China accuses US of fuelling ‘huge carry trade’

A

ASusilovic

The US Federal Reserve is fuelling “speculative investments” and endangering global recovery through loose monetary policy, a senior Chinese official warned on Sunday just hours before President Barack Obama arrived in China for his first visit.

Liu Mingkang, China’s chief banking regulator, said that the combination of a weak dollar and low interest rates had encouraged a “huge carry trade” that was having a “massive impact on global asset prices”.

The comments came as China and the US sparred at the Asia Pacific Economic Co-operation summit in Singapore over exchange rate policies amid rising international criticism that China’s currency is undervalued.

Mr Liu’s unusually blunt remarks underscore how China – the largest US creditor because of its massive holdings of Treasury bonds – has become a trenchant critic of monetary and fiscal policy in the US.

Since the start of the financial crisis, Chinese officials have issued a number of warnings that the US should not inflate away its mounting debt burden. Before these latest comments, however, Beijing had generally been most critical of US fiscal policy, urging Washington to spend less.

But speaking at a conference in Beijing, Mr Liu said the Fed’s policy of maintaining low interest rates together with the weak dollar posed a threat to the global economic recovery.

“[It] is boosting speculative investment in stock and property markets and will pose new, real and insurmountable risks to the global recovery and particularly to the recovery in emerging markets,” said Mr Liu, who is chairman of the China Banking Regulatory Commission.

“The situation has already encouraged a huge dollar carry trade and had a massive impact on global asset prices,” he added.

http://www.ft.com/cms/s/0/85f1fac2-d1dc-11de-a0f0-00144feabdc0.html?nclick_check=1
 
US has 11 trillion dollar national debt...deflation is not an option in this case. nominal inflation only way to go in the long run. increase money supply. spread the wealth. the US dollar is not weak, the other currencies WERE too weak.

Quote from ASusilovic:

The US Federal Reserve is fuelling “speculative investments” and endangering global recovery through loose monetary policy, a senior Chinese official warned on Sunday just hours before President Barack Obama arrived in China for his first visit.

Liu Mingkang, China’s chief banking regulator, said that the combination of a weak dollar and low interest rates had encouraged a “huge carry trade” that was having a “massive impact on global asset prices”.

The comments came as China and the US sparred at the Asia Pacific Economic Co-operation summit in Singapore over exchange rate policies amid rising international criticism that China’s currency is undervalued.

Mr Liu’s unusually blunt remarks underscore how China – the largest US creditor because of its massive holdings of Treasury bonds – has become a trenchant critic of monetary and fiscal policy in the US.

Since the start of the financial crisis, Chinese officials have issued a number of warnings that the US should not inflate away its mounting debt burden. Before these latest comments, however, Beijing had generally been most critical of US fiscal policy, urging Washington to spend less.

But speaking at a conference in Beijing, Mr Liu said the Fed’s policy of maintaining low interest rates together with the weak dollar posed a threat to the global economic recovery.

“[It] is boosting speculative investment in stock and property markets and will pose new, real and insurmountable risks to the global recovery and particularly to the recovery in emerging markets,” said Mr Liu, who is chairman of the China Banking Regulatory Commission.

“The situation has already encouraged a huge dollar carry trade and had a massive impact on global asset prices,” he added.

http://www.ft.com/cms/s/0/85f1fac2-d1dc-11de-a0f0-00144feabdc0.html?nclick_check=1
More...
 
I'm in Canada, and the US/Canada was in parity in the late 60's and 70's

Quote from marketwizards:

US has 11 trillion dollar national debt...deflation is not an option in this case. nominal inflation only way to go in the long run. increase money supply. spread the wealth. the US dollar is not weak, the other currencies WERE too weak.
More...
 
Quote from ASusilovic:

The US Federal Reserve is fuelling “speculative investments” and endangering global recovery through loose monetary policy, a senior Chinese official warned on Sunday just hours before President Barack Obama arrived in China for his first visit.

Liu Mingkang, China’s chief banking regulator, said that the combination of a weak dollar and low interest rates had encouraged a “huge carry trade” that was having a “massive impact on global asset prices”.

The comments came as China and the US sparred at the Asia Pacific Economic Co-operation summit in Singapore over exchange rate policies amid rising international criticism that China’s currency is undervalued.

Mr Liu’s unusually blunt remarks underscore how China – the largest US creditor because of its massive holdings of Treasury bonds – has become a trenchant critic of monetary and fiscal policy in the US.

Since the start of the financial crisis, Chinese officials have issued a number of warnings that the US should not inflate away its mounting debt burden. Before these latest comments, however, Beijing had generally been most critical of US fiscal policy, urging Washington to spend less.

But speaking at a conference in Beijing, Mr Liu said the Fed’s policy of maintaining low interest rates together with the weak dollar posed a threat to the global economic recovery.

“[It] is boosting speculative investment in stock and property markets and will pose new, real and insurmountable risks to the global recovery and particularly to the recovery in emerging markets,” said Mr Liu, who is chairman of the China Banking Regulatory Commission.

“The situation has already encouraged a huge dollar carry trade and had a massive impact on global asset prices,” he added.

http://www.ft.com/cms/s/0/85f1fac2-d1dc-11de-a0f0-00144feabdc0.html?nclick_check=1
More...


.................................

Liu Mingkang has it right.....very astute....


There is no question that risk is being overpriced when the FED forced rates to 0....

And there is no question what happens to newly priced valuations associated with this forced low rate environment.....

All new prices will fall like a stone in thin air....reaping havoc once again....

