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Thread: What impact will Fed interest cut have on China's economy?

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[quote=APAULT,247724]There is still a view that the USA matters!  OK I am exaggerating, let me restate that... There is still a view that the USA matters as much as it used to.  Remember the old saying, 'when the US sneezes the rest of the world catches a cold'.  Sure the USA is the largest economy but it's not going anywhere. It is held back by social and political problems.  So it has a fixed size and relatively stable trade patterns with the rest of the world.  On the other hand some new economies led by China are generating new trade.  China is not going to stop growing for some time yet and its new trade (and India's etc) is what is leading the world economy now.  If the USA stopped production tomorrow of course we would all feel it.  But a few hiccups because of the sub prime housing market problem (ie overly risky loans by ever greedy lenders) in the USA is not going to bring down the rest of the world.  Thank you the new developing world.  All we have to do now is fix the problem of the environment.

Unfortunately many world stockmarket traders have not woken up to this and still sell on the first sniffle in the USA and panic on a sneeze.  The problem is that other traders follow suit and sell because they know how the first group reacts and then we have a far more significnt fall in share prices.  Share prices typically reflect an underlying value but the flustuations are based on a very small number of the owners of those share deciding they must sell.  For example, a 10% drop in a share price may occur with 99% or more of the shareholders not selling but being patient and waiting for the panic merchants and speculators to wipe their noses and get back to back to basics (or as with all hyperchondriacs, look for the next potential sneeze).

Thirdly, the small impact it might have on China's economy is exactly hat China wants - you said that we have increased interest rates to try and slow the economy and reduce inflation.  Thank you Mr Bush for helping us!!

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