Does this indicate the world's financial leaders will bail on Bush?

[RainDog]

http://www.washingtonpost.com/wp-dyn/articles/A43402-2004Oct18.html

Bearish on Uncle Sam?

(actually, the headline SHOULD read "Bearish on Bush, imo)

On Sept. 9, as it must frequently do, the U.S. government turned to Wall Street to raise a little cash, and Paul Calvetti bet that demand for $9 billion worth of long-term Treasury bonds would be "huge."

But at 1 p.m., as the auction opened and the numbers began streaming across his flat-panel screens, the head of Treasury trading at Barclays Capital Inc. slumped in his chair. Foreign investors, who had been voraciously buying Treasury bonds, failed to show up. Bond prices cascaded downward, interest rates rose, and in five minutes, Calvetti, 38, who makes money by bidding on bonds at one price and hoping market demand lets him quickly resell them at a profit, had lost $1.5 million.


Paul Calvetti of Barclays Capital lost money recently by betting that foreign investors would snap up long-term U.S. Treasury bonds. (Helayne Seidman For The Washington Post)

"It's amazing," he gasped, after the Treasury Department announced that Wall Street traders, not foreigners, had been left to buy virtually the entire auction. "I don't think I've ever seen this before."

The most recent auction of 10-year Treasury notes may have been a fluke, a momentary downturn in one aspect of the massive world market for U.S. government and private-sector bonds, stocks and other securities -- a market so large and diverse that it has long been the world's safe haven. But a rash of new data, including Treasury Department figures released yesterday showing a net sell-off by foreigners of U.S. bonds in August, has stoked debate over whether overseas investors -- private individuals, institutions and government central banks -- are growing dangerously bearish on the U.S. economy.

[ogsball]

1. This is HUGE!

It shows that terrible things will happen if * is elected.

Oddly it's one of those little indicators that most people will never see.

[shraby]

2. We're screwed big time!!

[Nite Owl]

3. To put it in language the public will

understand: this is a national security issue and the * administration policies have put us in harms way. He has failed to protect us.

[othermeans]

57. This is exactly what Bush's former Treasury Secretary O'Neil said would

happen in his book: Price of Loyalty. He predicted a serious recession sometime between late November and January. He also said the tax cuts would have no lasting effect on the economy. Of course Bush fired him.

[On the Road]

4. This is No Speculative Scenario

In the last decade, you had runs on the currency in Mexico, South Korea, Argentina, Indonesia, and other countries. In every case, it was very damaging. Industries were destroyed and many people lost their savings.

It is not out of the question in the US.

[MisterP]

8. after IMF "reforms" were implemented, no less...

funny, almost like there's a connection
but I'm not allowed to say that

[Art_from_Ark]

26. There were plenty of runs on the Japanese currency as well

and those had nothing to do with IMF "reforms"

[MisterP]

9. after IMF "reforms" were implemented, no less...

funny, almost like there's a connection
but I'm not allowed to say that

[MisterP]

13. wow, my very first double post!

[Name removed]

42. Deleted message

Message removed by moderator. Click here to review the message board rules.

[MisterP]

47. alas, it was too late to fix

and here's a meaningless fifth post to your meaningless fourth (this is snowballing :cry:).
Well, we can count this post as a kick: I find it shocking (but not at all surprising, sadly) that nobody will buy U.S. bonds--not even East Asian countries that own a tremendous portion of our outstanding debt. Nobody wants to invest in Dubya's America! Can anybody remember when this has happened before, if at all?

[Art_from_Ark]

50. I don't know about China, but as far as Japan is concerned

the government and big exporters seem to have agreed that the "threshold of pain" is approximately 105 yen/dollar. If the dollar is stronger (as it is now), but less than 120 or so yen/dollar, then their attitude seems to be one of sitting on the sidelines, or at least taking a far less conspicuous position.

[screembloodymurder]

40. I'll bite

who's going to stop you?

[MisterP]

41. it's only an expression

[RainDog]

5. Sixth straight month of falling capital inflows

Bush has run up such a deficit, he has made our economy unstable when we have to have a BILLION dollars a day to pay the bills, while we have a 50 billion dollar monthly trade deficit.

