Remember when they explained to us we needed to have the Republicans in charge "because they're good with money"? Remember how excited the Villagers were about having a Harvard MBA president? Ah, good times!
The deep river of private money that helped knit together the global economy has abruptly dried up, new government figures show.
As the global financial crisis grew more severe this summer, foreigners sold almost $90 billion of U.S. securities — the greatest quarterly fire sale by overseas investors since the government began keeping track in 1960. U.S. investors also are retrenching; they unloaded about $85 billion worth of foreign holdings in the quarter, says the Commerce Department's Bureau of Economic Analysis.
"We've had a global panic. Everyone is pulling their money home," says economist Adam Posen of the Peterson Institute in Washington, D.C.
That's bad for economic growth in the U.S. because it threatens to starve capital-hungry companies and entrepreneurs. But it's especially serious for emerging-market countries that rely heavily on outside financing. Capital flows into countries such as South Korea, Turkey and Brazil were evaporating even before the mid-September Lehman Bros. bankruptcy made things worse.
The reversal of private capital flows signals an abrupt end to a nearly two-decades-long era of financial globalization, says economist Brad Setser of the Council on Foreign Relations. Private flows into and out of the U.S. for purchases of stocks, corporate bonds and federal agency bonds have dropped from around 18% of economic output to near zero "in a remarkably short period of time," Setser says.
Source: Crooks & Liars
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Ask a great money-maker what he wants to do with his money, — he never knows. He doesn't make it to do anything with it. He gets it only that he may get it. "What will you make of what you have got?" you ask. "Well, I'll get more," he says. Just as at cricket, you get more runs. There's no use in the runs, but to get more of them than other people is the game. So all that great foul city of London there, — rattling, growling, smoking, stinking, — a ghastly heap of fermenting brickwork, pouring out poison at every pore, — you fancy it is a city of work? Not a street of it! It is a great city of play; very nasty play and very hard play, but still play.
John Ruskin (1819-1900),
The Crown of Wild Olive (1866),
lecture I: Work, paragraphs 23-24
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