The world has more debt than it has income

Yes, projecting current one child/ per family will have China with slightly higher retired to worker ratio in 2050 than the US, but do you think that policy will survive even a decade more? Relaxing it to “only one male child / family” is now being discussed and highly likely soon.* - There is a shortage of women already and kidnapping of "brides" is a growing problem much of the country.

Also, as I noted, the cost of supporting the elderly in China, who tend to live with their family and do useful work like cooking and child care, is much lower than in the US where most either live in their own homes or are "warehoused" in expensive old folk’s homes.

More than a factor of 10 lower cost in China, when you consider the value of the work they do, I would guess and I am NOT speaking in absolute terms, but the faction** of the working group's income required to support the old. If that factor of 10 is correct, then the economic burden on the working population in China will still be small when Social Security is unsustainable in the US.
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*Actually already in effect for almost all with any money or political connections.

**In many cases having your Chinese grandmother living in your house ADDs to the family income as she cooks, cleans and watches the kids, freeing their mother to earn much more than the grandmother’s food costs. I.e. cost of caring for the old in China is often NEGATIVE (equal to added income).

 

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:crazy:

 

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Regardless of what is done, we will see China continue to reproduce well below replacement rate and not accept any significant immigration, and so the population will both age and shrink.

China needs a smaller population more than it needs a younger one: that's why they have the One Child Policy, and it's attendant demographic consequences, to begin with.

And is there some reason that American retirees can't move in with their children, and help with the cooking, should that prove desirable? I know many families that do exactly that.

Is there any reason to think that Chinese people won't want to live on their own in retirement, once they are wealthy enough that it becomes a serious option?

 

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Funny you should ask:

Brazil, I am almost sure, made them. About 4 or 5 years ago there were photos in the newspaper of units so large they were sections still as I recall, to make it thru roads closed at night on huge, special-for-the-job, flatbed trucks to the port.

You may not know but until the Three Gorges Dam came on line Brazil's Itaipu Hydo-electric plant was (and by serveral measures it still is)* was the world's largest. Brazil can build these huge turbine cheaper than the US can by far.

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Foreground torrent of water is the rainy season spillway excess the turbines can not handle. Power dam is the distant linear structure.
• It took 30,000 people 7 years to build the Itaipu Dam.
• It cost $20 billion to build. (I guess >50 billion in today's dollars and concrete prices)
• The dam is 7.76 kilometres long and 196 metres high.
• The reservoir behind the dam has an area of 1350 square kilometres.
• The Itaipu Dam generates 75 billion kilowatts of electricity per year. (Writer was no physicist. That should be KW hours)

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This photo & the five "bullets" above it From: http://www.kented.org.uk/ngfl/subjects/geography/rivers/river articles/itaipudam.htm

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Closer view of the power Dam From Wiki
(Note it is a little taller than two football fields are long -196 m - It only looks low as it is 7.76km of concrete stucture!) I have been inside it.

Quote from Wiki: "If Brazil were to use Thermal Power Generation to produce the electric power of Itaipu, 434,000 barrels (69,000 m3) of petroleum would have to be burned every day. ..." {Billy T comment: Brazil should apply for the corresponding carbon credits.}
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* "Itaipú Dam (25°24'50" S, 54°35'34" W), located on the Paraná River at the Brazil/Paraguay border, is the world’s largest hydroelectric power facility. Completed in 1991, the dam is a joint effort of of the governments of Brazil and Paraguay. The Paraná River is the seventh largest river in the world ... The main dam, as high as a 65-story building, is composed of hollow concrete segments, while the flanking wings are earth- and rock-filled. The volume of iron and steel utilized in the dam structure would be enough to build 380 Eiffel Towers, and the volume of concrete used in Itaipú represents 15 times the volume utilized to build the Channel Tunnel between France and England. Itaipú is one of the Seven Wonders of the Modern World, according to a worldwide survey conducted by the American Society of Civil Engineers. ... "

From: http://www.eoearth.org/article/Itaipú_dam (article last up-dated 25 Aug 2008)

And lots more facts about it there as well as at Wiki (or use the lat/long data and Google Earth). One not there is that Paraguay not only get 78% of its power from Itaipu, but has a right to 50% of Itaipu's generation. It sells the power, which it can not begin to use to Brazil. That income is Paraguay's main source of foreign exchange earnings!

