Because as of now the peg to the dollar still holds, and their currency has actually gone down against the euro, while of course only moving slightly up against the dollar. Rational response.
I for one DO get it James. I think it's us who are plugged into the policy mindset. The problems are just WAY too systematic for the Fed to worry about price pressure. The equation for the Fed is this. Would you rather have 5% unemployment and $100 oil or 11% unemployment and $50 oil? We're teetering on the brink guy's. Look at Treasury yields. Do FIVE YEAR T-NOTE YIELDS AT 4.04% SPEAK TO YOU?. Are Treasury investors pissed off by inflation and dollar weakness? OF COURSE! Then why are they invested? Because they want to sit out a turn in FREE PARKING. Assets are DEATH. Dollar denominated fixed income is merely the lesser of 2 evils.
He should go 400 points....and then we'll be like Japan was in the 90's....zero interest rates and still a bad economy because no one is lending.
So we should buy Chinese stocks on the morning of Oct 31? (presuming that the Fed does indeed cut rates)
Sure. One of those things that works until it doesn't. A lot of the money the Fed creates winds up in China, since their peg in effect gives them the same monetary policy as the US. All that inflation that everyone is expecting over here is mostly landing over there.
Can it be quite that simple? I don't think so. We may both have inflation, but there we part company. They have at least four things we don't have: 1. barbecued rats; 2. cheap labor; 3. rapidly increasing productivity; 4. Rapidly increasing demand. But we have two things they don't have: 1. Military forces all over the world; 2. 6,000 fusion warheads.. (They probably only have a measly 1000 or so.)
...you left out rapidly increasing inflation, which is what my point was. This is caused by the PBOC buying up all those dollars to keep the exchange rate pegged.
Bennie Boy is a student of the Great Depression - he'll print until the green ink is gone... M3 is still growing skyward.... 25 in oct., 25 in dec.
if he cuts 50 bps then short stock in dec, JAN, FEB... because oil will 100 and gold will be around 900. and dollar index will be around 70.