the upcoming fed move .. Whatever happened to INFLATION?

Quote from The Kin2:

In other words, the Chinese economy is undiversified, and a trillion of dollars in goods has been exhanged for a rapidly depreciating asset: U.S. T Bills and Currency.

This is even better than Europeans buying Manhattan from the Indians.

China cannot sell even if they wanted too. Who would buy?
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They sold 25B of notes/bonds (or something like that, according to the tics report) in august and the bond market went up. Hedge funds gladly bought from them in their flight from equity trade.

In 2 yrs China could get entirely out of US assets without hurting their bottom line too much.

And remember, going forward now, the EU is a bigger trade partner to China than the US, so I don't know how worthwhile your points are.

They'll make another few hundred billion a yr from the rest of the world and have no issue.
 
For China it wont all be down hill racing.

All stock markets correct or crash.

Theres will also, and boy will that rock the boat. China must know that capitalism does have things called recessions. I guess socialism did as well.
 
Quote from scriabinop23:

They sold 25B of notes/bonds (or something like that, according to the tics report) in august and the bond market went up. Hedge funds gladly bought from them in their flight from equity trade.
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Proof?

If you can provide any, I'll humble concede my points.
 
Quote from scriabinop23:

I find it very fascinating the entire market is absolutely gung ho that a rate cut WILL occur, mainly on the basis the economy is slowing and credit markets are falling into disarray again.

So tell me guys -- am I the most naive person in the room thinking the markets are a little too gung ho on the possibilities of a rate cut when we have $100 oil, USDX at all time lows (hey look AUDUSD just hit .91 !!!), and plenty of good companies actually releasing GREAT earnings?

The investment banks, banks, etc who've made a killing the past few years off this mortgage boom are finally giving back a portion or all of their windfall profits from the housing runup. Fine.

And yes, according to the bears the consumer is somewhat tapped (well, not according to bestbuy or Microsoft earnings).

Why doesn't the fed just wire the I-banks and banks funds as a goodwill and get this over with.

We don't need rate cuts here. They'll cut and oil will hit $110 at this rate, USDX down another few percent, etc.. Imagine when China is tired of seeing their dollar assets deflate. Watch what happens when China strengthens their currency and people go shopping at Walmart ! Doesn't the fed realize the deep shit they'll be in if they cut rates here, and oil keeps up price into a season where crack spreads are high? ($5.00/gal gasoline here we come)

$5.00 gasoline is probably like an effective 2%+ rate hike. It'll hurt the consumer (and the rest of the foodchain) much more than a lousy 25bp will help business.

The whole thing honestly pisses me off now. I thought the 50bp cut was good to sooth the markets amidst a crisis. But continued acceleration of this loose money policy is the same as Bush committing more troops to Iraq; basically following bad decisions with a double down. Ie: going into Afghanistan to wipe Bin Laden and the Taliban in 01 was a move hard to argue with. Going into Iraq, not quite. Following with more rate cuts is like going into Iraq.

Can't we just acknowledge I-banks are going to lose billions more, some might even go out of business (god forbid!!!), and take the pain on the rest of this housing boom deflation ?

Someone please give me Ben Bernanke's email address.

Either the market is reading Bernanke very very wrong, or we are all fucked.
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Not only will they cut, they will cut aggressively!
It's in the cards..
They know about the 'taxes' on the economy - the high oil, the high food prices...
But they can do whatever they want....
They can cut to 2.75...don't think they won't!

The Fed always overextends...

The change in policy last month was just that...a change in policy...trade it like it is...
 
Quote from PohPoh:

Not only will they cut, they will cut aggressively!
It's in the cards..
They know about the 'taxes' on the economy - the high oil, the high food prices...
But they can do whatever they want....
They can cut to 2.75...don't think they won't!

The Fed always overextends...

The change in policy last month was just that...a change in policy...trade it like it is...
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I agree with your point 'trade it like it is'... but overextended policy has to stop at some point..

when China stop buying USD (if they are smart enough) like the Japs did in 2004, who will pick up the tabs??
 
China will decouple even further if we get another rate cut.

This isn't some economic 'surprise attack' thats caught China with their pants down.

They are well aware and monitoring closely.

Cheap crap from China is Bernackes last card.

Once thats done, its over.

Who's going to finance federal debt at 5% when inflation is running at 15%?

Think about it.

The real estate bubble was created by a cheap dollar. Now an even cheaper dollar is going to save us?

That flies in the face of every economic law known to man. It really isn't different this time.

The music might play a little longer, but the USD is going to shit. That means prices at home are on the rise (don't believe the hype).

The more we deflate, the faster we inflate. The more inflation, the more capital flight from T-Bills = increase in bond rates, and soon, domestic rates.

What happens then? Thats right. Tankerino.

Thats just supply side.

Demand side - more inflation means the American consumer has less to spend on forerign and domestic goods.

When the American consumer buy less in absolute terms, the global economy slooooooows dowwwwwwwwwn.

The average American gets screwed too. 10% of their check goes to finance Bernackes recklessness.

Those on fixed income and the poor get hit the hardest.

At some point, Americans will wake up to the massive price inflation and start demanding wage hikes. Good luck with that.

Thats called the inflationary trap.

Recession with increasing prices.

hahah. You guys think you got it all figured out.
 
Quote from scriabinop23:

http://www.treas.gov/tic/snetus.txt

I stand corrected. China sold 14B, Japan 23.8B.
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You're right. Close to $30 billion in international selling. That's an awful lot of $$$ for hedge funds to absorb. If fed cuts again, bonds are going to soar and there should intensify the selling. What's that mean for the US?

My previous prediction has been proven wrong.
 
Quote from The Kin2:

You're right. Close to $30 billion in international selling. That's an awful lot of $$$ for hedge funds to absorb. If fed cuts again, bonds are going to soar and there should intensify the selling. What's that mean for the US?

My previous prediction has been proven wrong.
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Not really. World reserve status affords us a different set of rules - up until a certain point.

But that point is fast approaching at an accelerating speed.

How long will Bernacke play Chicken with the laws of economics, is anybodys guess

I've read policy papers outside the realm of traditional stewardship that call for the trashing of the dollar.

It jives with recent Fed decisions - that 20 years ago would seem blasphemous.

The dollar will not be defended. Why?

Global imbalances? The global imbalances were created by a CHEAP DOLLAR.

And an even cheaper dollar will fix it?

Economic disaster.

Inflation at 15% and bond yields at 5%.

LOL!!

GET REAL.
 
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