Quote from asap:
probably the subprime woes wont have a major devastating effect on the economy, probably not.
but the fact remains, US is still facing a huge budgetary problem due to its war efforts which doesnt seem to ease going forward. In addition, the US economic expansion of the latest years have been done at the expense of consumers, which at this point are quite overwhelmed by bad credit and high interest rates.
to finance its foreign policy, the US has to issue billions in public debt, which china, india and others gladly take. So since china and others surplus is financing US deficits, in the future, those imbalances will lead to a transfer of consumption rates from US to elsewhere or IOW, steep economic growth is more likely to be happen abroad, while the US will have to settle for subpar performance.
i dont have a slightest clue of what the market will do next but looking at the past sessions, it looks like it is safer to bet on the sell side because the market has already erased much of losses from last week, while the facts remain.