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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Alias Shrugged who wrote (3406)	12/15/2003 1:31:10 PM
From: Rarebird	Read Replies (1) \| Respond to of 110194

<The market will deflate despite still low interest rates.> Japan's Central Bank recently bought $US 9 Billion in the foreign exchange markets - IN ONE DAY - to try to prop up the US Dollar. In fact, over the past few weeks alone, foreign Central Banks have increased their combined holdings of US government securities by a tremendous amount! That is what is holding up not only the US Dollar, but as a monetary inflow into the US financial system, it is also acting to hold up the internal US economy. Now, what happens when they all STOP sending this global avalanche of money to the USA? First, all the financial instruments they previously bought have the buying pressure pulled out from under them. Treasuries and Fannies and Freddies take a tumble. This is the same as a climb in market interest rates, not in the official interest rates Greenspan has on offer over at the Fed. If Greenspan does not want to see US longer-term market rates climb, then he will have to send the New York Fed into the breach to buy this paper back faster than it is sold.