What are the rich asked to do to fight the "WOT?"

Are they asked to send their children..or forced to in order to afford college? Are they asked to sacrifice one of their vacation homes to pay for body armor?

Just wondering about all those patriotic Americans who make up the Bush base. Wonder how much they have parked offshore to avoid taxes, too.

[RainDog]

6. And Greenspan sees no problem

with Americans in debt up to their eyeballs, either.

http://www.washingtonpost.com/wp-dyn/articles/A44761-2004Oct19.html?nav=hcmodule

The record level of debt being carried by American households and soaring home prices do not appear to represent serious threats to the U.S. economy, Federal Reserve Chairman Alan Greenspan said Tuesday.

Greenspan said that high levels of personal bankruptcies were a concern because they indicated "pockets of distress" among American households. But he said the vast majority of U.S. consumers "appear able to calibrate their borrowing and spending to minimize financial difficulties."


---with the worst job creation record since Hoover, it must be hard to "minimize financial difficulties" when you can't get a job, or when the job you can get doesn't pay a living wage.

[serryjw]

54. Time Alan Greenspan retires........

Will Kerry replace him?

[sweetheart]

7. oooohh oohhh financial hardball... it's happening

Firstly, a short, wooly primer.

The american government prints bond certificates and sells them
at periodic auctions. The money that the government gets, it uses,
just like taking cash out of your credit card. Using that analogy,
when the payment for the credit card comes due, you take more cash
out of the card, and pay down the debt. In the treasury bond world,
this is done by issuing new bonds and retiring old ones. This has
always worked in the past as american debt was seen as "AAA" the
most stable investment place to hold your money in the world.

The news that a new issue was not instantly snapped up has been a
horror-story told on wall street for decades now, and its finally
coming true. Foreign investors have had it with bush and are hitting
america where it really hurts.

This is very serious stuff. If china and japan started dumping
their inventories right now, the entire USA economy would collapse
just like argentina, or russia. The dollar would devalue, leaving
US businesses trying to borrow more to meet their foreign obligations
and the whole thing would spiral out of control in to bankruptcy
of the most disruptive kind imaginable.... the federal government
going Kaput.

Bush must go now, or there may never be another close call. Its a
form of financial messaging to hint to americana, that foreign
investors will not be the parties to bankroll 4 more years of
aggressive war and totalitarian hubris.

Sadly it had to come to this.... but its our fault for being so
deeply in debt to start with.

[RainDog]

10. This is also the warning a good friend gave us

Emmanuel Todd wrote about just this scenario in his book, After the Empire.

He predicted the fall of the Soviet Union back in the 70s, and the book, above, warned that if American continued to act like a bully and treat other nations with disdain, other nations could bitch slap right back, and since corporations have continued to decimate our manufacturing base, we would be s.o.l.

The issue, for Todd, is how to make the U.S. fall somewhat softer because of all the problems this would create for the entire world, not to mention that the only manufacturing we've really cared about, military, would tend to lead to that old saw about "if the only thing you have is a hammer, everything looks like a nail."

Bush sure could use some "reality-based community" imput about now. He and his advisors cannot pretend we operate alone in the world. Sadly, I do not think he can or will understand this.

[RainDog]

48. This is Todd's view of the future

http://www.countercurrents.org/us-senn080803.htm

The American hegemony from the end of WW II into the late 1980s in military, economic, and ideological terms definitely had imperial qualities. In 1945 fully half the manufactured goods in the world originated in the US. And although there was a communist bloc in Eurasia, East Germany, and North
Korea, the strong American military, the navy and air force, exercised strategic control over the rest of the globe, with the support and understanding of many allies, whose common goal was the fight against communism. Although communism had some dispersed support among intellectuals, workers, and peasant groups, the power and influence of the US was by and large with the agreement of a majority throughout the world.
It was a benevolent empire. The Marshall Plan was an exemplary political and economic strategy. America was, for decades, a 'good' superpower.

And now it is a bad one?

