if i didn't come across this, will never believe it, guess if one don't know their stuff try smoke out or be vindinctive and play dirty, really learn something today, never judge the cover, the level of competency of people making our economic policies is appalling, no surprise the economic state we in
Hm...why or why so many threads descend into this? I learned something from both sides. So thread was useful. Why can't we be civil (and it includes me). Sad.
Fair - in the US->Japan scenario. But the question was regarding the biggest flows in terms of actual holding, rather than trading.
So my explanation of a set of macro mechanics is wrong... because I happened to have lost my old account because I had long discarded the email I used to sign up with? What a bizarre world we live in on this board.
I think my main issue with the argument and the initial one I had was the other aspect of interest rates. The risk element and the need to increase interest rates when the risk rises. The macroeconomic idea of lowering rates to increase money supply is not something that will enourage lending. The banks may have more money available to lend but that does not mean they can lend it out to people. The higher risk the higher the actual interest rate regardless of base rate. This will be the true factor that determines borrowing demand not the base rate. Therefore the lack of lending by banks due to market risk would counter the affect of a negative interest rate. This is my main concern with China too. Even if China was to continue buying debt or treasuries it does not solve this problem. It doesn't matter what level of liquidity there is available to banks if there is a high level of insolvency the lending mechanism on the demand side will fail. When you go to a bank to borrow money they bundle that up with other borrowers and sell it on to other institutions in the form of credit derivatives. When the credit crunch happened people stopped buying the debt and this meant banks had to hold on to more of the debt themselves which meant they had higher risk leading to higher interest rates. The other side of that was that banks were not lending at the same level even with higher interest rates. Even with low base rates banks in Britain are still not lending at the level desired. In short it doesn't matter whether the Chinese continue to buy treasury bonds or not it will not make up for the inability to get money to small businesses due to the high level of insolvency and potential future insolvency. Even if the Chinese were to invest all of its money into the US economy it would not be able to support the enormous amount of debt that exists and make the repayments viable. The US simply has too much public and private debt to be repaid. It is a matter of insolvency not liquidity. Further more you assume that China has the ability to continue making the macroeconomic transition to the US. If Chinese consumption rises, which it often does when economies grow. Less money will be saved due to higher consumption habits. If this happens on a domestic level, which all the signs indicate it is, the investment reduces and thus US investment from China will fall in time.
If the US is insolvent then who own this debt? Who in the world is so rich that it can put the US on default? Your statement does not stand good sense analysis.
Never said your explanation was wrong. In fact, I didn't read most of the back and forth bickering you and morgan were doing. I just love when someone gets busted with a new alias.