Currencies and the Global Capital Markets Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Currencies and the Global Capital Markets

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Hawkmoon who wrote (2674)	12/26/2000 8:08:53 AM
From: Henry Volquardsen	Read Replies (1) of 3536

Ron, I think you are on to an interesting point. This is an issue that Martin Armstrong pointed to in an interesting analysis about two years ago. It might help to look at it in somewhat more general terms. The post WWII analogy just ties it up in specifics that don't always translate directly. The US, for better or worse, is the center of the world's economic system. It has the best sovereign risk, the freest major economy with a consistent legal system and, not to be underestimated, the strongest military. There are other factors that contribute of course. In Armstrong's analysis he compared it to the position Rome occupied during the age of the Roman Empire. How does this relate to foreign preference to hold US assets? When times are good in 'the provinces' investors will feel very comfortable investing there and capital will flow outwards under the protective umbrella of the center. However when risk looms large there is a tremendous urge to 'run home to mommy', capital flows back to the center. This would also effect locally generated capital and not just repatriation. In the current environment most of the 'provinces' have significant troubles. The Japanese banking and insurance sectors remain a mess with no long term resolution in sight. This has affected the rest of Asia which complicates their own problems. Latin America also has problems. Europe is clearly in better shape than Asia but there are also big questions regarding the consolidation of the EU and structural issues that have reduced growth. All of this, I believe, contributes to a higher preference to hold dollar assets. While this is not an unlimited preference it is sufficient to allow the US to continue to run high trade deficits for some time to come. Henry

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next