QUESTION: A recent analysis by Allianz economists claimed that, ordinarily, when yields on Treasuries rise, the U.S. dollar strengthens as foreign capital pursues those higher yields. However, the dollar weakened as yields rose. They said that in this instance, it “suggests major holders were not only selling Treasuries but also converting the proceeds into currencies – possibly reallocating to European markets.”
This does not seem to be correct. It looks like an opinion. Could you comment on this, please?
Thank You
Greg
ANSWER: I think a lot of people fail to appreciate the stark difference between the US markets and Europe. The NYSE is worth MORE in total capitalization than all of Europe COMBINED! The US consumer spending on a bad day is still 25% of global consumer spending. Europe accounts for $1.20 out of every $10 spent. Europe CANNOT be a reservoir for big capital. It is so socialistic, it is a joke. We invented capital flow analysis, and we have the actual data.
This idea is not original about interest rates and capital flows. This is the typical academic theory they still teach in schools today. In 1927, that was the FIRST G4 meeting where Britain, France, and Germany petitioned the NY Fed to lower interest rates in hopes that that would send capital back to Europe. When they did that, it CONFIRMED that there was a debt crisis, and even more money poured into the USA.
The Fed cut rates in the US to help Europe, and the markets continued to rise as capital flows into the US intensified. The money was pouring into the US equities, and the Dow more than doubled as the Federal Reserve raised rates from 3.5% to 6%.
China has been reducing its holdings of US debt ever since the 2014 Ukrainian War began and the Biden Administration threatened China with sanctions if it helped Russia. This is what I have spoken about the BRICS is all about: geopolitical theater, not economics. China saw removing Russia from SWIFT as using the world financial system as a geopolitical tool. The Biden Administration was run by the Neocons, who do not care about the people or the economy, only their myopic desire to destroy Russia.
This is why FOX News or any mainstream news organization would NEVER invite me because I rain on their parade. This is all about feeding people the narrative they agree with. This is never about news.
BLOOMBERG
Bloomberg has crossed to the dark side of propaganda; They are more concerned about hating Trump than they are about reporting just the facts, ma’am. They reported:
“The rotation by investors out of American assets will go on for years if President Donald Trump persists with his global trade war.”
“The Trump administration has arguably opened the door for the country’s financial dominance to be challenged, with the dollar and Treasury bonds losing appeal in what may be a dire shift of fortunes for America. US equities also have been underperforming global peers this year amid fear that Trump’s strategy of tariff chicken will damage growth and stoke inflation.”
This is all based on the Democrats’ propaganda during the 1932 presidential election. As I have said, there is no serious economist I have ever heard blame the Great Depression on the tariffs, which did not come into effect until June 1930, and they were a response to Europeans raising taxes 33 times after World War I.
By the way, Japan and China have also been dumping European Debt. With Europe pushing for World War III, you have to be insane to buy European debt. European shares hold the risk of capital controls, and you will not get your money out when the first bullet is fired.
So, people are selling US shares and debt and moving to Europe as a safe haven? They must be the same people who are still driving alone in their car with a mask on to feel safe.
