Quantitative Easing could mark the beginning of the end for the USD

We all know that the Federal Reserve's quantitative easing is undermining the value and security of the US dollar. In an attempt to kick start domestic product supply chains and to undermine cheap Chinese imports. This type of debasement could very easily spark the end of a US Dollar dominated world. But which currency would be a suitable replacement for the USD? The EURO and the POUND have their own fair share of issues. The YEN represents yesterday's Asia in decline shadowed by the recent economic miracles of China and India. Further, China's pegged YUAN is too highly controlled and exposed to governmental manipulation to be a likely candidate. The AUD and the CHF are perceived to be too small and not liquid enough to be a safe enough bet. So, perhaps the only foreseeable solution will be for countries to hold a bread basket in reserve of an assortment of currencies (i.e. EURO, POUND, YEN, AUD, CHF, USD, YUAN, GOLD). Or, perhaps the Gold or Silver standard will return.

This chart perhaps shows the beginning of the end for the USD.

India's population growth

India has over 1.2 billion people and it is exponentially growing. Unlike China, India is the worlds biggest democracy and has made no attempt at curbing its growth with a one (1) child policy. So, what will happen to a much bigger India with projections of about 1.9 billion in twenty five years, and its resources are already depleted. India will either have to spread its resources more widely amongst its population or face increased polarity between the wealthy and the poor. In essence, India's classes will all grow in number, however they will likely remain as equal fractions. The biggest issue will be food and water, the quality and consumption per head will more likely reduce or be imported from surrounding countries to replenish the gap.

Liability of Airlines for recklessness

Qantas Ltd as an example has had a string of commercial accidents since it was floated on to the market in 1997. In the scenario that an airline suffers fatalities (deaths), which are attributed to by its maintenance, could the airline itself and its Directors be criminally liable under the Commonwealth Criminal Code.

In the scenario that an airline suffers a casualty the company and the Board of Directors could be criminally liable for cutting maintenance, so long as it was sufficiently connected to the fatalities. In this case the Court is empowered to make a finding of recklessness and order a fine on the company and prosecute the Directors individually. Under the Commonwealth Criminal Code at 5.4 (1)(a) a finding of recklessness will be made in the situation where a Director is aware of a substantial risk of death or injury and that the circumstances exist and that it was unjustifiable to take the risk, and the company takes the risk anyway.

Will 2011 doom the EURO?

There have been escalating rumours over the last six (6) months that Germany, the EU's largest economy is planning to announce its withdrawal from the EURO in early January 2011. Although these rumours seem a bit dubious, they allegedly stem from a Bund Employee who alleged on a chat site in early June 2010 that new generation Deutsche Marks were being printed for circulation in Germany, Austria, Netherlands and Finland.

Yet the question remains as to whether this rumour will in fact crystallise into reality in early 2011 and whether this would lead to the eventual demise of the EURO?

The geopolitical ramifications of a German led EU currency exodus would be as follows:

1. Shortly after Germany's announcement, France would make their announcement to exit to the Franc.

2. Thereafter the Eastern and Southern EURO 'basket republics' would be left with an unpredictable dud currency. Perhaps these nations would be able to follow the USA's hyper-inflationary lead and print their way out of debt. Nevertheless within days the EURO would likely par with the PESO's in Latin America.

QR National Share Offer worth AUD 5 Billion dollars?

This share offer worth AUD 5 billion dollars is complete ‘junk’. It is hardly different to those ‘junk’ derivatives that led to the global financial crisis of 2007. Like those worthless securitised property derivatives this Corporation has been grossly over valued. Only more heinous this QR National offer is marketed directly to ‘Mum and Dad’ retail investors rather than faceless corporate professional investors.

After reading through the QR Nat share offer prospectus and crunching some numbers the over valuation of this Corporation becomes acutely obvious to any layperson.

For example in the hypothetical that you invested AUD$1.00 in the financial year of 2010 in a five billion dollar share offer you would have earned a total of 4.0cents in profits. In the hypothetical that you invested your AUD$1.00 in QR Nat in the financial years of 2008 and 2009 your return on investment would have been 1.98cents and 2.8cents respectively. In the years between 2008 and 2010 the RBA calculates inflation at 4.4%, 1.8% and 3.1% respectively. So, had you invested money in any of these hypothetical share offers your miniscule profits would have lost out to inflation.

The RBA’s cash rate for this same period has fluctuated between 7% and 4.75%. So, comparatively if you had invested your money in a term deposit at least you would have made money.

The front page of today’s SMH Business Day quotes Deutsche Banks and Macquarie Banks valuations of QR at $2.53 and $2.75 respectively. Many smaller institutions such as Roger Montgomery give a much more realistic evaluation of anywhere between $1.09 and $1.48 per share. Yet the official share offer stands at about $2.80 per share.

The advocates for QR Nat argue that these miniscule returns are sidetracked into irrelevancy because of the potential for immense future profits and significant capital gains. Well in that case an analysis of the QR Nationals financials reveal a finding of total assets equating to 8.574 billion and total liabilities equating to 5.89 billion leaving net assets worth a total of 2.684 billion. Yet the Queensland State Government says that 2.684 billion is worth 5 Billion dollars in shares. In that case I would prefer my AUD$1.00 to remain in the Bank anytime.

Our Excessive Population Growth

The World's population is booming and its not because we are having more babies. It is because less of us are dying, when we should. We currently have 6.7 Billion people and the United Nations predicts that by 2025 we will exceed 8 Billion and by 2050 we will exceed 9 Billion. This excessive growth will be detrimental to mankind as the demand surpasses the supply for the worlds resources. In effect by 2050 there simply won't be enough h2o, food and fresh air to go around.

Goldman Sachs

The US Senate and various customers are running inquiries into Goldman Sachs conduct, with regard to their design and sale of certain securitised asset products. In 2007, Goldman Sachs designed mortgage backed securities that they knew would fail and then they bet on their collapse by purchasing credit default swaps, which pay out upon a default. In Australia this type of conduct may contravene the insider trading provisions of the Corporations Act and those responsible would invariably be held liable for hefty penalties including Gaol.