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July 4th, 2009 at 8:55 pm
Which countries will be in the least trouble because of the downturn (other than the US)?
July 5th, 2009 at 11:54 am
During the past 60 years, almost without exception, economies outside the US have employed policies that increased their dependency on the health of the US economy, directly or indirectly.
During the past couple decades, granted by the flood of liquidity unleashed, billions of people have seen their lifes improve, many leaving behind an existence of absolute inhumane poverty.
The flip-side is that this was granted by much too high a leverage (credit), i.e it happened too fast and lacked quality. The reversal of this will hurt. Because the first phase of a country’s development tends to be much more capital intensive than the service economy we find today in the US, sadly it will also be much more painful.
Now, paradoxically, those that were left behind by the incredible boom will hurt much less. Some African and Latin American countries come to mind (if you are thinking investment you may find it hard to locate any appropriate vehicles in those areas). India is the largest single country that will likely be less exposed to the downturn. But with the rest of the world in depression it will be no cakewalk for anyone, I am afraid.