The current president of Paraguay, a former Roman Catholic bishop, (Fernando Lugo) has just admitted to be the father of a out of wedlock child, fathered while he was still "wearing the cloth."** (And the mother says both her children are his - DNA testing is under way now).

Lugo was in Brazil on yesterday, 8May, wanting to change the treaty governing Itaipu to allow the excess power Paraguay cannot use to be sold to Chile & and Argentina and/or raise the price Brazil pays for it. (Paraguay can only use 10% of its 50% of production share -I.e. currently 95% of the power produced goes to Brazil at a current price of 4.5 cents/KWH but they only actually get 0.3cents as 4.2 cents is used to pay down Paraguay's construction debt to Brazil. Although wiki et. al. state Itaipu was a "joint project," all Paraguay did was to sign treaty saying it is OK to flood part of Paraguay for 50% of the power generated, and thanks for the loan of our share of the construction cost.)

**Well not all of it, obviously. ...Snicker, snicker ... (I have already used my limit of three images/ post)

 

The generators were built by two different joint ventures between various American, European and Chinese companies. Some of the components were indeed built in Brazil, by Alstom and Voith, European multinationals with operations in there.

http://en.wikipedia.org/wiki/Three_Gorges_Dam#Hydroelectricity_generation_and_distribution

http://www.eprf.ca/pi/documents/three_gorges/who.html

Although, examining that list, it's notable that turbines were such a small part of US involvement in the project. The contributions in finance, engineering, other machinery, cement and so on appear more significant, and most of the turbines supplies by GE appear to be produced by Canadian subsidiaries... The picture I'm getting is that our strong suit is gas turbines and jet engines, rather than big hydro turbines.

I did indeed know that.

The turbines in the Itaipu plant were supplied by a German company Voith (one of the suppliers for Three Gorges, as well). My understanding is that hydro and turbine production in Brazil occurs almost entirely in subsidiaries of the European multinationals Voith and Alstom.

Again, massive infrastructure projects like this have long been international undertakings, far exceeding the capacity of any single nation (particularly a developing one) to undertake on reasonable terms. As such, these enterprises are dominated by multinational conglomerates, not national industries.

The viability studies and basic design of the Itaipu dam, for example, was contracted to a joint American-Italian venture.

And, anyway, why should Brazil be able to sell them for cheap? Labor costs aren't a particularly big portion of the price tags of these kinds of items; what is their advantage supposed to be?

 

Perhaps instead of:
"Brazil can build these huge turbine cheaper than the US can by far"
I should have said:
These huge turbines can be built much cheaper in Brazil than in the US (so they were).

Again we have a different focus. I look at where jobs are being created (and lost in USA) and you at who owns and is profiting. Corporation, and their stockholders, me included, are international now, so I think my POV is more important. I no longer recall the exact number, but more than half of the profits of the S&P 500 (or perhaps it was only the DOW's 30) came from outside of the US activities during the last two years. Design work, engineering, etc. is still big business in the US, but US has an ever decreasing share of that global activity too. NYC is no longer the financial center it was. - London has passed it and Dubai is not far behind. (Insurance, like Loyds of London for commerce, etc. and bonds, especially "Islamic bonds," are larger than stocks in both these centers.)

Hell, the São Paulo stock / commodities market is now the third largest in the world! (Behind NYSX and Frankfort only) but that is because these two usually separate markets merged last year for greater opperational efficiency.

