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To: mishedlo who wrote (22075)	11/19/2004 7:53:38 PM
From: SeaViewer	Read Replies (2) \| Respond to of 110194

IMO China knows exactly what it is doing. If it can endure a little inflation to wreck Japan why not? Actually a lot of Japanese manufactures have moved to China in the last few years. A lot of Japanese are now working in China. The problem for China is the rising price in raw material and oil. Most manufactures in China have very low margin, around 4% net. The rising price in raw material and oil has been eating into their profits.

To: mishedlo who wrote (22075)	11/19/2004 8:18:33 PM
From: russwinter	Read Replies (2) \| Respond to of 110194

<Japan massively panics and sells US$> The policy of Japan and China won't be to sell USD, it will instead be to end vendor financing recycling back to the US. They will deemphasis heavy exporting to America for more Clown Bucks. Instead they (especially China and India, and perhaps, even Japan elswehere in pan-Asia or eastern Russia) will seek to employ USD directly in Asia building out domestic electrical systems, bailing out bad banks, putting in major public works systems: sewers, port improvements, resource development, etc, etc. Ending Asian vendor financing also has the effect of raising US interest rates, which is a defacto defense of the currency, which makes the USD the Asians hold go further. At some point speculators and investors may decide to hold USD paying higher rates (5%, 6%, 7%) rather than piling into assets like gold at 470?, 490?, 510?. There's a cry uncle level in there somewhere. Message 20784974 streettracksgoldshares.com At that point we are back into currency as money equilibrium. The trade deficit will then be cured for two reasons: not as much Asian crap to buy, and no easy money to buy it with.

To: mishedlo who wrote (22075)	11/19/2004 11:34:54 PM
From: RealMuLan	Read Replies (2) \| Respond to of 110194

Mish, here is my take. Under the scenario I described won't there be huge pressure on Japan to outsource it all to China? Japan now has really regretted that they neglected China's car market potential several years back when China invited them to set up auto plants in China, and Japan has been paying high price for it (very low market share for Japanese cars in China). So they will make sure they won't miss whatever next consumer product boom in China, maybe it is HDTV, maybe it is something else. So yes, they would like to move some manufacturing jobs to China. But the power shortage in China makes them slow to do that. It will be another 2 years or so before China can have enough supply of energy. China thinks in years. Hell I take that back, I mean decades. If China endures some more inflation while talking (and that is all it might be) more flexibility yadda yadda yadda, might it not really be a pyrrhic victory for YEN lovers if Japan blinks? LOL. But I have to say plenty of Chinese manufactures are like the ones in the US who do not have long-term perspective. But fortunately, most of Chinese decision makers still do have a long term view. Inflation does have some positive effects in China, 1) it can redistribute plenty due wealth back to farmers (for a regular Wang, the inflation in food price is what cut into his pocket, not the energy or raw material price); 2) Many of the middle class people in cities can endure the moderate inflation with no hardship, and so the gov. just needs to increase the minimum living expense for the city poor and the retirement pay. This will shrink some of the gene Index in cities. 3) The increasing income for farmers (largely due to the high inflation rate in food price in cities) attracts more farmers back to their home for farming. This is good for self-sufficient in grain supply, that still is a national strategy for China. IMO China knows exactly what it is doing. If it can endure a little inflation to wreck Japan why not? Yeah, this is an extra bonus of inflation besides what I listed above<g> Already Europe is hurting. Badly. It is bearing the brunt of this currency war. I think Europe may see nothing yet<g> I read someone was predicting that Euro will appreciate to Euro 1.8:US$1. That would be hell for them. If Japan loses, it loses its manufacturing base to China. Mish, I don't think that will happen. Most of manufacturing Japan built in China is for China's domestic consumption. Japanese holds their core technology production to themselves in Japan and never let Chinese touch them. Tell me this. How much will Japan lose if it sells enormous ENORMOUS amounts of US$ for YEN? How Much? After that wrecks Japan, why would anyone want YEN? I think it would be a pyrrhic victory and an immediate short of the YEN. Who would want them AFTER Japan panics? Thus I conclude Japan is not about to give US$ haters their fantasy play of Japan selling $. I agree. Japan would not sell the $ they already bought, but they will buy less and less. The US is playing economic hardball and managed somehow to get interest rates back at (and in DEC with one more hike) above Europe's interest rate. I have not seen anyone comment on that. This seems good for China, since China has more room to raise RMB interest too<g> The US is 100% without a doubt waging economic war on Europe, and from where I sit right now, most likely winning. Europe will be forced to cut prices to compete against the US or cut interest rates (lowering them below the US's) or start outsourcing to China as we have done. Now the US got their revenge on Europe for not supporting them in Iraq<g> Here is another question: If Japan stops buying will Europe start buying? Where is Europe's threshold for pain on a rising currency and loss of exports? I think Europe may already start to buy US$. Finally, ponder this question: If Europe starts buying US$, will the seller be China? WOW, what a way to unload US$ if China really wanted to. In reality, China will probably unload them by buying resources, and mines, etc etc etc. That is what China needs to grow. You are absolutely right.<g> China should sell some US$ they already bought, and use the newly earned US$ to buy some resources and invest in Latin America and Africa. And China may already been doing both as I can see. If China holds pat what can ANYONE do? I think you mean Peg, right? Why SHOULDN'T China hold pat, given their long term outlook on life? That is where they have every other country F'd because they will act in their LONG TERM interest. A bit of inflation now, Who cares? Exactly. now you can think like a Chinese<g> Can they pacify idiots like Snow with token rate hikes and on again, off again on again off again talk of repegs, floating the RMB, and yadda yadda yadda mostly by people in China that do not set policy? Why not? I hope you are right<g> I have said this before and will say it again, the way out of this mess if for a US consumer led recession. Weren’t the previous US recession all consumer led except this latest one? If this recession is fought, next up in deflation just might be Europe. Followed by the US. I call it rolling deflation. Now you get me. How could high energy and raw material price lead to a deflation?

