U.S. May Face ‘Armageddon’ If China, Japan Don’t Buy Debt
September 25th, 2009Via: CNBC:
The US is too dependent on Japan and China buying up the country’s debt and could face severe economic problems if that stops, Tiger Management founder and chairman Julian Robertson told CNBC.
“It’s almost Armageddon if the Japanese and Chinese don’t buy our debt,” Robertson said in an interview. “I don’t know where we could get the money. I think we’ve let ourselves get in a terrible situation and I think we ought to try and get out of it.”
Robertson said inflation is a big risk if foreign countries were to stop buying bonds.
“If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent,” he said. “It’s not a question of the economy. It’s a question of who will lend us the money if they don’t. Imagine us getting ourselves in a situation where we’re totally dependent on those two countries. It’s crazy.”
Robertson said while he doesn’t think the Chinese will stop buying US bonds, the Japanese may eventually be forced to sell some of their long-term bonds.
“That’s much worse than not buying,” he said. “The other thing is, they’re buying almost exclusively short-term debt. And that’s what we are offering, because we can’t sell the long-term debt. And you know, the history has been that people who borrow short term really get burned.”
elepahnt.
looking very confy in the living room.
just no one sneeze, please.
wouldn’t want her to get a fright and, you know, turn the whole house into kindling.
you put that elepahnt on steroids?
are you nuts?
ok, ok, i’m calm, the elephant’s calm.
we’re all ok.
please, just don’t give her any ideas, will ya?
Julian Robertson was widely quoted in 2005 as predicting a ruinous global economic collapse. You might be interested in googling this.
Here’s a good one on Julian Robertson that describes his play:
Julian Robertson Bets the Farm on Inflation
http://seekingalpha.com/article/141286-julian-robertson-bets-the-farm-on-inflation
While this is not a new position for Robertson, his constant confidence behind the play has inspired us to look at it more closely. Today, we are going to highlight Julian Robertson’s steepener swap play. In layman’s terms, he is betting on inflation.
…
Robertson ultimately feels that the US dollar will become so weak that it causes the central banks of China and Japan to stop purchasing Treasuries.
see, this is where both Japan and China are between a rock and a dying empire.
Japan is screwed by the weak dollar because:
1. exports priced in US dollars become expensive if yen prices are held constant
2. holdings of US treasuries become worthless (capt. obv. strikes again)
China is screwed because even with a loose peg to the dollar, if they pull the plug on the Shanghai-D.C gulf stream of make-believe money, the exports die and so do their US treasury holdings and so does their ability to maintain social order.
anyway, game theory is too linear to tell us much about how this will play out, but Orlov’s idea about avalanche red zones may give us some clues.
btw, how weak is “so weak”?
WARNING: THIS IS NOT A RECOMMENDATION TO BUY, SELL OR HOLD ANY FINANCIAL INSTRUMENT.
btw, how weak is “so weak”?
I’d guess that below 70.792 on the U.S. Dollar Index is where it loses cabin pressure. That’s the previous all time low set back in March 2008.
In Japan, however, you will probably start hearing specifically about 87.12 on USD/JPY. That support has to hold. It’s an exact double bottom—December 08 and January 09. 87.12 both times.
My guess is that BOJ brings out the big, big guns to hold that level. It’s in the high 89s at the moment.
USD/JPY below 87 sets up USDX to test that 70.792 level again.
I don’t think the dollar is going to anything but go up in value. If the dollar goes the whole thing goes. Maybe their playing chicken I don’t know but I doubt it. It’s all fun and games – its the dollars turn to be down today. They may be evil but I think they know what their doing 🙁
I also think Robert Prechter is right in that we already had inflation, that’s why the average cost of a house in SoCal was around 650k and now its down to some a lot lower.
It then boils down to how you define inflation / deflation. If you include assets along with the money supply then all the toxic debt is wealth destruction.
Check out: [b]The Great Deflation/Inflation Debate[/b]
Robert Prechter
http://www.netcastdaily.com/broadcast/fsn2009-0905-3a.mp3
Peter Schiff
http://www.netcastdaily.com/broadcast/fsn2009-0912-3b.mp3
Daniel R. Amerman & Michael ‘Mish’ Shedlock
http://www.netcastdaily.com/broadcast/fsn2009-0919-3a.mp3
Marc Faber
http://www.netcastdaily.com/broadcast/fsn2009-0919-3b.mp3
This is an interview with Marc Chandler – he mentions some things many of use might have forgotten
http://www.netcastdaily.com/broadcast/fsn2009-0912-2.mp3
You can find these MP3 files here: http://financialsense.com/fsn/main.html
Kevin,
interesting about the 87 yen double bottom…
btw, Paul Craig Roberts may be on the right track with his prediction for one part of the next downward spiral:
“interest rates will rise dramatically as the US struggles to finance its massive budget and trade deficits while the rest of the world tries to escape a depreciating dollar.”
yes, it is capt. obv., but the MSM do not seem to be giving it much air time. funny that!