The Epic American Credit and Bond Bubble Laboratory Message Board

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

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To: bond_bubble who wrote (56976)	3/28/2006 12:07:19 AM
From: mishedlo	Read Replies (1) of 110194

Mish, nice article, but you did not highlight one of the reasons why Roach was shocked. I'm not sure if it was obvious. If China revalues, its savings (reserves) immediately drops by that percentage of revaluation. US gets so much less debt. However, there will be same effect on trade in US whether there is a tariff of 25% or 25% revaluation. By not revaluing, China gets to preserve the cash reserves' value and achieve the same consequence in the trade. Also, if China revalues the currency, then it has to print excessive money (similar to what Japan did after Plaza accord) and hence blow more hot air into the economy. Looks like China is not willing to blow the credit bubble too much!! I have thought about similar things. For example: China can tax exports to the US at 25% and just keep the money itself. The US wil be "happy" with 25% higher prices and China not the US keeps the tax. US multinational corporations for the most part can then decide if they want to raise prices by 25% or not. Wouldn't that be fun? Mish

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