Heinz Blasnik- Views You Can Use Message Board

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Strategies & Market Trends : Heinz Blasnik- Views You Can Use

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To: GraceZ who wrote (635)	5/2/2003 9:46:30 AM
From: mcg404	Read Replies (1) of 4912

Grace: re: <I always wonder what could happen in a place like CA if those tiny little million dollar houses were closer to what they should cost. Spend 160k for a house and then use the remaining 840k to start a small business. Multiply that by the thousands and you have some economic fuel. > Multiply that by thousands and you have a great example of misallocated capital. Money chasing inflating assets versus productive ones. Reminds me of Doug Noland's recent observations on Argentina: "Foreign borrowings financed too much consumption and too little of the type of sound investment capable of creating the necessary economic wealth to repay Creditors. Once this course was chosen, it was only a question of the dimensions of the inevitable financial and economic dislocation. Reliance on foreign borrowings in combination with economic maladjustments over time combined to create acutely fragile debt structures. Indeed, it was precisely the nature of the speculative capital flows fostering non-productive Credit excess that proved fatal to the Argentine financial system. Frail debt structures and economic maladjustment left the currency, Credit system, and economy hopelessly vulnerable to both the inevitable reversal of speculative flows and attendant capital flight." prudentbear.com And if that 'reversal of speculative flows' occurs with the USD, it will be just another example of your belief in the free market where 'Capital flows to where the market participants believe they can get the best return.' But those aren't 'speculative flows', they're sound investments, right? Sound investments or just a good trade (while it lasts)? John

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