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Could the next black/green/dark gray swan be so obvious that it has avoided everyone? Well, except for the deputy governor of the Bank of China, who just gave the world a startling reminder of economics 101, when he said that it is “getting harder for governments to buy United States Treasuries because the US’s shrinking current-account gap is reducing the supply of dollars overseas.” Oops.
The funny thing about natural (and economic) systems: they can only be pushed so far before they snap back to default state. With the entire world embarking on an unprecedented spree of domestic bubble blowing to mask the collapse in global GDP, everyone forgot to trade. Zero Hedge has long emphasized that the drop in world trade can only sustain for so long before it brings the current destabilized system back to some form of equilibrium. Because with every country intent on merely printing more of its own currency, whether it is to build bridges or to make the stock of electronic book fads trade at 100x earnings, said countries ran out of non-domestic cash. Alas, this is most critical for the United States, now that Treasury monetization is over, as the US needs to constantly find foreign buyers of its debt to fund unsustainable deficits. Foreign buyers who have US dollars. And according to Shanghai Daily, this could be a big, big problem.
Here is what the BOC’s Zhu Min said earlier:
“The United States cannot force foreign governments to increase their holdings of Treasuries,” Zhu said, according to an audio recording of his remarks. “Double the holdings? It is definitely impossible.” Read more…
Econophysicist Predicts Date of Chinese Stock Market Collapse
The Shanghai Composite Index will burst between July 17 and 27, according to a new econophysics forecast.
…The theorist behind this prediction is Didier Sornette at the Swiss Federal Institute of Technology, in Zurich, who has pioneered the study of market bubbles. Last year, he used his method for spotting bubbles to reveal that oil prices where dangerously inflated.
The telltale sign of a bubble, he says, is a faster than exponential growth rate caused by a positive feedback mechanism that generates this nonlinear growth.
The faster than exponential growth rate is relatively easy to spot. According to the analysis done by Sornette and a few mates, the Shanghai Composite Index certainly seems to have had a faster than exponential growth–a 69 percent rise since October of last year.
Whether an unsustainable positive feedback mechanism is causing this growth isn’t so clear. Sornette and co suggest that what is responsible is the Chinese government’s massive lending spree designed to maintain its economic growth rate at 8 percent a year. China has maintained that kind of growth for some years now…
Get the paper: The Chinese Equity Bubble: Ready to Burst (pdf) from arXiv
Abstract:
Amid the current financial crisis, there has been one equity index beating all others: the Shanghai Composite. Our analysis of this main Chinese equity index shows clear signatures of a bubble build up and we go on to predict its most likely crash date: July 17-27, 2009 (20%/80% quantile confidence interval).
The yen has torn to its highest level against the dollar in five months and within sight of a 13-year high set in January, prompting speculation that Japan might try to curb its rise to prevent it damaging exports.
The yen hit 91.80 per dollar on trading platform EBS on Wednesday, leaving the dollar down 2 percent on the day. The dollar has firmed on Thursday to 93.30 yen but still stands 8 percent below a six-month high traded in April.
The yen also surged to its highest in two months against the euro, the Australian dollar and sterling .
Japan’s authorities intervened heavily earlier in the decade to stop a rising yen from harming its all-important exports.
But they haven’t intervened since March 2004, the end of a 15-month long spree in which they sold 35 trillion yen ($375 billion) to protect growth.
Just click to enlarge chart.
Yen looking strong againt USD and against many other currencies.
Now ,we will see What chart says about YEN against USD !!
Already Broken H&S ,look above chart.It looks YEN will again retest 87 level very soon.Weekly RSI is favouring YEN only.
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