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

To: benwood who wrote (64631)	6/26/2006 10:56:18 PM
From: Larry S.	Read Replies (2) \| Respond to of 110194

benwood, It make perfect sense. I do understand that the deficit leaves dollars in the hands of foreigners that buy for lack of anything better to do with them. I think part of what bothers me is the lack of anything better to do with them idea. They must know that they are buying a asset that must fall in value at some point. I understand the motivation of those who need to hold the dollar up so that we will keep buying. But they aren't the only ones buying. I think I'm beginning to see the answer to my original question which I think can be stated as why does running massive current account and trade deficits attract the foreign capital? I think it is word "attract" that troubles me. Your comments and those of ild both make it clear that the deficit puts dollars in the hands of foreigners that need a place to go and I can see that the deficit, in this sense, provides motivation than would not otherwise exist for foreigners to buy treasuries. I have always understood that much but I never thought of it as attracting capital. I think I going to sleep on this thought and get back to it tomorrow evening. Thank you again for your help. Larry

To: benwood who wrote (64631)	6/26/2006 10:56:47 PM
From: John Vosilla	Read Replies (1) \| Respond to of 110194

Haven't we seen this before several times? Usually the imbalances unwind in year 6 or 7 of the decade cycle after a period of speculation starting in year two of the decade in a certain asset class and commodities like steel also in a bubble of their own. What happens this time to resources and interest rates with the US consumer so overleveraged while Chindia is in a growth mode to middle class lifestyle that results in a current shortage of 50M new homes along with a new insatiable appetite for US consumerism?