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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Silver Super Bull who wrote (1025)9/25/2003 8:53:45 AM
From: glenn_a   of 110194
 
Deadbull.

When you say "but this freedom of action is becoming increasingly constrained by creditors of U.S. financial assets/obligations."

What leads you to say this? Do you think they will be less willing to buy debt if monetary/credit continues to expand?

... Well, would you be less willing to hold your money in a bank account if after 2 years they only gave you back 75 cents on the dollar? This is analagous to the situation presently faced by foreign bond holders.

The reasons they've continued to buy treasuries thus far is that it has been in their interests (that is Foreign Central Banks) to do so. Don't know exactly what the quid pro quo for this arrangement has been - but certainly in the case of China, it would involve access to the US export market on a most favored nation status, and would likely involve security agreements with certain nations. But as I mentioned before, I believe the game is changing here.

((It seems to me that creditors have been more than willing to buy debt even in the face of the U.S. monetary/credit expansion. Not only has the increasing debt been absorbed (bought) but it has been done at increasingly higher prices/lower yields.))

Yes, that is true. I would not, however, base future portfolio allocation strategy on this continuing. JM2C worth.

Regards,
Glenn
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