Forget about North Korea’s nukes — last week it was South Korea’s central bank sending out global shock waves. The bank just happened to mention that it was considering “diversifying” its holding, which some people read as dumping U.S. treasuries, and the stock market went into a tailspin.
Many in the economic forecasting business used it to warn that the U.S. economic bubble was about to burst. But cooler heads prevailed. The South Koreans backed off, the stock market stabilized, and the U.S. dollar regained much of the value it lost in the sell-off scare.
But uncertainty is still the word on the street. International observers say the government’s economic planners have their hands off the wheel, trusting the market, trusting the reputation of an economy which no longer steers straight. Too much trust in the guardrails.
David Rothkopf, former senior Clinton Administration economic official, currently chairman of the consulting firm, The Rothkopf Group, and author of the forthcoming “Running the World: The Inside Story of the National Security Council and the Architects of American Power”
Andy Busch, Global Foreign Exchange Strategist at Bank of Montreal in Chicago, and advisor to the US Treasury on economic and market issues.