The Oil Drum

245 comments on DrumBeat: March 14, 2008

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Moe_Gamble on March 14, 2008 - 10:01am

China's on a little buying strike (they made a big deal of announcing they were not going to buy commodities at high prices anymore). The price will stall here and consolidate, their inventories will be down, and then they'll be buying again, having to make up for the strike, and causing the next leg up.

I have to say, China strikes me overall as being the worst trader in the world.

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mcgowanmc on March 14, 2008 - 10:08am

China's in charge.

Who do you think is crushing the Yen, to the BoJ's dismay.

"The Fed has been forced to replace the Japan carry trade. Only there is a serious problem with this: Japan has a gigantic FOREX reserves of our debts and currency. We have virtually no Japanese debts or currency in our own reserves. We have run on laughable reserves for years: $60 billion, more or less! All our trade rivals have much greater reserves. So they can adjust things at will vis a vis ourselves. Now, they can't keep our rates super-low anymore due to the US overspending being out of control. Japan alone, can't do this anymore. Despite heroically low rates that are far, far below the rate of inflation in Japan itself. Japan no longer controls 50% of our trade deficit. China has taken over that role."

http://elainemeinelsupkis.typepad.com/money_matters/

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Moe_Gamble on March 14, 2008 - 12:08pm

China's in charge.

You may be right. Or maybe no one's in charge. I read an interesting 2006 paper from a Stanford guy the other day about China's predicament. He sees a limit on the amount to which they can allow the renmimbi to appreciate in value without causing a Japan-style deflation: http://www.stanford.edu/~mckinnon/papers/International%20Finance%20China...