It has, above all, become a weak one. The US no longer has the might to control the large strategic players, primarily Germany and Japan. Their industrial capacity is clearly smaller than that of Europe and approximately equal to that of Japan. With twice the population, this is no great accomplishment. Their trade deficit meanwhile, is in the order of $500 billion per year. Their military potential is nevertheless still the largest by far, but is declining and consistently over estimated. The use of military bases is dependant on the good will of their allies, many of which
are not as willing as before. The theatrical military activism against inconsequential rogue states that we are currently witnessing plays out against this backdrop. It is a sign of weakness, not of strength. But weakness makes for unpredictability. The US is about to become a problem for
the world, where we have previously been accustomed to seeing a solution in them.


---fwiw, Chalmers Johnson, in The Sorrows of Empire, has a similar view about empire via American military bases (but he stil sees us as an empire) and, though he is more upset about it, being an American, he also cautions about theatrical militarism and the economic problems this is creating for America.

[info being]

33. Wait. How would that be a bad thing?

A chance to start from scratch?

[sweetheart]

37. bankruptcy is not a "new" start

I hear you, that it appears that the bond markets are far removed
from daily american life, and what is so bad if some big businesses
and governments get screwed. That is ignorance speaking, the same
sort of ignorance that drives the bush people to pretend the USA is
not existing in an interconnected world.

Treasury bonds underwrite every single investment market on eath.!
In finance, there is a thing called "the risk free rate", which is
used to calculate the margin of risk of an investment that has some potential of default: http://en.wikipedia.org/wiki/Risk_free_rate

A treasury bond default is on a parallel with an earthquake, as the
whole house of cards is stacked up on top of the foundations.

Frankly, the way it would go down, is credit rating agencies would
"downgrade" us government paper, from say "AAA" to "AA-". The 3
agencies, fitch, moodies and S&P each have a system of ratings they
apply to the credit worthiness of debt, with AAA being reserved
for sovereign debt. Why? Well, it is presumed that taxpayers will
NEVER let their govrnment go bankrupt, and will rather dig up the
gold bars under the barn and give them as extra taxes to make up
any shortfall.

Such a downgrade, would end the world of deficit spending overnight.
The dollar would no longer be a preferred reserve currency, and
other nations would begin to unload their reserves for euros,
swiss francs and more stable currencies where the governments are
not playing russian roulette.

YOUR spending power would decline radically, and travelling abroad
would be only for people who are EXTREMELY rich, as is the case
today for indians and chinese. As interest rates would increase to
make up for the risk premium of the downgrade, lending banks would
start to fail, and the housing market would be in serious trouble.
People would not be able to afford houses anymore.

Bottom line, if such a thing were to occurr, it would only furhter
weaken the position of the poorest in society... the rich would
diversify their assets, as they are not so exposed to interest
rates as the poor are (credit card debt, car payments, mortgages,
student loans).

In the film fight club, there is a mytical catharsis as the credit
card records are blown up at the end, and this is the wishful
thinking. Fact is, that financial people never forget default and
downgrades. If you've ever lost an american express card by default,
they will never give you another one in your lifetime, as they have
such a life-memory, even if you paid back the default later with
interest.

The republicans sorta like the idea, as they would use it to cut
all things in the federal spending except the military and debt
service.(minimum government credit card payments). Then they could
hold up their hands and say "either we raise taxes, or we have to
cut social security, schools, and all that democratic shit". This
policy of pushing towards default is nothing good for what we love
and care for. Don't be fooled.

[info being]

38. Good analysis

I know. Your analysis is spot on.

The only possible positive outcome would be if we could somehow drastically change the laws / system at the same time. Unlikely then as it is now.

[Eloriel]

43. You are arguing from the point of view of preserving the system

I, and I know there are others, aren't particularly in favor of that. I'd like to see something completely different, something just, something fair and honest and without greed as the prime motivator. Something that doesn't exploit the weakest among us, whatever that weakness may be.

It would be lovely if we could change the system easily and effortlessly (well, we could -- but unlikely TPTB would assent to that), but that may not be possible.

And yes, I'm aware of the "suffering" that would go on if we had the type of crash you describe, very well aware. But there's plenty of suffering now, and plenty of injustice, and I for one am tired of it.
Sometimes lancing a boil is the right thing to do, despite how much it hurts. Then the healing can begin.

