<<Also, I have to wonder whether the Asian economies will lower
interest rates as they get further pressed...this may encourage borrowing by corporations in order to invest in the technology they need -- after all, high-tech>>
No, Asian economies cannot lower interest rates. Nor can they borrow much. This is the problem, remember? If they lower interest rates, the currencies will again be hit. Their weaker local currencies will not be able to buy as much American equipment, etc., etc. We should instead hope the U.S. lowers interest rates, which makes our exports and dollars cheapers.
In Korea, anyway, I think the IMF has mandated a tight money policy and new banking standards that require Korean banks to hold reserves and account for loans using the stricter Basle standard. This won't help Korean semis get money cheaply.
All that said, I think a small U.S. rate reduction is in the cards in the next six months, especially once quarterly earnings come in, the market stays flat or slips a bit and retail sales in December do not exhibit signs of inflation. My own guess is that this Christmas will be a bit slower than usual and there won't be a huge inflation threat.
Matt |
