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Originally Posted by RawAlex
The real issue is that the US could end up in a position of having to pay much higher interest rates on bonds to get these countries and large institutional investors in the game, which will lead to increased deficits, etc.
It will also make it somewhat harder to keep lowering interest rates to keep the housing market from collapsing.
My feeling is that the h8trs of the US in the world, the oil producing nations, the muslim fundamentalists, and similar are encouraging this no end. Every day that oil is expensive and the US is weakened in another day that the balance of power tips.
Forget about Europe having to learn German. You all might want to start brushing up reading from right to left.
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Will throw some thoughts RA - Suspect the main underlying problem is a lack of performance in US markets over the last ... five years or so. Investment confidence normally is based on potentially good results or actual results. Short term bursts or downturns don't matter too much, but if the results are consistantly poor over a number of years - investment is going the slow.
If you look at US markets over .. eg the last five years, - they have been lower than any other western industrialized country - averaging just under 3.5% per annum. It's only my
, but think this stems from actual performance (why there is a lack of performance - hell knows), - but to throw in higher interest may not be the solution and more like throwing the profits down the drain. Really suspect the issue of performance needs to be addressed and resolved. (There are probably plenty areas which can be the cause of this, but too many to throw into the pot here).
If and when the market does perform better - it's inevitable funding will be injected, but meantime, it's going to be hard to convince fund managers to throw clients money into the lowest markets in the western world. The market needs to take the initiative and start performing.
Oil and the Middle East - Don't believe OPEC have much to do with "muslim fundamentalists" or are particularly "anti". OPEC nations have a responsibility to manage their own assets for the benefit of their "shareholders" and have been taking substantial hits because of the reduced dollar value. (How this plays a role in increased oil prices - another story). It has got to be very tempting for OPEC to want to base their pricing on a currency other than peto-dollars and, so far, they have resisted. But, like China and Japan dumping dollars, there may come a time when OPEC seriously have to consider changing oil currency - especially if the dollar continues to slide. But... the effect of that would be so damaging - and possibly to a level that there would not be a recovery of the dollar in our lifetime and it sure would have a ripple effect around the globe.
Another angle on the oil issue is that the US consumes a disproprotionate volume of oil and this is has a serious effect on the US trade balance. Most of the product is not used for industry or "wealth creation" but, puffed from exhaust systems and forgotten about.
Totally agree on the effects of the Asian and Pacific rim economies - there is no doubt they are going to be the economic powerhouses of the planet - and probably to a level we have never seen before. This places a challenge on all western industrialized countries and it's obvious the economies of these countries need to be prepared to ride the challenge of upcoming economies. So far, tho this varies from one industrialized country to the other - it's clear a few nations are totally unprepared to meet this challenge and lack product to offer on the global marketplace.