This really shows that this is a global slowdown, not just something specific to the U.S., though the U.S. meltdown is having secondary effects due to the sheer size of our economy.
That chart is from Eric Janzen’s latest piece, Debate: Are China’s stock and property markets dual bubbles that are about to pop? (subscription required). He’s not convinced they’re quite about to pop, but that they probably are at or near the top.
In summary:
- The Fed will not raise interest rates to protect the dollar or before unemployment falls for six months or more, regardless of cost-push and supply crash inflation.
- The dollar will rise in flight to safety response by global investors when China’s dual stock and property bubbles collapse in Q4 2009.
- China is about where Japan was in late 1989 and the U.S. in early 2000, near the top of both stock market and housing bubbles, or at least close enough for the adventurous gambler to short it.
So China has its problems, too. That’s good only in the sense that the best thing going for the U.S. is that other countries may be more screwed up than us, which would allow us to preserve our position as the world’s reserve currency. It’s bad in that a crash in China could have unsettling results on the now-fragile U.S. economy.
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Les, what do you think about this?
The Fed Buys Last Week’s Treasury Notes
http://www.chrismartenson.com/blog/fed-buys-last-weeks-treasury-auction/23880
I saw that on ZeroHedge.
Really, the auction failed, though you won’t see the MSM putting it that way. The primary dealer was therefore obligated to buy the remaining notes, which amounted to 47% of the auction. Then the Fed turned around within a week and bought them off the dealer.
(Which is corrupt. The reason the dealer gets paid is that they agree to buy whatever doesn’t sell. But it turns out there’s no risk, since the Fed will cover them. The dealer can’t lose.)
The auction failure is every bad news. Not enough people/countries want Treasuries, so the Fed is soaking them up. If we can’t sell our debt we can’t pay our bills and we wind up exactly where California is heading.
And of course this means the Fed is printing money. I need to figure out if this is part of the $300 billion they announced they were printing by buying Treasuries, or in addition to it. Inflation here we come.
This report on Fed holdings is scary, too. They’ve bought half a trillion in mortgage-backed securities that are of questionable value.
http://www.cumber.com/home/fed.pdf