Japan and China lead flight from the dollar

Originally posted by mythatsabigprobe
I believe Toyota hires non union labor and isn't saddled with the huge retirement and health benefits packages that Ford and GM are committed to through union contracts.

You're right about that one. Unions are one of the major reasons that manufacturing has left this country. The union is an invention that was necessary after the industrial revolution but now that there are regulations on the length of work days and workplace safety, minimum wages, etc, unions are nothing but outdated and harmful to the economy.

To the guy who thinks he's going to be rich when Great Depression part II hits...haha, not if whatever Democrat (god help us) who's in office decides to nationalize the supply of gold a la FDR. That is, if you live in the US. I guess that sort of thing could happen anywhere though.

Our debt is at an all time high and rising. Who buys the debt, or more accurately, makes it possible to keep borrowing? The same ones that just started selling our debt. Double wammy, not only not buying, but selling! Time to answer for almost a century of inflation brought to you by the Federal Reserve SYSTEM! Thanks for all the Wars, Depression, and Recessions.

Originally posted by aava

I don't think the article was talking about the trade deficit OBE1. Unfortunately everything else sounds dead on, a perfect storm is brewing beneath.

I apologize for overlooking your post aava. You may have that right, and I did consider that interpretation.

Since the term deficit is generally applied to either the Current Account Deficit, the Federal Budget Deficit, or the Trade Deficit...I chose to address the latter since it is the only deficit that would actually "correct" (via exports), from a weaker currency...as per David Woo's statement.

I think you are right-on regarding the benefit of inflating-away the value of debt, not only foreign, but trillions in unfunded domestic entitlements programs. Still, I wouldn't recommend maxing-out those personal credit cards just yet

Thanks for shedding light on that aspect

I guess I'm a little confused about the whole 'inflating away your debt' thing. Don't your lenders catch on to this and refuse to lend to you?

I'm with HimWhoHathAnEar on that. Doesn't it stand to reason that if that's the case, China and Japan would be smart enough to not further weaken the Dollar by dumping it?

reply to post by Beachcoma


I'm afraid I was saying somewhat the opposite. China and Japan are lenders. When the Fed artificially creates money, it devalues their investment. As stated, this would be a way for us to jack them out of their loan to us. They know this and that is why they are getting out before the Fed further devalues their investment through the use of a printing press (fake money).

Originally posted by HimWhoHathAnEar
They know this and that is why they are getting out before the Fed further devalues their investment through the use of a printing press (fake money).

Agreed.

I kind of touched on that in this post:

In a situation where everyone who is holding US currency is "loosing value" the first one out of the door is the lesser looser while anybody who waits too long ends up the biggest looser. Iran is 85% of the way there, Venezuela made the move long ago, Russia as well, and now the big boys are on their way out the door.

I was wrong about Japan in that post though.
.

[edit on 10/17/2007 by Gools]

reply to post by HimWhoHathAnEar


Oh. That actually makes better sense.

Like I said before, economics isn't my strong point, but I'm here to learn

Originally posted by HimWhoHathAnEar
I guess I'm a little confused about the whole 'inflating away your debt' thing. Don't your lenders catch on to this and refuse to lend to you?

The advantage to debt holders in an inflationary environment is a fairly straight forward one. It really only helps existing debt (which we are FULL of) for the reasons you listed.

Let's say I owe Jim 10 dollars with no interest. Heavy inflation strikes and my 10 dollar debt is suddenly much easier to pay off, since I pay it off with cheaper currency. Even though it takes much more cash to buy goods, the debt I owe Jim stays numerically the same amount (10 dollars).

Lenders will catch on eventually, adjusting their interest rates for the high inflation to cover for their losses, which in turn limits the amount of loans being made (or liquidity in the marketplace). The reallllly interesting possibility is then a state of deflation. Deflation triggered by inflation, imagine that. Very similar to what happened to Japan in the 90's.

reply to post by RedDragon


Free trade, was to be use to help third world countries become more competitive. Economist learn in School that Free trade is beneficial but they do not care to learn that the Issue of off shoring can bring a dangerous situation as the one we have now in the US..

While this has help markets like China and Asia, it has cause our nation to lose their best high paying industrial jobs to outsourcing, because our government forgot to control how much of our nations wealth was to be given away in the manufacturing business to help third world countries.

Corporate American became greedy, while third world countries are benefiting with the free trade and raping what used to be US industrial power base, we have a trade deficit and can not compete with foreign goods in manufacturing.

Free trade is out of control we are now a nation of consumers not producers how can that be fair trade?

Free trade is not working for American is killing American while helping Countries like China become the superpowers.

