As global security unravels, dollar returns to dominance; Making a living off Facebook; 'GDP' term marks 80th anniversary

1 As global security unravels, dollar returns to dominance (Ambrose Evans Pritchard in Sydney Morning Herald/The Daily Telegraph) We enter the year of the all-conquering US dollar. As the global security system unravels - with echoes of 1914 - the premium on the world’s safe-haven currency must rise. The effect is doubly powerful since the US economy is simultaneously coming back to life.

America has shaken off the most drastic fiscal tightening since the Korean War, thanks to quantitative easing. Growth is near “escape velocity” - at least for now - at a time when half of Europe is still trapped in semi-slump and China is trying to cool the world’s most dangerous credit boom.

As the Fed turns off the spigot of dollar liquidity, it will starve the world’s dysfunctional economy of $US1 trillion a year of stimulus. This will occur through the quantity of money effect, hitting in a series of hammer blows, regardless of whether interest rates remain at zero. The Fed denies that this is “tightening”, and I have an ocean-front property to sell you in Sichuan. It is hard to imagine a strategic and economic setting more conducive to a blistering dollar rally.

It is a myth that emerging markets borrow only in their own currencies these days. External debt will reach $7.36 trillion in 2014, double 2006 levels (IMF data), mostly in dollars. Some $2 trillion is short-term. It must be rolled over continuously. Euroland will be hit on two fronts by Fed action. Bond yields will ratchet up, shackled to US Treasuries. Emerging market woes will ricochet into the eurozone. 

Over all else hangs the fate of China. The sino-bubble is galactic. Credit has grown from $9 tillion to $24 trillion since late 2008, as if adding the US and Japanese banking systems combined. The pace of loan growth - 100pc of GDP over five years - is unprecedented in any major economy, eclipsing the great boom-bust dramas of the past century. China may try to cushion any hard-landing by driving down the yuan. If so, this will transmit a further deflationary shock through the global system, catching the West sleeping with its defences against deflation already run down. The US may be strong enough to cope. For Europe it would be fatal. The denominator effect would push Club Med into a debt compound spiral. Let us give it a 30pc probability. Happy new year.

http://www.smh.com.au/business/comment-and-analysis/us-dollar-to-dominate-as-spectre-of-1914-returns-20140102-307md.html

2 Making a living off Facebook (Nicholas Carlson in San Francisco Chronicle) You should meet Koby Conrad. If you're older than him, he'll make you more optimistic about the future. If you're his age, he might inspire you. Conrad is a 20-year-old college student. Unlike most 20-year-old college students, he's also a business owner. Conrad owns an online store called Hippie Hope Shop. There, he sells goods like hookahs, incense, and hippie clothes made out of hemp. He gets traffic to his shop by running a Facebook page called "The Hippy Bloggers."   He also runs another Facebook page called Mother Hemp, which sends traffic to a store called Mother Hemp Products.

The business seems to be going well. Conrad says it pays for his entire living. He also tells us he's about to sell 50% of the shop to two investors in two $30,000 chunks. He plans to use the money to buy "likes" on Facebook. "The Hippy Bloggers" currently has 75,000 likes. Conrad wants to get that number to a million. By his math, that many likes will put his revenues past $50,000 per month — $600,000 per year.

Obviously, Conrad might be wildly overestimating his ability to scale his small online retail business. But you've got to love the ambition and the hustle. Conrad tells us he first got into online marketing way back when he was 19 and "knew absolutely nothing." He started with a YouTube page. Then he came to Facebook and built The Hippy Bloggers, which sends traffic to HippiesHope.com. Then came Mother Hemp. Now he's running a small retail empire and taking on investors.

Conrad says the best thing he "ever did" was go into consulting. "I never made any real money off of it. I had maybe 10 clients. But my 10 clients, they opened my eyes. CEOs I was consulting for hours — I made friends with lots of them, and they turned into mentors for me."

Conrad is not the next Mark Zuckerberg or Kevin Systrom. He's not a hacker building the next $1 billion or $100 billion social network. He's something almost better. He's a kid with limited technical expertise, who is using the Internet to build a fast-growing, small business. He's the kind of hustling, hard-working person the experts say doesn't exist in his "millennial" generation. "Everyone always tell you to be scared," he says. "Be scared of things going wrong, be scared of things not working, be scared of the people you meet online, but no one ever tells you that it could all actually work."

http://www.sfgate.com/technology/businessinsider/article/Meet-The-20-Year-Old-Millennial-Making-A-Living-5113474.php

3 'GDP' term marks 80th anniversary (Caroline Hepker on BBC) The term Gross Domestic Product was first introduced 80 years ago. GDP, the sum total of consumption, investment, government spending and exports in any country, has been the main way to compare the relative performance of countries. It is arguably the most important of all economic statistics as it attempts to capture the state of the economy in one number.

Quite simply, if the GDP measure is up on the previous three months, the economy is growing. If it is negative it is contracting. And two consecutive three-month periods of contraction mean an economy is in recession. GDP can be measured in three ways:

Output measure: This is the value of the goods and services produced by all sectors of the economy; agriculture, manufacturing, energy, construction, the service sector and government. Expenditure measure: This is the value of the goods and services purchased by households and by government, investment in machinery and buildings. It also includes the value of exports minus imports. Income measure: The value of the income generated mostly in terms of profits and wages. In theory all three approaches should produce the same number.

http://www.bbc.co.uk/news/business-25587089