I see people make a lot of simplistic posts because they don't really understand global economies. The panic right now is about a failing US economy. Many of you have no idea what you're talking about. Some of you much better than me. For the first, and larger group, I'm going to try and help you.
In the world of economics, currencies, finance, banking, etc, it is a system of relativity. The Federal reserve will cut rates. So will the European Central Bank, Bank of Canada, Bank of England, etc. In fact, they'd have already been decimating their rates except they've been worried about inflation and commodity prices. These are the facts on the ground and these relative cuts matter!
Many people are completely missing the primary factor as to what should be strengthening the $US - trade! The US trade deficit has improved dramatically over the last 2 years and is now a significant contributor to economy growth. Why has trade surged? US goods and services are significantly RELATIVELY cheaper than comparables in other plaves such as Canada and Europe. This is the invisible hand at work.
Europe is going in to recession, with three of the EU financial powerhouses expecting to
post a second straight quarter of economic decline. Europe is also facing their own housing crisis. This financial crisis is not limited to the US! Economic slowdown is spreading even to emerging markets and we could very well see a global recession. Only the US economy is the strengest an dmost productive economy out there AND they're much further ahead when it comes to dealing with the problems.
Are many of you even aware that Russia, lately an economic powerhouse has closed their stock echange for 3 days? They're on the verge of a confidence crisis that is manifesting itself in massive money outflows from the country. Anyone remember 1998?
Many of you seem to think the Resolution Trust will take worthless assets and impair the US balance sheet. This is driven by the incorrect assumption that mortgages and houses are worth nothing at all. While not holding the value they once did, they're certainly not worth half of what they once were. Not to mention that it's the financial institutions/investors who hold them that have been taking the losses, not the goverment.
But by all means, keep looking down at the US economy, forecasting doom and gloom for the USA and thinking that you've got it much better wherever you are.
The Fed will have to slash interest rates to stave off depression!
But the US currency has fallen so much! Surely that's a precursor to doom
Europe is going in to recession, with three of the EU financial powerhouses expecting to
post a second straight quarter of economic decline. Europe is also facing their own housing crisis. This financial crisis is not limited to the US! Economic slowdown is spreading even to emerging markets and we could very well see a global recession. Only the US economy is the strengest an dmost productive economy out there AND they're much further ahead when it comes to dealing with the problems.
Are many of you even aware that Russia, lately an economic powerhouse has closed their stock echange for 3 days? They're on the verge of a confidence crisis that is manifesting itself in massive money outflows from the country. Anyone remember 1998?
Many of you seem to think the Resolution Trust will take worthless assets and impair the US balance sheet. This is driven by the incorrect assumption that mortgages and houses are worth nothing at all. While not holding the value they once did, they're certainly not worth half of what they once were. Not to mention that it's the financial institutions/investors who hold them that have been taking the losses, not the goverment.
But by all means, keep looking down at the US economy, forecasting doom and gloom for the USA and thinking that you've got it much better wherever you are.
~TheDoc - ICQ7765825
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