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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Rational who wrote (20201)	1/3/2005 12:41:30 AM
From: mishedlo	Respond to of 116555

Everyone talks about excessive borrowing. There is an equal amount lent as borrowed. No one talks of this excessive lending, starting with Central banks that fill the pockets of bankers (not retained but paid out as bonus and raises), builders (not retained in the coffers of the companies), and all others, while loading the debt on the rest of the society through a propaganda of historically low rates. Plenty of people talk about it. I do all the time. But Russ has ane entire board devoted to it "The Epic American CREDIT and bond bubble laboratory". We also have the "CreditBubble Bulletin" come out weekly. If you mean mainstream media, then you are correct, but of course they do not talk much about the debt bubble either. The excessive money will have to shrink. Part of it will melt down due to house prices collapsing in certain areas. The rest will sink due to bond prices falling dramatically. Only good stocks will outperform everything else. I am not sure how to find a "good stock" but otherwise I pretty much agree. An imploding housing market will indeed destroy money. Corporate bonds, mumnicipal bonds, and junk bonds should all get hit. I do not think treasuries get hit. Not for a while anyway. Mish

To: Rational who wrote (20201)	1/3/2005 2:58:51 AM
From: zebra4o1	Respond to of 116555

Financial Tsunami Has a nice ring to it - you might have just coined the phrase of the year for 2005.

To: Rational who wrote (20201)	1/4/2005 1:05:59 AM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

>>Chinese banking sector may meltdown<< Don't hold your breath otherwise you might be drown<g>. The financial indicators of Chinese state banks have actually improved in the last couple of months, believe it or not<g>. And Zhou Xiao Chuan (the head of PBoC) will try everything in his power (he has plenty) to stop the bad/non-perform debt from growing further because he knows full well that would mean financial crisis. >>CHINA will see a lot of social instability due to the brewing resentment of "have-nots" about "haves." The disparity has been artificially accentuated by a low yuan value (vis-à-vis dollar/euro/yen) which creates vast amounts of fiat money by government decree in the accounts of a few private individuals (exporters, expatriates and bribe-collecting government functionaries). << Most of people in the West would agree with you. But most of Chinese now are actually more optimistic in terms of reducing the gap bet. haves and have-nots because Hu-Wen now have started to deal with the issue (unlike Jiang-Zhu who ignored the issue). Social instability will be reduced somewhat in 2005. More than 2/3 of those 50,000 demonstrations/strikes (most of them were small-scale) in 2003/2004 were due to the delay of salary payment. Many local governments. as well as the central gov. have made regulations, and taken a lot of efforts to reduce or even eliminate this kind of practice. Just a couple of months ago, Hu-Wen sent out a notice and set the bar that all kinds of strikes, demonstrations… belong to the interior conflicts within Chinese people, so no harsh crackdown should be allowed. >>The current President of CHINA has already visualized the simmering upheaval, but he cannot do much other than telling these private account holders, "sorry."<< Totally unfounded and absurd assumptions! Majority of people in urban areas have deposit. A regular Chinese, as long as they have a job, save 30-40% of their pay in the bank. So don’t you ever count on Chinese gov. could default on Chinese themselves. Corrupted officials dare not even put the money in state banks. They either keep cash or transfer them to Cayman Island or even Swiss banks. >> I believe he is a smart guy and will default on the private accounts fattened by the government. << No offense, but I think you are paranoid<g>. >>There will be massive outflow of capital from CHINA. Smart Chinese and Hong Kong residents therefore do not hold much in local currencies but real assets.<< Who care? As long as most of Chinese in Mainland hold much RMB, that will be good enough. Do you know that in many Southeastern nations, RMB can be used the way US$ used? Do you know even if in London or Paris, some retail stores are willing to take RMB? As a matter of fact, more and more Chinese exchange their worthless US$ into RMB in recent months. Haven’t you read those news?