why Cash that drives shares in Shanghai also keeps U.S. interest rates low?

Question

can someone explain and what does the china crash of 9% has someting to do with the U.S.A

Answer 1

China keeps US interest rates low by buying up US Treasury securities. When there is a lot of demand for treasuries, the US can issue them at low rates and they get bought. If the demand were to dry up, then they would have to be sold at higher rates to attract buyers.

There were many factors that contributed to the recent market volatility. The slide in China was seen as a possible indicator of slowing global economic growth.

Answer 2

Why cash that drives shares in Shanghai also keeps U.S. interest rates low? Because that cash buys both Chinese stocks and U.S. government bonds, keeping prices higher than it would have been otherwise. With bonds, high prices automatically translate into lower interest rates.

What does the China crash of 9% have to do with the U.S.? Most likely, nothing. Many Chinese companies maintain dual listings. Chinese investors buy shares listed on the mainland exchanges, foreign investors buy chares listed in Hong Kong. In recent months, domestic prices have been consistently above Hong Kong prices, in some cases by 30-50%, in a couple of cases, by 150-200%. A 9% drop in domestic prices, when viewed against this background, appears insignificant...

Answer 3

Chinese investors do the same as US investors do. We are in a global marketplace. Many investors are skiddish, lets say 10%. So when the market is flat for many investments that were in funds, the investors get edgy when after not gaining much for a year, they hear things about capital gains tax going up in china or in US sub prime lending problems in the Feds opinion over and over and think they know that that relates to the economy deeply and then hear Greenspan claim that there is a possible recession on the horizon. So the investors from China that have to do with sub prime lending mostly, and the investors in the US that are skiddish by a long shot, pull their money out of the market and put it in safe keeping or in a money market account and wait for advice. Now many of the REITs took a big hit but they should not have. The people that pulled out because they thought all REITs are the same. They are not! There are REITs in the residential market and REITS in the corporate market for instance. Corporate markets have nothing to do with housing markets, in my view. And besides that, I haven't known a house to go for less money after a lending institution takes it over from a failed mortgage. So how does value go down? It goes down because those that panic and pull out, perhaps on the recommendation of their broker or semi broker friends say, "Ohhh! I don't know!" And they hear some members of the Federal Reserve Board say "There might be a problem this year." and they hear Greenspan say( I personally think this guy should keep his mouth shut...wonder if he was being paid to get people's fears up...that time of year to shake people up with bad news....it is winter for Christ sake) he says something like... 'We might have a recession brewing". To me the Fed should clarify what a sub prime lender is for the people who don't know. But there is a big advantage that they don't to people who have big money invested in property...if you get out at a low...and the stock bounces back up, there is more money to pay their execs more money and you don't share in the longer run profits. That's my take.