Financial Conspiracy Theory
Lots of really bad things happening in the financial world right now and as Morgan Stanley becomes the latest to ship a big chunk of its ownership off to China it got me thinking about what's happenning and how it has come to pass.
Of course, this type of thinking can infest ones brain with ideas of those in the world with ulterior intentions. I was thinking of the recent purchases by sovereign funds like Abu Dhabi and China's and I can't help to think the current scenario may have been forseeable to those wanting to shift the global basis of power over the long term.
It is consistently written that the Chinese think in the long term. Long term meaning decades and longer, not years like most Americans believe the long term to be. Much has also been written about the Chinese becoming the second largest holder of U.S. Treasuries. Many conspiracy theorists believed the Chinese would begin diversifying their treasury holdings as the U.S. dollar continued to fall.
But I have a different thought; perhaps the Chinese and other large holders/acquirers of U.S. debt have been happily purchasing treasury securities and financing our wars, because they understood that over the long term, lower yields in the U.S. would be our downfall, or at least make our seemingly most valuable or influential companies need their assistance.
The thought goes like this: The Chinese understand our nation's greed. They have increasingly been feeding it with cheap consumer goods for a long time. Historically low interest rates (averge 90-day T-bill rate of 3.97% since 1997)have been kept artificially low by a few methods, 1) Demand for available yields from foreign countries (if noone buys our debt at current rates, we couldn't keep rates so low) 2) We exported our monetary inflation to foreign nations. Essentially this was done by purchasing cheaper goods from overseas producers in mass quantities. Global trade allowed prices of goods tracked by inflation indices to remain relatively tame, while those items stripped out of inflation gauges, like energy prices for example, were directly showing the effects of global shipping of these "cheap" goods. Low inflation gaugues allow real interest rates to appear lower than they should be and ulitmately keep US$ borrowing rates relatively low.
So the Chinese and other nations are happily accepting our $$ for cheap goods, expensive oil and other commodities, etc., meanwhile watching our greed manifest itself with the overleveraging of individuals, corporations, etc. When the lending institutions who fed this greed finally are forced to realize it's been over done, all they can do to stay solvent (protect their reserve balances) is to sell large pieces of themselves to the Chinese, Middle East and Singaporeans who have been sitting back and accepting 4-6% interest for years waiting...waiting...waiting for us to destroy ourselves.
...or not.
So, what has been giving you cheap thrills? :)
