ok, onus on you now
China has $110 billion from 2002 in trade surplus with USA alone
they announce intentions to go 1/3 1/3 1/3 with USTBonds, EuroBonds, Gold
but those are target goals
a quick move of 1/3 into gold would drive an oz to $500 fast
let's say they will be planning to invest $100 billion
they might now go 60-40 into USTBonds over EuroBonds
if these two markets are not the only large ones, then what are?
where would you put $100 billion per year???
now consider that Japan also has something like $70B with USA alone
and Korea has its own surplus
and Taiwan ditto
and Singapore ditto
I am getting smaller here
so add it all up and you might get a total of $250 billion a year in US trade surplus, which means dollar-based central bank surplus
(it all ends up in their central banks after private shedding)
where to put $250 billion per year ???
you just dismiss my point as improbable
our credit markets are peerless in this world
and no losses so far for anyone in the last 3 years in TBonds
these Asian investors dont simply want to find a place to put it, they want a place where it will be safe from quick loss, and safe from having to vastly overpay, only to see its value come back to equilibrium in weeks, showing a hefty 30% loss
imagine Asia sets its sights on say Brazilian credit market
their entire debt is $140B as I recall
that is their whole shooting match with a little over half my argued $250B
a pathetic investment, not gonna happen
imagine Asia sets sights on owning European pharmaceuticals
that might be a big bite on the sandwich of equities
a viable sector to be sure, but such an investment would drive up prices 5-fold fast
your turn
where would you set sights for investing $250 billion each year ???
if you think hard, you will have few if any alternative to US TrezBonds and GSE agency debt
keep in mind that the whole world is giving every conceivable economy a big big push into liquidity traps
except China, the upstart with low costs and low currency
that $250B will not pursue non-debt in the developed world
/ jim |
