Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Larry S. who wrote (64633)	6/26/2006 11:47:57 PM
From: basho	Read Replies (2) \| Respond to of 110194

Larry, I think you're absolutely right to question the word "attract". Using it in that context in effect reverses the cause and effect equation. It's a lazy shorthand in common usage which in my view generates far more confusion than clarity. As I see it, the primary driver of the whole unhealthy cycle is "excess" US demand generated by a combination of debt fueled consumer spending far above historic norms and ongoing US fiscal deficits. The resulting external deficit must of course be funded by foreigners or it couldn't arise in the first place. In other words, if their risk perception of the US shifted enough to severely curtail their willingness to recycle those deficits, then they wouldn't be able to be generated in the first place. America would quite simply have to curtail its hunger for imports and/or generate more exports.

To: Larry S. who wrote (64633)	6/27/2006 12:57:38 AM
From: benwood	Read Replies (1) \| Respond to of 110194

Larry, my thought on the "why" which has been bounced around here no doubt several times is that China would like to eat our lunch, much as we ate England's lunch when a similar dynamic was set up a hundred fifty or so years ago. The longer they keep the charade going (passing around the Old Maid Cards as Russ puts it) the longer their budding manufacturing industry has to mature. I personally think they'd like to reach a juncture where their automotive exports to the US have a chance to get to the 2nd generation (maybe 10 years from now) so that the debt saddled American consumer helps them ramp up demand and work out the kinks, ala Korea & Kia (et al) in the past 10-15 years. At that time, I think they won't care if the US implodes into a sink hole ala Argentina. If we implode now, however (say, this Friday), then they will have (I believe) a huge problem on their hands -- lots of industries just getting going, oversupply in some commodity industries but too immature in higher order manufacturing like autos. Because other markets aren't ready to take the place of the US consumer/addict, there will be an immense hole in global demand and the deflationary scenario expected by some will unfold with no ace in the hole to stop it. So, in short, I believe they are simply crossing their fingers and toes that nothing unravels yet... the longer it holds together, the better off they will be long term. When I say "they" I mean China. Japan (and Korea) of course has propped up our deficit too and doesn't have a lot to gain except global manufacturing domination <g> They value market share over profits, assuming (correctly, usually) that eventually they will own the market. Take a look at Toyota and Honda now... Long term view is destroying the short term nincompoop management at GM & Ford. When I think about it, I believe that ultimately, this scenario is condoned by the US Gov't in order to spend way beyond their means. They get to gallivant around the globe blowing up this and that, expanding their power magnificently, all enabled because of the trade deficit. If it weren't for the easy Al ATMs from various bubbles and the huge push into debt (for consumers), interest rates would have gone up to attract the necessary savings and the economy would have cooled considerably and the climate to allow reckless overspending and expansion by the Federal Gov't would have been resisted. But ultimately, their insane policies will lead to lower revenue, or higher tax rates and lower growth, or both. Real wages have stagnated mightily, and with high paying manufacturing jobs being exported and replaced with shopping... it ain't gonna be pretty, methinks. Sorry to be so long winded... must be the heat wave in Seattle affecting my brain. --Ben