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November 18, 2008
The Death Of The Dollar Has Been Greatly Exaggerated
Nov. 18 (Bloomberg) -- International demand for U.S.
financial assets rose more than economists forecast in September
as China surpassed Japan to become the biggest foreign holder of
Treasuries.
Total net purchases of long-term equities, notes and bonds
increased a net $66.2 billion in September from $21 billion the
previous month, the Treasury said today in Washington. Including
short-term securities such as stock swaps, foreigners bought a
net $143.4 billion, compared with net buying of $21.4 billion
the month before.
Foreign demand for U.S. agency debt from companies such as
Fannie Mae and Freddie Mac increased from a month earlier.
Purchases of long-term agency debt totaled a net $6.2 billion,
compared with net sales of $8.7 billion in August.
The U.S. trade deficit shrank in September by 4.4 percent
to $56.5 billion, the smallest in almost a year.
Comments
Please continue commenting on the Green Parrot post and anything else to do with renovation or bad contractors.
This is a public service message intended only to reiterate that the sky is not actually falling.
Posted by: daveinbedstuy at November 18, 2008 9:40 AM
The World, and China in particular, still has an insatiable demand for dollars, US Trasuries and US Agency paper (Fannie & Freddie). The What has been going on and on how everyone around the World will be selling the dollar and Treasuries. He has no idea what he's talking about. This demand will continue to keep interest rates low.
What...maybe you can add something to the parrots discussion; or start another thread about eating crow.
Posted by: daveinbedstuy at November 18, 2008 10:02 AM
"translation please..."
Here is my non-expert take on it:
What this means is that the US government is still able to raise money by borrowing (i.e., selling treasuries) and does not need to print massive amounts of money (causing serious inflation) yet.
It also means foreign governments and investors (and investors in general) are so scared to death of investing in anything that is not ultimately backed by nuclear missiles that for the foreseeable future the US government is likely to be able to continue to deficit spend at a high rate as long as US consumers continue to buy enough crap from overseas for our overseas friends to make enough money to loan some of it back to us.
The decline in the trade deficit is most likely due to the reduction in the cost of oil and some reduced consumer spending.
If the government is able to use this borrowed money effectively, it could reduce the severity of the recession.
For example, if the govt. pays a construction company to build a bridge, they can employ people who can then spend money at stores, pay their mortgage, and pay taxes, resulting in every borrowed dollar moving through at least 4 or 5 people's hands and part of it going back to the government. On top of that, a bridge -- hopefully to somewhere -- gets built.
If, however, the government gives the borrowed money to banks who essentially throw it into one of the big gaping holes on their balance sheets, then the borrowed money creates no economic activity -- it just postpones the bankruptcy of the bank. In that case, either we get lucky and the economy picks up before all these banks go bankrupt anyway, or we are unlucky and can proceed with our previously scheduled severe recession, or, possibly, Great Depression 2.
On the plus side, once the government does have to start massively printing money, all of the treasuries that our overseas friends bought from us will become increasingly less valuable as inflation erodes the dollar. That's an important lesson about debt: be careful loaning money to people who control the value of the currency the debt must be repaid in (in other words: China would be wise to lend us gold rather than dollars).
So, in order to prevent inflation from destroying the value of the treasuries they already own, guess what our overseas friends have to do? You guessed it... buy more treasuries.
There is no "insatiable" demand for dollars. People we owe a lot of money to want us to stay solvent so we can eventually repay them. And if that means loaning us a few more bucks, they are willing to do it.
This may or may not work out well for us, but it is certainly better than the alternative of not being able to borrow money at all.
Posted by: northsloperenter at November 18, 2008 10:18 AM
What will happen when China starts chocking on that paper?
What will happen when not if China dumps?
What will happen when the Chine "Dollar Recycle Operation" shuts down?
Here is the Baltic Dry Shipping Rates.
http://www.dryships.com/index.cfm?get=report
You take a look on this chart and notice the correlation between this chart and the implosion of the Mutant Asset Bubble. Most of the Charts are now broken and this will have a devestaing effect of Dollar recycling.
And...
Chinese provinces try to limit layoffs
BEIJING (AP) — Two Chinese provinces are trying to deter companies from laying off large numbers of workers as they struggle to limit the fallout from the global financial crisis.
One of the country's richest and most developed provinces, Shandong, is attempting to enforce a local order that a company must go through the government if it wants to lay off more than 40 employees, an official said Tuesday.
Companies are closing factories and walking away from fulfilling orders! This will be the death of this crap called The Mutant Asset Bubble. Say hello to 14% interest rates...
Dave=POOWED
The What
Someday this war is gonna end...
Posted by: what at November 18, 2008 10:29 AM
Further evidence that you can't stay on topic and know not of what you speak.
"What will happen when not if China dumps?"
Only the sentence writer is POOWED when shit like that comes out.
How are we supposed to respond to a train wreck of a sentence like that??
You've had your 15 minutes of fame What. In fact you were way too early which is as bad as being wrong. It is now time to hitch your headline wagon to a different train and get your head around making money on the long side here.
Posted by: daveinbedstuy at November 18, 2008 10:37 AM
"You've had your 15 minutes of fame What. In fact you were way too early which is as bad as being wrong. It is now time to hitch your headline wagon to a different train and get your head around making money on the long side here."
I love that thinking Dave. Please go long, the "bottom" is in. Go for it big guy you can do it.
The What
Someday this war is gonna end...
Posted by: Return of The What at November 18, 2008 10:43 AM
Since when did the dollar die? The dollar is raging and has been raging, due to a tsunami of cash away from risky equities, commodities, leveraged investments of all sorts into US Treasuries. This dollar has been on a tear since June.
Posted by: donatella at November 18, 2008 3:36 PM
Not against the Yen. Besides, its something the What has been ranting about with no supportive evidence. Forget about it donatella. You are correct, it hasn't been this cheap to visit Europe in many years.
Posted by: daveinbedstuy at November 18, 2008 4:33 PM
The yen and the dollar are safe havens. I was being talked in off the ledge one depressing day by one client (india/dubai) who extolled the legal and political system of the US, nothing to sniff at right now, despite all our problems. Do you want to invest in an ethanol facility in Brazil or dump your money in US Treasurys. We know the answer on that one. And you may know about the yen "carry trade" whereby yen was sold to invest in higher yielding investments elsewhere. Well, those yen went home, to the boring, cash rich banks of Japan, where they don't do exciting things and now everyone is happy about that. So the yen is strong, the dollar is strong, gold is hanging in, commodities getting DECIMATED. I don't know why some people are cheering on the end of the world. What has Brownstoner become, a diary for some sleeper cell?
Posted by: donatella at November 18, 2008 5:19 PM
"I don't know why some people are cheering on the end of the world. What has Brownstoner become, a diary for some sleeper cell?"
In case you didn't get the memo, accusing people who disagree with you of being terrorists went out of fashion around 11:00pm, November 4, 2008.
Posted by: northsloperenter at November 18, 2008 6:11 PM
very odd thread
Posted by: donatella at November 18, 2008 9:52 PM
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