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I think most of the discussion up to now has been off-base in looking at
cause and effect. The Japanese have made tons of money borrowing yen at
rates less than 1%, and buying US Treasuries, giving them a 6% return
and currency appreciation. When this trade is no longer profitable, the
Japanese will sell. Quickly.
It will take a lot of bankrupcies in Japan to soak up the excess
liquidity in Japan. Once that happens, and Japan (and the rest of Asia,
for that matter) becomes a profitable place to invest, US interest rates
will rise as US Treasuries are sold.
IMHO
Dan Goncharoff
bullcom wrote:
>
> RTīs ,
>
> a thing nobocdy talks about is the fact that the net debt added each year is in
> economical terms used to create money. Thats how we get more money in the economy,
> get expansion and eventually inflation. The big risk is that if the US starts to pay
> down debt, because of the surplus, there will be no more money created, maybe even
> soaked up. No more expansion of money and thus by all means of s/d, money would
> become a commodity whichs price should rise. Rates would go up, it will be hard to
> get credit etc. Thats were the real danger comes from.
>
> Sounds strange, but the medium term effects of a budget surplus are the biggest
> threat to stability in our days.
>
> Keep an eye on it - Ulrich
>
> Earl Adamy schrieb:
>
> > There is ample evidence available in the weekly Fed Reports that foreign central
> > banks have been liquidating US debt holdings at a steady rate - balances have
> > dropped by 10% from April '97 peak of 650+ billion. This appears to be offset by
> > the decline in government demand for borrowing. The situation should not be a
> > problem until such time as the US dollar reverses course - the whole debt pile
> > may then indeed be a bubble.
> >
> > Earl
> >
> > -----Original Message-----
> > From: Tin Mervin Yeung <tinyeung@xxxxxxxxxxxxxx>
> > To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
> > Date: Monday, July 06, 1998 1:03 PM
> > Subject: foreign holdings of US govt securities
> >
> > >Hi, RT's,
> > >
> > >Please help me find data to refute the following chart:
> > >http://www.lfcity.com/chart11.htm
> > >
> > >If this chart is true, then we are not going to have a rising stock
> > >market (+30% annually) for the next 50 years.
> > >
> > >Mervin
> > >
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