Monday Update: Futures Keep Rising; Chinese Accumulate Dollars

By iamned - Last updated: Monday, May 25, 2009 - Save & Share - Leave a Comment

A modest rally in the futures is drawing the ire of short sellers all over the blogosphere. Apparently the North Korea nuke test is bullish, as evidenced by the rebound in Asian and European markets last night. Long MA POT and GOOG stock.


Business Insider, Henry Blodget’s blog, reported that China’s dollar reserves grew in March, putting a nail in the coffin for the ‘dumping dollars’ permabear myth. This is yet again another reason to buy & hold stocks.

In March alone, China’s direct holdings of US Treasury securities rose $23.7bn to reach a new record of $768bn, according to preliminary US data, allowing China to retain its title as the biggest creditor of the US government.

Why do the Chinese keep accumulating dollars? Because they have an economic surplus (remember their economy is till growing despite the supposed global recession), and therefore have no where else to park their money. Also, in order to avoid a catastrophic trade war they need to keep inflating their currency, which in turn helps relive the debt burden of the United States. If the Chinese start dumping dollars, we can respond buy not importing as much plastic crap, which would devastate their economy. It is this dependency that allows the United States to inflate its way to prosperity.

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