Actions - not words - are the ultimate decider.
Beijing has ultimate authority over any US bailout package - indeed
any Western bailout package. The Chinese could care less about the
Western stock market. All they want is preservation of jobs back at
home and their Treasuries to be worth something.
The Chinese just sent a shot across our bow. The Davos conference is
a collection of Western bankers and politicians who still think they
are in control. Meanwhile, China issued this statement:
"Whether we will continue to buy U.S. Treasuries, how much we will
buy, depends on our own need for maintaining the value of our foreign
reserve investments and keeping them secure."
We also heard from the Chinese on Thursday when the 30 year long bond dropped 4 or 5
points and finally closed on Friday at 3.6%.
To be sure the Chinese did not suggest that they would liquidate treasuries but traders interpreted it that way. Chinese comments also set the tone for the big oversupply of bonds on Thursday's treasury auction on the 5 year note. This encouraged bond shorts to call Bernanke's bluff about monetizing the 30 year long bond and allowed them to ride it 4-5 points lower.
BUT we remain in deflation. This is evidenced by:
1) UUP - strong dollar; AND
2) USD/JPY - (relatively) strong yen; AND
3) General Macro-economic environment
Saturday, January 31, 2009
- ► 2011 (58)
- ► 2010 (53)
- The Debts of the Lenders: China Speaks On Davos an...
- The Debts of the Lenders: The Irony of the West
- The Debts of the Spenders: EU Hawkish On Inflation...
- The Debts of the Spenders: It's the Clearinghouse ...
- The Debts of the Spenders: The Death of Graham Ble...
- The Debts of the Spenders: Watch the UK and Italy ...
- The Debts of the Spenders: The Bad Bank Idea
- The Debts of the Spenders: The Euro - Diverging Bo...
- The Debts of the Spenders: The Euro - An Inherentl...
- The Debts of the Spenders: Has the Bond Bubble Bu...
- The Debts of the Spenders: Duration Of Bernanke's ...
- The Debts of the Lenders: Forex And Risk Appetite
- The Debts of the Spenders: G7 Floods Bond Markets ...
- The Debts of the Spenders: Commercial Real Estate ...
- The Debts of a Nation: Looking Forward Into 2009
- ▼ January (15)