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    Default foreign 'hot money' investors getting nervous ...


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    Default Re: foreign 'hot money' investors getting nervous ...

    I love Melonie!

    I have nothing to add. Just thought it was a pity to see such a nice thread go with no replies.

    Keep posting... some of us still read all your articles

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    Default Re: foreign 'hot money' investors getting nervous ...

    Thanks Salsa.

    Actually, the concept of foreign 'hot money' inflows, and the potential negative consequences to the US dollar / economy if and when that 'hot money' stops flowing towards America, are poorly understood by most Americans. In a nutshell, Americans spend 2-3 billion dollars per day on foreign imports of one form or another ( oil, autos, durable goods, interest payments on loans and bonds ). This is counterbalanced to some degree by the inflows of foreign 'hot money' buying US bonds, stocks, other American assets, plus providing capital for loans and private investments.

    If and when the outflows of US dollars spent by Americans on foreign imports are no longer counterbalanced by 'hot money' flows in the opposite direction, it is logical that the US dollar exchange rate will tank big time making all imported items more expensive. It is also very probable that US dollar interest rates must rise to attract needed capital from different sources, and that US dollar inflation must rise as well since the gov't will be forced to print money to cover the shortfall in 'hot money' inflow to keep the economy liquid.

    To paraphrase a famous movie line, America is arguably 'dependent on the kindness of strangers' ... however in this case the word 'kindness' is a bit misplaced since the 'strangers' who hold those 'hot money' dollars are for the most part Arab oil sheiks, Chinese / Indian nouveau riche, 'old money' Europeans etc.

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