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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 (6826)	2/3/2004 12:25:05 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

<As long as the Carry trade can make money borrowing at 1% and lending at 4% they will continue to do so. It is probably one of the biggest sources of bank profits.> The carry trade is also major component of the profit of speculators against the dollar. Borrow USD at one percent and pile into commodities with shortages, or currencies with decent interest rates still. If you remove the later (Europe, the last stand against the crack-up boom) then they will shift all their attention towards finding ways of exploiting the crack-up boom. That would be more finding assets with "real value" using the Mises term. Probably would be buying gold, more nickel, more copper, more energy, more food stuffs, hoarding more commodities, and pushing prices still higher. If I was running monetary policy, I'd be asking the question of how my negative real rate monetary policy (and yeah, I know I'm not calling the shots, what's your point? still a question you have to ask and answer) is now further infecting the world by encouraging such crack-up boom trading.