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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (69556)	9/26/2007 6:15:45 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

OUTSIDE THE BOX: Precarious Dollar Scaring Saudi Investors optionetics.com The genuine concern was made clear recently when the Saudi Central Bank indicated that they will take specific measures to stop the very large pool of money flowing into the country. This is because they are facing an inflationary threat and have indicated they do not want to adopt a U.S. interest rate policy that could very well lead to a recessionary environment. ... In fact, this concern has started to manifest itself—the latest U.S. government data on foreign holdings indicated a decline in purchases of U.S. bonds from $97 billion to just $19 billion in the month of July, with outright net sales of U.S. Treasuries. This decline of inflows could actually accelerate if the yield gap between the U.S. and the rest of our global trading partners continues to narrow, which would have adverse ramifications in terms of garnering foreign capital inflows needed to amortize the current account deficit. The reality is that investors from other nations have slowly but surely been pulling out of the long-term American debt markets, which leaves the U.S. dollar dependent on short-term funding. Foreign investors account for over 25 percent of America’s credit and short-term paper markets over the past 24 months. One of the biggest obstacles for the dollar is that declining U.S. rates will at some point trigger a reversal yen "carry trade," prompting huge flows from the United States back to Japan.