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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: peter michaelson who wrote (77827)	8/16/2011 2:35:18 AM
From: elmatador	2 Recommendations Read Replies (1) \| Respond to of 217975

periods of great crisis are really just opportunities in disguise. Case in point, many emerging markets are now emerging in name only. They’ve become “BEEs” or Big Emerging Economies, with superior risk-reward characteristics, newly unbridled consumer power, and – gasp – some element of adult supervision when it comes to fiscal fitness. Not surprisingly, their bond markets are pricing in an entirely new set of expectations, 6%-9% growth, and capital markets that may exceed $300 trillion by 2025, according to proprietary research … more than 60% of which will come from outside the established players of the United States, the EU, and Japan. What’s more, many of the same emerging markets we used to regard as little more than entertaining backwater trading partners are now some of the world’s biggest foreign creditors. Virtually all have large reserves, and the importance of this development cannot be understated. At a time when we are hamstrung by our own problems, this is hard to imagine. But it’s not difficult to understand: since WWII, developed countries have contributed ever less to global growth. It’s not that we’re falling off the map. In fact, quite the opposite is happening, and other nations are simply coming up to speed. Here’s why. In contrast to years past, when a financial crisis would have erupted into a fiscal crisis, countries like China, Brazil, and others have seen their currencies strengthen. This makes their dollar-denominated debt easier to repay, especially as a creditor, because any weakness in the currency actually improves fiscal accounts. At the same time, being a net external creditor gives emerging-market policy makers economic flexibility that simply wasn’t possible a decade ago. As a result, many emerging economies, particularly the BEEs, can now provide a sort of countercyclical stimulus that is capable of stimulating domestic demand, even as they become less reliant on their exports. This is why China, for example, has not crashed and Brazil refuses to buckle. According to the International Monetary Fund, worldwide official foreign exchange holdings reached $9.69 trillion in the first quarter of 2011. That’s a 17% increase year-over-year in aggregate. As of the end of Q1 2011, total foreign exchange holdings by advanced economies were $3.16 trillion, and total foreign exchange holdings by emerging and developing economies were approximately double that, or $6.53 trillion. If your jaw is not on the floor already, consider China. As of March 2011, China had $3.1 trillion in reserves all by itself, while the U.S. showed merely $128 billion in the proverbial piggy bank. fxstreet.com