Michael: > Does anyone have any thoughts about how sensitive > US interest rates might be to declining demand by the central bank?
Not much given the current reversal of capital flows back to the US, in my view. Where will that money go other than the US Treasuries in these days, given the ongoing credit crisis? It would be a problem if the Chinese Central Bank starts to dump the US Treasuries it holds, but I don't think it will happen any time soon. It would be a suicide for the Chinese. > Even more important, how long can the unhealthy codependence of the US and > Chinese economies last? As long as China and the rest of East Asia hold this much of US Treasuries, it may last for many years to come. But, there are many signals that they are looking for a way out. The thing is that they have not found that way yet, as it appears. Hence my speculation. They need to stop exporting to the US and start producing for their domestic markets to free themselves from the build-up US dollar reserves, but such things do not happen overnight. Until that happens and works its way for some decades, I don't see any real threat from China. Best, Sabri _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
