Will there be asset bubbles globally?
*Bloomberg, by John Fraher and Simon Kennedy, October 30, 2006
Global Cash Glut Fuels Investment Boom, Rate Concern
“Markets around the world are awash in excess cash, fueling a frenzy of investment from London to Tokyo that may lead central banks to push interest rates higher than investors now anticipate.
Money remains cheaper than in the 1990s even after every major central bank raised rates this year, the first simultaneous tightening since 2000. The cash glut is reheating the U.K. housing market, while in Japan companies plan the most investment since 1990. China’s biggest bank this month attracted orders for more than half a trillion dollars with its initial public offering of shares.
“Interest rates in the main economies have still not been raised enough,” says Tim Congdon, visiting fellow at the London School of Economics and one of the “wise men” who advised the U.K. Treasury in the 1990s. “There is a buoyancy in asset prices one gets with high-risk monetary growth.”
Without further tightening, central bankers may have new asset bubbles and inflation risks on their hands.”
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