Even if there is a global downturn, the US economy will remain strong. Where else is capital going to go? If developing economies go bust, developed nations like the US will buy up their assets in a fire-sale.
I don't know if that's quite right. From what I understood, one large cause in the inflation of US stocks has been from the inflow of foreign capital. Much of that capital is essentially a blind investment into ETF's.. I forget the numbers, something like 8% of total NYSE value and 30% of all trade volume. Those investments are essentially saying, "I don't really care what you do as long as you're doing it in US Dollars". They are certainly not investments evaluating the financials of specific companies.
That is a problem for the US and the World alike. A down-turn in the US economy which affected stock prices would cascade and cause an evaporation of money world wide overnight.
Developing countries are the least hurt by global recessions. And the point isn't that the capital has to go somewhere, it's that it's not actually there to begin with. Besides, the article says it's the US specifically that looks like it's in trouble and that foreign stocks looks much better.
Investment in developing countries is considered to be more risky. In a recession people move their money into less risky assets. I believe a major recession is coming, but I think the US will be the least hurt.
China just opened up outside investment this week. Chinese capital already owns way more of America through various investment vehicles than we are willing to admit.
We abdicated our global leadership to China the day Trump was elected. Our economic leadership will likely follow in the next decade.
Nixon's visit to china was motivated by a need to finance the war machine. Reagan didnt do anything to prevent waves of economic refugees from coming to the US after the economic hitmen took out Mexico's economy. Clinton picked up the free trade baton from Bush 41, passed it off to Bush 43, who passed it off to Obama.
Hopefully el presidente can find a way to stop the bleeding of thousands of economic paper cuts.
China's economy is highly dependent on Western consumption of their goods. If the US went into recession, and Americans significantly cut back on their consumption, which many of them certainly could afford to without going into poverty, wouldn't that wreck China's economy?
>China's economy is highly dependent on Western consumption of their goods. If the US went into recession, and Americans significantly cut back on their consumption, which many of them certainly could afford to without going into poverty, wouldn't that wreck China's economy?
No, they will manipulate their currency or adjust prices so that more people from China and India buy that stuff. Adding a few hundred million consumers will not be that difficult with those measures.
The Fed manipulates US currency too. We just don't call it "currency manipulation" because, conveniently, the definition of currency manipulation is buying foreign currency. Buying up your own currency/bonds or increasing reserve requirements achieves the same result.
That is a problem for the US and the World alike. A down-turn in the US economy which affected stock prices would cascade and cause an evaporation of money world wide overnight.