Can China Allow Its Largest Exporting Partner To Fall Apart ?

Realistically, how high can the 10-year rise from the 3.40% level? Looking at low rates in Japan (and now in the US), there seems to be a bigger force in control. It seems to me, traders don't have the courage to step aside and let rates rise.

China certainly isn't going to step aside and allow its largest exporting partner to fall apart. The government isn't going to stand by and allow rates to rise. There just seems to be a large collusion of groups keeping rates low. I'd like to see rates rise, as I believe it's unfair to prudent investors who are deprived of higher safe rates.

They'll do whatever it takes to keep rates low. My point is that if the dollar falls apart -- and they cannot control that dynamic -- then rates will be jacked for them whether they like it or not.

And if they stand in front of it by monetizing Treasuries, it will actually exacerbate the problem. So they're at the mercy of the dollar here, and the lower the dollar goes, the harder it makes it for them to prop up rates. If I were Ben Bernanke or Tim Geithner right now, I'd be going long on Pampers, extra-absorbent in size.

Not sure if this makes sense, but some are arguing they want the dollar down to stimulate exports, and in fact, are behind this dollar devaluation. Why didn't they lose control of rates as the dollar dropped from 2004-2008? How did Japan keep rates near zero with "quantitative easing"? I'm not challenging anyone, but trying to understand why this go-around, the drop in the dollar would create a problem. Personally, I hope they get what they deserve for playing with Mother Nature!

I think there are two main differences though.. : one, during that period I don’t think the U.S. was being viewed as bankrupt yet, so people were buying U.S. bonds and pushing rates lower as the “safety trade." Two, I think the currents of protectionism are rising to the surface - today’s pissing match over steel being the latest.

And to add to that, I'm wondering whether China has as much an interest in buying U.S. bonds, considering the money isn't being recycled into buying their exports, rather to fund U.S. financial capital holes -- healthcare, education, union paybacks, etc. -- none of which would send the money back to China.