However, hedge funds could cause another scenerio to materialize. Historically, as inflation increased and the dollar devalued, US investors sought to put money in hedge funds seeking double digit returns investments in emerging markets. Some speculators borrowed new cheap Asian money and invested in higher yield US securities others reaped the benefits of hot money. Hedge funds seemed content to remain positioned in emerging markets, as long as US consumption remained strong. When foreign Asian markets becoming uncertain about the future panick set in. Panick was fueled by fears that US inflation will rise and US consumption decrease. This was a worst case scenerio because Asian markets were in the business of production not consumption and any changes in expectations of consumption could have massive impacts. The hedge fund remained root while profits were within the acceptable threshhold but as profits drops so did their confidence wain and these hedge funds could flee out of Asia back into US securities. The sudden increase in available liquidity would cause a surge in borrowing and business growth,further inflating the economy, drive down interest rates, and inflate the stock market. The surge in market capital in the stock market will cause a job boom, until balance is achieved then a massive depression will set in, lasting about 20-30 years.[Learn More ...]

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