More Inflation

Yesterday, a Chinese credit agency downgraded US Treasuries. It is pretty clear that the agency would not do so without the consent of the government. I believe this means the Chinese are planning on buying less treasuries and hence US Dollars. That is likely the reason treasuries performed so poorly yesterday.

In order to purchase less treasuries China will either need to allow the yuan to rise or use the dollars to buy natural resources or a combination of both. Either way, this should lead to higher inflation in the US.

1 comment:

Anonymous said...

I'm thinking we close higher today. Turn around Wed.

Initial claims are encouraging. We are turning the corner.