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What would happen to developing nation (India/China etc) stocks if the US economy crashed severely?
By Rose | November 6, 2008
accorn34 asked:
It’s my opinion that the US economy is heading for a major economic crash, perhaps even another great depression.
I was just wondering what would happen to an index fund that was invested in emerging markets (such as India/China/Russia etc) if the US economy crashed heavily – both in the short term and long term.
Kenneth
It’s my opinion that the US economy is heading for a major economic crash, perhaps even another great depression.
I was just wondering what would happen to an index fund that was invested in emerging markets (such as India/China/Russia etc) if the US economy crashed heavily – both in the short term and long term.
Kenneth
Topics: US Economy | 5 Comments »
November 9th, 2008 at 4:56 pm
Short term – you would lose
Long term – you would lose
You need a strong US to have a strong economy around the world. Most countries depend on the strong US dollar.
November 10th, 2008 at 10:42 pm
there is this guy that writes articles about the us economy
i read some of them and i was really suprised too.
just google us economy and you will get all sorts of different
things.
November 11th, 2008 at 7:38 pm
If US economy crashed heavily any investments in emerging markets would lead to a huge loss and it would end up taking a long time to recover.
The short term investments would be a better choice with trade in period of less than a month on stable industries like construction, telecom and electronics.
November 14th, 2008 at 7:27 pm
Economy works like yin-yang. If America were to crash, rest of the world will also be effected by it. There are many countries that are self sustaining, like Japan, but for China who relies heavily in exporting, their market will also suffer.
It helps if you don’t think of America as a single country, but think of it as one fourth of the world. America going into depression will have similar effect as Europe going into depression.
November 17th, 2008 at 11:27 pm
What other people have said is true. However you must understand that the only thing that would really have an effect is the level of dependence on US imports and exports.
US itself is self sustaining – it sources 60% of supplies locally (which is HUGE compared to what it was).
Other countries that are developing and rely on exports to the US will crumble. UNLESS they find new markets. China found new markets during the Asian crisis and Australia managed to get away from it because it was pushed by local demand – but I wouldnt be relying on local demand if I was in China.
But then if those countries do get effected severely, the rest of the world will follow – BUT not as severely. Economists will start foreseeing the overall economic performance and the countries that are next on the list will start applying fiscal and monetary policies that will cushion this.
For example: US crumbles, takes down China. China stops exporting heavily to the US, and so it ceases its demand for coal from Australia. By that time, Australian economists would have tightened fiscal policy (budget) and would cushion the fall by providing transfer payments. Countries without these types of luxuries are unlikely to have the cushioning.
Also keep in mind that Russia’s exports are spread all through the world and a recession just in the US wouldnt impact that economy as hard unless it hit the EU, which it shouldnt because the EU has trade protection from the ground up.