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It’s simple; a lot of the QE from US left US and went to emerging markets, when there was an interest rate difference between those markets and US’s 0 percent.
by joefranklinsrs 8y ago
It’s simple; a lot of the QE from US left US and went to emerging markets, when there was an interest rate difference between those markets and US’s 0 percent. Overtime, the profits earned from those overseas investments stayed overseas. However, when China’s stock market collapsed in 2015 and more money started flowing back into US, US raise interest rate in late 2015. This prompted more return of money back into US, which prompted more economic slowdowns in emerging markets (enhanced by political instability in turkey, Russia, and rising debt in China). With fed raising rates higher and higher, and emerging markets slowing down even more, more and more of the QE money flew back to US. Thus the real estate boom in Silicon Valley, NY, and Los Angeles. Ironically, a lot of China’s QE resulted in the same flow; lots of money went into US real estate. And now we have dollar strength, rising interest rates, emerging market crisis, US gdp growth at 4% in q2
- xapata 8y agoUS GDP growth spike may also be due to companies buying foreign supplies before the tariffs hit.
- bbstevecou 8y agoYup, that's why China lost 3.8Trillion out of their 7Trillion wealth in the last decade. https://www.forbes.com/sites/insideasia/2017/02/22/china-capital-flight-migration/ https://www.forbes.com/sites/insideasia/2017/02/22/china-cap... And why China is in deep trouble because they have 3Trillion (supposedly) in foreign reserves, but IMF said China needs at least 2.5Trillion for normal import/export operations. So really, they only have 500B in foreign reserves. And now they're going through reserves even faster, selling dollars to prop up yuan, since yuan has now fallen 10% within the last few months.
- pas 8y agoWhy do they need 2.5T USD for import-export? Could you elaborate on this?
- simonh 8y agoThey need the reserves to cover their credit risk. This Forbes article lays it all out pretty well. https://www.forbes.com/sites/salvatorebabones/2018/05/24/china-is-sitting-on-3-trillion-in-currency-reserves-but-is-that-enough/#de570a65fce8 https://www.forbes.com/sites/salvatorebabones/2018/05/24/chi...