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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: 6821massey who wrote (97919)5/26/2009 8:50:05 PM
From: The Vet1 Recommendation  Read Replies (1) of 116555
 
From the Richard Fisher comments on

telegraph.co.uk

"Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."

"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal.

The Chinese are now afraid of their own shadows, as well they should be.

The problem they acknowledge is that the US Treasury market is the only market in the world large enough to absorb their huge surplus of US dollars. What they can't come to grips with is that it only retains that size and liquidity because of their own presence in that market.

In fact any market that they moved their trillion dollars into would become far bigger and far more liquid simply because of their own dominant position, but moving from here to there is almost impossible for them without sustaining huge paper losses. In reality, the money they have in US treasuries is lost already because they cannot withdraw it from that market and US inflation and a weakening US dollar will eventually sap the value from it until it is almost worthless.
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