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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: russwinter who wrote (26396)	2/13/2005 11:35:32 PM
From: mishedlo	Read Replies (2) of 110194

Keep in mind the extent of US financing needs under Bretton Woods II. A trillion bucks a year needed for foreign sources, $900 billion, even 800 billion if real progress is made on deficits. All you'd need to upset the apple cart is an adjustment at the margin by one, several or many participants. And it wouldn't even have to into Euros, or gold, it just be internally. This project for instance is being paid for from USD reserves. But who are the buyers if they sell? You still haven't answered. I doubt that Malaysia by itself means a damn thing. Assume for a minute that China sells them to buy Euros. What then? The Euro goes to $1.40 or $1.50 then what? Then they are sitting on a freaking pile of Euros instead. How does that do them any good? So they buy Euro bonds pushing that rate down to 0%. Then perhaps US$ look attractive at 4.2% In the meantime the US keeps flooding the world with dollars. All it takes is a catalyst to stop the nonsense, then we get an enormous credit crunch in the US. What was the light that was turned on in March of 2000? Was there an event? All of a sudden the insanity stopped. It just did. This can go on for 6 more months or heaven help us another year or more, or it can stop tomorrow. Maybe Greenspan says something stupid. Terrorism sure would be an easy scapegoat. How does GM pay that $2B to Fiat? GM need to sell $2B more in bonds? Will GM rally on the settlement or will the bond market choke on GM paying out $2B? It is interesting that everyone is giving Noland big kuddos for his piece when I talked about the Greenspan Hedge blowing up weeks ago. I guess if I would have predicted 8% interest rates as the end result then everyone would have thought I was brilliant too. Mish

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