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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Ramsey Su who wrote (23584)12/18/2004 9:04:45 PM
From: mishedlo  Read Replies (1) of 110194
 
Mammoth selling of treasuries is quite simply NOT in ANYONE's best interest IMO.

Now that does not mean it can not happen, but it does reduce the odds. Think of it this way.....
China gets money from the US as we buy tons of junk.

They take those dollars and buy hard assets in copper mines and oil in South America and Sudan and forge ties with Australia and do other things that makes tons of sense like building up oil reserves and building steel factories. In other words, they recycle those $ as fas as they can and park the rest in treasuries to support the US consumer.

Now lets say China suddenly starts dumping all their treasuries as idiots like Xie propose. The US$ crashes, they can now no longer spend those dollars to buy assets in Chile, oil from the mideast and Africa, and the worth of those treasuries plunges immediately. Furthermore any US assets thay own goes down the tube, the Euro soars and Europe immediately goes into a recession, and finally there is nowhere for China to sell their products.

Now, do you doubt that what I outlined is a PLAUSIBLE if not probable outcome of massive selling of treasuries? If you believe it is plausible as I do, and if you think China is rational as I do, then the only reasonable FN conclusion anyone with half a brain would realize that it is NOT LIKELY.

Now, just because it is NOT LIKELY does NOT mean IT CAN NOT HAPPEN. It can happen but it is a SUCKER BET to think that it will.

If this does not make sense to you, please tell me why?

Mish
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