That is happening now with US equipment investment declining by 2.3 per cent in the most recent quarter, and investment in technology by 10 per cent. These cutbacks have had a big effect on Asia where exports of electronic equipment have fallen by 25 per cent, which helps explain why Asian GDP growth has flattened out over recent quarters.
To set the stage, let’s remember that it is very unusual for GoC securities markets to seize up in periods of financial stress. During the global financial crisis—as in most market-wide liquidity stress events—a flight-to-quality mindset took hold and market participants rushed to buy GoC bonds.