It seems to me that the finance, design and engineering jobs you so praise are following the fabrication jobs to foreign lands. Many corporation CEOs will tell you flat out, that they need to be near the "factory floor," so offices are moving out of the US. (And this is not just heavy industry, like autos, but light industry, like making IC chips, etc.) It seems impossible but even medical services are leaving. - A whole city in India lives from surrogate mother services. Routine X-rays (not emergency X-rays) taken at large clinics now often go thru the web to be read by an Indian doctor (while it is night time at the clinic) and the typed report is waiting back in the clinic computer the next AM when it opens, for less than half the cost of local MD reading it.

SUMMARY: Just because the US was the leader in these high skill jobs does not mean it always will be. The trends I see indicate the US is losing the share it once had of the jobs you praise. Do you have any facts to show that wrong? I.e. in what area of design, engineering, finance etc. services is the US share of global activity growing?

 

Thanks for your general support in my exchange with Quad, but I think your image of Chinese banks is obsolete. Here is part of 5Jan09 Newsweek article found at: http://www.newsweek.com/id/178029

"The irony is that 10 years ago, China's banks were among the weakest in the world and today they are among the strongest, …

The government allowed banks to be listed on stock exchanges, which meant they had to report their earnings according to Western accounting standards. Now two of the world's three biggest banks by market capitalization are Chinese: Industrial & Commercial Bank of China, which is the biggest, and China Construction Bank, No. 3.

Beginning in 1998, the government recapitalized them. Several years later, the government used approximately $60 billion of its massive foreign currency reserves to help finish the job. … Under China's old risk-weighting system, the banks were able to declare that loans to state-owned companies carried zero risk. That allowed the banks to have huge balance sheets with virtually no capital. No more. As of Sept. 30, the average capital adequacy ratio for all of China's publicly traded banks totaled about 13 percent, well above the government's required standard of 8 percent.

The treatment of nonperforming loans has changed drastically as well. In the old days, such bad loans were simply rolled over, with skipped payments being capitalized into the loans. Then the government decreed that interest payments on a loan had to be received within 90 days for it to avoid being classified as nonperforming. Initially, the amount of nonperforming loans rose, but as of Sept. 30, 2008, nonperforming loans totaled only 2 percent of the loan total for the country's listed banks. That compares with 2.3 percent for FDIC-insured banks in the United States. {Billy T insert: To be expected as in US credit is tight and American are deep in debt, but in China few even know what a credit card is and save 40 to 50% of their income.}

Before the reforms of the past decade, banks didn't have to create provisions for bad loans, regardless of the quality of their loan portfolios. Now provisions are substantial. As of Sept. 30, provisions for loan losses among the listed banks amounted to an impressive 123 percent of their nonperforming loans. {Billy T insert: Much higher than in US where periodic write downs occur due to inadequate allowance for non-performance and/or lack of asset evaluations or markets.}

In 2003, Chinese regulators let foreign investors increase their stakes in Chinese banks from 15 percent to 20 percent.* That ruling gave the banks more capital and credibility, paving the way for their initial public offerings beginning in 2005. It also gave the Chinese institutions access to Western management expertise, though fortunately for the Chinese, they didn't match their Western brethren's excessive risk-taking.

And that's still paying off: China's publicly traded banks registered a 53 percent increase in net income in the third quarter of 2008 from the same period in 2007. And perhaps most importantly, Chinese banks skipped the subprime party. They will, at most, have to write off 0.1 percent of their assets as a result of owning toxic U.S. securities …”

SUMMARY: Like Brazil's banks, Chinese banks are sound and profitable, not "losser" like most in the US are now. Brazil however, is way ahead of Chinese banks in credit services, like credit cards and personal loans. Not only that, but the only way you pay bills in Brazil is to deposit into the company's account.**

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* More than a year ago, I started a thread or made post in one, which I cannot find now. It told of one, not small, Chinese bank that was now fully managed (if not >50% owned) by some English bank(s). The point of the post was to note they were starting to introduce charge cards. I think this is very significant change for China. - Why I made the post.

