i like being cautious so i have no problem with the above. you are right that for instance Spain and Ireland are going to fare worse than others. however i consider housing bubbles as symptoms rather than causes of the current problems. the cause is really too much debt coupled with hope that ever increasing growth will somehow repay it one day. or that chinese will never become consuming more than one bowl of rice per person. on that count europe is so much better off than US/UK that it is mind boggling. household debt to income ratio is more than twice as much in US/UK than in Germany/France (core of EURo). for instance (as you know) credit cards are not used much in continental europe while every teenager in UK is deep in debt already. fiscal responsibility on micro level is what will ultimately matter imo. on the other hand productivity growth is better in the US which should hopefully soften the debt burden faster.
Here is what is happening. Netting the last 12 months, foreigners barely buy our agencies anymore, thus the high spread. Instead they just funneled it into treasuries. If they choose to not buy our securities anymore and thus go into a policy of selling our dollars, they lose their competitive export advantage to us (since we see inflation of their goods). This just creates an opportunity for somebody else, or actually stimulates jobs locally. In the end, the free exchange rate mechanism solves all of these problems and acts as a feedback to regulate the effectiveness of other policy (excessive money printing, excessive sterilization, etc).
You mean what exactly? Trichet's hike in July from 4% to 4.25%, saying how they are concerned with inflation and how there's no recession looming in Europe? Followed by panic cuts of epic proportions just 10 weeks later? This is more congruent with blatant incompetence and incredible European aristocratic arrogance, not consistence.
The only places it may be reasonable to buy "real assets", housing I'm assuming you mean, is in a country that doesn't have any government "bailout/stimuli" programmes. But that ,in of itself, is not a good reason to buy assets as an investment, Regardless of what country we are living in we are in for a doozy of a recession and as real assets have yet to drop to sufficient levels to induce interest, we are in effect in a deflationary cycle. If you think it may be "ripe" to buy in Europe, watch what happens when Russia goes ahead with their intended increase of natural gas prices. It could basically cripple industrial output ,thereby stymieing consumer spending which ineffect reduces US exports, thereby. prices will weaken, therby..................how do you say deflation? We simply have to put on our seat belts and ride it out for 12 months plus so that the mess can be seen for what it really is....as I have said before, it won't be pretty. The economic dynamics will change for at least a generation. On the side, maybe Madoff can offer a small stimulation package
Back in early 85 I visited Beijing. At the airport I was the only passenger present and my Cab on the 40 Km. or so drive was the only car on this narrow beautiful straight lonely road...all of the Chinese were still in their local uniforms at the time. Look at how far they have come in so little time, thanks to the naivety and the ignorance of US but, mind you they must know very well pulling the rug from under the US will also backfire and send them back to where they were! In return for the lousy 500B, they have got Trillions by the dozen out of the dumb American economy, so it's not a big deal, just think of it as robbing the bank and throwing a piece of meat back, to keep them quiet...
Crude Oil reached $145 in 2008 because of massive demand from China & India. I think 5% or 10% of "Oil money" from gulf countries goes to Taliban and Al-Aqaeda as financial help. Worldwide terrorists must have become rich when Crude Oil reached $145 per barrel. They must have purchased High-tech weapons. Even weapons of mass destruction is possible. It can be said that China and India indirectly provided finance to terrorists worldwide by forcing Crude Oil to reach $145 per barrel
China did not display any military power. The US just took one on the chin to keep international things from blowing out of proportion. The evidence said that it was the Chinese pilot's fault. In WW2 according to Jane's fighting ships, the USA sunk over 95% of Japanese shipping. China was being dominated by the Japanese and we extricated them from China as well as a host of other Asian-Pacific countries.
That's the biggest mistake USA did, because while doing so USA created the MONSTER (China) and now this MONSTER (China) is about to devourer/Eat USA. USA should have let Japanese finish of China and then USA should have finished Japanese.
Its very simple, countries act in their own self interest. The US does, no less should be expected for China (and for those talking about how China is what it is today because of the US, well that is true but the reverse can be said also, if it wasn't a mutually beneficial arrangement it would not have persisted so long, if you feel the US should have taken more advantage of its relative position of power when it had the chance you could argue that it did but if it did not the blame US trade negotiators not the Chinese). China and any other Asian economy is more than happy to buy US debt if that results in econommic growth. Economic growth here translates to consumption, which means exports for China upon which they can grow their economy. Cheaper to lend to the US to spur domestic growth than to have to spend on domestic projects. The arrangement has worked well until now, China makes interest on the money lent while fueling their growth engine, US consumption. Now China sees that the growth engine is broken and the money being lent is not fueling any growth but just disappearing down the black hole of WS speculation, so it may as well stop lending and start spending domestically instead. Unless and until the US starts spending the dollars borrowed on incentivising area sof high growth there will be no incentive for anyone in an export economy to lend to us.