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Gold/Mining/Energy : Big Dog's Boom Boom Room

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To: Taikun who wrote (40703)	3/24/2005 3:07:17 AM
From: Tapcon	Read Replies (1) of 206322

Taikun, We may be talking past each other a bit here <ggg>. I wasn't suggesting that if China re-pegged that Chinese CB would require zero percent allocation in US dollars. China would, as you indicate, need to carry levels of foreign reserves appropriate to their trade levels. We see that Japan holds something like 715 billion US debt in propping up the Yen with their "dirty float" exchange rate. China holds, what, 190 billion with their fixed rate. Notwithstanding the shift of many CBs away from US buck in their total reserve holdings, the point I was trying to make is this: To the extent that the RMB exchange rate is moved away from its current peg, there would be less cause for China CB to continue to buy US treasuries to hold down the upward pressure on the RMB. Latest quarterly figures show that US now requires about 2.9 Billion US$ per business day to finance the deficit. If any of the large players who buy US debt decide to back off their current rates of buying, interest rates here will rise...unless the Fed decides to monetize the debt by printing money. From the latest Fed rhetoric, it sounds like they are planning to reign in the easy credit and are not choosing the monetizing path.

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