To: mishedlo who wrote (22075)	11/20/2004 6:12:31 PM
From: Jim Willie CB	Read Replies (3) \| Respond to of 110194

Japan must see its yen currency rise a big bunch and the Chinese yuan rise a little less so we see a yen rise relative to the yuan this is a new "Sophie's Choice" for Japan Jyen down ==> exporters protected (status quo) Jyen up ==> energy costs down, Nikkei up, underwater banks avoided avoiding underwater banking system is the HIGHEST priority for Japan therefore, that will lead all policy with foreign investment driving up their Nikkei stocks, we will see the Jyen continue up Chinese demand will continue for Japanese exporters if yuan goes up less than Jyen, Chinese demand will continue for consumer goods and for high-tech industrial equipment Russ reported this data a month ago I kept it the load from the last 6 months has been born by Japan, China, UK, Caribbean collectively, Europe is in retreat USTBond Holdings in $Billions country -- current -- 6 mo ago -- change JAPAN ------ 721.9 ---- 614.5 ---- 107.4 CHINA ------ 172.3 ---- 153.8 ----- 18.5 KOREA ------- 63.4 ----- 57.0 ------ 6.4 TAIWAN ------ 56.4 ----- 55.7 ------ 0.7 HONGKONG ---- 49.4 ----- 53.1 ----- (3.7) SINGAPORE --- 26.0 ----- 25.7 ------ 0.3 THAILAND ---- 14.8 ----- 15.3 ----- (0.5) UK --------- 134.8 ---- 107.0 ----- 27.8 IRELAND ----- 21.7 ----- 15.7 ------ 6.0 CANADA ------ 33.1 ----- 28.3 ------ 4.8 CARIBBEAN --- 91.3 ----- 60.5 ----- 30.8 MEXICO ------ 35.6 ----- 28.5 ------ 7.1 OPEC -------- 43.1 ----- 41.0 ------ 2.1 SWITZERLAND - 48.9 ----- 48.2 ------ 0.7 GERMANY ----- 48.3 ----- 46.0 ------ 2.3 LUXEMBOURG--- 26.4 ----- 27.7 ----- (1.3) ITALY ------- 14.8 ----- 14.9 ----- (0.1) BELGIUM ----- 14.1 ----- 12.9 ------ 1.2 FRANCE ------ 10.2 ----- 12.3 ----- (2.1) SWEDEN ------ 10.1 ----- 10.6 ----- (0.5) SPAIN -------- 9.2 ------ 9.7 ----- (0.5) NETHERLANDS -- 7.3 ----- 12.6 ----- (5.3) TURKEY ------ 16.4 ----- 14.2 ------ 2.2 BRAZIL ------ 16.2 ----- 11.3 ------ 4.9 TOTAL ----- 1839.6 --- 1627.8 ---- 211.8 / jim