**But payments can be automatic monthly so you do not need to do anything. All companies of any size have an account in your bank. All government and most other workers do not get any "paycheck" - just a deposit into their account. (Money in Brazil is very modern and mainly "electronic" or credit cards, except for grey market transactions made in cash between individuals, like bribes.) I.e. You cannot pay electric company, etc. with a check sent to them but checks can pay a person, like a taxi driver or your maid. Banks are very central to the Brazilian economy. They even withhold the taxes*** from your CDs earnings etc. to reduce tax cheating and send annual statements to you and to the Brazilian "IRS," which are cross checked, by computers. You must report you ALL your assets annually and if they increase more than your income would allow, you will be investigated. If you do not report them and the bank or your employer does, you are also in trouble. (Every few months, there will be a newspaper photo of stacks of cash some Politician had under his mother's bed, etc. Years ago, this grey money left the country in dollars, but the dollar vs Real has lost too much value so not much does now, I think.) Perhaps it is much the same in the US now, but I was always paid by check. (Effort printing and distributing them is inefficient and delays a few days before the money is real - not instantaneous as in Brazil.)

***Rate is structured to encourage longer term savings: 22.5% if less than 6 months but dropping in four 6-month steps to 15% if on deposit for 2 or more years. There is also an extra tax on movement of funds in less than 30 days, but I never do that so do not know it.

 

Most of developed world has same aging population problem so guess it OK to post only US news here:

"... The Social Security trust fund will run out of assets in 2037, four years sooner than previously forecast, the trustees said yesterday.
Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago.... ''
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From: http://www.bloomberg.com/apps/news?pid=20603037&sid=aqLTt.TroGcM&refer=home

These debts dominate all others governments have and there simply is not the income to pay them.

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Personally, I expect to check out of Hotel Earth before too much shit hits the fan.

 

From Post 62 by quadraphonics:
“Exports currently run to about 1/3 of China's GDP. Roughly half of that goes to the US and EU”

From my reply, post 63:
I do not have numbers, so accept your 1/3, but want to note that much of what China exports is not 100% Chinese made. … So excluding the Re-exports, China's exports are ~20% of GDP and a falling percent of GDP as the domestic market is growing faster. ... Thus it is quite reasonable to guess that when China is delivering more to Southern Hemisphere countries that the net exports will be only ~15% of the even larger than now GDP. If half of 15% continues to go to US and EU and the re-export are excluded, then about 8% of Chinese GDP jobs will depend on the sales to US and EU. (~4% of Chinese GDP jobs made by buying Americans). But of course if exports to US and EU continue to fall and those to the Southern Hemisphere continue to rise then not even 4% of the GDP jobs will need American buyers.”…”

From: http://www.economist.com/finance/displaystory.cfm?story_id=13649520 :
“Economists are revising up their forecasts for China’s GDP growth this year: 8% may now be possible even if American consumers remain frugal. There is
a myth that China’s growth depends on American consumers. In fact, if measured on a value-added basis (to exclude the cost of imported components), China’s exports to America account for less than 5% of its GDP. ...”

SUMMARY: Quad and most others suffer from this myth!
The Economist states American NOW accounts “for less than 5% of {Chinese} GDP.” Thus, I was too weak in refutation of Quad in post 63. I said that LATER, after China’s exports to the Southern Hemisphere and domestic consumption had both grown significantly, (now at >22% annually) that exports to American would be responsible for ~4% of Chinese GDP.

Elsewhere I noted that these exports were made in factories with high value production per worker so that less than 1% of Chinese jobs would depend on export to the USA. Consequently I concluded there would come a day when China would say:

Go to Hell USA! We do not need to sell to you. Your green paper is worthless now.

Quad has countered this by noting it is never profitable to eliminate potential customers. To which I replied that there is a limit on the productive capacity of Chinese factories and the first claim on it is the rapidly (>22%/ year) domestic market and the second claim is the Southern Hemisphere delivery of items promised and payments under the many long term contracts China has signed for raw materials, energy, and food stocks.

If after a dollar collapse, which China can cause anytime it likes now, US and EU are in deep depression the cost of these items will be much less. US is now largest user of oil etc. but would not be buying much during a depression so in today’s dollars, China’s oil imports might cost only $20/ barrel. Certainly, very cheap imports of needed items is much more valuable to China than trying to expand factory production to be able to sell to the US also.

