Deleveraging: The Pullback by investors

Washington Post, October 28, 2008 on page A9: "Deleveraging is extending massive losses on global stock markets, the Hong Kong stock market had its biggest one-day percentage drop since 1989, and Tokyo's Nikkei fell to its lowest level in 20 years. This situation is affecting currency markets, with economists warning of a growing disequilibrium in global exchange rates.

However, US Dollar is thought to be a more reliable than most other currencies, with the rush to the dollar sending its value soaring against the Euro, the British pound and a host of emerging market coins in recent weeks."

Some economists hold traveler's checks in US Dollars without interest but as a safe investment still instead of downward trebd of stocks. It is up to the mindset of the investors.

Contribution from China would be expected with cash reserves if approved by authorities in China. China's retail sales are still doing well but credit worries causing retail slump in America. Such situation threatens businesses during the Yuletide 2008.

Economist Sasajima of Meiji Gakuin University in Tokyo said: "Our society is definitely becoming a class society." i.e. a widening income gap in Japan. In the US,such situation can be noted as well. Presidential candidate Obama wants to have CHANGE with redistribution of wealth in USA. UN declared that China is a more egalitarian society i.e. Middle class folks are gaining momentum but not in the United States. I have reason to believe that situation will change after election next Tuesday, Nov.4th to search for a better America with more equitable distribution of income and wages in a society of more folks in the middle class as the backbone for peace and economic development.

C. Fred Bergsten, director of the Peterson Institution for International Economics reasoned that as the currencies go down, the debt in dollars for emerging economics is going up substantially and that is very much like what happened a decade ago in the Asian financial crisis. It is a "fear" that could happen again. China is robust with a vision since June to manage macroeconomic policy as stated by Premier Wen via Phoenix TV, Hong Kong on October 28, 2008.

My comment: It is up to the actions of folks for their reactions of their behavior during such tough times of global problems. Needless to say, the actions by most governments and IMF should solve some problems during the course of time. We need to watch the developments as time goes by.

Francis Shieh a.k.a. Xie Shihao as a lifelong student of economics to learn the events from empirical evidence.

Tuesday, October 28, 2008 at 10.55 a.m.