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  1. #11
    Senior Member ptgatsby's Avatar
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    Quote Originally Posted by oberon View Post
    People do it, it's true, but not everyone does, and so we'll always have drug manufacturing in the US.
    I should point out that... you probably will only have it so long as the US remains ahead of the curve (ie: has competitive advantage) in producing new drugs. Or raises huge trade barriers to generics, which it has, effectively... but that encourages innovation, so it's working so far. In a contraction, though, this might reverse itself, especially if some fundamental shift in the world economy happens.

    Don't see it happening, least not quickly, but... it could happen (beyond the 'eventually everything changes' clause ).

  2. #12
    Senior Member Lateralus's Avatar
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    Quote Originally Posted by ptgatsby View Post
    I should point out that... you probably will only have it so long as the US remains ahead of the curve (ie: has competitive advantage) in producing new drugs. Or raises huge trade barriers to generics, which it has, effectively... but that encourages innovation, so it's working so far. In a contraction, though, this might reverse itself, especially if some fundamental shift in the world economy happens.

    Don't see it happening, least not quickly, but... it could happen (beyond the 'eventually everything changes' clause ).
    Did you just say that trade barriers encourage innovation?
    "We grow up thinking that beliefs are something to be proud of, but they're really nothing but opinions one refuses to reconsider. Beliefs are easy. The stronger your beliefs are, the less open you are to growth and wisdom, because "strength of belief" is only the intensity with which you resist questioning yourself. As soon as you are proud of a belief, as soon as you think it adds something to who you are, then you've made it a part of your ego."

  3. #13
    Senior Member ptgatsby's Avatar
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    Quote Originally Posted by Lateralus View Post
    Did you just say that trade barriers encourage innovation?
    Artificial pricing through a combination of regulations preventing external manufacturers being involved and patent locks on existing drugs.

    Trade barriers was a bad title, given the two ideas together in my head - protectionism as far as the OP, but also with patent locks to create local monopolies (where the trade barriers prevent external competitors).

    Note: not good for the economy, but good for those companies.

  4. #14
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    Does anyone remember what I just said about the worldwide acceptance (or the coming LACK of it) of our dollar?

    Bloomberg.com: News

    Dec. 17 (Bloomberg) -- The world’s biggest currency-trading firms say the dollar’s appeal as a haven amid the financial crisis all but evaporated.

    The U.S. currency slid to a 13-year low against the yen today and had its biggest one-day decline versus the euro after the Federal Reserve reduced its target interest rate yesterday to a range of zero to 0.25 percent, the lowest among the world’s biggest economies. CMC Markets said today the currency’s prospects appear “ominous.” State Street Global markets said the dollar’s outlook has been “undermined.”

    “The dollar has been under heavy downward pressure,” said Robert Minikin, a senior currency strategist in London at Standard Chartered Bank Plc. “This move is very well-justified and has a long way to run.” Standard Chartered is preparing to cut its dollar forecasts, Minikin said.

    Yesterday’s rate cut brings the Fed’s target to below the Bank of Japan’s for the first time since January 1993. U.S. policy makers repeated plans to buy agency debt and mortgage- backed securities and said they will study buying Treasuries, a policy known as quantitative easing.

    The dollar fell to 87.14 yen, the lowest since July 1995, before trading at 87.45 yen as of 3:51 p.m. in New York, from 89.05 yesterday. It depreciated to $1.4437 per euro from $1.4002 and traded at $1.4366, the weakest since Sept. 30.

    ‘Ominous’ Outlook

    The dollar is likely to decline “longer term,” analysts including New York-based Ashraf Laidi at CMC Markets wrote in a report. “Prospects ahead appear particularly ominous for the world’s reserve currency once global economic stability starts to build up.”

    The Fed’s debt purchases will cause the dollar to weaken to $1.4860 per euro, analysts led by Robert Sinche, New York-based head of global currency strategy at Bank of America Corp., wrote in a report yesterday. The Fed reduced the scarcity of dollars and investors slowed the deleveraging process, which drove the currency to a 2 1/2-year high against the euro in October, Sinche said.

    “Those temporary supports for the dollar appear to have eroded,” Sinche wrote. “Aggressive quantitative easing by the Fed should add to U.S. dollar supply globally and undermine the value of the dollar.”

    State Street Global Markets, a unit of the world’s largest money manager for institutions, said the Fed’s move is “perilous” for the dollar as investors accumulated an “extreme” long position on the currency, or bets it will climb.

    Record Low Yields

    “This implies a significant potential for a dollar unwind if the real money community attempts to chase price,” Hong Kong-based strategist Dwyfor Evans wrote today in a report. The shift toward quantitative easing “has undermined the U.S. dollar significantly over recent weeks.”

    The dollar’s decline against the euro compares with a similar move in the early 1990s, indicating the U.S. currency may weaken to a record low of $1.65 late next year, Citigroup Inc. strategists Tom Fitzpatrick in New York and Shyam Devani in London wrote in a research note.

    “If it walks like a duck and talks like a duck … it’s a duck,” Fitzpatrick and Devani wrote. “The dollar walks and talks like a currency going back into its bear market.”

    The dollar declined 11 percent against the euro and 8 percent against the yen this month as yields on two-, five-, 10- and 30-year Treasuries fell to record lows, encouraging investors to look outside the U.S. for higher returns.

