Saturday, May 23, 2009

A Fed Bank President in China

Dallas Fed Bank president Richard Fisher just returned from a trip to China. He told WSJ:

Senior officials of the Chinese government grill[ed] me about whether or not we are going to monetize the actions of our legislature.I must have been asked about that a hundred times in China.
The Chinese are clearly concerned about dollar inflation, which suggests that they will not be aggressive buyers of U.S. debt, if they on net buy any at all.

Given that the deficit is climbing, this is not a good sign for the long-term Treasury market. As I have said before, over the next decade, you could make a career out of shorting the debt markets.


  1. Wenzel,

    If you're getting paid off in dollars each time you short US debt, can you really come out too far ahead on those trades if the dollar is crashing all the while?

    How many millionaires were made by shorting Zimbabwean debt over the last few years?

    Not trying to make a snide remark... I honestly am wondering if it's possible to "win" when you're working with a currency that's collapsing.

  2. Interesting point. I suspect that the profits will be greater than the inflation rate. However, you might want to hedge all or some profits via gold and other commodities and, maybe, the Chinese currency.