It's often said that if the American economy gets the sniffles, the rest of the world catches the flu. So what happens if it's the U.S. that catches the flu, and in a bad way? Does that put every other economy on their deathbeds, calling their lawyer to put together a final will and testament?We'll soon find out. Indonesia's composite index fell around 10% in a single day Monday, the kind of drop that would have American market commentators running for their bottles of Maalox. (Even the 777-point Dow plummet the other day wasn't as big as that, percentage-wise.) One culprit is that Indonesian inflation is running at a two-year high of 12%, worrying enough to practically guarantee more hikes in interest rates, which are already lofty at over 9%.
But the core worry is that global stock markets are undergoing a rout of historic proportions, and investors are fleeing for shore - away from emerging markets and dodgy currencies, and towards money-market funds, government treasury bonds, gold, and not a whole lot else. Contracting economies means less energy consumption which means Indonesian commodity concerns, like coal companies, get hammered. Only thing to do is batten down the hatches and hope that the storm passes, with your house still standing ...
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