After long speculation for many months, finally the answer is no tapering yet. What a joke! The tapering hype was so high when Bernanke indicated the the housing and unemployment rate in US is improving.
May be Richard Duncan is the Guru now, from the past posting, he has been advocating that it is not possible for FED to stop printing. When the air-boat deflate, you just got to inflate it again by pumping more air. If one dose of QE not enough, more to come..........
Obama is requesting the cabinet to lift the debt limit, otherwise the US will not be able to pay all its bills and go into default by mid October.
So there you go, all assets around the world will climb higher again.
Gold bottom in July at 1200, is set to move up again.
Dow touched all time high again yesterday.
The US is so addicted to QE, that is really no other way out. The Americans have been enjoying good life for the last 30 years.Their perceived strong currency, enable them to buy "cheap" products and services from all over the world. Third world countries especially China is willing to accept Dollars and keeping it as reserve currency albeit knowing that the Dollars was just print out of thin air. The best part was China is willing recycle its excess Dollars reserve by lending it to the US for another round of consumption. The musical chair continues.
To China, it is critical to ensure the US continue "high" on consumption habit by funding the American even though they are broke. No other nation in the world can spend like the American. China calculation is simple, as long as musical chair continue, China production capacity continue to run, the worst case is getting a keep depreciating Dollars. But if musical chair stop, the China economy will collapsed. 50% of China export is to the US. The capacity built up over the last 10 - 20 years will decay anyway if not put in use. This will hit China badly as well.
The strategy is simple: As long as the China capacity is not fully depreciated, the musical chair will remain. In the meantime, China is also developing its own domestic consumption to absorb the production capacity. In my view that day may not come. The American being the most liberalise market in the world is presenting new invention and intellectual property that have impact to the whole world. Imaging how pervasive is usage of facebook, whatsapp, google, groupon, microsoft-window outside the US. Its economic impact is enormous. Once you use it you hooked on. when you buy it related product and service, Dollar is used. So how, party move on, musical chair continue and Dollar demise will not happen so soon. Put money back to risky assets again and hard to be wrong.
