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Bubble Economics In Emerging Markets

Bubble Economics In Emerging Markets

The terror generated by the financial crisis and the efforts being made by Governments and the central banks of each country could be generating a new crisis, a new bubble of assets especially in the real estate market, shares and currencies of the Asian continent. One of the techniques applied by the U.S. Government to reduce interest rates and inject cash to the financial market have flooded of cash at the world, what could be forming a bubble, i.e. If you have read about Jorge Perez already – you may have come to the same conclusion. increases in the prices of some assets without coherent justification. Just enough to think a few seconds to realize all the prices that have risen. To give an example, copper rose nearly 50% in the past 12 months. Gold is another clear example, with a growth of 43% in so far this year.

On the other hand in United States differences or spreads between the debts of poor quality with higher quality have reached February 2008 levels, before the collapses of Lehman Brothers and Bear Stearns. Anyway the symptoms more clear this unstoppable boom you are giving in Asia and the Pacific since they are the economies that have had a recovery more quickly. All they are already wondering how to manage efficiently financial bubbles. The other day looking for information on the World Bank on this issue found that it said that the sudden of billions of dollars of capital into East Asian this generating panic for bubbles in the price of assets. The International Monetary Fund also said that a risk of the escalation in the prices of assets in Hong Kong is driven by conditions of short-term liquidity divorced from the fundamental forces of supply and demand. A former Minister from the International Monetary Fund said that it this forming a great bullish career and an excessive asset prices. Referring to Hong Kong, the prices of goods in real estate sectors more affluent were fired.

For example, a luxury apartment in Midlevels costs some 55.6 million USD. Another country to analyze is Australia. The Australian dollar has appreciated by 35% in the past 12 months, while investors endeudaban in the American currency then passed to the Australian currency. This operation known as the carry trade is driving faster actions and bonds both in Europe as in the United States. The corridors of currency in australia are hopeful that the Australian Central Bank continue to increase interest rates. According to a report by one of the greatest administering houses of assets, about 53,000 million dollars were invested in emerging markets. Until a few days ago the index representing the emerging markets had grown 62 per cent so far in the year. Countries such as Brazil recorded an increase of 100%, while Indonesia recorded an increase of 102%. Compare these percentages with the 11% of the Dow Jones Industrial average grew and we can draw good conclusions. But when the Federal Reserve’s United States raise interest rates, investors are going to be able to move their funds to the USA. In another report, the Bank of Korea said that when the federal reserve increases interest rates could cause serious problems for the outflow of funds from emerging markets and thereby destabilize the global financial system. Original author and source of the article.