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Strategies & Market Trends : Heinz Blasnik- Views You Can Use
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To: NOW who wrote (1584)5/20/2003 7:02:39 PM
From: EL KABONG!!!  Read Replies (1) of 4907
 
tooearly,

you think those foreign buyers did not contribute to the bubble?? I am not sure what your point is....

Oh, no... I'm quite sure that to some greater or lesser extent, foreign government holdings contributed to and exacerbated any price bubbles during the late '90s.

of course their are other assets they can and do buy. that is not his point.

Ah, but that was his point... He specifically said that the US government debt was/is the only choice that foreign governments have (currently) in the way of choices for depositing their excess US$ reserves.

My statement is that his statement is flawed. Just one of the myriad reasons why equities markets the world over are having capital inflow problems is that government debt (the world over) is directly competing in the capital markets for investment monies, partially to the detriment of the equities (and corporate debt) markets. The monies cannot flow into both locations at once. If the investing entity puts a dollar bill into government debt, s/he cannot simultaneously invest that exact same dollar in equities.

Foreign governments do have other choices as to what to do with their current US$ denominated reserves. Government debt is their easy choice, no thinking or equity market risk undertaken. Choosing elsewhere involves some degree of capital risk.

On another topic, what did you think of Mr. Baker's riposte as published on the same site as the original article?

KJC
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