This Reuters piece quoting me and the Mises Institute seems to have really made the rounds.
Source link: http://archive.mises.org/3782/the-conundrum-question/
The Conundrum Question
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Nice work! You said:
“Now, if China were to decide to sell off its holdings of US t-bonds, obviously it would lead to an initial rise in yields. However, the Chinese are unlikely to sit on the dollars—they most likely will employ the dollars obtained from t-bond sales to purchase some other US assets, which in turn will push their prices up and lower their yields. In other words China’s action will not have any effect on excess US money overall. Hence over time China’s selling off of t-bonds will have no effect on interest rates.”
-in the case of a credit crunch, would they not in fact sit on the dollars and wait for prices to fall (i.e. “hoard”)?
Given the liquidity (“money”) entering the system, and the potential for price inflation caused thereby, does this mean that a long-term thinker would attempt to secure as much long-term, low-rate debt on income-yielding assets as possible, and wait for another repetition of the events of the late 70′s and early 80′s?
Congratulations on being cited by a major wire service.
Also, I wanted to post something here, wishing you, and the entire Mises.org community (staffers and users) a very Happy Independence Day!!
regarding: “another repetition of the events of the late 70′s and early 80′s?”…
With the savings rate at sub 1%, and consumer, corporate and gvt debt at record highs, i just don’t see how we can have double digit price inflation again. Too many capital goods, thanks to Mssrs Keynes and Greenspan.
-the banks won’t lend to surefire losers. I just hope that Dr. Shostak is right about the Chinese holding onto our debt.
Your right eric, we probably won’t get to double digit inflation, becuase the recession will be so massive all but the sound industries will be able to stay afloat. It’s pretty clear the Fed has lost control of the mooney supply. Banks are falling over themselves trying to lend to anyone with a heartbeat. Is a SUV or an inflated housing mortgage a capital good? We will look back on this time and shake our heads at how stupid the Fed was, and hopefully it will be abolished!
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