December 11, 2006
The World’s Biggest Vendor-Financing Scheme
Best bit from the interview with Martin Barnes in this week’s Barron’s:
As long as Asian central banks are prepared to buy the dollars, then [foreign investors not wanting to own dollars is] not going to be problem for some time to come. And they’ve got a huge incentive to keep buying dollars. The huge incentive is what some people have called the world’s biggest vendor-financing scheme. The rest of the world is lending America the money to buy their goods, keeping overseas factories running, keeping American consumption going, keeping interest rates down. It prevents currency instability from causing any problems in financial markets, and everybody seems to benefit. It is a complete win-win situation. But, of course, there is a big distortion of market forces to the extent that central banks are propping this up.
Win-win, right. We get DVD players and they get little pieces of funny-colored paper in return.
Chinese property company stocks mentioned in an article by Jon Ogden:
- AGILE PROPERTY (3383.HK)
- BAOYE GROUP (2355.HK)
- BJ CAPITAL LAND (2868.HK)
- CHINA OVERSEAS (0688.HK)
- CHINA RES LAND (1109.HK)
- GREENTOWN CHINA (3900.HK)
- HOPSON DEV HOLD (0754.HK)
- R&F PROPERTIES (2777.HK)
I’ve written about R&F Properties before:
“Correcting” Property Market “Distortions”, May 19, 2006
Guangzhou R&F Properties Co., Ltd., September 6, 2005
December 12th, 2006 at 8:34 am
Funny. I’d always thought of it the same way. Having covered telecom during the bubble I have learned to be very wary of investing in entities who lend their customers the money to buy the products. It isn’t a sustainable model.
December 12th, 2006 at 10:39 am
Wow. Sounds like eventual and imminent economic failure of the “greatest country in the world.”
Ignorance is bliss.
December 12th, 2006 at 10:23 pm
define failure
December 14th, 2006 at 1:36 am
Our governments grossly irresponsible fiscal policies of borrowing money to repay yesterdays debt, and using the money supply as an ATM for the federal government. Is finally catching up with us, and as the value of the dollar declines along the our nations credit score, foreign investors will be less willing to recieve relatviely low intrest in return for US debt, and will refuse to lend money to a country with such a quickly falling currency.
But you could argue that it is the natuarl and healthy cycle of the economy.
December 14th, 2006 at 2:44 am
“Creative destruction.” LOL