Finally, while assets nowadays are much more liquid, this has not boosted long term productive investment. Instead, the profitable carving up of healthy companies has freed up capital to flow to intangible assets, houses and other forms of real estate, fueling a speculative crisis.

Finally, while assets nowadays are much more liquid, this has not boosted long term productive investment.

The Chinese have grasped the hidden key to Japan's success in the 1970s and 1980s.

To transfer assets overseas?

The asset that is purchased need not be a physical asset.

For employees to develop, they must be imbedded in a stimulating workplace, with new problems to solve, harder tasks to be mastered, added abilities to strive for.

Basically, it is productive change, which I call economic dynamism .

First, China has an understandable interest in diversifying its substantial holdings of foreign exchange reserves away from low yielding US Treasuries to real productive assets with higher returns.

So, why are investors holding such assets?

No catastrophic earthquake or tsunami has destroyed southern Europe s productive capacity.

This erodes an economy s skills base and saps its long term productive capacities.

But if the Fed refuses to accommodate inflation produced by a dollar collapse and accepts a depression in the belief that the long run benefits of maintaining its credibility as a guarantor of price stability will come before we are all dead, American equities will suffer. Chinese property values and manufacturing assets would also be vulnerable, as the US abandons its role as importer of last resort and China s coastal export development strategy turns out to be a dead end.

Chinese property values and manufacturing assets would also be vulnerable, as the US abandons its role as importer of last resort and China s coastal export development strategy turns out to be a dead end.

Under these circumstances, large excess capacity develops and commodity prices fall.

By the second half of the year, the investment bust in real estate, infrastructure, and industrial capacity will accelerate.

Expanding the demand and reducing the supply of these risky assets is a way of manipulating their price.

Realigning China s infrastructure means emphasizing quality over quantity, and reducing state ownership and controlled prices in favor of market forces.

Will bank stocks once again outperform the market?

No private party would buy such an asset.

Once the music stopped, the assets plunged in value.

Rising asset prices follow from this psychology.

In my opinion, we need to diversify our assets.

First, it does not require government regulators to decide how much individual assets are worth, because private markets value toxic assets.

With every month that the economy loses productive capacity, the likelihood of stagnation and deflation rises.

New manufacturing technologies have generated feverish excitement about what some see as a Third Industrial Revolution.

Their bad assets will be separated and wound down over time.

As American assets have lost their attractiveness, their prices have dropped.

Liquid assets are assets that resemble cash, because they can easily be converted into cash and used to buy other assets.

Moreover, investment in public infrastructure and urban facilities will not create industrial over capacity instead, it will provide long term public consumption durables that households and companies will use for years to come.

White collar knowledge workers respond to different incentives and political appeals than do blue collar industrial workers.

It turned out that there was enormous excess capacity, and import substitution soon began, even in the midst of financial turmoil.

The authorities understand that the profits from Namibia's natural resources need to be invested in infrastructure and production capacity.

In the late 1950s the full production of the plant was turned over to non military production.

The difference is that the assets are private and the debts public.

When assets are seen as less risky, their prices rise.

That is enough to shake asset prices worldwide.

But is the recovery of asset prices driven by economic fundamentals?

Asset purchases have no balance sheet effect, because assets replace money.

Of course, farmland is much less important than other speculative assets.

After all, where else would they place their asset bets?

That is fine in theory, but where do such assets come from?

Lack of confidence is reflected in low and volatile asset values.

Either way, current asset prices are no longer warranted.

If it declares bankruptcy and refuses to buy back its assets, bankruptcy laws should give the central bank the first claim on the bank's assets.

In fact, fixed business investment as a share of GDP is some 2 lower today than 4 years ago.