Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: elmatador who wrote (51144)	6/21/2004 2:47:10 AM
From: Taikun	Read Replies (1) of 74559

Most Asian nations think financing the US (read the US consumer) is preferable to stimulating domestic demand. Whether it be the military premium, for market research or the efficacy of the US markets or the consumptive behavior of the US consumer, it still pays gov'ts to invest in the US debt to finance their exports. In buying US treasuries, China and Japan achieve the following -coordinated (albeit inefficient and possibly misguided) global defense at some level -access to a huge advanced consumer market -an investment yield -dollar hedge -subsidizes their own industry, who would inevitably sell less if the US treasury yield was priced without participation of China, Japan Therefore, purchase of US Treasuries is a subsidy paid by China, Japan, to their export industries that helps their entire economy. From China, Japan viewpoints: Take away US-led global defense, US dollar importance and add Japanese and Chinese increased military spending, stimulating their own domestic market may become more advantageous, but not right now.

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