[sweetheart]

44. You can't reverse the tide of western economics

The USA might collapse, and that will bring about mass poverty, but
certainly nothing "completely different". The economic base is way
beyond the USA, embedded in every country on earth... and all that
will happen, is that the USA will go down, like the soviet union did,
with all the democracy THAT brought!

I agree with your heartfelt feeling, that we should ditch the
neoliberal basis for american consumer/worker life, however, going
bankrupt will not achieve the result.

I think america's founders understood better, they LEFT england to
make a new start. I believe as well, that the empire is best left
in order to achieve something completely different.

There is no healing in gross third world poverty, and that is what
this thread portends. When your life's savings becomes worthless
due to inflation, and your job barely covers food, there is no
healing.

This is the internal debate i have with myself here on DU, there
are some things we want to salvage out of the wreckage, and hoping
the ship sinks beneath a mile of water, will salvage nothing.
Womens equality will be a forgotten dream and we can heal in mud
huts with an average life span of 45.

Sorry i i'm being asinine... it upsets me, this needless destruction
of goodwill, and the illusion of our birthright to have a civil
socity.

[Wapsie B]

45. Thank you for putting this

in terms a non-economist can understand. This is one of the scariest threads I've read on this board.

[Art_from_Ark]

51. Japan is not about to start dumping inventories of Treasuries

In fact, if the yen approaches the "threshold of pain" of 105 yen/dollar, the Japanese government will probably start to buy MORE Treasuries. They are taking a rather long-term look at this, and expect the bu$h regime to be replaced by one that is more fiscally responsible. With most of the globally-traded commodities in the world valued in dollars, it only seems prudent from the Japanese government's perspective to stock up on interest-bearing Treasuries when they're cheap, especially as that would also have the effect of keeping the yen from getting too strong.

[jwirr]

53. No it is our fault for having bushie

as a president in the first place. If you are correct and this is done deliberately to warn us that the international community will not put up with anymore of bushie - I would suggest that the people who had better learn that lesson NOW is the rich and the bushie corporations. Bankruptcy will be harder on them than it is on those who have little to lose to begin with. They are the ones with the wealth that will be used to pay off our creditors. Finally they are going to see that their idiocy is bad for all of us.

[RainDog]

11. This is IMPORTANT NEWS folks....a warning...

so I'm kicking it up again.

[LibertyorDeath]

12. Thanks for this.

This is unreal to me. What has to happen before America will dump these
criminals from office.

[TahitiNut]

14. People lose; Fatcats gain.

High interest rates mean taxpayer money flowing into wallets of the rich.
Does anyone really think the Busholinis mind?

[jwirr]

55. Who is going to buy from them?

[RainDog]

15. China and India

if you read this, combined with Greenspan's "optimism" about Americans being in debt up to their ears...think about the effect rising interest rates, combined with foreign nation's lack of interest in funding our deficit spending...if our economy is already running off overconsumption, what happens when people face rising interest rates to cover the debt they already have?

http://www.morganstanley.com/GEFdata/digests/20041018-mon.html#anchor0

...But there’s another aspect of these initiatives that has profound implications for the rest of us — the growing inclination of Asian financiers to divert their financial resources away from funding America’s open-ended consumption binge.  There’s no great secret as to the massive dollar overweight in Asia’s foreign exchange portfolio.  As of year-end 2003, the BIS reported that Asia held about 62% of all official foreign exchange reserves; moreover, our calculations suggest that so far in 2004 Asia’s FX reserves have increased by nearly $350 billion, or another 20%.  At the same time, BIS data reveal that about 70% of the $3 trillion in official foreign exchange reserves are held in the form of dollar-denominated assets. 

In other words, Asian central banks are leading the way in dollar buying — a strategy that is aimed at preventing their currencies from rising and thereby impeding the region’s export-led growth models.  Asia’s official appetite for dollar-based assets also fills an important hole in America’s massive external funding gap — a 5.7% current account deficit that now requires financing to the tune of some $2.6 billion of capital inflows each business day of the year.  Without such generous Asian financing, the dollar would undoubtedly fall, and US real interest rates would most assuredly rise — classic characteristics of the time-honored current account adjustment.

