Bund, Tbond of the Hot Hand fine del Capitalismo(vm98)
- Creatore Discussione dan24
- Data di Inizio
gipa69
collegio dei patafisici
If one borrows in Japan and lends it in the U.S. at a higher rate, but then hedges the currency risk (you must sell dollars forward versus buying yen forward), the forward rates embedded in the currency hedge exactly offset the profit one would earn in the rate differential between the countries. There is no free lunch. The “carry” trade then as it is referred to must somehow lend at the higher rate in the U.S. without hedging the currency. So in essence the world is massively long the dollar and short the yen. Who would do such a stupid thing?
Why none other than U.S. central banks. I have explained the process before. The Fed creates cheap credit to the U.S. consumer and that credit is spent oversees in Asia. Asia, receiving dollars in trade, should then go into the market and sell dollars to buy yen. If they did this it would drive the dollar down and U.S. rates up. The Fed could no longer offer cheap credit as the market would not let it. Instead, Asian central banks are keeping the dollars and creating credit in Yen.
It is our friends in Asia who are massively long the dollar and short their own currency in a prolonged attempt to keep their currency cheap to continue to export to us (and lend).
When we speak of consumers or traders or banks or hedge funds long the carry trade it is in reality that they are borrowing cheaply and taking risk with it. They borrow money to consume, they borrow money to buy stocks, they borrow money to buy mortgages and they borrow to buy whole companies at aggressive terms.
The carry trade is central banks creating credit and huge foreign exchange reserves in astounding amounts and lending it out for private investors to take more and more risk with it.
On your second point I think you are correct: banks are taking more and more risk (and laying some of that off to private investors) in their lending practices due to high competition and pressure from shareholders and the Fed (the Fed has lowered margin requirements aggressively, thus signaling to banks to take more risk).
The leaders of central banks are bureaucrats. The current Fed make-up is 86% academics with little market or business experience (at least under Greenspan it was 50%). They are under great pressure to keep economies chugging along and just like politicians they put off any pain to the next regime. Just look at Thailand. They prudently became concerned at the amount of speculation being created by loose policy and tried to raise margin requirements. Their stock market traded off 15% the next day. I assume they were quickly taken out to the shed by more “powerful” central bankers from other countries. The next day they reversed their decision and markets rallied.
The world is hooked on free credit.
Why none other than U.S. central banks. I have explained the process before. The Fed creates cheap credit to the U.S. consumer and that credit is spent oversees in Asia. Asia, receiving dollars in trade, should then go into the market and sell dollars to buy yen. If they did this it would drive the dollar down and U.S. rates up. The Fed could no longer offer cheap credit as the market would not let it. Instead, Asian central banks are keeping the dollars and creating credit in Yen.
It is our friends in Asia who are massively long the dollar and short their own currency in a prolonged attempt to keep their currency cheap to continue to export to us (and lend).
When we speak of consumers or traders or banks or hedge funds long the carry trade it is in reality that they are borrowing cheaply and taking risk with it. They borrow money to consume, they borrow money to buy stocks, they borrow money to buy mortgages and they borrow to buy whole companies at aggressive terms.
The carry trade is central banks creating credit and huge foreign exchange reserves in astounding amounts and lending it out for private investors to take more and more risk with it.
On your second point I think you are correct: banks are taking more and more risk (and laying some of that off to private investors) in their lending practices due to high competition and pressure from shareholders and the Fed (the Fed has lowered margin requirements aggressively, thus signaling to banks to take more risk).
The leaders of central banks are bureaucrats. The current Fed make-up is 86% academics with little market or business experience (at least under Greenspan it was 50%). They are under great pressure to keep economies chugging along and just like politicians they put off any pain to the next regime. Just look at Thailand. They prudently became concerned at the amount of speculation being created by loose policy and tried to raise margin requirements. Their stock market traded off 15% the next day. I assume they were quickly taken out to the shed by more “powerful” central bankers from other countries. The next day they reversed their decision and markets rallied.
The world is hooked on free credit.
f4f
翠鸟科
gipa69 ha scritto:Da perfetto imbexille mi sono imbottito di antibiotici e sono andato a lavorare
Così riuscirò a stare male anche per capodanno...
gooood morning bbbanda
ciao Gipa , non trascurare la salute
il 2007 pare un anno complicato, mica ci possiamo giocare lo strategist alle prime battute
gipa69
collegio dei patafisici
frank73 ha scritto:Un auguri a tutti di un nuovo anno gainante
Volevo chiedere una cortesia a gipa se possibile aveva postato un link dove c'erano se non mi sbaglio i future dello yen ovvero simili ai nostri euribor oppure agli euro$ americani.
ciao a tutti miticiiiii
Se lo trovo te lo rimando.....
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