October 14, 2008

Where Is The Excess Capital?

Wall Street friends have been saying that in the last few years there has been a noticeable excess of global capital. Investors in Asia and oil-rich countries have had too much cash and have been looking for places to park their money. That demand drove the invention of exotic investment instruments vehicles. Mortgage derivatives were just one of many ways for investors to put their money in a wider range of assets.

The same observation is fingered by some (here, William Wheaton) a key cause of the U.S. mortgages and housing bubble.

My question is this: now we've had a crash. Is the excess of global capital still looking for a place to park? Where will it go next? Or has the money just evaporated?

Posted by David at October 14, 2008 11:35 AM


Is there some particular reason why you don't publish your posts in their entirety in the RSS feed? Would you consider doing so?


Posted by: Samir at October 15, 2008 03:33 AM

In all of your observations, how do you feel that policies that encourage all Americans to borrow and spend, rather than save, affect our economy?

Posted by: Mary at October 15, 2008 11:39 AM

I suspect it has evaporated. Here's why: The US economy has given up trillions. If those trillions were repatriated or converted from USD to some other currency, there would have been a sell off of USD and concurrent falling price of USD, which is not apparent. During the drop last week, we saw a rising US Dollar.

Posted by: Roger at October 15, 2008 02:28 PM
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