Celý článek zde:Asking the Chinese to Buy Our Mortgages?
This all amusingly contrasts with the following news item today from Bloomberg, in the you can't make stuff like this up category. US Department of Housing and Urban Development Secretary Alphonso Jackson is in Beijing. He is meeting with various Chinese banking authorities, asking them to buy US mortgage-backed securities. Evidently he is doing this with a straight face. The same story goes on to talk about the collapse of the subprime market.
On the one hand we have US Congressional leaders demanding that China let the dollar drop another 20% or so against their currency, and then another government official asking them to buy more US debt, which will drop 20% when they do allow their currency to rise. And they call the Chinese inscrutable?
Has it come to this, that we have to have government officials going to China to ask (some would impolitely say beg) them to buy our debt? You do have to appreciate the irony. Then again, maybe they think it is their punishment for selling us bad pet food and toothpaste. You sell us unsafe products and you have to buy our mortgages.
A Half a Trillion and Counting
That being said, Chinese exports were $103 billion in June, the first time they have ever been above $100 billion. But that is not the truly impressive number. Greg Weldon (http://www.weldononline.com, one of my truly must-read letters) highlights a very interesting trend.
(Chinese) "Official FX Reserves ... $1.333 trillion! Whew, seems like an astronomical figure ... until you consider the single month export total exceeding $100 billion for the first time ever, in June. What IS interesting is the quarterly 'flow-of-funds':
"Official FX Reserves ... up + $130.6 billion during the 2Q, similarly oversized and in line with the RECORD rise posted in the 1Q, at plus + $135.7 billion. In other words, $266.3 billion in reserve accumulation during the first six months of the year ... or ... MORE than ALL of last year, with 12-month, full year- 2006 reserve growth of + $247.3 billion
'Note the sequential quarterly reserve growth back to the end of '05:
4Q-05 ... up + $ 49.9 billion
1Q-06 ... up + $ 56.2 billion
2Q-06 ... up + $ 66.0 billion
3Q-06 ... up + $ 46.8 billion
4Q-06 ... up + $ 78.4 billion
1Q-07 ... up + $ 135.7 billion
2Q-07 ... up + $ 130.6 billion
"A moon shot on the back of skyrocketing monthly export figures. China is now accumulating dollars at a HALF-TRILLION PER YEAR PACE."
Think about that for a second. Banking authorities in China have to figure out how to invest $500 billion in new dollars this year! Maybe it makes sense to go ask them to invest in our mortgages after all.
Finally, Greg writes today of a statistic that causes me to raise my eyebrows. Total world foreign exchange reserves are $5.3 trillion. The dollar share is $3.4 trillion, or 64.2% of the total, which is at its lowest share level since 1996. Rising are the euro, pound sterling, and "others." Also falling in FX reserve share is the yen, which partially explains why that currency is also falling.
Russia, China, and India own almost $2 trillion of those dollars. Throw in Korea, Japan, and Taiwan and we rise to $3.1 trillion, or 93% of all dollar reserves in the hands of just six countries.
Notice one more thing. All of those countries are doing their best to keep their currencies from rising too rapidly against the dollar, even as all but the yen make new highs. That being the case, they are not likely to be selling too much any time soon. Rather, it is more likely they will diversify over time with new money coming in.
Also, think about the problems of a European manufacturer or business. Not only is there increased competition from all over Europe in the growing trade zone, but your currency is rising against all of Asia and the US. There are starting to be some very serious complaints about the weakness of the Japanese yen against the euro. Of course, that means the raw materials you buy are falling in price, but not your relative labor costs.
http://www.frontlinethoughts.com/printa ... =mwo071307