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Old 12-16-2008, 08:02 AM
 
Location: Raleigh, NC
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The dollar doesn't look so strong now, does it?

How long before the last bubble, the bonds bubble, collapses?

With the Fed issuing it's own debt in a sad pathetic attempt to prevent monetization, how much longer can the charade be kept up?

U.S. Fed mulling issuing own debt - WSJ | Markets | Bonds News | Reuters
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Old 12-16-2008, 08:08 AM
 
Location: Hope, AR
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There goes your deflation scenario.
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Old 12-16-2008, 08:27 AM
 
Location: Raleigh, NC
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If this happens, it'll be one of the quickest bubbles I've seen. Something in the order of 6 months to a year?
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Old 12-16-2008, 08:45 AM
 
Location: Los Angeles Area
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Calling the rally in the dollar a "bubble" makes little sense. The uptrend was obviously caused by the deleverage by the world's financial institutions. Now that that is easing the dollar will return to a more fundamentally driven level.

Having a strong dollar right now makes matters worse for the US, every nation pretty much wants a weaken their currency right now.

Calling treasuries a bubble likewise makes little sense. Its a rush to safety. The problem with the treasury market is what happens when others stop buying them? Not what happens when the yields start to go up again. Obviously, short term the FED can buy treasuries but they can only sterialize such actions for so long.
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Old 12-16-2008, 09:00 AM
 
Location: Raleigh, NC
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Quote:
Originally Posted by Humanoid View Post
Calling treasuries a bubble likewise makes little sense. Its a rush to safety. The problem with the treasury market is what happens when others stop buying them? Not what happens when the yields start to go up again. Obviously, short term the FED can buy treasuries but they can only sterialize such actions for so long.
It seems you are characterizing the very nature of some bubbles. People flocked to real estate as a supposed flight to safety, amplified by the existence of "cheap money". The act of deleveraging has likewise amplified the flight to this Treasury rally. As the rest of the world picks up steam by recasting trade agreements (sans America), worldwide investments will pick up taking money out of US Treasuries in a NY minute.
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Old 12-16-2008, 09:05 AM
 
1,956 posts, read 4,863,817 times
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Quote:
Originally Posted by ViewFromThePeak View Post
As the rest of the world picks up steam by recasting trade agreements (sans America), worldwide investments will pick up taking money out of US Treasuries in a NY minute.
Except that these trade agreements cannot be recast in a NY minute for two reasons. First, the U.S. still produces a lot of goods that people want and need (not as much as we should based on our consumption, but still...). Second, there is still a lot of major underlying value in the U.S. that you're not going to get the rest of the world to agree to reject any time soon (education and rule of law, for example).
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Old 12-16-2008, 09:27 AM
 
Location: Raleigh, NC
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Originally Posted by StoneOne View Post
Except that these trade agreements cannot be recast in a NY minute for two reasons. First, the U.S. still produces a lot of goods that people want and need (not as much as we should based on our consumption, but still...). Second, there is still a lot of major underlying value in the U.S. that you're not going to get the rest of the world to agree to reject any time soon (education and rule of law, for example).
Education, there's something to be said about this. But, I am not suggesting that Carnegie Mellon labs will close down. Also, I was exaggerating about cutting off the United States entirely. But, looking at the Baltic Dry Index down by nearly 95%, it looks like things are in motion.

Rule of law? Many emerging markets have that already, especially in Asia. All you need is government to provide security to the people and the Asian culture of falling into line will do the rest. While I personally treasure some luxuries as 2nd amendment rights, it's just gravy insofar as trade agreement partners are concerned. If you're speaking about Zimbabwe, I would understand.
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Old 12-16-2008, 09:30 AM
 
Location: Los Angeles Area
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Quote:
Originally Posted by ViewFromThePeak View Post
It seems you are characterizing the very nature of some bubbles. People flocked to real estate as a supposed flight to safety, amplified by the existence of "cheap money".
They flocked to real estate as a flight to safety? Are you serious? People flocked to real estate because they thought they could purchase a house and then sell it for 15~20% in 1-2 years. Thats how bubbles are formed. How exactly is purchasing a house with a pay option ARM flocking to safety? This makes no sense at all....

Quote:
Originally Posted by ViewFromThePeak View Post
The act of deleveraging has likewise amplified the flight to this Treasury rally.
Sure, but a bubble it is not. Yields on treasuries will go up, that is obvious.

Perhaps, you don't see that getting everyone to buy treasuries at almost zero interest rate while the dollar is relatively strong....is actually brilliant. The more and longer term debt that they can get eaten up the better.
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Old 12-16-2008, 09:33 AM
 
1,956 posts, read 4,863,817 times
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Quote:
Originally Posted by ViewFromThePeak View Post
Education, there's something to be said about this. But, I am not suggesting that Carnegie Mellon labs will close down. Also, I was exaggerating about cutting off the United States entirely. But, looking at the Baltic Dry Index down by nearly 95%, it looks like things are in motion.

Rule of law? Many emerging markets have that already, especially in Asia. All you need is government to provide security to the people and the Asian culture of falling into line will do the rest. While I personally treasure some luxuries as 2nd amendment rights, it's just gravy insofar as trade agreement partners are concerned. If you're speaking about Zimbabwe, I would understand.
But can you get Asians to consume the junk products that so much of their economic growth was based on? They are attractive places to do business, to produce things, but as important as production is, it's only half the equation. The only other country I've seen that has such a rampant penchant for consuming crap on the level of America is Russia. And given their horrible demographics, I wouldn't expect them to pick up the slack any time soon.
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Old 12-16-2008, 09:40 AM
 
Location: western East Roman Empire
7,438 posts, read 11,234,793 times
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Four years ago around this time the USD slumped to 1.36 against the EUR, it rebounded to around the 1.17-1.30 range in in 2005-2006. In early 2007 it slumped again to around 1.45, and in 2008 it reached an all-time low against the EUR at around 1.60.

In recent months it rallied to around 1.25, but the rally stalled it has slumped again to the level where it was four years ago. However, the current EUR rally is ongoing as I write this and I do not see a significant resistance level until we reach around 1.60 again.

It may be at that point we'll have a better sense of the relative strengths and weakness of the US and eurozone economies as perceived by the foreign exchange market.

It may be more useful if people define bubbles and collapses in measurable terms, such as a specific exchange rate or interest rate.

To me, collapse means, for instance, that a currency, or rules for regulating relations between currencies, go out of existence.

In the current environment, collapse may mean that debts in the global banking system are wiped out or in some way significantly re-arranged, and we go into a new worldwide currency regime. Now, this may actually happen through the G-20 process, the next meeting of which I scheduled for April, three months into the next US administration. We'll see.
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