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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (18496)	4/27/2002 2:34:24 PM
From: Ilaine	Read Replies (3) \| Respond to of 74559

I recently ran across a chart that boggles my mind. Trying to find a similar chart that doesn't require Adobe Acrobat to open, haven't yet, but I am sure you have the software to open it. public.asu.edu See the first page? In 1998, global foreign exchange trading volume was about $350 trillion annually. I expect it's much more now. Completely dwarfs the volume of international trade in goods and services. All that money, sloshing around, looking for a little advantage, then moving on. I haven't found the figures yet for 1929-1930, but I know from my readings that one of the things that caused the Great Depression was the breakdown of the free flow of foreign capital -- which was then called "hot money." Hot money flowed into the US, not so much to play in the stock market (they weren't that dumb) but for broker's loans, call money occasionally hitting 20% during the blow-off top. After the Great Crash, when the Fed started cutting interest rates, the gold went elsewhere, again looking for advantage. Well, of course back then they had fixed exchange rates, which we now know don't work, because it just leads to arbitrage, and to protect the exchange rates, they tried capital controls, which we now know don't work (someone tell Argentina!), and they played around with interest rates, which we now know is a double edged sword -- if you raise interest rates to attract hot money, you'll kill ordinary business transactions. Fascinating.