David McWilliams in the Sunday Busisness Post

World’s financial community gives two fingers to the US - (SBP)

Investors can now see through the Americans’ game. Since 2000, the US has been playing a big game of IOU with the rest of the world. They spend more than they save, and they’re asking us to bridge the gap.

On the day the Irish media was focused on the consummation of the Fianna Fail/Green Party marriage, an event of considerably more importance for this country received little coverage. Yet this event is likely to have more significant and longer-lasting ramifications for us than anything this new government gets up to.

On June 15, the US government was given two fingers, not by a bunch of internationalist lefties, but by its main supporters, the international financial community.

The US treasury tried to sell new US ten-year treasury bills worth $8 billion to plug the gap between what Americans spend and what Americans save. For the first time ever, foreigners said: ‘‘No thanks.â€

If the dollar does crash, where will USD/JPY go? Should someone with dollars now buy JPY as a safe haven? Anyone want to have a guess?

While a collapse in the dollar might be bad for the Irish economy it might not be bad for the Irish property market. Look how the interest rate cuts after 9/11 revived the Property market. If the dollar falls hard the ECB will be under severe pressure to cut rates to maintain competiveness.
For anybody interested in the property market the most important thing is when and at what level do IR peak?
Because of the tremendous amount of floating rate debt around, the Irish property market is very IR sensitive.
I would see the worst possible scenario as being that the US shows unexpected economic growth later this year and early 08 and the global boom continuing. Then who knows when the ECB stops?

Japanese government debt is arguably a lot more junk like than US debt.

The US government owes about 60% of GDP today . The max level considered prudent by the Eurozone in fact . It rose under Bush .

The Japanese (state local and national ) Government debt is OVER 160%

Even at our lowest, 20 years ago, the Irish debt maxed at 125% of GDP

more detail on the McWillians article here

I found that to a more clear & cogent articel from MCWilliams, non of his typical phrase coining.

I suppose there is not point in beating about the bush due to it gravity of the subject.

While you can never rule out anything in finacial markets (Irish property prices could continue to go 8-10% pa for the next decade), a “collapse” in the dollar is, unlikely, even accepting the economic mess that the 43rd Persident has overseen on his watch

There are too may other economies dependent on a relativley stable US$ trading range; the Chineese, the Japaneese, the Eurozone, the UK before you get to the Koreans, Auzzies, Swiss, Kiwis, Singapore and the OPEC block etc.

The markets know what the effect of refusing US debt would most likely be. They will do what ever is needed to ensure profitable trading ranges, not because it suits them to ‘play ball’, but becaues the alternative is just too messy. Yes, the market players can move the market by buying or not, and some central banks may want to teach the Yankies a lesson by holding back, but in the short to medium term, everyone plays ball and the “status quo” is maintained.

That said … if it did happen … the price of a hosue would be the least of our worries :cry:

Blue Horseshoe

Bear Market in US Treasuries

bloomberg.com/apps/news?pid= … refer=home

as for me, I don’t know what to think :confused:

People are looking in the wrong place. The collapse of the dollar, a US recession or the CDO market falls apart might see interest rates fall, but it will lead to a credit crunch. You’ll not be able to borrow as much.

Interest rates are yesterdays news, liquidity is what we need to watch now.

Where can I read more about the June 15th debacle, in a Mr Men style level of complexity?



I like this line:

“but there is something unreal about accusing those who point out the blatantly obvious.”

he also talks about the “miracle economy”, this week some people here looked foolish by criticising those who didn’t believe in the “miracle economy”.

The Emperor’s New Clothes
by Hans Christian Anderson (1837)

Blue Horseshoe

David McWilliams must be reading the PIN. As I’m fairly certain I haven’t changed my posting signature since day one of the pin. Its so hard being ahead, no one understands 8) (until its too late)