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

To: NOW who wrote (62236)	5/30/2006 10:00:53 PM
From: sammy™ -_-	Read Replies (2) \| Respond to of 110194

The entire system is jeopardized if Japan goes ahead and raises interest rates, thus shutting down the yen carry trade, which has fueled global hyperinflation and speculative bubbles for the past several years. The carry trade is a near limitless cash machine for banks and hedge funds. They can borrow at near zero interest rates in Japan, or 1% in Switzerland, to relend anywhere in the world that offers higher yields. Look at downgraded Iceland's sovereign debt. Interest rates in Iceland are 10.75%. The Bank of Japan has announced plans to abandon the zero interest rate policy. This has triggered the panic. David Bloom of HSBC warned, "The carry trade has pervaded every single instrument imaginable, credit spreads, bond spreads; everything is poisoned. It's going to come to an end later this year and it's going to be ugly, even if we haven't reached the shake-out just yet. People have a panglossian belief in the march of global capitalism but that will change as soon as attention switches back to US financial imbalances.