It’s on this latter point that the alarm went off when I read the account of India’s infrastructure funding plans.  The Financial Times story also quoted an unnamed Indian official as saying, “We are subsidizing the American economy.  These are scarce resources that can be put to better use.”  That’s been the biggest risk all along, in my view — that Asia would recognize that it has a greater role to play than simply subsidizing excess US consumption in order to keep its export machine fully employed.  India’s intentions, in conjunction with Chinese actions earlier this year, hint at a reordering of Asian priorities — away from providing the “vendor financing” of a saving-short US economy and toward focusing on its own domestic development imperatives.  To the extent that this puts a crimp in America’s low-interest-rate regime that has been so central in driving the demand side of the global economy, so be it.  Asia now seems increasingly emboldened to take that risk — especially in light of daunting needs of its own. 

That very point was underscored by Montek Singh Ahluwalia, Deputy Chairman of India’s Planning Commission and one of the top advisors to India’s new Prime Minister.  In the weekend FT article, he was quoted as leaving little doubt of the wisdom of using FX reserves to backstop an infrastructure fund.  He suggested that since India’s FX reserves are probably too high anyway, the government should use a portion of these proceeds to take the lead in stimulating a broad-based attack on the Indian infrastructure gap.  I spent some time with Montek Ahluwalia on my recent visit to India.  He is tough-minded and pragmatic — and utterly determined to lead the way on new economic policies for the new government.  His message should not be taken lightly.  It has important implications for India, the US, and the broader global economy.  On balance, China and India are basically on the same page: They are no longer committed to open-ended dollar buying in their foreign exchange reserve management operations.  Given America’s massive current-account deficit, at the margin this shift is negative for the dollar and for US real interest rates. 

[DeepModem Mom]

16. kick

[AntiFascist]

17. Time to buy Euros...

USD Extends Losses Across the Board by Korman Tam

...

The dollar came under renewed selling pressure overnight, dropping to a fresh multi-year low against the Canadian dollar, and fresh multi-month lows against the yen and Swiss franc. The outlook for the greenback remains grim as sentiment for the currency continues to turn bearish. Although oil prices retreated off record highs yesterday, there’s no indication of further declines to come.

<snip>

[OneTwentyoNine]

18. I'd love to know what those Investors got for interest rates...

Suppose they got 9,10% or more?? Meanwhile the average working slob can hardly pick up 3/4% through a savings account,maybe 3% in a long term CD.

Those rates just cost tax payers another boat load of money to pay for Bush and his credit card fiscal plan.

David

[RainDog]

19. More on this issue

http://www.nytimes.com/2004/10/19/business/worldbusiness/19dollar.html?oref=login&oref=login&oref=login&oref=login

If the United States were to temper its appetite for foreign money, the Chinese and Japanese could curtail their purchases of American securities without causing financial havoc. The dollar could then drift lower against Asian currencies, benefiting American exporters and manufacturers that compete with Asian imports.

But this would require Americans to increase their rate of savings. Household savings have plummeted to only 1.5 percent of personal income, from 11 percent 20 years ago. With the federal government running a budget deficit of 3.5 percent of the nation's output, the public sector hardly contributes to savings.

A disorderly situation would occur if foreign money dried up suddenly when the United States still needed it. Then, the adjustment in American savings might happen involuntarily. Interest rates would rise sharply, and the dollar could fall abruptly. This could induce a sharp economic contraction, even stagflation.

"The longer we wait," Mr. Goldstein said, "the more likely we'll have the adjustment anyway. But the adjustment will be more chaotic and sharper."

[Petrodollar Warfare]

20. China Dumps Dollars for Oil & Gold

To add to some perspective to this issue, I found the below article rather interesting. The suggestion of a "petroyuan" is definitely thinking outside the box...but I think this is probably a good analysis of one possability of the petrocurrency wars. Well, 2005 will likely not be a good year for the dollar...:-(


CHINA DUMPS DOLLARS FOR OIL & GOLD
Todd Stein & Steven McIntyre (Oct 18, 2004)

http://www.kitco.com/ind/Texashedge/oct182004.html

"Safeguarding one's access to vital natural resources such as oil and gas is crucial to nation's long-term prosperity. But telling soldiers and their families that they are fighting in part to protect against the threat of $10.00/gallon gasoline is not exactly good for morale or public relations. Protestors chanting "No blood for oil" would have a field day if the White House press secretary made an announcement such as, "Good news, the Baghdad Museum has been looted, 1,000 American troops have been killed, but we have secured 90% of Basra's oil fields."

