I will believe the Saudis don't see any upcoming problems with Ghawar when they cancel one of their projects due to low oil prices. If they continue to be full steam ahead with increasing their capacity then I think they are aware that Ghawar may not be as robust in 5 years time as they would like us to believe.
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Mon Aug 04, 2008 7:34 pm Post subject: Re: China Threatened Paulson Over F&F...800B later....
Some here might remember I started talking about the upcoming demise of Fannie in 2005. That's when it became apparent to the Treasury Secretary at that time that Fannie would not survive in its present form once the extent of its profits - actually lack thereof - became well known. So to give the markets the appearance of normalcy, they somehow got China to shift much of its foreign exchange reserves from Treasuries to agencies (F & F).
Obviously something must have been promised to get China on board, and that was the sub-rosa bailout plan to have the US treasury back agencies when they started to fail.
This has nothing to do with confidence but much to do with having the US taxpayer bail out a private corporation from bankruptcy. Well eventually they actually won't even stop that, but as far as the Fed-Treasury are concerned the financial system is somewhat functioning while they are still in office. _________________ It's already over, now it's just a matter of adjusting.
Last edited by DantesPeak on Mon Aug 04, 2008 7:49 pm; edited 1 time in total
Posted: Mon Aug 04, 2008 7:40 pm Post subject: Re: China Threatened Paulson Over F&F...800B later....
When the lender comes to the borrower and says, "show us you'll make good on this dog of a loan we made you [ . . . or you get no further loans]," shockingly, the desired effect is rendered. _________________ Massive Human Dieoff must occur as a result of Peak Oil. Many more than half will die. It will occur everywhere, including where you live. If you fail to recognize this, then your odds of living move toward the "going to die" group.
Posted: Mon Aug 04, 2008 7:41 pm Post subject: Re: China Threatened Paulson Over F&F...800B later....
Quote:
demise of Fannie in 2005.
I remember this quite well.
Quote:
eventually they actually won't even stop that, but as far as they are concerned the financial system is still functioning while they are still in office.
This is what is worrying me, frankly. The game can only go on as long as the investors (China, Russia, Saudi) believe that the US government can prop up the whole thing.
When they lose this confidence, there really will be hell to pay.
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Mon Aug 04, 2008 7:58 pm Post subject: Re: China Threatened Paulson Over F&F...800B later....
pup55 wrote:
Quote:
demise of Fannie in 2005.
I remember this quite well.
Quote:
eventually they actually won't even stop that, but as far as they are concerned the financial system is still functioning while they are still in office.
This is what is worrying me, frankly. The game can only go on as long as the investors (China, Russia, Saudi) believe that the US government can prop up the whole thing.
When they lose this confidence, there really will be hell to pay.
Economist Roubini, much quoted at this site, says foreign central banks and SWFs have actually increased buying of US denominated debt (treasuries + agencies) - maybe to around a $500 billion annual rate. This may be because no one else can or will step up to buy dollars to finance the $700-800 billion annual trade deficit.
Perhaps needless to say, even with oil around $120, that trade deficit will probably be climibing further.
There probably comes a point when they just won't step up to the plate anymore to buy dollars. Words probably can't describe what would happen next. _________________ It's already over, now it's just a matter of adjusting.
Posted: Mon Aug 04, 2008 11:36 pm Post subject: Re: China Threatened Paulson Over F&F...800B later....
DantesPeak wrote:
There probably comes a point when they just won't step up to the plate anymore to buy dollars. Words probably can't describe what would happen next.
This day may come soon.
For now, the Olympics are what keeps China financing the US. They want successful games, it's a marketing thing for them and they will be damned if some like a global recession (or depression) is going to intervene.
Once the Olympics are over though....
Additionally, in 2000 the Chinese announced a plan to bring 1/3 of their population into the "middle class" over the next 10 years, that would be done by 2010.
My entire outlook centered on that date, as I believed afterwards all bets are off, but as they already fired warning shots in the spring of 2007 I think we may see this one come at us much much sooner.
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