Don’t blame Obama for this sad state of affairs. GWB’s policies caused it. That is why I could state the large bold line above years ago, long before >90% Americans had even heard of the obscure Chicago politician who is now the POTUS.

 

Please don't invoke me in a third-person manner. If you have something to say to me, go ahead and address it to me, and refrain characterizing my thoughts and positions. This behavior is provocative and disrespectful.

That said, some interesting exermpts from an upcoming NY Times article:

http://www.nytimes.com/2009/05/17/magazine/17china-t.html?_r=1&ref=global-home

"In China, the collapse of global trade has eliminated 20 million jobs along the industrial southern coast, according to Beijing’s official numbers. One Obama adviser told me the real number may be much higher. "

"Moving to an economy based more on consumption and less on exports happens to be the policy of the Chinese government, and has been since 2003. Its latest five-year economic plan, announced in 2006, was organized around the idea. [...] Remarkably, though, the Chinese economy has become even less reliant on household spending, and even more reliant on business and government spending, in recent years. Consumer spending now makes up about 35 percent of China’s gross domestic product, down from 40 percent in 2004 and almost 50 percent in the early 1990s. By comparison, the share is 54 percent in India, 57 percent in Europe and 70 percent in the United States. "

"Yet the huge imbalances between the two economies are actually a very recent phenomenon. Throughout most of the 1990s, China’s current account surplus — the value of exports minus the value of imports — equaled less than 2 percent of its gross domestic product. As late as 2001, this surplus was only 1.3 percent of G.D.P. But then it began soaring. Last year, it was 10 percent of G.D.P., according to the World Bank. "

"If you think of the exports as the first link in the causal chain, the resulting pile of Chinese savings is the second. Much of this savings has been by the corporate sector, which is subsidized by the government in all sorts of ways (an undervalued currency, low interest rates, cheap energy). The economic boom brought big profits, and companies held on to much of them. The government has also increased its savings in this decade by collecting more taxes and, until the financial crisis, running a budget surplus. And households increased their own savings in the 1990s, in reaction to the dismantling of many bloated state-run companies and the cradle-to-grave benefits, known as the “iron rice bowl,” they once provided to their workers. "

"The coastal cities that experienced tremendous booms over the past decade are struggling with mass unemployment. Millions of recent college graduates, the demographic that often starts protest movements, are unemployed across China. Stocks have fallen more sharply than they have here."

 

I meant no disrespect and have often stated respect – that you are better informed than me – that I enjoy our discussions as I of the learn from you, etc. I do not understand your comment / request about use of third person as I certainly cannot use first person – that would be putting words in your mouth. Perhaps you will tell where I offended and show how I could make my point without use of third person.

Is my offensive comment: “Quad and most others suffer from this myth!” ? For years, you and I have conflicting POVs on the extent to which China will need the US in a few years. For years, I have posted the bold large text of post 89 and you often refute it and give various reasons why less goods sold to US would harm China.*
For example, from post 761 of the “Do you think China will overtake …” thread you state:
“The day they tell the US to get lost, is the day that they see a sustained reversal in their share of world manufacturing employment.”
Or in post 60 of “World has more debt than income” you state:
“Let's not forget that everyone - even service economies with trade deficits - requires export markets for their health. … there never came a point at which the US wanted to see the collapse of its primary export markets, … Why should China be any different? …” Note is reflects a misunderstanding of my point, which was not that China would cease to export, but that it would export to the Southern Hemisphere what it had in excess of domestic needs, instead of export to the US and EU.

Thus, I think it is a fair statement of fact that you, like most others, believe in the myth that trade with US will remain essential for China’s economic health. If I were not so lazy I could find several more posts where you state essentially this widely believed myth. (I have never called it that – The Economist called this belief a “myth.”) If my stating you suffered with this myth is not what offended, what was?

