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

To: russwinter who wrote (26350)	2/13/2005 9:17:35 PM
From: mishedlo	Read Replies (3) \| Respond to of 110194

The public warnings have been been coming from smaller Asian CBs. Thailand has indicated it intends to cut USD holdings from 80 to 50%. Russia has issued similar statements. Malaysia and Singapore are rumored to be reducing dollar portfolios. Korea, Taiwan, Hong Kong hold $500 billion, and Singapore, Malaysia, Thailand, and India collectively hold over $350 billion. Roubini refers to these smaller CB actions as "free riders", using the monetizing and anchoring of the larger Wizards to unload Old Maid Cards. It makes perfect sense, and it's not insignificant. All the tired global monetary regimes of the past failed because of a pick up in free riding and players going for seats in the game of musical chairs. Let's assume that Thailand Russia Malaysia India Taiwan all cut their US$ reserves. Hell for that matter lets throw in Europe, Japan, and China for good measure. Everyone cuts their US$ reserves and everyone plows into what? Euros? What will they do with those then. Buy Euro bonds forcing the interest rate on those to zero? Of course gold bugs will tell you everyone will buy gold but we sure see little sign of that happening. Tell me who the counter party is please. Is the US buying dollars? LOL - Not really possible Is their no counter party? - Not possible either Who is that counterparty then and what do they do with all the US$ they are holding? Suppose you say they buy assets with them like oil. OK then what does Saudi Arabia do with the US$ then. Ultimately tell me how these US$ are gotten rid of and where they go if in the ideal world of US$ bears, virtually no one holds any dollars. If there is a counter party holding US$ then what does that person do with them? Of course someone could attempt to corner the copper market, but then what? What does someone do with all that copper when they have a supply that vastly exceeds demand. Here is the problem: There is a huge oversupply of US$ that no one can put to productive use. Mish