Major holders of US Debt, China, Russia, And Brazil have been massively liquidating US debt in what is reported as the biggest decline of US debt since “1978”. This means that other countries are initially dumping the dollar, which could be a strategic ploy by the BRICS banks. In a sense, these massive holders of debt were soaking up all the inflation the dollar devaluation has spurred, and retrospectively now amongst market slowdowns they are dumping the dollar in an attempt to increase yield returns with their domestic currency. In a sense we are seeing a global tightening of fiscal policy in response to the over devaluation, rather the United States is expanding.
However, mainstream economists are arguing that there are no market signs to even put on the breaks of expansionary policy, considering we are not seeing signs of growth it means that we need to continue to expand the money supply to stimulate the market contraction of 07 still to this day. Regardless of the ineptness of understanding markets or how they work, these economists do not even realize that we are facing a contractionary economy because we have devalued our dollar for far too long.
While initially boosting fiat paper currency and enacting an overvalued exchange rate we have created a currency bubble, and the foreign countries see this as true. So, with this historic dollar dump can it spark the stages of an overvalued currency bubble to pop? In a sense, considering we are now expanding the money supply at such a rapid pace, and yet we can no longer look at global markets to soak up the inflation of the dollar, this petrodollar will begin contract.
As we started last week, we saw an increase in the NYSE index. This means that rather than a liquidation of domestic companies we are seeing a rise in asset prices. Is this rise in asset prices due to the dumping of the dollar? Is it due to the 0% rate change by Janet Yellen? Well, its probably a mixture of both, in a sense when these major inflation soaking countries turn around and liquidate their US debt, that debt must go somewhere. When that debt started hitting the NYSE it caused a surge of asset prices, and with that surge companies will now be soaking up the inflation of the central banks reckless printing, as opposed to foreign countries. In a sense, the already overinflated assets inside the NYSE, the ones that were in the process of liquidating the bad assets are now soaking up more inflation, and ultimately doing the opposite of what the market should do.
This means, the stock market is yet again going into another hike in its index, then will turn around and we will see a massive liquidation in assets. As for China, it is a smart move to liquidate US bonds, however they are now taking the yuan they received from the US bond liquidation and attempting to now boost up the Shanghai Index, in a way to attempt to trick the traders of the shanghai composite. This will cause the Shanghai prices to rise while the government boosts up the prices, however, in the next few months the chinese markets will take a massive hit once the security controls are lifted. When this massive hit happens, we will see an export of capital from Shanghai, and an inflow of capital to other countries.