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Author Topic: could it be the next financial bubble?  (Read 3418 times)

Offline reddevil

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Re: could it be the next financial bubble?
« Reply #30 on: May 10, 2019, 03:54:19 AM »
There is a discussion of China buying US debt and dumping it ect.

If a country is wealthy, where does it hold the wealth (you cannot hide under your pillows). They need to exchange their currency for something that is internationally recognised for its value. One is gold (not the XAUUSD that we traders trade it - that is CFD, you don't own the gold) and the other is other foreign currency. Gold is not very liquid and you need to transport/store it etc

If China claims that they have a hundred warehouses full of Yuan, what good is that? They can just print the money themselves and no one can say they are rich. So they need to exchange their Yuan with USD. This is done by buying the US government debt. They could buy corporate debt too, that will be foolish for a central government. They could also buy Euro but USD is the most liquid currency since it is from the world's biggest economy.

Now, US government can print the money and don't have to buy another countries currency. This is the anomaly and advantage the US government has.

China can sell the US debt but what do they buy in exchange. The worlds trade is done in USD e.g. oil, gold etc. Chinese banks needs USD and USD is held in USA. Chinese banks do not have vaults full of USD, it is all held on paper with US banks.

That is why the IRS is powerful and can compel any countries brokers/regulators to comply with their rules and hence no brokers outside of USA wants any US residence as a client.  Swiss banking secrecy laws have to cave-in to the IRS, if they don't, IRS can stop UBS, CreditSuisse from doing business in the US and Swiss economy will collapse.

Online Humble Trader's Fx

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Re: could it be the next financial bubble?
« Reply #31 on: May 10, 2019, 11:58:02 AM »
There is a discussion of China buying US debt and dumping it ect.

If a country is wealthy, where does it hold the wealth (you cannot hide under your pillows). They need to exchange their currency for something that is internationally recognised for its value. One is gold (not the XAUUSD that we traders trade it - that is CFD, you don't own the gold) and the other is other foreign currency. Gold is not very liquid and you need to transport/store it etc

If China claims that they have a hundred warehouses full of Yuan, what good is that? They can just print the money themselves and no one can say they are rich. So they need to exchange their Yuan with USD. This is done by buying the US government debt. They could buy corporate debt too, that will be foolish for a central government. They could also buy Euro but USD is the most liquid currency since it is from the world's biggest economy.

Now, US government can print the money and don't have to buy another countries currency. This is the anomaly and advantage the US government has.

China can sell the US debt but what do they buy in exchange. The worlds trade is done in USD e.g. oil, gold etc. Chinese banks needs USD and USD is held in USA. Chinese banks do not have vaults full of USD, it is all held on paper with US banks.

That is why the IRS is powerful and can compel any countries brokers/regulators to comply with their rules and hence no brokers outside of USA wants any US residence as a client.  Swiss banking secrecy laws have to cave-in to the IRS, if they don't, IRS can stop UBS, CreditSuisse from doing business in the US and Swiss economy will collapse.


With all due respect, where do you get all this BS? In fact, one might be asking why are you spreading US propaganda?

Gold is still a reserve medium and when push comes to shove, any country to country serious exchange is done in gold. Look at what happened most recently in Venezuela: Tons of gold was transferred out of the country to Russia and beyond.

The only thing the US controls is the "technical" aspect of exchange, that is to say, the efficient exchange between parties in a world of business where time is of the essence and exchange can be done on a "trust" basis. If physical gold is not the main security, let the US open its so-called "empty" vaults of gold in Fort Knox and elsewhere.

Perhaps you should be asking yourself, why do all these counties listed below, including the IMF, hold reserves of gold if they could easily just hold paper USD?

https://en.wikipedia.org/wiki/Gold_reserve


Like the motto states on the "international" note of exchange, "In God(s) and aliens we trust, everyone else pays in gold!"... Lol :)


Regards,
HumbleTrader
« Last Edit: May 10, 2019, 06:06:34 PM by Humble Trader's Fx »
We humbly approach the Forex Market and take only what is earned through our hard work and intelligence.

Offline y5nitro

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Re: could it be the next financial bubble?
« Reply #32 on: May 11, 2019, 09:32:01 AM »
Since today all goods are produced in China, it is relatively normal that decreased global demand for goods will impact Chinas economy to some extent. Still, instead of normal 7-8% of GDP growth, they will fall to 4-5%. Remember that both EU and US are struggling to have at least positive growth

Offline reddevil

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Re: could it be the next financial bubble?
« Reply #33 on: May 13, 2019, 02:23:31 AM »

A person usually hold 2 types of assets.

1. long term assets such as property or fixed term deposit.

2. short term cash/on call. This is for daily expenses etc.

But if the person gets into short term financial difficulties, he can borrow from a bank against his property,

For a country, the long term assets are gold and short term is usually US debt.

China would have bought both gold and US debt as their economy grew.
Like I said above, gold is for long term and not quickly convertible.

A country who is short of money and still want to keep gold, they can issue Debt. e.g. japan/ EU/USA.  People have confident in these countries and may be willing to give them money in exchange for a piece of paper. These countries have confident that there are buyers and are confident they can service their debt. Also their debt can be sold/bought in the secondary debt market.

