Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: mishedlo who wrote (12164)	9/23/2004 5:37:59 PM
From: Now Shes Blonde	of 116555

From Fleck Of Central Banks & Fannie?-No-Thanks Finally, in mulling over what Fannie Mae could mean for our markets, my friend Jim Grant pointed out something that I hadn't quite thought of initially. In an email to me, he wrote: "It might be useful also to mention Fannie's dollar connection. Federal agency securities held in custody by the Fed for the accounts of foreign central banks run to $244 billion, up $54 billion in the past 12 months. That compares to $1 trillion of Treasurys (up $273 billion in the past 12 months). As you know, foreign -- mainly Asian -- central banks absorb stupendous amounts of dollars. They invest them in Treasurys and agencies. Jim continued: "If you were running the People's Bank of China, you might not take kindly to the Fannie revelations. You might sell Fannies for Treasurys, or stop buying Fannies AND Treasurys. Or do nothing, retaining every ounce of faith in the U.S. and its picture-perfect financial management." An excellent point made by Jim. Those are just other reasons why Fannie Mae might turn out to be the financial story of the decade.

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