U.S. economy to suffer because of China collapse
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Another day of losses has hit markets around the globe, starting with a slide so fast and so deep in the Chinese markets that trading was halted. The ripples of the Chinese collapse are being felt around the world with U.S. markets dropping at least 1 percent.
LOS ANGELES, CA (California Network) - Chinese markets fell by another 7 percent in early trading on Thursday, triggering a safety measure which halted trading for the day. When markets opened in Europe, then the U.S., smaller drops immediately registered.
China's market was open for just 30 minutes when the halt was triggered.
The single-digit drops may not feel like they're very big, but in markets with trillions of dollars in circulation, even a small percentage drop can wipe out billions in value from investment portfolios.
The drop in China, which is impacting other markets around the world, is being caused by a slowdown in Chinese manufacturing. Factories are ordering less and producing less as consumers in China have slowed their spending. Less productivity means less likely profit, which causes the value of stocks to decrease.
In the United States, the trend is to raise interest rates, which have been at historic lows for several years. But now with trouble returning to the market, future interest rate increases could come into jeopardy. Rates are raised when the Federal Reserve wants to slow growth and retard inflation. But with growth slowing around the world because of China, the Fed may not want to raise rates. Raising interest rates while the economy is contracting would accelerate decline instead of reversing it.
Europe is forecast to suffer more from the Chinese downturn as European markets are even more dependent on China that U.S. markets. However, the U.S. will suffer too since the world's markets are all interrelated.
There is growing concern that the world economy, and China in particular, could be on a bubble. If so, then the markets will eventually correct themselves, resulting in massive losses around the world.
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