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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: bart13 who wrote (85650)8/29/2007 12:38:36 PM
From: Haim R. Branisteanu  Read Replies (1) of 110194
 
Hi Bart, my comments referred to this statement for the dollar index not trading below the 80 barrier

Here are two very important arguments for this time horizon:

Money supply inflation by international central banks has exceeded the Fed's for four years
Risk premiums have more upside adjustment in foreign currencies than in the U.S. dollar
Don't worry if you don't understand these things.


my question is which "money supply" he refers to, and I think that the FED does not control money supply - if he refers to M3, then WS controls it now via financial engineering debt derivates and IMHO by myriad ways of “new era alchemy” securitization which lead to the current debt debacle around the globe.

That is also why non-performance of the sub prime loans are hitting banks in EU and Asia. The reason for holding those securities in EU and Asia is the biggest ponzi scheme in decades engineered by WS to achieve synthetic higher yields on supposedly high quality debt.

This higher yield on CDO's, CMO's and CLO's rated A and higher by US agencies held the US dollar index from sliding further even that the trade deficit was growing.

This phenomena is very different form other countries were FDI goes mostly in productive means and not in bubbles, or consumerism (credit card debt backed securities or HELOC backed securities) like the US.

Those CDO's, CMO's and CLO's etc. sold overseas is what gave the support to the USD – lets call it the debt laden carry trade counter balancing the trade deficit.

In a different way we could look at this phenomen as XYZ country with a big pool of available work force expands its manufacturing base and sells their products to the US and instead of receiving hard currency, they are satisfied receiving WS fabricated debt to keep their factories humming in hope nothing will seriously blow up in their face.

In the meantime know how and the manufacturing base is expanding overseas producing smarter and better products sold mainly to the US but later world wide. The long term winner is the exporting country as they bet that this debt will be ultimately paid and marking time to build their economy and local “trickle down” prosperity and wealth.

Best example is to compare the new power center in China and India v. the old power centers in the US which cities are more modern dynamic and attractive? Where are the more luxurious shopping malls and where are the new big jewelry and diamond markets – the classic sign of prosperity – one is for sure NYC lost its prominence.
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