Friday, August 10, 2007

the jitters

Oh you blogging bears. You've done it! Given the markets the jitters! Who would have thought that a bunch of nut bars' comments would have been heeded? Finally...

It's no news that things are going sideways, I just haven't posted on it because everyone else has already covered it. I've just been listening in fascination, and wondering if I am OK with the portent of developments. I think I am.

This is supposedly all about sub-prime exposure, but I think that it is much bigger than that. There has been talk of boycotting the Beijing Olympics because of human rights issues, Tibet, etc. vis-a-vis the Chinese. Guess what? They do not give a crap. They are holding $1.33 Trillion US Dollars, and are making rumblings noises about dumping them. What better way to save face than by ruining your adversary?

Choice quotes from just another article:
A CHINESE Government researcher has issued a veiled threat to US policymakers not to get too tough in insisting the Chinese yuan should appreciate.

The researcher, He Fan, told the state-run China Daily that China had accumulated "a large sum of US dollars" and that its holdings contributed "a great deal to maintaining the position of the US dollar as an international currency".

If the yuan's exchange rate against the dollar did not remain stable, said Mr He,..., China could be forced to take strong action.
I wonder if such veiled threats add to the jitters.
If China was to dump its US currency, it would hurt its own pocketbook because it is such a large investor. "There would be turmoil in the financial markets," said Menzie D Chinn, professor of economics at the University of Wisconsin. "It's not really a credible threat."
Look - China does not have to dump it's green backs to cause turmoil - it is already starting. This noise just makes the markets shakier, as people realize just how tenuous this whole house of cards is.
"And then another point I've made for some time is … what the Chinese hold in treasuries is less than one day's trading volume in treasuries. We have a broad, liquid market."
Phew! That is reassuring. Almost as assuring as the mountains, the 2010 Olympics, Blab Rimmer, and Scam me Somemore.

I am drawing a quavering line between a possible boycott of Beijing, China's US $ holdings, the present shakiness of the stock markets, and Vancouver RE, but that link is there. Vancouver RE is meaningless in overview.

The BIG PICTURE is very...big.

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