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

To: TobagoJack who wrote (99591)	11/10/2008 8:16:12 PM
From: Hawkmoon	Respond to of 110194

Your response in section "A" seems a bit cryptic and non-specific, so it's hard for me to directly respond. But with regard to section "B", there's no doubt that China has been working desperately hard to upgrade the livelihood of their peasant class. And up to know, they were making great progress in financing it strictly via mercantilist policies. They're export driven economy, driven by deliberate strategies aimed at maintain a low exchange rate between their non-convertable currency and those of their customers (primarily the US) has funded most of their efforts. But when they have to spend 1/2 of their accumulated foreign reserves, it's sending a clear signal that they no longer believe they can expect that exports are going to finance that internal development. IOW, they're getting ready for the inevitable protectionist policies of the incoming US administration and a decrease in their markets in America. Also, there are already instances where Chinese managers are just buring their financial books and walking away from their companies and leaving their workers in the lurch with no payroll: latimes.com It's much easier to manage a peasant population where expectations by the masses are relatively low. But once you've shown them how others are living, moved into a city to work in grueling conditions, they start to feel a bit more entitlement. And that makes for a dangerous recipe for urban unrest within China if those expectations are not maintained and delivered upon. now that an obvious crisis is upon all, capital call I concur. But let's face it.. it will not be for the purpose of appeasing the voting masses. It will be to save their butts from a general nationwide uprising that creates competition to the one party system. it is not as if china did not figure on having to develop the rural hinterland or accelerate the satisfaction of 600 years of pent-up demand There's been "pent up demand" within China for centuries. There's been pent up demand for political openess and competition, yet that has been brutally repressed, as at Tianimen square. This is what I believe is motivating the apparachiks in Bejing. They just went through the highlight of their history, the olympics and within 5 months the dreams are being shattered. There will be a lot of questions being asked by the people as to where everything has gone wrong. Just like we're asking where the hell it all went wrong by encouraging non-credit worthy people to own their own homes, then turning traditionally conservative mortgage loan business into a wild and wolly stock market via RMBS, CDOs and CDS. my doubt is regarding whether we are actually in 'deflation', or 'forced sale'. small diffrenece, but ultimately may prove to be important detail. Well, for those holding the assets, or unable to produce and sell goods at the cost of manufacture, it doesn't make much difference. Consumers will not spend on anything but essentials until they are sure that what they buy won't depreciate. And that's the same for gold TJ. If you're facing a "cash crunch", you start selling any luxury items you have at hand. And gold is a luxury until inflationary pressures dictate that it's essential to preserving a storehouse of value. Recall that the price of gold only recently soared as commodities soared. It was a play against the USD as oil prices soared (despite the fact that US demand for oil has leveled off over the past 3 years). give me your e-mail and i will send you a definitive study of gold during periods of inflation and deflation since ancient times. Since 75% of all known gold has been mined since 1910, I wouldn't put much credence in those historical numbers. But there is an interesting anecdote from the 1300's relative to how the arrival of Mansa Musa, and his altuistic manner of giving away vast amounts of gold caused massive inflation in Eygpt: Gold was at a high price in Egypt until they came in that year. The mithqal did not go below 25 dirhams and was generally above, but from that time its value fell and it cheapened in price and has remained cheap till now. The mithqal does not exceed 22 dirhams or less. This has been the state of affairs for about twelve years until this day by reason of the large amount of gold which they brought into Egypt and spent there [...] ” —Chihab Al-Umari[ en.wikipedia.org But like you said, we'll have to wait and see when it's the right time, if at all, to buy gold. Inflation indexed bonds might prove to be more of an indication. Hawk