It wasn't too long ago that the major stock markets around the world acted differently from each other. This was particularly the case in Asia with Ja...
It wasn't too long ago that the major stock markets around the world acted differently from each other. This was particularly the case in Asia with Japan's economic malaise and the Asian financial crisis that began in 1997. The U.S. stock market has always traded on its own merits and,
even if things went crazy on Asian stock markets, New York would most often open in a different direction.
Things have really changed over the last few years and they've changed dramatically since the credit crisis took hold around the world. Now, equity markets are moving in a concerted fashion, trading mostly on announcements of government stimulus policies. I don't think there's ever been a time when stock markets have acted in such a similar manner.
Global trade has ballooned in recent years and, despite the significant growth of some Asian countries, the world still wants to hold the U.S. dollar as its reserve currency. This is why I'm not one of those people who feel that the dollar is on track for a significant decline. Where else will governments and institutional investors put their money -- Chinese treasury bills? I don't think so.
With the world still wanting to buy U.S. dollars as a safe haven and reserve currency, I can only conclude that all the billions and billions of borrowing by government isn't a worry. The world still wants to finance the American economy and U.S. government spending, because there isn't a large enough currency alternative and there won't be for years and years.
China is beginning to grumble about the U.S. dollar as the globe's reserve currency. It owns an estimated trillion U.S. dollars and it's worried about its investment. That country wants the International Monetary Fund (IMF) to explore the creation of a new international reserve currency. Individual countries would then have special drawing rights based on its percentage contribution to the IMF. This isn't going to happen anytime soon, but some countries are beginning to talk about it.
The globalization of economies is going to be the source of significant strain over the coming decades and currency baskets like the euro will be tested to the limits. Over the near and medium term, I'm not worried about the prospects for the U.S. dollar, because the global marketplace has no other alternative to consider. This is good news for the American consumer, because global investors are there to lend the U.S. government money for all the bailouts and stimulus spending.
Access to credit is the single most important requirement for countries, economies and individuals. With investor appetite strong for U.S. dollars, I'm not worried about the future, I'm hopeful.
Profit Confidential
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