Would you buy debt from Venezuela or Argentina? These 2 countries if they issue debt, the interest rate will be very high in order to attract buyers. The buyers would not be central bank of other countries.

Would you buy debt from China if they issue them? yes and no. China is big and won't collapse anytime soon. But China is also controlled by a party which can decide not to pay the interest, and there is nothing you can do about it, although this is highly unlikely.

hence if you need to buy debt, US treasuries is the most attractive.

This is not US propaganda but fact of life.

Saudi Arabia will be issuing debt this year, if they are rich why do they need to borrow?. Every country needs spending money. Also they will be issuing some of the debt based in USD. Why USD, why not Yen or Euro etc?

China will be reducing some of US debt once the trade tariff start to bite.

Offline AtlantaSean

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Re: could it be the next financial bubble?
« Reply #34 on: May 13, 2019, 02:34:51 AM »
The next bubble to burst is government debt, and once that happens a contagion will sweep through ALL markets. Interest rates at historical lows, central banks propping up govt's by buying debt at discount. Would you personally buy 30yr paper for a measly 2.5% return at maturity? Bretton Woods collapsed, and in this experiment of debt based currencies the USD is king BECAUSE it has the deepest debt market. Central bank buying of gold is only an alternative to the Dollar, as other countries bond markets are looking much weaker. Draghi has destroyed the European bond market, Abe the Japanese bond market. It is definitely coming, but the United States should suffer last in line.

Offline reddevil

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Re: could it be the next financial bubble?
« Reply #35 on: May 13, 2019, 06:07:45 AM »
There was a comment above about Fort Knox not having all the gold as stated on paper.

Where do country store their gold?. Usually you store in Fort Knox. Why? Like I said above gold is long term asset and you will only sell this asset if you country is in dire straights. and If you do need to sell your gold, the buer don't need to take the gold from fort knox, they just have on paper the X tons of gold from country abc now belongs to you from the US treasury.
You can then at a later stage sell this gold and it is just paper changing hands, much like bearer bonds. The "gold" remains in fort knox.

Germany repatriate their gold from fort knox since they don't think they will ever need to use this reserve. Venezuela repatriate their gold to caracas, since they don;t trust the USA. But now they need to sell the gold to get cash since the economy is shit. Would you give Venezuela cash for a piece of paper that says you own a ton of gold in caracas? Of course not, you like to send in a plane to transport the gold away and then got to find a place to store the gold. And Venezuela will never sell the gold for USD, they will take Euro etc, to avoid dealing with US Banks.

remember gold price change from day to day and you don't get much use of this asset unless by selling debt. Japan issue debt and pay 0.1% interest. They buy US debt  that pays 1.0%(example).  They are laughing all the way to the bank. No wonder they are happy to continue with quantitative easing.

You don't have to store your gold in fort knox, you can store it in bank of england. Any trusted stable country will do. Remember, storing gold cost money.


Offline Umar

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Re: could it be the next financial bubble?
« Reply #36 on: August 10, 2019, 08:24:51 AM »
I have also heard that there is significant discussion recently about governments and their gold. Many of major world economies are repatriating their gold kept in other countries into their own treasuries. I cannot be certain what kind of signal this provides to markets?

Offline Eliza Abrams

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Re: could it be the next financial bubble?
« Reply #37 on: August 13, 2019, 03:15:32 PM »
It is nothing good, I imagine.

Offline drunkfx

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Re: could it be the next financial bubble?
« Reply #38 on: August 13, 2019, 03:46:40 PM »
I have also heard that there is significant discussion recently about governments and their gold. Many of major world economies are repatriating their gold kept in other countries into their own treasuries. I cannot be certain what kind of signal this provides to markets?

Maybe its a second attempt to introduce gold standard and create a kind of sound monetary system. People and Central Banks are tired of bubbles and similar fraud we have to put end to that.

Offline Gyles

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Re: could it be the next financial bubble?
« Reply #39 on: September 12, 2019, 07:55:34 AM »
Drunkfx, I am certainly a person who would be very happy to see gold standard back again. At least I will be able to know what is exact value of my local money. However, it will not happen, because it will have huge repercussions on the major economies of the world. Would you agree with me?

Offline drunkfx

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Re: could it be the next financial bubble?
« Reply #40 on: September 12, 2019, 04:37:49 PM »
So many rumours, meanwhile China and US are planning an interim deal, cancelled some tariffs and are resuming purchases of strategic goods. I think trade spat hurt both badly.

Offline drunkfx

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Re: could it be the next financial bubble?
« Reply #41 on: Yesterday at 08:32:54 PM »
The next bubble to burst is government debt, and once that happens a contagion will sweep through ALL markets. Interest rates at historical lows, central banks propping up govt's by buying debt at discount. Would you personally buy 30yr paper for a measly 2.5% return at maturity? Bretton Woods collapsed, and in this experiment of debt based currencies the USD is king BECAUSE it has the deepest debt market. Central bank buying of gold is only an alternative to the Dollar, as other countries bond markets are looking much weaker. Draghi has destroyed the European bond market, Abe the Japanese bond market. It is definitely coming, but the United States should suffer last in line.

It's natural to see and accept declining yields because firms lose market power, productivity growth slows and population ageing in developed economies accelerates. We are heading to permanent stimulus environment where central banks will try to directly affect consumer demand buying and selling not only bonds but other assets in the economy.

 

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