It's about to get the boot from international trade.
And gee whiz.. I guess that means that the rest of the world, especially Europe, has all of their ducks in order and no need for US markets??
You're myopic about this global financial crisis. It's not just the US.. IT'S EVERYWHERE!!! Look at the cutbacks in industrial production that are being suffered from those economies who sold primarily to the US. People didn't think it could get any worse in Japan, but their production was down 30% LAST QUARTER!!
"The Japanese economy is crumbling because of its massive dependency on exports," said Yoshiki Shinke, senior economist at Dai-ichi Life Research Institute.
"Japan will only see a recovery when the economies of its export markets recover."
google.com
Europe is no better off. In fact, some credible analysts perceive the risks to the European fiancial system FAR OUTSTRIP the problems here in the US:
finance.yahoo.com
There's some VERY FRIGHTENING stats in that article, and it's possible that European problems made wind up overshadowing the current focus on the US crisis. It also might result in capital flight from Europe to the US.
Btw, one of the reasons the SEC permitted the IBs to go to 40-1 leverage is because they couldn't compete with the leverage the European banks were using. But the Europeans could get away with high "gearing" so long as they had US markets to purchase their exports.
Furthermore, the Chinese, Japanese, and Europeans have attempted to manipulate currency exchage rates by keeping a lot of capital denominated in USDs. They don't want to ship their profits back home because that would necessitate them to sell those dollars and convert to their own currency.
That foreign money was CRAVING YIELD and all of those mortgage and investment banks were more than willing to meet that demand. So they colluded with the Rating Agencies to package all that stuff up and sell them off as CDO's, RMBS.. etc, each with a stamp of approval from Moody's or S&P, from analysis based upon CDS spreads derived sum BS mathematical risk analysis equation from David X. Li..
Just insane, but EVERYONE was involved, as well as responsible.
But most of all, I agree with Barry Ritholtz that the Rating Agencies bear the ultimate responsibility for becoming involved in obvious conflict of interests and using bogus analytical models.
Hawk |
