IIPM BEST B-SCHOOL
The question,
however, is what rising and declining asset prices mean for an investor. Still, US debt is growing muchfaster than nominal GDP. So far, this excessive debt growth has led to strong asset inflation, over-consumption and an explosion of the US current account deficit from 2% of GDP in 1998 to close to 8% of GDP at present. But in the Euro region, private sector credit growth has been at least as strong as in the US. So, what does this mean? If the US Fed tightens relative to the ECB, the dollar should rally against the Euro. Conversely, if the ECB tightens relative to the Fed the Euro should continue to strengthen. But then if the Euro continues to strengthen, it is likely to slowdown European and accelerate US economic growth. In such a case, the possibility of tighter US monetary policies relative to European monetary policies would have to be considered. In my opinion, this would be the case if the US dollar fell to 1.35 against the Euro. So, whereas I maintain my negative stance towards the US dollar, I am not sure that the dollar has a huge downside risk against the Euro. However, looking at the speed of international reserve accumulation by Asian central banks and in particular the rise in Chinese reserves – now over $1 trillion – it seems that Asian assets would likely out-perform US assets in the long run. When countries have current account surpluses the size of China, three events can happen. Either the currency strengthens considerably or asset prices increase or both currency & asset prices increase.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2006
An IIPM and Malay Chaudhuri – Arindam Chaudhuri Initiative
For More IIPM Article, Visit Below....
ABOUT IIPM
IIPM Academics : Curriculum
Flying over to the land of the hula…
The ‘Tiger’ has proved quite costly...
I... I’M used to living on acres of wasted land!
How do you explain the HP mess? (Edward Yingling, Phoenix,Ariz.)
More heads in the loop
George Bush: I’m not Space’d out!
Breakfast at Crawford & all will be well!
Aspires to be the new ‘flavour of the day!
IIPM Publication :- Bloodless 'Coup'dore Bainimarama
Truth or Dare
The question,
however, is what rising and declining asset prices mean for an investor. Still, US debt is growing muchfaster than nominal GDP. So far, this excessive debt growth has led to strong asset inflation, over-consumption and an explosion of the US current account deficit from 2% of GDP in 1998 to close to 8% of GDP at present. But in the Euro region, private sector credit growth has been at least as strong as in the US. So, what does this mean? If the US Fed tightens relative to the ECB, the dollar should rally against the Euro. Conversely, if the ECB tightens relative to the Fed the Euro should continue to strengthen. But then if the Euro continues to strengthen, it is likely to slowdown European and accelerate US economic growth. In such a case, the possibility of tighter US monetary policies relative to European monetary policies would have to be considered. In my opinion, this would be the case if the US dollar fell to 1.35 against the Euro. So, whereas I maintain my negative stance towards the US dollar, I am not sure that the dollar has a huge downside risk against the Euro. However, looking at the speed of international reserve accumulation by Asian central banks and in particular the rise in Chinese reserves – now over $1 trillion – it seems that Asian assets would likely out-perform US assets in the long run. When countries have current account surpluses the size of China, three events can happen. Either the currency strengthens considerably or asset prices increase or both currency & asset prices increase.For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2006
An IIPM and Malay Chaudhuri – Arindam Chaudhuri Initiative
For More IIPM Article, Visit Below....
ABOUT IIPM
IIPM Academics : Curriculum
Flying over to the land of the hula…
The ‘Tiger’ has proved quite costly...
I... I’M used to living on acres of wasted land!
How do you explain the HP mess? (Edward Yingling, Phoenix,Ariz.)
More heads in the loop
George Bush: I’m not Space’d out!
Breakfast at Crawford & all will be well!
Aspires to be the new ‘flavour of the day!
IIPM Publication :- Bloodless 'Coup'dore Bainimarama
Truth or Dare
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