The U.S. today is much worse off than it was 10 or 20 years ago compared with the rest of the world. The Asians should thank the Federal Reserve for this. The Fed practically created the emerging market economies.
The Chinese pegged its currency to the dollar in 1994, and until 1998 not much happened. When the Fed began printing and boosting asset prices in 1998, there was this huge debt growth, and U.S. consumers began spending at a massive rate.
That increased our trade deficit from $200 billion to $800 billion. Of course, trade deficits have to be offset by trade surpluses in other countries. So the Chinese began ratcheting up production. Then their employment went up. Their wages went up. Entrepreneurs began investing more money in capital spending. The Fed is not the only factor that led to strong emerging market growth, but it certainly was a major factor in it.
Related ETFs: iShares MSCI Emerging Markets Indx (ETF) (Public, NYSE:EEM), iShares FTSE/Xinhua China 25 Index (ETF) (Public, NYSE:FXI), Morgan Stanley China A Share Fund, Inc. (Public, NYSE:CAF)
Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.
