4 replies to this topic

[Cirrus]

My wild speculation of recent events..... It's no secret that without dollar recycling by China and perhaps another CB or two we would have big problems with interest rates and the dollar's standing as the world reserve currency. Here's my wild speculation on what might have happenned recently between Paulson and China and perhaps even the G8: China made no secret that they now want to recycle more of their massive current account surplus from bonds to stocks. We all know that real interest rates are close to zero as the CPI understates actual inflation. China isn't ignorant. They tell Paulson that they want to now buy equity in the US itself and not equity in the US currency as their holdings are being inflated away. Moreover, they tell Paulson that "they want to start buying at a better price--they want a good deal". Thus, we have a short term starvation of liquidity and rates rise. I believe we could be seeing the beginnings of a nasty correction here. This will set up another really nice run IMO. The floor will present the Chinese with their 'good deal'. It will be their reward for continuing to prolong the global financial environment and the standing of the dollar.

Edited by Cirrus, 12 June 2007 - 09:31 AM.

[Islander]

My wild speculation of recent events.....


It's no secret that without dollar recycling by China and perhaps another CB or two we would have big problems with interest rates and the dollar's standing as the world reserve currency. Here's my wild speculation on what might have happenned recently between Paulson and China and perhaps even the G8:

China made no secret that they now want to recycle more of their massive current account surplus from bonds to stocks. We all know that real interest rates are close to zero as the CPI understates actual inflation. China isn't ignorant. They tell Paulson that they want to now buy equity in the US itself and not equity in the US currency as their holdings are being inflated away. Moreover, they tell Paulson that "they want to start buying at a better price--they want a good deal". Thus, we have a short term starvation of liquidity and rates rise. I believe we could be seeing the beginnings of a nasty correction here. This will set up another really nice run IMO. The floor will present the Chinese with their 'good deal'. It will be their reward for continuing to prolong the global financial environment and the standing of the dollar.

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Your are right about one thing. Stocks are next and it will be a melt-up, right now the sell spikes say it goes on for a while. Islander

Edited by Islander, 12 June 2007 - 09:36 AM.

[ecpinto]

Lets see... You have 1.6 trillion dollars... You have a billion people whose standard of living just went up by manipulating the price of the Yuan to a level which promoted exports... Now this billion people can buy most of the goods produced in China... Ergo...we dont need to sell much to the USA cuz their currency is toast... So we dont need bonds... no demand for bonds...Lower prices...Higher interest rates... Helicopter Ben will come in and inflate in a do or die attempt...everything takes off.. So Does Gold...BTW...Gold just tested its 200 day ema

[hiker]

interesting

[linrom1]

My wild speculation of recent events.....


It's no secret that without dollar recycling by China and perhaps another CB or two we would have big problems with interest rates and the dollar's standing as the world reserve currency. Here's my wild speculation on what might have happenned recently between Paulson and China and perhaps even the G8:

China made no secret that they now want to recycle more of their massive current account surplus from bonds to stocks. We all know that real interest rates are close to zero as the CPI understates actual inflation. China isn't ignorant. They tell Paulson that they want to now buy equity in the US itself and not equity in the US currency as their holdings are being inflated away. Moreover, they tell Paulson that "they want to start buying at a better price--they want a good deal". Thus, we have a short term starvation of liquidity and rates rise. I believe we could be seeing the beginnings of a nasty correction here. This will set up another really nice run IMO. The floor will present the Chinese with their 'good deal'. It will be their reward for continuing to prolong the global financial environment and the standing of the dollar.

I think this is very good analysis. A gradual increase in Treasuries combined with rising yuan, is a recipe for continued Chinese growth. Heads or tails they win: higher return on investments combined with higher purchasing power. I think this is exactly what Paulsen was trying to drive through to stubborn Chinese. But, just exactly how that benefits USA: heads or tail we lose, except the liquidity keeps flowing and financials keep collecting fees.