"Skeptics would tell you that part of the reason why American and NATO troops remain in Afghanistan after overthrowing the terrorist-harboring Taliban is to get a foothold in the game for Caspian Sea oil. Whether or not you believe these skeptics, it is a fact that multinational energy companies have developed a renewed interest in building gas and oil pipelines linking the Caspian region with the lucrative international market of the Arabian Sea. This activity has worried the three large powers in the Central Asian region: Iran, Russia and China. All three of these countries have indirectly (or sometimes directly) supported America's enemies over the last three years with either military or financial assistance. While Iran and Russia have long supplied America's adversaries with arms, the fact that China has stepped up its efforts in this arena marks a disturbing trend."

"...China has already invested billions of dollars into pipeline projects in Central Asia and the Middle East and has strengthened its relationships with governments from energy-rich states. For example, China is Sudan's largest trading partner and the most important foreign investor in Sudan's oil industry. China National Petroleum Corporation has a 40% stake in the international consortium extracting oil in Sudan, and it is constructing refineries and pipelines, enabling Sudan to benefit from oil export revenue over the last five years. Recently, China deployed thousands of troops to Southern Sudan to protect its pipeline interests while Western oil companies have been withdrawing from the war-torn African nation...."


"....Like Britain a century ago, the United States has greatly over-borrowed in an effort to control access to the world's energy supply and at the same keep its domestic economy firing on all cylinders. As competition for diminishing oil resources threatens U.S. dollar hegemony over world oil transactions, expect to see increased Chinese political and military presence in the Middle East. The presence of Chinese PLA troops in Sudan, in our opinion, marks the middle kingdom's entrance into the great game. China's next move could come in the form of massive dollar devaluation when they decide to unload their supply of accumulated greenbacks. China just recently released six billion of those greenbacks for its purchase of Noranda Mining - Canada's biggest mining company. Keep your eyes open for stepped-up greenback dumping by China in exchange for natural resources such as oil-bearing properties or perhaps more mines. We predict that in the near future, Saudi princes will decide to denominate some of their oil transactions in Yuan (or at least something other than dollars) and invest their profits into shares of China Mobile or PetroChina instead of Citigroup."

[kayell]

21. Ruh-roh This kind of action by the world has been predicted here

in the past. They can't and undoubtedly wouldn't want to go after us militarily, but they can and will destroy the remaining shreds of our economy if we don't shape up. This is not going to be fun.

[sweetheart]

22. "terrierism" has distracted from state enemies

Consider if you were a loyal, right wing strategic advisor to the
bank of China. You know that america is your enemy, beneath all
the fluff, a nation that has invaded you, helped japan invade korea,
fought against you near your korean border, financed opium imports
in to your country, and done allll sorts of really nasty subversive
things to attack china.

You have been financing the US debt, not because you love the USA,
but because of the export-model that has allowed you to generously
export your way towards relative wealth at the cost of the USA
foolish behaviour. If you dump the inventory, the dollar
will collapse, and if you hold on to it, you are sitting at the
poker table with the largest pile of chips... a nice position of
power and influence in the china/ameircan cold war.

However, if your goal is serious regime change in america, then
you will want to overthrow the entire federal government, and this
can't be done by getting Kerry elected. Selling the inventory "now"
will get kerry elected, as it will signal to the world and to
america things like what this thread is warning.

If you wait, and pray for bush to be reelected, then you can pick
a time slot when americana is hurting even more, and THEN dump the
entire inventory overnight. This would devalue the dollar massively
and cause interest rates to shoot up towards 50%... like mexico
in 1994. American paper would become worthless, and foreign
investors would run the bank to get out before the dollar went down
to nothing.

