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

To: mishedlo who wrote (37023)	7/26/2005 6:14:52 PM
From: futures speculator	Read Replies (1) \| Respond to of 110194

Those interest rates differentials are going to support the US$ and I have been saying that ever since we saw the cover of Newsweek "The incredible Shrinking dollar". Mish, I have read your blog and know your view on the dollar. Just WHAT do you think is driving the dollar nowadays? It's 1/ the tax-free (4% vs 35% normally) corporate profit repatriation, from 3rd countries into US. I wrote in a prior message that this is probably the % of USD debasement in the future. And 2/ the "forced" (for various reasons) buying of dollars by Japan and China (and lately Carribean pirates) Look at the Treasury auctions. Today 64% of 20yr TIPS auction was sold to foreign central banks. THAT'S 2/3rds of the issuance. Not to you, not to me, not to some pension fund domestic or foreign. Do you think "normal profit-motivated investors" would have taken up the difference? Sure, but at what rates? "Savings glut" some say? LOL! China prints out of thin air HALF of its RMB used to buy USD. Japan created the biggest amount of counterfeit money ever created in history and bought USDs in 1Q2004. And they're telling you inflation is running at 2.5% Japan now holds $850bn, China $720bn. What will they do with them? Japan I don't know, maybe they consider it a "tribute" tax to the US. China it's hard to say, in my opinion they'll try to buy hard things (like oil or copper) around the world. Also stocks, which is why the asset prices are going skyhigh. THAT'S THE PROBLEM OF USING A FIAT CURRENCY BOTH FOR PAYMENT AND AS A STORE OF WEALTH. Interest rate differentials are also a factor, but NOT the only one. GBP has 4.75% and USD 3.25%. Why is then GBP falling? (I mean it was falling hard long before the terror attacks)