I did not complain, but you have offended me in post 58 of “World has more debt than income” with: “It's striking how you keep coming back to this bit of imagined theatrics. { My large bold text in post 89} Clearly, this scenario holds some kind of deep emotional appeal for you….” I have NEVER questioned your motives, emotional state, or reasons like this. But to move on to the discussion:

I agree completely with your quote from the NYT here, but I never asserted that China’s domestic needs were ONLY the Chinese consumers buying.

Clearly China’ needs of raw materials, and energy, is mainly for the expansion and improvement of infrastructure. So long as The CCP is in power that will be the case. Perhaps I have mislead (badly stated) my point with “domestic market” ? What I have always meant by this is that China’s factories will be hard pressed to meet the domestic needs and the exports required under the many long term contracts, so will not have much capacity to sell anything to US and EU in a few years, even if US and EU could afford to import.

I have pointed out that the Chinese worker in these factories is rapidly gaining in purchasing power and no longer content to work long hours for low pay just so American can buy cheap goods in Wal-Mart. The CCP is not only building infrastructure, but trying to provide rapid increase in material life styles for the population (In their own self interest of course as that is why the CCP enjoys such wide spread support with the masses despite the lack of many personal liberties.) For example 3% of GDP will go into improvements of health care (and this reflects the CCP’s continuing and increasing understanding that a centrally managed economy (like old USSR) fails compared to one where the people decide what their needs are by buying in the market place. The CCP is doing this more to increase the size market economy (than for health of the population) IMHO, but I expect that the CCP’s buying will dominate the Chinese economy for years. (They plan more than 100 new one million inhabitants cities in the now rural areas, with subways etc. – that is huge demand for iron, copper, cement, etc. and probably initially even more food imports as farmers move to the cities, but eventually the recent farm law changes will let agribusiness produce much more food per worker as in the US.)

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*And I agree that CURRENTLY is the case NOW so I always introduce that phrase with something like “Someday” or “There will come a day” then I go on to explain that IMHO Chinese factories will be hard pressed to produce all that is needed in China and honor the deliveries promised under the long term contracts China is signing for raw materials in the Southern Hemisphere. I have started to use “S. H.” instead of “South American and Africa” as “S. H.” is both less typing and more accurate as includes Austral, N.Z. and other important Asian trading partners.

 

“… over the past decade {GM’s} sales in China have steadily increased, while dwindling sales at home have turned the company into a relic. … The company is already attempting to move its manufacturing operations to the Asian powerhouse, {China} and that has given rise to speculation that it will move its headquarters as well. Of course, if GM – which has already received $15.4 in government loans – were to pick up stakes, the political fallout would be epic. What could be more “un-American” than a 101 year-old American automotive company that’s being propped up by taxpayer dollars moving to a communist nation? But the reality is that American consumers aren’t buying GM vehicles and Chinese consumers are.

That means if the company is going to remain viable, China, not America, is GM’s land of opportunity. …”

From: http://www.moneymorning.com/2009/05/18/general-motors-china/

As in my post 86 comments that CEOs often want to be near the “factory Floor” which were:
“It seems to me that the finance, design and engineering jobs you so praise are following the fabrication jobs to foreign lands. Many corporation CEOs will tell you flat out, that they need to be near the "factory floor," so offices are moving out of the US. (And this is not just heavy industry, like autos, but light industry, like making IC chips, etc.) It seems impossible but even medical services are leaving. - {examples} …”

 

“… Treasury Secretary Timothy Geithner will urge China {next week} to boost domestic demand and … encourage China to move toward a more flexible exchange rate … {but} the Treasury chief may meet an unprecedented level of concern about the outlook for Treasuries. China is the largest foreign holder of U.S. government debt, … about $768 billion in Treasury securities as of March{2009}

For the fiscal year that ends Sept. 30, the deficit is projected to reach a record $1.75 trillion, according to a Congressional Budget Office forecast. …Treasuries have lost 5.1 percent, including reinvested interest, so far this year … The dollar has also been hammered, with the Federal Reserve’s trade-weighted Major Currency Dollar index sliding 3.2 percent so far this year.

