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

To: glenn_a who wrote (22197)	11/21/2004 3:57:42 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

<Personally, I expect a negotiated resolution of this situation, of which Greenspan foreshadowed this past Friday - i.e. moderately rising US interest rates for a period, a lower dollar on a secular basis particularly vis-a-vis Asia, a gradual move away from the US$ as the sole global reserve currency, and one hell of an ugly year in asset markets in 2005 as interest rates begin to normalize.> I also believe this is what they are attempting, but it won't be successfully "resolved". I feel China and pan-Asia will try and restructure away from US centric profitless exporting and towards domestic (pan-Asian including Russia, which the Japanese will help finance) investment in major public works, transportation, social services, banking shore ups, resource development and maximization. They will need to use and protect their Clown Bucks and Old Maid Cards to pay for this. UST bond holdings at bottom of this post, there are also agencies: Message 20787163 They will move quickly on this too. The other outcome is where I agree with Misheldo (minus the deflationary outcome). Even the nominal rate increases from Asian recycling starvation, will start to have a serious effect on the US housing and credit bubble, and put additional pressure on the USD, then requiring higher rates to battle inflation caused by the weak USD. This weakness then puts more pressure to defend the USD, creating a vicious feedback loop. To trade well in 05 will require a conceptualization of this process. <Really, to my mind this addresses the question of what portion of economic value should be returned to labor (in the form of wages), capital (in the form of profit or interest), government (in the form of taxes to pay for social benefits) or the consumer (in the form of lower prices).> October 9 issue (only have a paper copy) of "The Economist" has an article entitled "Help Wanted" that discusses how this is playing out with labor shortages in China. Discusses not just a rejection of poor wages, but dangerous working conditions, failure to provide decent living quarters (permanent urban settlement provisions) and medical care. More and more Chinese workers are telling employers "to get lost".