Thursday, 17 March 2011

Fool me once, shame on you; fool me twice, shame on me...

My thoughts are with all the Japanese people following the ongoing tragedy.
"kami sama ga mamoru youni"
"May God protect you."

"Japan is a very rich country and has a high savings rate and has the capacity to deal not just with the humanitarian challenge but also the reconstruction challenge they face ahead."

US Treasury Secretary Tim Geithner
Tuesday 15th of March 2011.

Geithner does not believe that there is a risk Japan could sell their US Treasuries to raise cash in order to respond to the damages caused by both the earthquake and the tsunami.

And the reason why according to US Treasury Secretary is that "Japan has a high savings rate":

Japanese getting older = Bad for savings Tim...

Yeah right Tim! Spot on!
This is purely and simply incorrect to stay polite. Get your facts right...I am not surprised to hear this from the man who was in charged of regulating the US banks while at the New-York Federal Reserve Bank from 2003 until 2009.

Are we witnessing at this very moment the demise of the US dollar?

Japan might be finally calling another bluff from the US by dumping in size their US Treasuries to rebuild their economy.

I previously wrote about the Bluff Call of 1971 - the Nixon shock and the collapse of the Gold Standard.

Is it payback time for Japan following the disaster of the 1985 Plaza agreements? (please refer to the post: Analyze this!).
As a reminder from my previous post, another former quote from Tim Geithner:

"On June 1, 2009, during a question-and-answer session following a speech at Peking University, Geithner was asked by a student whether Chinese investments in U.S. Treasury debt were safe. His reply that they were "very safe" drew laughter from the audience."

China is not stupid. I wrote specifically on the fact that China is well aware of what happened to Japan with the Plaza Agreements of 1985: The end of the American Dream, the call for trade barriers and the rise in populism....

Please find enclosed the link to the Chinese view on what happened to Japan following Plaza in 1985:

Revaluation of Japanese Yen, a historical lesson to draw: analysis

Maybe Japan has no choice but to cash in on its holdings to rebuild its country and repatriate Japanese Yens. At least this is what the FX market is betting on, given this evening huge price action and surge in JPY versus the USD from around 80 to an amazing 76 JPY for one USD to now back to 79...Crazy...

Japan selling their US Treasuries would be driving up interest rates.

Prior to the dramatic events happening in Japan, Bill Gross, from PIMCO, the authority on bonds, announced to the world he had dumped all his US Treasuries from his flagship fund: “Yields may have to go higher, maybe even much higher to attract buying interest,”
Yes, Bill Gross expects a sharp increase in interest rates within the next few months. If Japan starts dumping some of its US Treasuries holdings (around 885.9 billions USD as of January 2011), you can be assured Bill's expectations could materialise. China cut its holdings of US treasury bonds by 5.4 billion USD to 1.15 trillion USD in January, reported, citing the U.S. Department of Treasury.

During the 1995 Kobe earthquake, the Japanese repatriated 30 billion USD worth of U.S. government bonds, equivalent to about 13 per cent of its Treasury holdings at the time.

This time is different?

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