Where's The Beef? or Where's Waldo?
Brad Setser has an excellent post entitled Where are the World's Reserves going?
Where are the reserves? is kinda like Wheres the Beef? or Where's Waldo? My best guess follows:
The US is the largest consumer of oil on the planet. The US consumer and industrial complex are directly supporting the oil based economies of OPEC and non-OPEC suppliers. In addition, we indirectly support the commodities and natural resources based economies as well.
Without our consumption at the current parabolically increased prices, these "resource" based economies have little or no legs to stand on and quite frankly they are probably in the toilet and facing civil war or rebellion.
Put another way, if the collective "resource" based economies which are mostly third world banana republics, dictatorships, Russia, the Stans and the Middle East had no oil to offer us, we wouldn't even bother to give them the time of day.
But since they do have what we want, we are currently ramping up their economies and current account reserves in an accelerated manner, that would have taken decades under normal conditions.
The trade surplus reserves are being hoarded in various forms, gold, precious metals, and various assets. A large chunk is in oil futures and options, but what does not circulate back to support the dollar and our bonds is mostly being hoarded in cash.
Hypothetical, if there is a derivative event or global banking crisis, or the dollar "hits the wall" when the Asians unify their currencies, and in any event the global economy takes a collective dump, and every form of asset deflates globally, what will be the safe haven?
What if the globalized supply chain suddenly breaks down in effect, hubba hubba who do you trust? Better to prepare for that day by investing at home and lessening your dependence on others who do not have your best interests aforefront.
And if you have a barrel of cash when the shit does hit the fan, you can continue to invest internally to keep your population employed and satiated, and everyone else can go fly a collective kite.
So where are the reserves? Saving for a rainy day comes to mind as well as three old axioms:
When the chips are down, cash is king, and
When the chips are down, every man for himself and
When your sitting on a pile of other players chips, best to pocket most of them and walk away from the table a winner, lest the house take it all back.
Where are the reserves? is kinda like Wheres the Beef? or Where's Waldo? My best guess follows:
The US is the largest consumer of oil on the planet. The US consumer and industrial complex are directly supporting the oil based economies of OPEC and non-OPEC suppliers. In addition, we indirectly support the commodities and natural resources based economies as well.
Without our consumption at the current parabolically increased prices, these "resource" based economies have little or no legs to stand on and quite frankly they are probably in the toilet and facing civil war or rebellion.
Put another way, if the collective "resource" based economies which are mostly third world banana republics, dictatorships, Russia, the Stans and the Middle East had no oil to offer us, we wouldn't even bother to give them the time of day.
But since they do have what we want, we are currently ramping up their economies and current account reserves in an accelerated manner, that would have taken decades under normal conditions.
The trade surplus reserves are being hoarded in various forms, gold, precious metals, and various assets. A large chunk is in oil futures and options, but what does not circulate back to support the dollar and our bonds is mostly being hoarded in cash.
Hypothetical, if there is a derivative event or global banking crisis, or the dollar "hits the wall" when the Asians unify their currencies, and in any event the global economy takes a collective dump, and every form of asset deflates globally, what will be the safe haven?
What if the globalized supply chain suddenly breaks down in effect, hubba hubba who do you trust? Better to prepare for that day by investing at home and lessening your dependence on others who do not have your best interests aforefront.
And if you have a barrel of cash when the shit does hit the fan, you can continue to invest internally to keep your population employed and satiated, and everyone else can go fly a collective kite.
So where are the reserves? Saving for a rainy day comes to mind as well as three old axioms:
When the chips are down, cash is king, and
When the chips are down, every man for himself and
When your sitting on a pile of other players chips, best to pocket most of them and walk away from the table a winner, lest the house take it all back.
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