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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: TimbaBear who wrote (49506)1/12/2006 11:03:22 AM
From: ild  Read Replies (2) of 110194
 
<<<It won't be the question of "but sell off in favor of what?", it will be "Sell off, no matter what!" They'll spend USD to buy oil reserves, to buy commodities, to buy gold, to buy anything just to get rid of USD. It is already happening but if one is blind to it, it's invisible.>>>

If China buys Russian oil it will result in USDs being pushed over to Russia. Russia in turn will buy French cheese and wine. French will buy Chinese made toys, so the USDs will be back to China. My two points:
1. The only real way to spend USDs is to buy something in the US and return USDs to the US. What can they buy in the US? IMHO there is no tangible/productive assets that can be bought in the US. China couldn't buy Unocal.
2. Only small USD holders will be able to exchange USDs for other assets. Big holders like Japan and China will not be able to exchange their USD holdings as there is no buyers for them. As USD depreciates China will lose capital it holds in USD paper.
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