China Diversifying 1 Trillion USD Worth of Currency Reserves

I say they will tell stories of VIGILANCE and that's about all.

Think again what that would do to for housing, construction, lending, manufacturing and autos if they raised rates. We keep adding a sector or two each month as it is. How confident of your income would you be to go buy a house, car, or boat if they started raising again? Multiply that effect by 400 million.

Why did you think they had stopped raising them? It wasn't because they were very high. It was because it would cause a much worse situation.

What happens if they raise rates to mop up liquidity?

1. Recession for sure. We are teetering now. It would push the economy over the edge, just like a tax hike would.
2. Big 3 all bankrupt, employees and retirees left with nothing, dumped on government for bailout.
3. Huge increase in foreclosures and bankruptcies as people lose jobs. 1/3 of the nation lives paycheck to paycheck now
4. Dramatic decline in home values
5. Credit meltdown caused by deflation in asset values
6. Huge budget deficit as everyone falls onto safety net
7. Dollar confidence crisis followed by loss of reserve currency status, and hyper-inflation on prices of imported goods and materials.

I think it would get a new word

CRISIS
 
Quote from thriftybob:

I say they will tell stories of VIGILANCE and that's about all.

Think again what that would do to for housing, construction, lending, manufacturing and autos if they raised rates. We keep adding a sector or two each month as it is. How confident of your income would you be to go buy a house, car, or boat if they started raising again? Multiply that effect by 400 million.

Why did you think they had stopped raising them? It wasn't because they were very high. It was because it would cause a much worse situation.

What happens if they raise rates to mop up liquidity?

1. Recession for sure. We are teetering now. It would push the economy over the edge, just like a tax hike would.
2. Big 3 all bankrupt, employees and retirees left with nothing, dumped on government for bailout.
3. Huge increase in foreclosures and bankruptcies as people lose jobs. 1/3 of the nation lives paycheck to paycheck now
4. Dramatic decline in home values
5. Credit meltdown caused by deflation in asset values
6. Huge budget deficit as everyone falls onto safety net
7. Dollar confidence crisis followed by loss of reserve currency status, and hyper-inflation on prices of imported goods and materials.

I think it would get a new word

CRISIS
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you are brainwashed.
2., 5. and 7. is lunecy, 3. and 6. is nonsense and 1. is highly unlikely....
 
Quote from Bitstream:

i dont think the bankers will allow gold to rise much, but yeah the $ is utterly fucked...and by design. buy long dated $puts u'll be protecting your wealth.
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I second that
 
Quote from dhpar:

you are brainwashed.
2., 5. and 7. is lunecy, 3. and 6. is nonsense and 1. is highly unlikely....
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3 is relative...too many rely on a paycheck to get them by (if that in some cases) and any relative financial crisis will push them over the edge...on top of that very little if any is saved up because none can be.

It's not living; it's existing...
 
Quote from MattF:

3 is relative...too many rely on a paycheck to get them by (if that in some cases) and any relative financial crisis will push them over the edge...on top of that very little if any is saved up because none can be.

It's not living; it's existing...
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i was talking more in terms of hike impact on overall economy - rather than just a few jobs in NEW or LEND.
I know <i>thriftybob</i> hates inflation as I do so I was a bit surprised that he sees hike as a bad thing....
 
The only thing I hate worse than 3 or 4% inflation is a recession or depression.

With debt levels sky high, both public and private I don't see how we can make it thru a recession without it cascading out of control, because if you look, you'll find the government has always borrowed and spent to get us out of recessions. That option is only available if these other countries will lend us additional money to do it. Once the dollar starts dropping significantly, which is what will happen in a recession, these other countries won't want to lend us massive additional amounts to bail us out. Not only that, you have baby boomer retirement knocking at the door.

That is why they MUST engineer a "slowdown" or "soft landing" instead.
 
no - they do not need to engineer anything. The economy is still going quite well. Of course there are weak spots but they need to rot away anyway.
Look at the fundamental picture of the economy and you can hardly say that it has got worse in the past year or so. Both external and internal balance is improving, rates that matter are low, unemployment is low, consumption strong, oil prices lower, house prices about the same, credit spreads tighter, equity higher, china/india strong, europe stronger etc etc...
I really believe that the way into hell goes through fed starting to bend the first pressure they encounter - that would sink dollar, reinflate the economy in the longer term, hurt equities and decrease the real wealth of consumers...
That said I took some chips off the table recently but largely because I expected panic prognosis like yours will start to hit wires every other minute....
 
'Paycheck to paycheck.'

I love this phraseology.

The reality is Americans have a negative savings rate.

The bulk of the savings individual Americans who do have a positive net worth resides in their home equity.

So, yes - if home values suffer a steep absolute or relative decline (relative to inflation) over the next series of years, many (not all) people will see some, much or even all of their savings wiped out.

It's not hyperbole to suggest this.

How many people will really retire with intact pensions and employer provided medical insurance in this nation?

For that matter, how many retirees who have these benefits now will retain them (think IBM or United Airlines)?


The home is where the savings is, on balance in the U.S. Moreover, the home is where incremental consumer spending has originated from for many, many Americans, by way of HELOC extraction. Wage gains relative to inflations haven't been enough to sustain the brisk consumer spending of the last 5 years.

If we see substantial declines in home values, as it looks like we may (as this process has already begun), America will have a serious problem caused by significant reduction in consumer spending.
 
Quote from Daal:

whats the advantage over forex, currency futures or etfs
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the same advantage any other vanilla option has over outright purchase of stock. so it's up to your risk parameters...for once u dont have to pay margin/interests rates and there's less risk capital commitment.
 
What part of basic Econ do you guys not understand?

Guess what happens to export economies when Yanks are not buying?

China and Japan, not to mention the rest of SE Asia, will buy dollars until the End of days. Because they HAVE TO!

Guess what happens when China can't grow at 10% per year to support the absurd growth rate of youngsters entering the workforce?

Not to mention the 60% of them that earn less than 2 bucks per day.
 
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