Turmoil in US may have lasting impact
Friday, 19 September 2008
From Fazle Rashid
NEW YORK, Sept 18: The greatest danger for the US economy is not yet over. The current turmoil may have a lasting impact. The US economy has been badly bruised and the wounds are not likely to heal any time soon. The scars could be permanent.
The Asian investors who staked their money in dollar-denominated bonds may switch to China. The media and US analysts are blaming the media in Asia for overblowing the news of the economic disasters thus stoking panic and alarm. Asia's savings have in essence bankrolled American spending for decades and an Asian loss of confidence in American financial institutions and assets would have dire consequences for both US government and the American tax payers, the New York Times reported today.
The unrelenting deluge of adverse publicity for American investments seems to be seeping into the consciousness of the rich and middle class across Asia, the analysts said. Asian investments in US are in trillion dollar. The weariness towards the US is becoming deeply entrenched in the minds of the Asian investors. The Asian investors pessimism is born out of bankruptcy of Lehman Brothers, Bank of America rescuing Merrill Lynch and the government after initially turning it face finally agreed to bail the giant insurance company, AIG Asian interest in American assets is wilting.
The US Treasury Department data revealed that there has been a sharp shift in international capital movements. Private investors withdrew a net of $92.9 billion out of US in July after putting $46.8 billion in June. The withdrawal was almost double of deposit. Asian economy will recoup faster than the US economy from the current malaise.
If cash is King during the current global financial crisis, then Asian governments and financial institutions are Emperors. China, as reported earlier, has a foreign exchange reserve of $1.8 trillion. The Chinese reserves grew at a phenomenal pace recording a growth of $280.6 billion in the first six months of this year, a pace of $64 million an hour. America has a huge stake in Chinese economy. The United States on the other hand has accumulated a trade deficit of $181.1 billion.
The US analysts say changing Asian sentiments have not eroded the value of dollar. The experts said if the withdrawal continues to be in the same vein as in July, it could spell further problem for the US economy. China has emerged as the biggest beneficiary from the economic turmoil in US. The exact amount of China's gain cannot be quantified now. The automakers were the first victims of the collapse of mortgage lending. It had vainly sought government assistance.
Now with elections not even seven weeks away both the presidential candidates, both being sitting Senators, have vigorously advocated for $25 billion loans for three giant automakers, namely, Chrysler, General Motors and Ford.
The loans will be highly politically motivated. The two states Ohio and Michigan home to automakers could make or break the political fortune of Barack Obama and John McCain in Nov 4 presidential elections. So government taking politically motivated decisions is not unique in Bangladesh alone.
NEW YORK, Sept 18: The greatest danger for the US economy is not yet over. The current turmoil may have a lasting impact. The US economy has been badly bruised and the wounds are not likely to heal any time soon. The scars could be permanent.
The Asian investors who staked their money in dollar-denominated bonds may switch to China. The media and US analysts are blaming the media in Asia for overblowing the news of the economic disasters thus stoking panic and alarm. Asia's savings have in essence bankrolled American spending for decades and an Asian loss of confidence in American financial institutions and assets would have dire consequences for both US government and the American tax payers, the New York Times reported today.
The unrelenting deluge of adverse publicity for American investments seems to be seeping into the consciousness of the rich and middle class across Asia, the analysts said. Asian investments in US are in trillion dollar. The weariness towards the US is becoming deeply entrenched in the minds of the Asian investors. The Asian investors pessimism is born out of bankruptcy of Lehman Brothers, Bank of America rescuing Merrill Lynch and the government after initially turning it face finally agreed to bail the giant insurance company, AIG Asian interest in American assets is wilting.
The US Treasury Department data revealed that there has been a sharp shift in international capital movements. Private investors withdrew a net of $92.9 billion out of US in July after putting $46.8 billion in June. The withdrawal was almost double of deposit. Asian economy will recoup faster than the US economy from the current malaise.
If cash is King during the current global financial crisis, then Asian governments and financial institutions are Emperors. China, as reported earlier, has a foreign exchange reserve of $1.8 trillion. The Chinese reserves grew at a phenomenal pace recording a growth of $280.6 billion in the first six months of this year, a pace of $64 million an hour. America has a huge stake in Chinese economy. The United States on the other hand has accumulated a trade deficit of $181.1 billion.
The US analysts say changing Asian sentiments have not eroded the value of dollar. The experts said if the withdrawal continues to be in the same vein as in July, it could spell further problem for the US economy. China has emerged as the biggest beneficiary from the economic turmoil in US. The exact amount of China's gain cannot be quantified now. The automakers were the first victims of the collapse of mortgage lending. It had vainly sought government assistance.
Now with elections not even seven weeks away both the presidential candidates, both being sitting Senators, have vigorously advocated for $25 billion loans for three giant automakers, namely, Chrysler, General Motors and Ford.
The loans will be highly politically motivated. The two states Ohio and Michigan home to automakers could make or break the political fortune of Barack Obama and John McCain in Nov 4 presidential elections. So government taking politically motivated decisions is not unique in Bangladesh alone.