All one has to do is note the price change on 20 year debt with a 3% 10 year bond at par....when the rate moves to 8%.....

And if the Chinese hold a complete time out on purchasing US debt....how about 15 to 20% on the long bond....

This is where the surprise is going to come from....

And everyone succumbing to forced pricing of risk will pay a hurrendous tax.....

This move is neither inflation or deflation dependent.....it is US debt policy dependent....

The winners are going to be those with cash....when the inevitable surprise comes....
 
Quote from marketwizards:

US has 11 trillion dollar national debt...deflation is not an option in this case. nominal inflation only way to go in the long run. increase money supply. spread the wealth. the US dollar is not weak, the other currencies WERE too weak.
More...

11 trillion on the balance sheet. another 60-100 off.
 
Those who sit in the glasshouse shouldn't throw with stones. The Chinese seriously need to shut up yapping about distorting markets and fueling bubbles.
 
Quote from makloda:

Those who sit in the glasshouse shouldn't throw with stones. The Chinese seriously need to shut up yapping about distorting markets and fueling bubbles.
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Agreed. Pot, meet Kettle.
 
Quote from makloda:

Those who sit in the glasshouse shouldn't throw with stones. The Chinese seriously need to shut up yapping about distorting markets and fueling bubbles.
More...

.................................

US debt....is not going away....

US debt WILL get bigger....

They ....China.... have the reserves....

US does not equal Japan....

So....the next big move is....????
 
Today, in a similar fashion, the seeds of Depression are sown in China. Economists hail the growth of China, many not realizing that China is undergoing an inflationary credit boom that dwarfs that American one during the roaring ‘20s. According to official government statistics, 2002 Chinese GDP growth was 8%, and 2003 growth was 8.5%, and some analysts believe these numbers to be conservative. According to the People’s Bank of China own web site (http://www.pbc.gov.cn/english/baogaoyutongjishuju/), “Money & Quasi Money Supply” for 2001/01 was 11.89 trillion, for 2002/01 was 15.96 trillion, for 2003/01 was 19.05 trillion, and for 2004/01 was 22.51 trillion yuan. In other words, money supply for 2001, 2002, and 2003 grew respectively 34.2%, 19.3%, and 18.1%. Thus, during the last three years, money supply in China grew approximately three times faster than money supply in the U.S. during the 1920s.

No wonder the Chinese stock market has been booming and the Chinese real estate market is on fire. Just like the U.S. in the 20s, China finances today foreign countries, mostly the U.S., by buying U.S. government bonds with their trade surplus dollars. Just like the Fed’s failed attempts of moral suasion during the 20s, the Chinese government today similarly attempts in vain to curtail growth of credit by providing it only to those industries that need it, that is, only to industries that the government endorses for usually political reasons. Also, for most of the current boom, Chinese consumer prices have been mostly tame and even falling, while prices for raw commodities have been skyrocketing, which perfectly fits the Austrian view that prices of higher-order goods, such as raw materials, should rise relative to prices of lower-order goods, such as consumer goods. This indeed confirms that credit expansion has already been in progress for a considerable time, and that inflation now is in an advanced stage, although it has not yet reached a runaway mode. Thus, economic conditions in China today are strikingly similar to those in America during the 1920s, and the multi-year credit expansion implies that a bust is inevitable.

http://www.financialsense.com/editorials/petrov/2004/0902.html

What was wrong with his analysis from 2004 and why has the bust not yet occured?
 
Quote from Debaser82:

Today, in a similar fashion, the seeds of Depression are sown in China. Economists hail the growth of China, many not realizing that China is undergoing an inflationary credit boom that dwarfs that American one during the roaring ‘20s. According to official government statistics, 2002 Chinese GDP growth was 8%, and 2003 growth was 8.5%, and some analysts believe these numbers to be conservative. According to the People’s Bank of China own web site (http://www.pbc.gov.cn/english/baogaoyutongjishuju/), “Money & Quasi Money Supply” for 2001/01 was 11.89 trillion, for 2002/01 was 15.96 trillion, for 2003/01 was 19.05 trillion, and for 2004/01 was 22.51 trillion yuan. In other words, money supply for 2001, 2002, and 2003 grew respectively 34.2%, 19.3%, and 18.1%. Thus, during the last three years, money supply in China grew approximately three times faster than money supply in the U.S. during the 1920s.

No wonder the Chinese stock market has been booming and the Chinese real estate market is on fire. Just like the U.S. in the 20s, China finances today foreign countries, mostly the U.S., by buying U.S. government bonds with their trade surplus dollars. Just like the Fed’s failed attempts of moral suasion during the 20s, the Chinese government today similarly attempts in vain to curtail growth of credit by providing it only to those industries that need it, that is, only to industries that the government endorses for usually political reasons. Also, for most of the current boom, Chinese consumer prices have been mostly tame and even falling, while prices for raw commodities have been skyrocketing, which perfectly fits the Austrian view that prices of higher-order goods, such as raw materials, should rise relative to prices of lower-order goods, such as consumer goods. This indeed confirms that credit expansion has already been in progress for a considerable time, and that inflation now is in an advanced stage, although it has not yet reached a runaway mode. Thus, economic conditions in China today are strikingly similar to those in America during the 1920s, and the multi-year credit expansion implies that a bust is inevitable.

http://www.financialsense.com/editorials/petrov/2004/0902.html

What was wrong with his analysis from 2004 and why has the bust not yet occured?
More...

.........................................................

One way to view this .....is this...

What is a ....going concern....?

It does not matter about the forecasts and why....

What matters is....is it currently a robust growing....going concern ....?


It is ...until it is not....
 
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