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

To: shades who wrote (54256)	2/19/2006 3:59:25 PM
From: bond_bubble	Read Replies (2) \| Respond to of 110194

The treasury dept is unwilling (or not knowing?) to tell us where the foreigners got the extra dollar to purchase USTs. That is the key - that will be driving the interest rates. I thought they were going to stop reporting M3? Bernanke said it costs the banks too much to track that useless figure eh? This would mean foreigners are leveraging in the repo market - which is where Fed releases most of the money. So that would mean more leveraging not supported by asset earned in USD (like asset earned in trade deficit). A ponzi scheme where borrowing beyond the income support. Henry Liu suggested, paying all these leverages with money will cause such a high inflation (bond when unfrozen with cash to bailout will release so much cash it will cause high inflation. Currently, all the credit (people wrongly referring it to as money printing) are frozen as bonds and hence it is not causing so much inflation as the credit should). It is to avoid this inflation, Fed will not bailout these leveraged players. Instead, in the financial panic that will happen, Fed will raise interest rates and allow the credits to extinguish. They might provide liquidity but no one will trust Fed at that point onwards as Fed would have failed them once.... I see banks going bankrupt even though there might not be run on the deposits.... This is my opinion. I think, hyperinflationists are betting that Fed will bail these leveraged players (by converting their bonds at high price into cash profit) and so USD will fall etc. But USD fall will not cause exports to rise as there is not much industry in US (currently utilities comprise about 20% of manufacturing - how can US export electricity, water etcc?). Rather, if US then needs to build industries to export goods, it will need the resources to build the industries (just as Asia is trying to do this now). Such industries can be build in US ONLY if USD is valued decently - else it will be expensive to build industries (this is where I believe PPI will be so high to build goods in US). To make it easy on industries to build and hire (as the panic wwill cause so much layoffs), Fed will raise rates and will allow deflation come what may - just to create employment. If not, employment will tank and simultaneously you will have high inflation and falling assets....