Zhou Xiaochuan advocated a “super- sovereign reserve currency” disconnected from any individual nation, casting doubt about the long-term role of the dollar. … China will need to keep buying dollars if it plans to keep the yuan tethered to the dollar, said Brad Setser, a former Treasury official who is now an economist at the Council on Foreign Relations {Foreign Affairs publisher} “If China insists on pegging to a now-depreciating dollar, it isn’t clear that China will be doing anything other than add to its dollar portfolio,” Setser said. “China’s public expression of concern about its dollar holdings is somewhat at odds with its policy of pegging to the dollar quite tightly.” …”

From: http://www.bloomberg.com/apps/news?pid=20601110&sid=aW4cL0q33S_s

Billy T comment: I.e. Yuan can only remain undervalued WRT the dollar, if China continues to support the dollar by buying dollars for reserves; however, when China is mainly tending to it internal demands and contract obligations China will export little to US and EU. Then China need no longer needs to support the dollar. – In fact it is then to China’s advantage to have dollar collapse so US and EU cannot afford to compete with the then strong Yuan for the import of energy, mineral and food stocks.

Without China lending to the Treasury - only the printing presses will finance the growing US debt. Can you say "run-a-way inflation" ?

 

We'll get there sooner or later...however:

1. Who will manage the new global currency?

2. Will it be virtual, or backed by a tangible asset?

 

Not sure, but think the idea is the dollar and other currencies in some formula = the new currency or "back it."

 

A new virtual currency backed by a collection of old virtual currencies???

 

That is about it, as I understand it. China and others do not want the global trade to be in only in dollars is the motive. China wants to switch to the SDR.

The SDR consists of 0.6 U.S. dollars, 0.4 euros, 18.4 yen and 0.09 British pounds. Its value fluctuates with exchange rates. Today 29May08 one SDR is equal to ~1.5 U.S. dollars. Thus it takes about 3 SRDs to buy a Big Mac. Rather than SDRs, a composit of four currencies in big trouble, I'd like to hold my assets in a strong currency, like Big Mac certificates.

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Bar chart is debt/GDP on many countries and arrow above each is the increase expected by 2010. Brazil is not on chart as is about 37% (at extreme right) You may need to increase text display to read these graphs.

Middle is US and Euro zone as fct of time, and last is sevaral of the EU countries separately. The very tall arrow of ISL is Island - a collapsed banking system. Except for ISL, the length of the arrow is crude measure of the stimulation of their economies. Worth noting in central graph is that the slope of the US curve is about twice that of the Eiro zone - Perhaps why the Euro is growing stronger vs dollar now. I.e. the lesser of two evils as Euro zone has big problems too.

The best stock advice ever (Buy low / sell high) would seem to apply to the bar chart currencies.

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Yikes...the special drawing rights would be managed by the IMF, the financial equivalent of the United Nations!

Are you sure those weighting numbers are right?

 

They are a cut&paste from article I read today at bloomberg, I think, but can no longer find it there. (stories change often.) I bet wiki tells also the SDR composition.

I have thin line at bottom of my screen telling exchange rates. Now Euro buys 1.4155 $s; Pound buys 1.6186 $s, 95.32Yen buys a $ and just for the record 1.9665 R$ (Brazil) buys a dollar. You can check to see if those weighted do make ~1 SDR. I guess I should tell the source: MarketBrowser.com It is free and when full screen will display 12 time history of graphs (any mix of stocks or currencies). I normally let it have only about 3mm at bottom of my screen. It up dates dates every 15 minutes or so. I find it very useful. - It even uses red and green to tell the direction currency is changing. Normally I would not give a plug but they have helped for years without me paying one cent (They do bug you to up grade when they first open.)

 

I see... the percentages are:

44% US Dollar
34% Euro
11% Yen
11% Pound

Why would China favour this system when it doesnt include the Yuan?

Would this currency ONLY be valid in exchange between governments?