because all the “we’re doing an electric/ultracapacitor/hydrogen fuel cell car! Me too! Me Three!” talk has dropped off the map, but on the other hand it means people can save money on fuel bills. It was barely 6 months ago, Oil hit $140 Per Barrel, and now the low point (within the last two weeks) was $35 Per Barrel. No matter how hard Opec has tried through production cuts, Oil has continued to fall. Is this is a good thing?

    Also, the current value of the Dollar, according to leading market analysts (drink! but just for once, i’ll take the times of london’s word that they are “leading market analysts”) is due to three things:

    1: “Barack Obama Syndrome” : Barack Obama is seen in some circles as the next FDR, and will “magically fix everything!”, so speculators have traded on the assumption that the US national debt will fall and the economy will right itself

    2: “Look Over There!” : The most recent Bank Failures and Crashes (with the exception of the Madoff Pyramid Scheme Fiasco) have all been away from the USA, meaning the Dollar is seen as a “relative” safe haven and hence investors have flocked there. This is another example of how the markets are ruled by human emotions, and not by logic.

    3: “Playin by our rules” : Like it or not, the US economy (and government) can do things that the rest of the world can’t. Simply because it is seen as :playing by more conveninet rules”, the USA and the Dollar is seen as better than the rest of the world and their currencies. Investors still continue to think that the USA will continue to get the influx of ideas, intelligence and foreign investment that is supposed to keep it afloat in troubled times. In short, The USA is seen as being able to leave beyond it’s means and get away with it, whereas the Rest of the World has to play by normal rules.

  • Matthew

    Here is my more detailed response:

    Your meaning is too theory based and so can’t be used to predict foreign conversion rates. The better definition that is not that usable, at least initially, is that the foreign currency market has the same ‘herd’ mentality that any financial market has.

    I also agree that speculators and all those financial institutions that take a ‘percentage’ are one of the reasons why there is great inefficiencies in the financial markets. That is ironic as the whole point of the financial markets is to be more efficient in getting investors and entrepreneurs (risk takers) together and match their risk profiles. When I say efficient I mean in terms of time and money and at the moment it is highly inefficient in terms of money. They DO NOT generate/create wealth but people that take money in the form of ‘Transaction costs”.

    1. I think you are agreeing with me in that there is not absolute value that can be calculated to which the foreign exchange rates will gravitate to but one of perception and ‘momentum’.

    2. They do but they also don’t as the market for the goods that are imported will only bear a certain price and if it goes above it, as long as there is no other supplier or substitute (oil been the only example that even has a semblance of this occurring at the moment), other alternatives and other alternative sources appear.

    If you look at Beef as an example and lets say Japan and/or Korea as the market and lets say their currency devalues against the USD and so the cost of US imported beef gets more expensive in these nation/(s). Given there is a lot of exporters of beef that will be happy to sell at the lower price then to maintain market share the US importers and the consequently the US farmers will have to bear the decrease in the amount of USD they receive or risk losing the market to lets say Australia.

    I want to note that in Australia the currency is known as a cyclical currency due to its export base is mainly primary goods. This is actually a good thing as when the world economies takes a downturn Australia’s currency gets devalued as prima facie it will have problems exporting its primary goods. The devaluation is actually is a good thing as the goods that are been sold is now priced cheaper on the world market but without effecting the amount that the Australian miner/farmer receive in AUD. Also as the rest of the world is in a downturn the sellers of goods and services become more desperate to sell and so the price in Australia is maintained, even though the AUD is devalued against the other currencies. The floating currency is one of the reasons that Australia as the economic track record that is the envy of the developed world with 16 consecutive years of expansion.

    My point is floating currencies are good as it acts as a ‘natural’ stabilizer to the economy and also does not allow imbalances of the type that has/is occurring with China (too much foreign reserves) or Zimbabwe (official exchange rates area a joke and no one will change their money at those rates).

  • Matthew

    Here is my more detailed response:

    Your meaning is too theory based and so can’t be used to predict foreign conversion rates. The better definition that is not that usable, at least initially, is that the foreign currency market has the same ‘herd’ mentality that any financial market has.

    I also agree that speculators and all those financial institutions that take a ‘percentage’ are one of the reasons why there is great inefficiencies in the financial markets. That is ironic as the whole point of the financial markets is to be more efficient in getting investors and entrepreneurs (risk takers) together and match their risk profiles. When I say efficient I mean in terms of time and money and at the moment it is highly inefficient in terms of money. They DO NOT generate/create wealth but people that take money in the form of ‘Transaction costs”.

    1. I think you are agreeing with me in that there is not absolute value that can be calculated to which the foreign exchange rates will gravitate to but one of perception and ‘momentum’.

    2. They do but they also don’t as the market for the goods that are imported will only bear a certain price and if it goes above it, as long as there is no other supplier or substitute (oil been the only example that even has a semblance of this occurring at the moment), other alternatives and other alternative sources appear.

    If you look at Beef as an example and lets say Japan and/or Korea as the market and lets say their currency devalues against the USD and so the cost of US imported beef gets more expensive in these nation/(s). Given there is a lot of exporters of beef that will be happy to sell at the lower price then to maintain market share the US importers and the consequently the US farmers will have to bear the decrease in the amount of USD they receive or risk losing the market to lets say Australia.

    I want to note that in Australia the currency is known as a cyclical currency due to its export base is mainly primary goods. This is actually a good thing as when the world economies takes a downturn Australia’s currency gets devalued as prima facie it will have problems exporting its primary goods. The devaluation is actually is a good thing as the goods that are been sold is now priced cheaper on the world market but without effecting the amount that the Australian miner/farmer receive in AUD. Also as the rest of the world is in a downturn the sellers of goods and services become more desperate to sell and so the price in Australia is maintained, even though the AUD is devalued against the other currencies. The floating currency is one of the reasons that Australia as the economic track record that is the envy of the developed world with 16 consecutive years of expansion.

    My point is floating currencies are good as it acts as a ‘natural’ stabilizer to the economy and also does not allow imbalances of the type that has/is occurring with China (too much foreign reserves) or Zimbabwe (official exchange rates area a joke and no one will change their money at those rates).