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

To: mishedlo who wrote (6673)	2/1/2004 1:51:55 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

<We disagree on the sustainability of that.> We probably don't disagree much on the sustainability of it (in fact I'm still not sure of the extent of the blowoff, depends on CB reaction), but more so on the impact, and what is means in the MEANTIME. You think it's a non-event, I think anything but. <mammoth job losses here to boot> Where's you evidence of this? I track this daily, and see a stagnant job market at this point, not "mammoth losses". <No amount of interest rate hikes here will stop Chinese consumption of commodities.> You choice of the words "will stop" is interesting too. That's not my argument, and would challenge you to show where it was. But back to task, it is my belief that higher rates (as the BOE is now starting) will work to cool off US excessive credit based consumption (that is the cause of excessive Chinese/Asian input demand) and by extension the commodity and input goods market. It will also have a cooling effect on the various carry trades into commodities, currencies, and debt. Of course the other way for it to happen is price rationing, especially on subsistence items like food and energy. I suspect the later (a world wide subsistence crisis) will happen first, and cause an inflation scare which will then have the defacto effect of repricing credit higher, with or without the Fed. I guess that's the preferred course you think they should (or will?) follow? Another wild card is for the Chinese to now reprice their currency higher. That just prolongs the subsistence inflation/crisis for the US because it makes it cheaper and easier for the Chinese to buy and consume energy (still priced in USD). I can see the US getting heavily leaned on by this Chinese strategy, and it would be well deserved. It would also benefit Japan to do so in a commodity/energy crack up boom scenario. The goal would then be to have strong currencies so as to be in a position to best afford scace goods and commodities, especially of the subsistence variety.