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

To: orkrious who wrote (3531)	12/17/2003 12:38:45 PM
From: yard_man	Read Replies (1) \| Respond to of 110194

I'll say again -- he's a one-termer -- he is too frickin' cocky about this whole thing. Dean is right -- there never was any threat to us -- I'm no fan of the Dems, but even slick didn't SPEND, SPEND, SPEND like Bush -- I'm ready to vote for the other socialist party dogs ... Republicans are the part of GARGANTUAN, INTRUSIVE government ...

To: orkrious who wrote (3531)	12/17/2003 1:07:00 PM
From: Eva	Read Replies (1) \| Respond to of 110194

orkrious <China's crack-up boom which is the result of interaction with the US current account deficit is highly likely to go ker-splat in '04 ( even if only temporarily, i.e.> In that case we got to watch our commoditiy plays, don't you think? Thanks Eva

To: orkrious who wrote (3531)	12/17/2003 1:19:23 PM
From: ild	Respond to of 110194

Date: Wed Dec 17 2003 13:14 trotsky (Pit yorkie) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved 1. why would China flop? it will flop when the credit expansion comes to a halt. note in this context that China's internal credit expansion is inextricably linked to the US current account, and with it, to the US credit expansion. in China, a plethora of malinvestments has taken place, as always happens when too much money out of thin air hits an economy. how do we know? look at commodity prices - they are a symptom of the fact that demands on resources are made that those resources can't currently meet. look at the recent reports that China is bulding more steel mills than can't possibly be fed by currently available iron ore production. note also, that the Chinese government, scared that the boom is getting out of control, has belatedly ordered the state owned banks to stop lending to car manufacturers, steel producers and aluminium producers ( all of whom strain the electricity infrastructure close to breaking point at this stage ) . it is a TYPICAL Misesian crack-up boom, and it will end the same way such booms ALWAYS end: a bust as soon as the credit expansion stops. well, the credit expansion IS stopping. as for the US economy, the statement "That still needs the USA which will only come down when interest rates hike" is imo naive. as a matter of fact, after 3 years of extraordinary 'stimulus' measures ( i.e., an unprecedented rate cutting spree, the biggest expansion in the budget deficit ever, and an unconstrained mortgage credit and housing boom ) the US economy looks incredibly anemic. over 30% of resources are idle - industrial capacity utilization is creeping along at depression levels, personal income has first fallen, and now stagnates. meanwhile, it has taken nearly $7 in ADDITIONAL credit to produce $1 of GDP 'growth', which in turn is largely a statistical mirage anyway ( not only hedonic indexing contributed, but also the fact that what amounts actually to a net negative for the economy is counted as a 'positive' in the GDP accounts, like e.g. the wasteful government spending - esp. on defense - and the rise in oil prices ) . your 'solution', namely to 'simply print money' obviously is exactly what has happened over the past 3 years already, and it has irrevocable damaged the economy's structural integrity imo...to the point that when the dreaded consumer rescession finally strikes, we could be faced with a bust that exceeds anything seen since the 30's. you are also conveniently forgetting that 'printing' money alone doesn't achieve anything - someone must be willing and able to borrow and spend the money ( i.e. must take actions that further deplete the pool of real funding, putting the economy ever deeper into the hole ) . however, who is left to do that? total US credit market debt is now at nearly 360% of GDP - $36 trillion. even if we assume a low interest expense of say 7% for the entire amount, the economy would need to produce $ 2.5 trillion annually in NET PROFITS to simply pay for the interest on this amount. we're running into mathematical impossibilities here, which is why it has become a "Ponzi economy" where new credit is taken on to pay off old credit & interest. so instead of fearing rate hikes, you should ask, 'how much potential stimulus is left to avert the collapse?' - and the answer is, not enough.

To: orkrious who wrote (3531)	12/17/2003 3:21:50 PM
From: ild	Read Replies (1) \| Respond to of 110194