And yes I took economics in College, in the late 1970s. at that time we were still a superpower with a fair industrial base and a fair trade while China was still knee deep on rice fields

[edit on 18-10-2007 by marg6043]

You don't think that there indoctrinating college age kids into buying this FREE TRADE crap lolE crap lol

nafta= was bad for canada (softwood lumber and such)

however our canadian dollar is soaring....woot woot, vive la canada

Who Bought the Bonds?

WHO BOUGHT WHAT?

Asian investors dumped $52 billion worth of US Treasury bonds alone, led by Japan ($23 billion), China ($14.2 billion), and Taiwan ($5 billion). It is the first time since 1998 that foreigners have, on balance, sold Treasuries.

So perhaps someone could explain to me why the U.S. Treasury complex rallied like a bad thing in the month of August?

I recall quite vividly that the “line from officialdom” and widely reported in the main-stream-financial –press, was that August’s rally in Treasury Yields was all about a ‘supposed flight to quality’.

It now seems that we were all sold a ‘bill of goods’.
Link

In the above linked article, Rob Kirby adds a little perspective to the August 'Flight to Quality' media spin. With the Treasury's own statistics showing that the flight out of US securities overwhelmed the flight in...who was doing the buying? Kirby's chart illustrates the August decline in the 10yr yield...which corresponds to increased prices/buying for the same period.

Sour corporate earnings, declining corporate tax revenues, and flight of foreign capitol = an explosion in Fed money supply. Looks like the slowest train-wreck in history is about to accelerate.

Friday closing bell didn't look very peachy either, it seems that the fed may again do another infusion to boost consumer spending, because if we do not make it through the holiday spending with flying colors, retail is going to become part of the line of casualties after the housing crash woes.

But if you have money to spend let me tell you, you are going for the right of your life this holiday season.

Foreign central banks net buyers of U.S. debt -Fed
Thu Oct 18, 2007 4:30pm ET

who is bying our debt now, lets see,

The Fed said its holdings of Treasury and agency debt kept for overseas central banks rose $12.57 billion in the week ended Oct. 17, to stand at a total of $2.025 trillion.

The breakdown of custody holdings showed overseas central banks bought $10.10 billion in Treasury debt to stand at a total $1.237 trillion.

today.reuters.com...






[edit on 20-10-2007 by marg6043]

Greenspan Says Dollar Drop May Reflect Falling U.S. Debt Demand

Oct. 22 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the dollar's decline may reflect a growing unwillingness among foreigners to buy U.S. securities.

"Obviously there is a limit to the extent that obligations to foreigners can reach,'' Greenspan said in a speech in Washington yesterday. The dollar's decline to its lowest since 1997 may be ``an indication America is approaching this limit.'' Link

Amazing timing on Greenspan's retirement last year...think he knew the party was about to end? It was the Greenspan Fed that supported years of Japanese currency intervention. Sell the Yen, buy US Treasuries. The strategy successfully gave an advantage to Japanese exporters and fueled the record US housing and equities bubbles.

Last weeks TIC shows that Japanese faith in the US economy is shaky. Japan, the largest underwriter of American spending habits. As a result, the Yen strengthened last night as much as 113.38, and US equities are poised to sell-off again today as carry-traders run-to-cover.

Greenspan's eternal book tour...will it ever end? Over 18yrs of Fed leadership, and he's unable to accept one iota of responsibility for the repercussions of the largest liquidity pump in history

here it is monday AM,
so far the HSI (Hang Seng stock exchange) is down 1,091.42 or 3.7%

it could be blowback,
their divesting of treasury bonds, and the forcast of the dollar devaluation
together with less & less exports to a recession headed Ameica
could be combining to diminish their markets too...

less anticipated growth in their economy?
China's currency too overvalued?
the stampede out of USD holdings by HSI corporate treasuries?

reply to post by St Udio

I'm thinking it's primarily the strengthening Yen rippling through the Asian Indices, and general uneasiness with the US economy that casued the pull-back. If there are no bombs dropped by the financial sector today, and the Dollar can hold it's rally...the carry-trade should be back in play, and equities could rally some by close. What's kinda interesting is softer oil in light of the Turkey situation

Profit taking?

Gloomy economic outlook?

PPT?

Don't worry everyone. President Bush said that the US economy is booming and we are creating many many jobs everyday in the US. We need to spend more and more for the war in Iraq for the democracy we can bring to those poor people in the Middle East. Our country is now enjoying the greatest prosperty in many years. Just keep on enjoying yourself . Don't worry about anything. Spend more money for this coming holiday season.