The foreigners can exit the US$ even without losing confidence in the US.
I had heard rumors since February that some major banks will collapse in Taiwan before year end. My sources in Taiwan are pretty decent ... politicians, bankers and big families. Now I hear that out of the 12 major banks, only three are expected to not run into liquidity problems. Of the 9, bad debt is at around 25-44% and large borrowers have been getting money from the banks since start of year in order to pay interest and not default. There is no deposit insurance in Taiwan. LCs issued on foreign banks are being demanded from export trading partners, and contingency plans to temporarily vacate Taiwan by the wealthier folks have been made. The government has drastically soften its tone towards mainland China. Do not know the state of the insurance industry.
Now, should all this expected excitement take place, capital stored in the form of short term treasury bills will be required back home in Taiwan. Plus side, US consumers will be able to buy cheaper still computers, though financed with higher credit card interest. Downside, Intel will get tremendous competition in mother board and chipsets. Downside, down wind effects in SE Asia, Japan and Korea.
We know the script, saw the trailers, and some of us even attended the preview.
In such a credit crunch movie, the imploded economies will not be buying much from the US, regardless of exchange rate considerations. |
