Chile Forum

Investors have caught up to the fact that "decoupling" of other economies from the US is bunk, which I explained in this forum a year ago when most everybody in the forum though we were headed for a 400 CLP USD. I said last year we'd bounce back to 500 or about, and I said that the Euro would lose its shine, and here we are. When the US economy suffers, everyone else does too, but usually the US is first to bounce back. An economy such as Chile cannot absorb a lot of new investment because of institutional factors we know well living here: a short-term culture, weak education, weak work methodology and ethic... If you inject too much money into a developing economy it just overheats. After a while money goes back to the US because a) it's bigger, b) it's not as hobbled by bureaucracy as the EU, c) and regardless of banks going bankrupt, its companies and workforce are just more productive and efficient than in most other places (and that's just a fact).

Bad news in the US now = bad news in Euroland and Japan in the near future. You can get excited about BRIC all day long but everything else doesn't nearly have the same level of stability and development. Chile, the haven of stability in Latin America, has its military on alert around Sept. 11 because they're afraid of leftist sabotage on power plants, among other things. It has translated into helicopters constantly hovering above Viña (including at night) last week. The spy agency in Brazil is secretly tapping phone calls between the head of the supreme court and a senator, while Russia is back to invading its neighbors... so yeah go ahead and invest everything in developing economies, and have your ass handed back to you like it happens once a decade. As messed up as the US is (and oh yeah it is!) it's still the safe haven, relatively speaking.

Yes, the US is losing its overwhelming prominence, but it's going to take decades for other economies to really be able to pick the slack. Talking about full decoupling now is delusional. Even quite wealthy Europeans cannot make up for depressed US consumer spending and buy enough Chinese crap if Americans can't. Hence, USD bouncing back even in the wake of pretty bad news.

this reminds me of a quote from trudeau (former canadian prime minister, while speaking to the US press club, 1963):

"Living next to you is in some ways like sleeping with an elephant. No matter how friendly and even-tempered is the beast, if I can call it that, one is affected by every twitch and grunt."

i take the previous writer's point to be that the world economy will swing up and down with the US economy, since the US is by far the largest and most efficient economy on the planet, despite its current volatility.....so the USD and CLP will remain more or less where they are, relative to each other, or perhaps the USD will gain value when the US economy starts to recover.

some people on this forum have suggested that a total collapse of capitalism is on the horizon, since it's a house of cards built on the widespread belief that paper money is actually worth something more than the paper, and a paper bill with a 5 printed on it worth more than a very similar paper bill with a 1 printed on it. i'm trying to imagine a scenario that leads to a collapse of that belief system, and the only things i can think of are so cataclysmic that everyone on the planet would already be suffering terribly. unlikely, but i'm thinking about a chicken farm anyway.....

For those who follow gold/silver, and can laugh about the last few weeks or so, this is pretty funny...

http://www.youtube.com/watch?v=eVB-SSkkLnY

Another hectic day today with oil and gold bouncing back, USD down to 529 from 548 end of last week. Glad we did several 200,000 peso ATM runs at 540+.

otravers wrote:Glad we did several 200,000 peso ATM runs at 540+.

eeuunikkeiexpat wrote:Kicking myself for not taking out more CLP this weekend at 547.

Maybe next time, eeuu ..

time to revive this thread.....since the last post in september a lot has happened.....

the banking system locked up, the US government authorized $750 billion dollars to baliot the banks, the US elected barack obama to take over in january, the dollar rose to about 680 in late november, the economic news around the world keeps getting worse and worse, unemployment is rising quickly as businesses shut down and cut back, nearly every level of government in the US operates in huge debt, the stock market swings wildly but is still down about 40% from a year ago, more fraud uncovered on wall street, the fed cut interest rates to nearly 0 and the dollar has been dropping quickly for the past week, currently at about 630 pesos to the dollar.

what's next? let's see....in early january we can expect more bad economic reports as the month and the quarter and the year are ending. could be depressing for a lot of people as they see their losses in equity and stocks. businesses around the world will scale back production and unemployment will continue to rise. obama will be sworn in on january 20 and will immediately announce a massive job-creation program based on improving the US infrastructure. interest rates will stay low until the economy starts to recover. large numbers of foreclosures will continue to depress housing values and slow new construction.

my question is....is the general trend for the first quarter of 2009 going to be a rising dollar or a falling dollar vs the CLP? better to move cash reserves sooner, or later?

No one knows, CC48. But we can bear this in mind: the dollar's falling because it's being sacrificed to internal economic considerations. That's why bureaucrats now speak of "quantitative easing" of the money supply (which, being interpreted, means "inflation" or "printing-press money"). I doubt that a new president will seek to alter this policy; rather, as most of his recent predecessors -- this Bush, Clinton, Carter -- he more likely would extend it.

I wasn't sure about reviving this topic or post it to the main economic crisis thread, but this serves more as an educative resource for those of us who couldn't fully understand the crisis at first. It's a video explaining the crisis, that has gotten quite popular through viral websites recently (digg and others). It addresses things like the credit default swaps, and how it all started:

http://vimeo.com/3261363