Global Financial Bloodbath: $5 Trillion Wiped In 2 Days | Will Europe Turn To China
For decades, one of the biggest—if not the biggest—US exports was (and is) debt, mostly government debt. Foreign nationals use Treasury bills as collateral, often in trade with nations other than the US. Meanwhile, Wall Street makes out as the "middle man," and Congress Critters can spend money feeding their special interest friends without raising taxes. So we are selling off bits of our nation in return for trinkets.
To cut the trade deficit, we will need to cut the budget deficit or save more as a nation (and consume less). In recent years, the Treasury floated more short-term debt, which we must roll over, so interest rates may not decline by much (although those looking for a "cash" position while things get sorted may want what the Treasury offers). Painful adjustments (many affecting quite influential groups) will be required.
Inflation has helped boost the stock market beyond the valuations the traditional "P/E" ratios would suggest. We may be witnessing a return to the mean, which may seem mean indeed as investors race to "de-leverage" first. Meanwhile, most corporations bought back shares when interest rates were low, pumping up the market, and may be selling now.
It is said Europe will turn to China to replace the United States, while China turns to Europe to replace the United States. I wish them luck.
