Probably end badly - yes, especially for about the bottom third or so. People in middle America who have some land, a 401(k), not too much debt, etc. might be okay.
People who are selling labor without some high level skill are already getting crunched by out sourcing.
One way of looking at the push to increase US savings is an effort to get as many people as possible into the ownership lifeboats as parts of the US economy become less competitive.
The Republicans expect to gain ideologically from this, but note that the Dems pushed housing very hard during the Clinotn years.
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A small fraction of the elite were into hedge funds in the middle 1990s - now they are being marketed to everybody, with predictable results.
The private equity side has seen a big explosion in interest. Unfortunately, there are not that many people who can run a business in anything more than a mildly competitive, low change environment. This is producing the same result as the boom in venture capital did, namely poor to negative rates of return.
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By the way, purchases by the Carribean based funds are counted as capital inflows, when in many cases they are using money from the US. Often money which was moved out by adjusting transfer pricing between corporate subsidiaries.
Meaning the trade defict is not as bad as it appears, and some of the capital inflows will continue in the future, even if Japan and China stop buying.
I don't find the buying of US debt or most listed stocks to be ominous. Buying control of small companies, strategic resources, etc. would be more worrisome.
For example, you wouldn't want an Austrailian who is married to a former Chinese Communist Party member to control major media outlets in the US, now would you ?
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Many of the hot money crowd have managed to out smart themselves the past year or so. Shorting the USD doesn't work all the time. They also shorted the homebuilders...
Some of them were also short oil this fall.
Some commnetators think there is a hedge fund bubble...
In 1997 the hot money crowed tried to bust the Hong Kong Dollar from it's link to the US Dollar. They didn't get very far. |
