Chile Forum

ADMIN NOTE: UPGRADED TO GLOBAL STICKY, AS THIS MESS IS NOT GOING AWAY EITHER.

I thought this was worthy of its own thread.

I wanted to get everyone's 2 pesos on the economic crisis, and the potential impact on Chile.

Watching the international news the last couple of days, I have never heard so many economist use such strong terms. From the former fed chief saying things like this could be a once in a century crisis, to a investment anyalis at a press conference that was all but screaming that everyone should pull their funds out of the United States now while there is a short term dollar bounce, it grabs your attention. These are people that normally encrypt their concerns carefully in technical talk, that are bluntly saying RUN!!!

For our buisness we are watching carefully the impact on foreign Pensions that are entrenched. The dollar / pesos bounce is good for us in terms of traffic to Chile. It was getting a bit expensive for foreigners (big improvement over last year this time), but foreigners and investment funds are dramatically reduced it might bite us.

Chile overall seems to be taking it well. Brazil, Argentina, Mexico, and the rest that where already in bad shape and over exposed to paper foreign investment are getting whacked.

Don't forget where the Chilean national government stashes the majority of its USD reserves.

eeuunikkeiexpat's got it right, Chile has a lot of its reserves abroad in USD...

Besides, if the world economy really tanks, there's just no way copper isn't going to dive along. It's 65% of exports, exports are 40+% of Chilean GDP. You do the math if copper drops by 50%... Even if the peso drops which should help with wood and fruit exports, I don't think there's enough export diversification or internal pent demand to save Chile from suffering in a worldwide slump. Others might have more riots though!

The USA is looking at the abyss of a mostly deflationary depression with the world probably going along for the ride. I'd say the world banking authorities et al. only have a couple of months or less to avert this outcome. How, don't know ... they are the Masters of the Universe though.

May take two years to work out but my prognosis is it will end as an inflationary depression and major monetary reform before all is said and done.

NIA. DYODD.

Standing pat in cash till the dust settles except for phys which will only be touched in dire circumstances (which really may come to pass)

USDCLP-542.50...Probably on its way to 600 and maybe 700....Commodities are getting slammed today..Copper included...A deflationary depression that has been masked for the good part of 6 years has now overcome the deception. Inflation? Forget It! The USD is rising now in the face of all assets. This is the natural outcome in a worldwide deflationary bust. The reserve currency is rising and rather abruptly spelling a full on asset crash lay right ahead. The idea that monetization by the Fed has a chance to overcome this situation is maybe less than 50%. The debts are too large for the system to continue to cover over with credit excess and impossible to cover over when debt creation has stalled.

All the craziness is flying right over my head.

Jimmy has said this before, about the CLP shooting to 600 or higher to the USD. For me, that seems like a good thing. My income is in USD and generally stable, regardless of all the insanity that's been going on in financial markets. I don't expect to be feel much of a pinch for it.

I have no investments to gain or win on outside of my monthly income.

Am I missing something?

The result of all this insanity seems to be just that I'll have more buying power in Chile over the next 6 months thanks to a stronger USD exchange rate... which would be really nice for me.

I've got to be missing something here.

The USD to Uruguayan Peso has shot up over here this weekend. Starting on thursday its charged from under 19 to over 21 pesos to the dollar, which is a BIG difference!

I can't figure out what is going on.

Are you on a pension? Corporate, State or Federal (SS or similar)? PROBABLY (nothing is 100%) OK for now if Federal.

Is your US bank safe? Even if less than 100K in the account could be weeks or months till you get compensated by the FDIC in an out of control run situation. CDs and money market funds are also in danger unless solely invested in 100% short term US T-Bills. There are only 3 or 4 funds I know of that fit that profile.

I would have a good stash of local cash in smaller denominations and coins if the international banking system seizes up and goes on a temporary holiday.

Anything more catastrophic, then you gotta start thinking about what you have in your cupboard, physical safety, barter items, etc. Somehow I feel I'll be better off weathering this thing in Chile than the social powder keg known as the USA.

yea, almost everyone they interview these days on wall street is using very serious panic voice. The average investor seems to be the only one not in a serious panic yet ( which makes me think perhaps they should be ). The big boys on the other hand all look like they are trying to figure out how to get the window open so they can crawl out on their ledges.

The insurance companies imploding are likely to be the straw that breaks the camels back because of their international exposure. Right now Latin America is only being hit by investors withdrawing some speculative money, high fuel prices, and mostly exposure to big international companies like Endesa (guess that dam will have to wait).

From our buisness point of view this is much better for us than last Oct when the peso / dollar rate was dropping right at the moment everyone was planning their vacations to Chile. On the other hand, I am terrified that people might put off their retirement or go a bit more conservative with the their retirement.

We gave up our liter of blood in this blood bath about two years ago, and now we seem to be fairly well over it. That was when people stopped trying to finance properties using their over priced properties in the States when buying in Chile. There is likely still a few around, but we have become better at spotting them.

Once those people fell out of the market, then we only have to deal with people with real cash. I think it the long-run it makes Chile more attractive because as expensive as Chile is it is still a bargain in terms of stability.

The only way I see this ending is the U.S. government stepping in and buying out mortgages on the ground, and properties in default. Without support under the housing market and the source of all that messy bad debt, they are just using bubble gum to patch the dike ( i.e. billions of dollars to stop trillions of bad debt going really bad ).

eeuunikkeiexpat wrote:... short term US T-Bills ...

Selected Treasury Yield Curve Rates 9/2/08 -- 9/16/08

1-Month CMT at 0.23%

For good reason. 30 day T-Bills is the safest way to hold USD cash bar none. Evidence the big money knows where to panic into.