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

To: Wyätt Gwyön who wrote (25233)	1/24/2005 8:44:26 PM
From: Tommaso	Read Replies (1) \| Respond to of 110194

>>> the genius who wrote the article was on NPR today calling for USD to go to zero.<< If you expect anyone to take you seriously, do not overstate your point.

To: Wyätt Gwyön who wrote (25233)	1/24/2005 9:33:18 PM
From: regli	Respond to of 110194

> ... it excludes China and Japan, LOL. the genius who wrote the article was on NPR today calling for USD to go to zero. < There are a few important facts stated in the article. The author’s opinions are not very important to me. - In a further worrying sign for the greenback, 47 per cent of reserve managers surveyed said they expected the growth of official reserves to slow to less than 20 per cent over the next four years. Between the end of 2000 and mid-2004, official reserves had increased by 66 per cent. - More than 90 per cent of central bank reserve managers said that the income from reserve management was "important" or "very important". - The 65 central banks that participated control 45 per cent of global official reserves. Individually, they had up to $250bn under management. Obviously the Chinese are decreasing their dollar accumulation. Xinhua Financial Network News: China jumps on dollar-selling bandwagon despite denial – analysts China's pile of foreign exchange grew to over 540 bln usd at the end of October, according to the Ministry of Commerce. This compares with the official 514 bln usd at the end of September and 403.3 bln at the end of last year, excluding 45 bln usd used to bail out two state-owned banks. BNP's Redeker said that the mismatch between the speed at which its foreign reserves are rising, and the slowdown in treasury purchases has convinced the market that China's denial rings hollow. "Their custody holdings aren't in line with their currency reserves, suggesting that they are already restructuring," he said. Interest in the make-up of its massive pile of foreign exchange holdings was triggered by a Chinese news report late last month quoting a member of the People's Bank of China's monetary policy committee as saying that US dollar holdings were being cut. With Japan it is more difficult to tell but public pressure is increasing there according to a number of editorials I have read. In Western Europe the situation is clear and has been for a few years now. I spent 6 months a year in Switzerland and Germany for the past 4 years. Europeans are not at all in favor of investing in dollars for two obvious reasons: deficits and war. In this environment, given the facts stated in the article as well as the U.S. need for external financing, it is very difficult to be an optimist about the dollar. Though I did bet on a short term recovery, I am extremely disappointed how little push the greenback got. I will hold out a bit longer and will reassess after the next rate hike. I seriously doubt the dollar will go to zero; however, it looks to me like we may see an abrupt and significant fall as soon as it becomes clear that the deficits are simply going to increase. If the FED stops to hike and therefore admits to a weak economy it will make things even worse. Financial concerns combined with political antipathy are very dangerous signals to send when one depends on inflows of more than $2 billion a day.