In bankruptcy, the US military would suffer just like the CCCP one
did at the fall of the soviet union. The bases would close and
massive military cuts would have to be taken, as there would be
NO money to pay the bills... end of US empire... bankrupt, just like
how the british empire ended, the russian one, and the roman one.

I think bush and his morons have spaced out that america has real
enemies who are not playing for some short-term trivial suicide
bombings, but the whole card game... and they've set up the whole
country to take a fall of unprecedented proportions.

Bush is an enemy of america, and all true enemies of the USA will
want him reelected. It is no suprise given that, that Japan's PM, Russia
and israel support bush. They've been waiting for decades for the
chance to strike... and like how we all wanted yeltsin to stay in
power, not because he was good, but because he was destroying
soviet power, likewise, they want bush in for the same reasons.

Be prepared for the weimar republic scenario. Better some gold
bullion in your hand, or euros in an offshore account to secure
your non-property assets. We're in for some turbulance.

[TreasonousBastard]

31. Interesting scenario, but...

I'm thinking that the rest of the world is crapping their collective drawers over the thought of a US financial collapse. It would pretty much take everyone down. Historically, they have been doing everything they can to prop up the dollar and assist us in buying their exports by buying Treasuries.

I am sure that they are anticipating the day when we fall and they can go on and do their own thing without having to deal with the gorilla sitting in the corner, but has that time come?

China, Korea, and Japan are entirely export driven. Without our market they are pretty well screwed. Europe and South America are fairly well self-contained and could survive without us. Africa and the rest, including the Middle East have too many of their own problems to really care.

And India????

I would guess that the hoped for scenario is that the rest of the world is seriously thinking of diverting scarce resources internally and not using them to buy back the US. Ultimately, they hope to improve themselves and let us somehow take care of our own currency problems.

China and India seem to have gotten over the hard currency hump and no longer need the vast amounts of US cash for internal capital. Aside from now having buckets of dollars, I think they feel that the Euro will do just fine when they need a few more buckets here and there. Both of them have major plans for internal development and can add domestic production to their exports.

For a few years now I've been looking at new trade zones and blocs forming-- Asia, Europe and North America. South America and South Asia are in play as to where they will hang their hats, and the Middle East, Africa, and the rest of the emerging nations could once again be the battleground for this new economic war.

Whatever happens, it will be interesting.

[donkeyotay]

36. it's the oopsie of the century

I think bush and his morons have spaced out that america has real
enemies who are not playing for some short-term trivial suicide
bombings, but the whole card game... and they've set up the whole
country to take a fall of unprecedented proportions.

I think that pretty well sums it up. We're left trying to win a fight while chained to lead weights around our ankles. The only thing China has to work out is the timing.

[RainDog]

46. thanks for your imput, sweetheart

here's the Financial Times article that's mentioned above, btw.

http://news.ft.com/cms/s/823f268c-2126-11d9-9db7-00000e2511c8.html

Inflows in the year to date totalled $594bn compared with a trade deficit of $394bn, but strategists warned this masked weakening inflows on a quarterly basis. The first three months of the year saw an average $85bn a month; this eased to $71.6bn in the second quarter, and to date, an average $61.5bn in the third quarter.

“This contrasts with the trade deficit, whose upward pace is outpacing net inflows,” warned Ashraf Laidi, chief currency strategist at MG Financial, who noted too that the ratio of inflows to the trade deficit (outflows) had fallen to 1.1 from 2.2 near the end of last year.

The report showed net purchases of Treasury bonds dropped to $14.6bn in August from $22.4bn the month before. Moreover, the inflows were the result of official institutions - central banks - buying a net $19.1bn but private investors selling a net $5.1bn. It was the first time the private sector was a net seller since October last year.

“The important thing is how the inflows are made up,” said David Bloom, currency analyst at HSBC. “Government sector flows were very high - the private sector does not want to fund the current account deficit at this price; it is politically funded.”

[Zech Marquis]

23. I'm not a wall street type

but even a normal guy like me can see this and say,"oh boy we really are FUCKED now--owned by wall street!" :scared:

[jhain]

24. I am learning alot from this thread

I am learning alot from this thread- thanks, everyone.