Date: Wed Dec 17 2003 14:49 trotsky (P. Yorkie) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i meant the effect the US trade deficit with China has on China's money supply. since the Yuan is pegged, money supply in China has exploded at well over 20% growth rates. this produces malinvestment in China. the same holds of course for other mercantilist Asian nations that finance the US current account by printing up domestic currency to buy US govt. debt. the point here is that it's a vicious cycle, with all participants apparently 'forced' to print as much 'money' as possible. this creates various booms and boomlets, but depletes the pool of real funding. once the pool of real funding effectively begins to shrink, it doesn't matter anymore how much money you print - the boom can not be restarted then ( Japan's experience over the past decade+ ) . this is the problem the Fed has encountered now as well....like i said, an unprecedented rate cutting spree has done very little to improve the US economy's most important facets. it is a huge mistake to avert a realignment of the production structure in order to avoid a recession, or a deep recession. it hollows the economy out, while the recession simply happens later - and then is much worse than it would have been otherwise. in short, the central banks can only con the market for a little while...and are making things worse while doing so. Date: Wed Dec 17 2003 14:28 trotsky (AU-NB) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved 1. the currency should remain unaffected as long as it remains inconvertible. however, if it were convertible, it would no doubt come under pressure on account of the 'hot money' fleeing China. 2. hard to say....but generally, if the US savings rate were to rise, and credit expansion to slow down further ( all sine qua non conditions to end China's boom ) it should be positive for the dollar, as the current account deficit would then no doubt shrink as well. but i'd expect that to happen only from much lower dollar levels, mainly because there's such a huge dollar overhang in the hands of foreign investors. their dumping exercise hasn't yet progressed far enough. 3. i think it would be negative for commodities prices, and the pms could well fall in sympathy at first. then again, gold's special role as the ultimate safe haven asset may come to the fore if there's a perception that the world is in an intractable economic crisis. certainly market participants would expect the CBs to react the way they always do, with the printing press. so there may be an intermediate term correction in the PoG, followed by a 'fear run' in gold. Date: Wed Dec 17 2003 14:10 trotsky (Earl grey@refi boom) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved certainly another refi boom can't be ruled out entirely. but low rates ALONE may not be able to do that. in order for such a boom to eventuate, you also need widespread conviction that house prices will continue to rise at exorbitant rates ( i.e. at rates exceeding the cost of the credit incurred ) . however, we already have a record high in mortgage delinquencies, and a string of record highs in personal bankruptcies - so there are your first ominous cracks. also, recent reports from certain areas show that delinquent mortgage debtors often get LESS for their house when they sell than they owe to the bankster. for years now appraisers have intentionally overestimated the value of properties due to the fee based structure of the business - the higher the loan that is originated, the more money the various go-betweens make, and so they have put pressure on appraisers. but in the end, it's only worth what the market will bear. note also, the incessant talk about a 'housing shortage' - but 'starts' are at an all time high. it's similar to the DRAM shortage in '99 - as soon as a lot of talk about a shortage was in the air, an unprecedented glut developed within months. in US hosuing you have the additional datum that 70% ofhouseholds already pretend to own a home - a saturated market. and residential real estate p/e's ( i.e. price compared to rentals ) are at an ATH. in short, it makes no economic sense whatsover to buy - and house prices are so high as to have become elusive for many first time buyers. so there are many reasons to expect that the boom will run into trouble, regardless of interest rates. incidentally, if rates were the only determinant of a housing boom, Japan's property market would be ablaze. but it has been in a slump lasting 13 years now, with no end in sight yet. can it happen here too? i think it absolutely WILL happen, and no-one can do anything about it - it's too late.

To: orkrious who wrote (3531)	12/17/2003 4:27:53 PM
From: RealMuLan	Respond to of 110194

>China's crack-up boom which is the result of interaction with the US current account deficit<< the chart in this report tells a different story. Private demand is the driving force in China GDP pick up. Message 19604251

To: orkrious who wrote (3531)	12/19/2003 1:19:59 PM
From: ild	Read Replies (1) \| Respond to of 110194

Date: Fri Dec 19 2003 10:51 trotsky (ork@'will the BoJ manage to keep the dollar's) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved decline orderly'. in theory, yes. after all, there is NO LIMIT to the amount of Yen the BoJ can print. as a matter of fact, its printing press has been doing overtime for quite a long period now. however, there are many reasons to suspect that in the end, they will simply be overwhelmed by the developing crisis. at that point, unexpected things might happen. for instance, there is no immutable law of nature that says that Asia's central banks must continue throwing good money after bad in an attempt to keep their new age mercantilism alive. of course, Japan is a VASSAL of the US treasury, first and foremost, and so far, is probably doing as it's told. but the inescable fact is that the central banks can not con the market forever. Japan's incessant printing of Yen in order to buy depreciating dollars is not an isolated event - it has far-reaching consequences for its economy, and indeed other economies in Asia. when the consequences of these actions finally hit home , there may be a change in political leadership. the new guys may be less pliant - and less inclined to add to the IOU mountain. the huge dollar overhang in Japan's hands is in fact a threat to the dollar longer term - simply because one day, someone will come and want to get rid of it. it is one of those very thin threads upon which the entire dollar standard/fiat system hangs. when it snaps, gold would probably trade at stratospheric levels...it's less obvious what stock markets would do. it's possible that they will gain nominally, but not in real terms. historically, stock markets have often risen in response to monetary crises, due to the fact that stocks inter alia represent a claim on productive assets.