Liquidity

I asked myself the other day: "Is liqidity reflexive right now?"

It would seem to be because it comes from the carry trade. The carry trade is reflexive because the carry trade depresses the Yen further and builds up the Euro, Pound, New Zealand Dollar, etc.

The carry trade will continue until the central banks have to break the pegs for political reasons. Right now the BOJ is ok, but the Chinese Central Bank is under pressure. The sentiment in China is that the authorities won't risk any downturns before the Olympics in 2008, so everyone is fearless over there.