[CrispyQ]

25. Me too! Definitely a bookmark thread.

And one to forward to friends & family.

[Beam Me Up]

27. Add me to the "learning a lot" cadre. Kick.

[the_real_38]

28. God help us now...

... cause we're going to need the aid. The lenders have had enough of supporting our debt. And the only way to start paying it off is to run a surplus, and the only way to do that is to raise the top marginal rate and cut defense spending.

And there is no way on Earth that reason is going to win that argument with the GOP in charge. Man, things are going to get bad if this continues.

[flyingfysh]

29. This is extremely serious

This should be getting top billing on every news program.

Without bond buying by foreign borrowers, Bush's mad strategy of huge deficits will collapse.

[carnie_sf]

30. So it turns out

that deficits DO matter

[info being]

34. Exactly, just like profits actually did matter in 1999.

[bobbieinok]

56. just like old style conservatives claimed?????

[the_real_38]

32. kick - please keep this up...

.... I know it's only about economic collapse, and that's no where near as important as Dick Cheney's gay daughter, but everyone should probably read it.

[Pillowbiter]

35. There was a similar report to this in 1991

Though not as dire in consequences, it basically summed up that the US would be bankrupt by 1996 if things continued as they were under BVSH I. Fortunately Clinton got elected and fixed that mess and then some.

Though because of extrenuating factors, Kerry will have a harder time, but will still be able to at least balance things. This is because he will pretty much do what Clinton did, finance our sciences and tech industry. The dot com boom wasn't just because everything was new, but also because it got alot of support from our government at the time in tech subsidies. Unfortunately Kerry will not be able to do as well with this until the hemorraging of american jobs due to outsourcing is curbed by taxes and maybe even fines.

PB

[NJCher]

39. junior's "reality"

Foreign investors, who had been voraciously buying Treasury bonds, failed to show up.

This is bushco, creating their own reality again, LOL.

An act of supreme naivete, right on par with issuing little American flags so the Iraqis could wave them on TV after the "fall" of Baghdad.



Cher

[scarletlib]

49. Little anecdote along these lines:

After WWII Egypt under Nasser was flexing its muscle and seized the Suez Canal. Great Britian wanted to retake the canal and that meant war in the Middle East. The "empire" was existed precariously at that time and had a lot of debt which the U.S. basically controlled. The U.S. quietly refused to finance this little expedition and the Brits had to fold.

Reality is we have a lot of debt out there and foreign countries are now financing our little wars. If the international community gets fed up enough they can do the same thing to us.

Fact is we live in an interdependent world whether or not bushco wants to believe it.

[RainDog]

52. Greenspan getting some flack

http://www.reuters.com/newsArticle.jhtml;jsessionid=WUN5EE0M0FZPSCRBAELCFEY?type=reutersEdge&storyID=6558223

NEW YORK (Reuters) - Not much seems to trouble Federal Reserve Chairman Alan Greenspan these days -- not oil at more than $50 a barrel, record levels of consumer debt, nor a possible U.S. housing bubble.

The Fed chief has gone to great lengths in speeches in the past few days to soothe financial market concerns about some of the most pressing worries facing the U.S. economy.

But his efforts seem to be falling on increasingly deaf ears, with growing skepticism in bond and foreign exchange markets following his pronouncements on oil and household debt.

"Greenspan's modus operandi now is always to play down problems," said Stephen Roach, the director of global economics at Morgan Stanley and professionally known as one of the biggest worriers on Wall Street.

Roach's view strikes a chord with many investors, who are far less upbeat on the economic outlook than the Fed chief.

--Roach is in the link above about China and India, and he was interviewed/quoted in The Financial Times article above, too.

[jhain]

58. gas over 2 bucks here

hardly driving anywhere these days if I can help it.

This entire situation is making me very very nervous.
Many expect gas to jump alot after Nov 2- they 2.00 + is said to be a false low...

[LiberalAndProud]

59. This president is bankrupting our country. WAKE UP AMERICA!

[Wapsie B]

60. This deserves to be kicked.

This is serious stuff here. If enough foreign $$ pull out of the US it's goodnight Irene.