Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: russwinter who wrote (3618)	12/18/2003 10:39:24 PM
From: yard_man	Respond to of 110194

bullish for bonds and the dollar ... yet the dollar has continued to slide. Everyone says we can't do a "japan." Maybe we can't, exactly ... but worldwide monetary inflation is beginning to sputter ...

To: russwinter who wrote (3618)	12/19/2003 5:07:40 AM
From: Crimson Ghost	Read Replies (1) \| Respond to of 110194

BUNDESBANK WARNS ON DOLLAR CRASH AND DEBT CRISIS [Source: Bundesbank Monthly Report, Dec. 2003] In its latest monthly report, the German Bundesbank devotes a special chapter to the "stability of the German financial system". Here, the Bundesbank notes that "external geopolitical shocks and strong gyrations on global financial markets" are right now among the biggest risks for the financial system. "The extraordinary current account imbalances, in particular in the US" could lead to "abrupt movements on foreign exchange markets." This risk could even be increased by "plenty of worldwide liquidity", which could "promote the emergence of financial asset price exuberance and an infection of mis-valuations from one market to the other." The situation would further worsen once price inflatio and interest rates start to go up. "In particular in those economies, which show signs of an over-heated real estate market on top of high levels of private indebtedness, a rise of interest rates could have grave negative consequences." Again, the Bundesbank points to the US economy, where the "indebtedness of private households has increased sharply in recent years and in 2002 reached 110% of disposable incomes, an all-time high", while the savings rate has been very low. All of this increases the "financial vulnerability of private households" in the US. Should the real economies be hit by one of the mentioned scenarios, the credit quality of corporations would also be damaged, thereby causing severe problems for the corporate bond markets.