China CBRC Warns Dlr Carry Trade A Threat To Global Economy

Discussion in 'Wall St. News' started by S2007S, Nov 16, 2009.

  1. S2007S


    More dollar carry trade news that you should NOT ignore....

    when this unwinds its not going to be pretty at all.

    Sunday, November 15, 2009 - 06:06
    China CBRC Warns Dlr Carry Trade A Threat To Global Economy

    BEIJING (MNI) - The Chinese government has joined a growing international chorus warning of the threat to the global economy posed by the U.S. dollar carry trade.

    Liu Mingkang, the director of the China Banking Regulatory Commission, warned a forum here at the weekend that a falling dollar and low U.S. interest rates are providing a vehicle for speculation worldwide, and are exposing risks for the emerging markets in particular as asset prices soar.

    "The carry trade in U.S. dollars is huge because of U.S. dollar depreciation and the U.S. government's policy to keep interest rates unchanged and that has had a big impact on global asset prices, encouraging speculation in stock and property markets," he said.

    "This is posing new, concrete and inevitable risks to the global economic recovery, particularly the recovery of the emerging markets," Liu added.

    There is growing unease about the implications of Washington's ultra-loose monetary and fiscal policies as global asset prices soar. Analysts and policy-makers -- from the International Monetary Fund to economist Nouriel Roubini to Dallas Federal Reserve President Richard Fisher -- have warned of the risks of asset bubbles forming as investors borrow cheap in dollars and reinvest in higher-yielding currencies.

    At the Asia-Pacific Economic Cooperation (APEC) forum in Singapore last week, Donald Tsang, the chief executive of Hong Kong, reportedly said that he was "scared" about the implications of the dollar carry trade just as his government struggles to contain what some fear is a rapidly-inflating property price bubble.

    Tsang's comments fueled speculation in London currency markets on Friday that the Hong Kong government would abandon the Hong Kong dollar's 26-year old peg to the greenback.

    Some Chinese officials have long portrayed the domestic economy as being held hostage by U.S monetary policy and, despite capital controls, domestic asset prices are also surging as an estimated tens of billions of dollars flow into the country each quarter.

    Chinese importers are also borrowing heavily in dollars to pay for their imports, central bank data suggest. Outstanding foreign exchange loans rose 40% year-on-year at the end of October to $359.6 billion, compared with the 34.2% rise in outstanding yuan loans.

    The central bank said in its third quarter monetary policy report last week that nearly half of foreign exchange lending in the third quarter was for trade financing purposes.

    U.S. President Barack Obama will visit Beijing this week for talks with senior Chinese leaders in which he is expected to talk up the need for Beijing to resume the yuan's appreciation against the dollar, and be told of the need to rein in U.S. deficits and bring order to the American financial system.

    Liu also gave a blunt assessment in his speech about the current state of the global economy.

    "The world economic recovery is currently mainly a result of the government's stimulus package as well as corporate restocking," he said.
  2. this is all Obama's fault why did he continue with this policy in collusion with bernanke??
  3. Unfortunately it doesn't correlate well with your "Dollar is going to collapse" theory. Now what?
  4. Because he's a NARCISSISTIC, POWER HUNGRY MOFO... NOTHING COUNTS EXCEPT, "it's all about him"..
  5. S2007S


    I know it doesn't correlate, this carry trade can go for 4 weeks, 4 months or even 4 years until then who knows what is going to happen, either this trade unwinds or the dollar continues to collapse, either way its a negative going forward. They can talk all they want about supporting the dollar but I don't see anything happening anytime soon, the longer this carry trade goes on for the more significant problems for the economy in the future.

    The free money and 0% interest rates destroyed this economy once already and will happen again if the proper steps aren't taken immediately.