Posted on 08/29/2010 10:23:09 PM PDT by JustTheTruth
Treasuries and other U.S. debt instruments will, at some point, be recognized as the junk bonds that they have become. If you're locked into anything not short-term, it is time to start thinking about your exit strategy before rates climb.
“The Chinese move slowly and steadily to secure their interests. Continuing to finance an unwieldy and unmanageable level of debt in the USA - so that individuals and governments can continue to live way past their economic means - is not in China’s interests, so they’re putting the brakes on that direction.”
Neither, though, is this action cost free for the chinese. The consumption of their goods in the US will surely go down... but our gravy train had to end sooner or later.
Assuming that interest rates will go way up, if you have a low rate fixed 30 year mortgage, that would be a good thing, not something you want to escape from. If you have a fixed interest deposit paying 1% though, that could be a problem.
Ah, Globalism.
This should be the lead news story on the MSM.....as it is, we will never hear about it.
I think this is just bluster. If the Chinese or any other country run a trade surplus with the US, that surplua of dollars has to spent on US goods and services. If they stop buying bonds, they will buy something else. Actually, I do not blame anyone for selling treasuries at their current prices they are very expensive and would be quite profitable for a lond term investor.
Banks back switch to renminbi for trade
http://www.ft.com/cms/s/0/182a2b70-b130-11df-b899-00144feabdc0.html
By Robert Cookson in Hong Kong
Published: August 26 2010 17:55 | Last updated: August 26 2010 17:55
A number of the worlds biggest banks have launched international roadshows promoting the use of the renminbi to corporate customers instead of the dollar for trade deals with China.
HSBC, which recently moved its chief executive from London to Hong Kong, and Standard Chartered, are offering discounted transaction fees and other financial incentives to companies that choose to settle trade in the Chinese currency.
No, it is all about debt and the ignorance of the American people that thinks they can have whatever they want as long as they can borrow to pay for it.
“....China would look to diversify its holdings and was a buyer of European and Japanese government bonds as well as other currencies.
A statement along those lines in more normal times would have seen the Hayman phones running hot to sell US dollars.
But at the moment the US dollar, as the world currency, is gaining considerable support from the Middle East and other areas.....”
So what’s he saying with the above, and then he states:”
But longer-term when the main supporter of a particular asset says that they will withdraw their continued support, the value of the asset will fall. If China follows through on the Hayman declaration it is not good long-term news for the US currency.”
So then he’s saying China as the “MAIN SUPPORTER”...well of course as our industry, our “assets” not all, but a substantial amount have shifted to China, but the Middle East is interesting for the Muslim situation isn’t it.
Sets head to spinning.
>Assuming that interest rates will go way up...
Interest rates going way up would be a huge nail in the coffin, affecting everything in the country.
> If the Chinese or any other country run a trade surplus with the US, that surplua of dollars has to spent on US goods and services.
LOL! Excuse the laugh - you owe me a keyboard.
Where on earth did you ever get that notion?
They can - and do - spend that surplus everywhere else in the world, particularly in the EU and parts of Asia where they are building quite a bit of clout.
.
FWIW, the PEOPLE have started to figure out that they can’t do that.
The GOVERNMENT, OTOH, that’s a different story.
Think again. How China's taking over Africa, and why the West should be VERY worried
Here is how one poster put it: "While China invests in businesses, energy, metals, cheap labor (???) we invest in food stamps, unemployment compensation, stimulus tax credit checks, illegal immigrants, public sector unions, you can see where this is headed."
So if everything else is worse, you would rather be paying a higher interest rate on your mortgage? I agree that high interest rates are painful. I just don't agree with the article's advice about being locked in long term: "If you're locked into anything not short-term, it is time to start thinking about your exit strategy before rates climb." Maybe what the author was thinking was better than the way he expressed it.
” Here is how one poster put it: “While China invests in businesses, energy, metals, cheap labor (???) we invest in food stamps, unemployment compensation, stimulus tax credit checks, illegal immigrants, public sector unions, you can see where this is headed.”
Right now, we are in self-destruction mode.
......The Chinese move slowly and steadily to secure their interests......
a growth rate of 10% is neither slow nor steady. The fact is capitalistic exuberance have created lots of problems. Last week we saw close up one such problem.
The explosion of interior business and trade produced such rapid growth in transport that the growth of infrastructure, roads and bridges, was unable to keep up. The need for road maintenance was overcome as well. The increase in traffic destroyed roads. The result was the mother of all gridlock as roads were closed for mandatory maintenance.
China as a nation experiences the same problems as any small business. In hard times one wonders how he will make it. In good times one wonders how he will ever marshal all the forces to keep up.
odd, the ChiComs sell us stuff, then use the money to purchase the debt the .Gov creates to keep the bread and circuses going, and yet it has nothing to do with Globalism?
Now that whole industries have relocated to China, where do you suppose that money comes from to purchase that massive amount of debt?
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