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

To: Claude Cormier who wrote (43460)	10/14/2005 11:06:48 AM
From: carranza2	Respond to of 110194

It takes an outsider to see clearly what we cannot see. Thanks for bringing the article here. Although it is a bit shrill, I think it sets forth a lot of very large truths quite succinctly.

To: Claude Cormier who wrote (43460)	10/14/2005 1:42:29 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

To make things simple, let us just examine some key economic issues raised by some economists: What if the dollar plummets? Do stocks follow? How about pensions? What if interest rates soar? How would all the new homeowners, who stretched to buy with adjustable and interest-only loans, cover their mortgages? How would consumers with record credit-card debt make their payments? Would they stop buying? Stop taking vacations? What will happen if they go bankrupt? New rules going into effect later this year make it harder on such debtors. How would a government, which depends on the taxes of a strong economy to operate, keep all its promises? To us, the good news is that when the country is in deep trouble, the US will not have the energy to pick on China. Even when it is necessary to start another war to divert people's attention, it would pick one much smaller in size and weaker in strength, like Iran. This will provide a much more amicable environment for China to make good use of its "period of strategic opportunity" till 2020 for the country to pass through a turbulent zone between per capita income of US$1,000-3,000. But in the short term, now the US not only sneezes, and all symptoms indicate that it is going to suffer from a SARS-like trouble, the whole world should take extra precaution not to get infected. One thing is for sure, some time in the not too distant future, every central bank and institutional investor is going to dump US dollar and US Treasury bonds. Once, when a country like South Korea dumps the dollar, the still unsold US Treasuries in the asset column of Asian central banks - US$2,000 billion according to some estimates - will collapse. The cheapened dollar will cause a sudden jump in the US inflation, which forces the Fed to jack up interest rates. A giant leap in inflation will cause a severe recession, or perhaps a depression, in the US. These countries' exports to America will dry up, which in turn will spread the global economic downturn like wildfire. After the stampede, everybody is going to get hurt, not least the central bank of China, and the Hong Kong Monetary Authority, which are major US creditors and with the US as their number one export market. The recent currency reform of the RMB is most timely, and it is about time we should do something about the Hong Kong dollar. At the same time, China should make extra efforts to rekindle internal consumption, and diversify its market really fast before the great US bubble bursts. ==================================================== Why ask questions you say you are going to answer and then not do it? Did he answer any question he asked? Exactly which economic issues did he address? Instead he launched into a tirade about what will happen if South Korea dumps the US dollar, and then with no explanation as to what would cause that, just assumes it will happen. ie. "One thing is for sure, some time in the not too distant future, every central bank and institutional investor is going to dump US dollar and US Treasury bonds." It is an extremely poor article, all hype, no analysis that does not even address the issues and questions he says he will address! One thing for sure is that clown laid zero basis for the one thing he claims is "sure" to happen. It is a piss poor article that does not even really warrant discussion IMO. Mish

To: Claude Cormier who wrote (43460)	10/14/2005 1:47:19 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

Dear Mish, You have been a proponent of the global recession, debt repudation, strong dollar thesis... and deflation If I have understand what you have posted in recent months. BTW - I have been bullish on the dollar only in the context of the US raising rates. Once that stops or is about to stop, the US$ likely takes a nasty spill. That said, it is possible the dollar has actually bottomed. I do not see a collapse of the dollar by another 50% or whatever as some dollar bears do, the reason being I expect other countries to be fighting the global slowdown with their printing presses as well. Mish