ONE OF THE frequent failings of Asian investment gurus is that soon after they reach their exalted status they stop looking at Asia and concentrate mostly on the doings of the US Federal Reserve Board. 'Fed watchers' is what these sorts of people are called. Ask them what they think of the Thai stock market and they will tell you that the next Federal Open Market Committee meeting will be held in two days' time, at which point US interest rates could go up or could go down or could go round and round. This, they will say, means that the future lies ahead of us and, although it all depends on market fluctuations and unforeseen factors, the house view leans towards cautious optimism on Thai share prices. Perhaps I do them an injustice but I was a minor Asian investment strategist myself for many years and I cannot protest complete innocence. All I can say is that I had plenty of company. Let me revert to a spot of Fed watching today as we are at a point where it may have some significance to us with our peg to the US dollar. A new Fed chief, Ben Bernanke, has just been picked to succeed Saint Alan Greenspan. Mr Bernanke has definite views on how he should do his job, including setting a target rate of inflation for monetary policy, a stricture that Saint Alan always shunned. Mr Bernanke believes that we no longer need to worry about depressions in the economic cycle. They were a danger when monetary policy was chained to the gold standard and the US government could not simply flood money into the system. But it can do so these days, he says, which means that the printing presses can be cranked up to full speed if depression threatens and easy money will then get the US out of its fix. There is truth in what he says. It is a prescribed remedy to a classic difficulty. The only reservation I have about it is that it may be a little too simple. Perhaps the imbalances from which the US economy now suffers may not respond so quickly to it this time. Look at the first chart. Yes, the average man on the street in the US no longer saves any money at all. He is now a net borrower. A blizzard of credit card advertising nonsense has won him over. I shall grant you that this is not true of corporate America. It still saves and invests its earnings as steadily as it has always done and this makes up for a good deal of the personal savings shortfall. But my story has more to do with the psychology of individual US consumers. They are now heavily of the view that they do not need to save money as the market value of their homes has risen considerably in recent years, which, they believe, is as good as savings in the bank. In confirmation of this notion, the red line in the second chart shows you the trend of home prices in Massachusetts. They have doubled in the past six years alone and the latest figures still show the trend continuing up. The blue line gives you the contrast of residential prices in Hong Kong in US dollar terms. I accept that home prices elsewhere in the US have not risen as much as in Massachusetts but it is big cities such as Boston that concern me here, not trailer parks in Wyoming. And what these US consumers have done with their supposed savings is borrow money against them, ahead of realising them to spend on consumer rubbish largely from China. The result is that their country's current account balance is in deficit to the tune of a hefty 6.4 per cent of GDP. But now let us postulate that the US housing bubble, fuelled heavily by the low interest rates of the Greenspan years, should burst under the pressure of rising interest rates. It is a far from unlikely scenario and would have an enormous impact on US savings and consumption habits. