Wednesday, September 10, 2008

The Debts of the World: Deflation Part III

It's not just here in the US we have asset deflation.

Countries worldwide are experiencing the bursting of bubbles.

There are 3 types of international economies undergoing asset deflation - commodity based exporters, manufacturing based exporters, and mature economies. Commodity based exporters - United Arab Emirates, Iran, Venezuela, Russia, Brazil, Australia, Kuwait, Saudi Arabia.

Manufacturing based exporters - China, Vietnam, Taiwan, S. Korea, Mexico.

Mature economies - UK, Ireland, Japan

ALL of these countries have one thing in common - BIG real estate bubbles and in many cases big stock market bubbles too.

Many of these countries built too much too fast. Just look at China or the Middle East.

Who else builds 20 skyscrapers a month? A 7 star hotel in the desert?

China has even worse problems than we do - their stock market is ALSO deflating. The Shanghai index has been down for the past 3-4 months (look at FXP - Ultrashort China ETF for ex.).

I repeat, gold will NOT rise in value until the asset deflating is done. Until then, all these foreign countries are piling into Treasuries and buying more time for the US to do more bailouts. The full effects of hyperinflation will begin sometime next year.