Wednesday, May 17, 2006

The New Chinese Market

The first thing that we need to realize, is that China is a Communist country. Its hampered by the economics of the free world. Rules are made to be broken.

The second thing that needs to be realized, is that this country's government has never taken economics 101. It doesn't have to, and because of that, it has no idea what we are referring to.

The third thing to realize is that the rest of the world is taking this "Nine year old kid" and selling them the "Candy Store" for U.S. dollars. The real problem, we are paying them in funny money.

If and when the Chinese, "smarten up," they should become net gold buyers using U.S. dollars.

This might be hard to swallow, but ask yourself, what is China doing with these new reserves? Somebody is buying a lot of Treasury's each Tuesday. If the Chinese have no idea of what is going on, the present discount rate makes sense. You can't stuff it in a mattress.

If they catch on to what is happening, you could see interest rates jump a quarter point at each auction. No body would be buying.

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