Henry: Regarding demand by foreigners for US investments. A UCLA study points to Europeans getting a hard licking. :
contracostatimes.com
Published Tuesday, December 12, 2000
UCLA model predicts U.S. recession in 2001
Relevant excerpt:
" Edward Leamer, director of the UCLA forecast, described a more severe scenario for a national economic slowdown. He
noted that much of the runup in stocks had been driven by money from abroad, especially Europe, with annual net
investment inflow exceeding $400 billion, equal to more than 4 percent of gross domestic product.
Leamer cast the runup in Internet stocks, and the resulting prosperity here, as a deal in which U.S. consumers got the
better of European investors.
"Had we financed the Internet boom with bonds issued by viable American companies, we would be deeply in debt to
Europe today, but we wisely issued them worthless equities," or shares of stock, he said. "These Europeans will never
get their money back since the first attempt at wholesale cashing in will bring a double deterioration in their value."
But Americans who have counted on the Internet stock boom to continue indefinitely may also suffer because they
"have to adjust painfully to a new lifestyle that is no longer being paid for by issuing worthless paper to unsuspecting
Europeans," he said. "The adjustment could require a long and deep recession, like Mexico in 1995."
Leamer warned that there are clouds all around the economic horizon.
"It's hard to see any basis for optimism about the global economy overall for the next year," he said.
Leamer said that the national economy "can expect a slowdown (with) slight negative growth of (gross domestic product)
in the second and third quarters of 2001" and said that even early action by the Federal Reserve to lower interest rates
wouldn't be enough to avert a recession. "
Also regarding the concern you and Zeev had regarding Asian markets, you might be interested in reading what Mr. Jay Chen's perception of Tawain's currency and economic situation :
Message 14876711
IMO, I see the festering dispute with China about Tawain's independence coming to a head sometime in the near future. Regardless, of economic conditions, I would not be at all surprised if Tawain's statehood becomes a bigger story next year than the Middle East was this year. One can only hope for some peaceful resolution. |
