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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (64685)	6/6/2005 8:19:06 PM
From: carranza2	Read Replies (1) \| Respond to of 74559

It's only a bit more complex than that, Mq. As the governmental budget and trade deficits increase, both have to be financed somehow. Because US savings rate are appalling, the consumer is not fully paying for the consumption orgy we've had in the past few years. Deficits, debts, and pipers have to be paid someday. The US is putting off the inevitable, making the debt even more onerous when it is time to pay. The scheme for financing both is what the economists call Bretton Woods II, an implicit understanding created in which vendor-financing is the key. The Asian countries, principally China, have bought scads and scads of US Treasury bonds but have not converted them into their own currency because doing so would make their currencies rise as against the dollar, killing off or seriously dampening profitable trade which is the basis for the development of their economies. These T-bills are being held as reserves. Interest, of course must be paid on them. There is only a set amount of T-bills any country can purchase without (a) whetting its appetite for them and (b) determining that the internal economic contradictions prevalent in America make them unwise investments. Thus, though a T-bill is universally recognized now as being the best obligation any conservative bondholder would want to have, there is no guarantee that this will remain the case if the enormous budget and trade deficits aren't cured. Vendor finance is the game, Mq., but vendors must be eventually paid. The debts the US is racking up are huge. And we are not making provisions for their payment. A perfect storm. Jay can surely tell us all about it. Me, I plan to somehow profit from it, though I don't yet know how.