Re: Crisis and US economy

["ÁÎ×Ó¹â Henry C.K.Liu ¹ù¤l¥ú" <hliu@xxxxxxxxxxxxxx>]

User996472@xxxxxxx wrote:

> Aside from the effects on the US trade balance and the disinflationary
> effects on the US economy, the SEA collapse also instigated a massive influx
> of funds into the US financial mkts.  Hence, over time the investment
> situation in the US has to be retraced.  The interesting question is, were
> investments spurred by the reduction in interest rates or by the massive
> influx of funds from abroad?  Subsequently, does one supplant the other or
> are they in equal proportions?

Normally, a drop in interest rates chases away investment from a country.  The
inflow of global funds in the past 3 years has been driven by flight to safety
despite relatively low returns.  With the US equity markets appearing more and
more a bubble, that safety perception is challenged.  The wild volatility has
been caused by short term trading, the volume of which has been falling in
recent weeks.  That means that losers are outnumbering winners and trading
capital has been destroyed at rather high paces.  A drop in trading capital will
soon translate in a bear market, which if not already here, is imminent.  The
big houses are all trying to take adavantage of volatility to exit as painlessly
as possible while keeping panic at bay.  All we need is a consecutive supply of
bad news to start a stampede in this nervous market.  As they say, bad new
always comes in threes, right?  What has been fueling the US expansion is
private sector debt, which unlike public debt, cannot be paid back with taxes.
Private sector deficit finacing has very limited upside.

Henry C.K. Liu



>
>
> Regards,
> Tl