    “The dollar is going to struggle while it has low yields,” said Roddy MacPherson, the Edinburgh-based head of currency strategy at Scottish Widows Investment Partnership Ltd., which manages the equivalent of $152 billion. “We’re looking to add to our short dollar position if U.S. yields continue downward.”

    UBS Stays Bullish

    MacPherson said he moved toward a short dollar position, or a bet it will depreciate, against the euro in the past four days. The currency may end next year at $1.40 per euro, he said.

    For UBS AG, the world’s second-largest foreign-exchange trader, demand for cash amid the freeze in bank lending will support the currency. The Libor-OIS spread, a gauge of cash scarcity favored by former Fed Chairman Alan Greenspan, was at 140 basis points today, or about 14 times its average in the five years before the credit crisis began.

    “There is still a premium on liquidity, which will be supportive to the dollar even in the current environment,” said Geoff Kendrick, a senior strategist in London at UBS.

    Goldman Sachs Group Inc. said investors can profit from the dollar’s decline by selling the currency for its Canadian counterpart.

    The U.S. currency’s drop is becoming “broader-based,” Jens Nordvig, a New York-based strategist for the U.S. securities firm, wrote today. “Temporary dollar demand from deleveraging and funding flows has come to an end. The prospect of aggressive quantitative easing is starting to have a significant negative impact on the dollar.”

  5. #15
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    As Rates Race to Zero, Printing Presses Gear Up - Economy * Europe * News * Story - CNBC.com

    As Rates Race to Zero, Printing Presses Gear Up

    When the Federal Reserve policymakers decide on interest rates Tuesday, investors will probably look one step beyond their decision, to gauge how much money will the Fed be willing to print once it is out of rate ammunition.

    Rates won't likely hit zero Tuesday, but this could be unavoidable in the near future, according to strategists and market experts.

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    Unemployment is likely to surge after more job cuts have been announced by banks and the U.S. auto industry teetering on the brink of collapse. The housing market is likely to take another hit as more people lose their jobs, and consumption will plummet further.

    "Rates will fall close to zero. Everywhere," Hugh Hendry, chief investment officer and partner, Eclectica, told CNBC.com. "The central banks will be forced to take them to zero because of the widespread disruption in society, for job losses."

    And nations may have to let them stay there for a long time, while finding new ways of easing policy even further.

    "It's a typical race to the bottom," Ronald Stoeferle, equities analyst, Erste Bank, told CNBC.com. "But it's probably too late for this. In the current situation, I think we have to wait for this whole drama to unfold."

    The drama may be prolonged and could take its toll on one of the world's most successful currencies: the euro [EUR-TN 1.4287 0.0042 (+0.29%) ].

    If this crisis happened 15 years ago, currencies of various countries in Europe would have depreciated and this would have mitigated some of the shock, Hendry said.

    During the recent boom years, Europe was captured by private equity mania, small businesses were laden with debt, credit cards and consumer credit flourished. Now the debt must be paid and Hendry says it may take 10 years for this to be achieved.

    A 10 percent to 15 percent contraction of the European economy is possible over the next 36 months and after that "we'll spend six years recouping to the GDP level of 2007," he predicted.

    Without a flexible exchange rate, unemployment will surge, especially in the weaker euro zone members, the PIIGS as Hendry calls them – Portugal, Italy, Ireland, Greece and Spain – and these countries will break out of the single currency.

    How Zero Rates Can Sting

    The problem with massive easing is that once interest rates have hit zero there is nowhere they can go, analysts said. And rates at 0 percent can start to do damage.

    Rates below 0.5 percent in the U.S. could generate losses at money market mutual funds, which charge a fixed management fee, Paul Ashworth, an analyst with Capital Economics, wrote in a research note.

    In turn, outflows from these funds would have a knock-on effect on already battered credit markets, as money market funds have over $3 trillion under management and a third of that is invested in commercial paper and corporate bonds.

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    Redemptions will mean funds will dump these assets and forced selling could push up borrowing costs for businesses, choking them even further, Ashworth wrote.

    In the UK, rates at zero may mean that savers will not feel any incentive to keep cash in long-term deposits, making it harder for banks to meet their regulatory liquidity ratios, economists from Investec said.

    "What is currently more important than the price of money is the quantity of money," Investec's Philip Shaw wrote, adding that UK rates may get close to zero by the spring.

    Printing Money

    The Fed has already moved on from using interest rates as a monetary policy tool and the next fed funds target rate after the Dec. 16 meeting is "almost academic," ING economist Rob Carnell said.

    The Fed's balance sheet has expanded to more than $2 trillion, made up of collateral received in exchange for liquidity provision, or loans of Treasurys.

    "In our view, this is, for want of an alternative description, 'printing money'," Carnell wrote in his research. "And our assumption is that there is more of this to come."

    Besides mortgage-backed securities and asset-backed securities, the Fed will purchase Treasurys, corporate paper and even stocks to provide much needed cash, he predicted.

    "The Fed's only option is effectively to 'print money' by crediting the reserve balances held by commercial banks at the central bank," Ashworth also said.

    Buying Treasurys would be the biggest weapon that hasn't been deployed yet, as such a policy means the Treasury could pump into the economy as much cash as it needs.

    "There's no limit to the amount of money that the Fed can print and Congress can spend," Ashworth said.

    But for some, that's a scary thought, as the amount of U.S. government debt is already staggering.

    "Nobody really knows how these policies will work out," Stoeferle said. "If it were another country, the U.S. should probably declare bankruptcy."

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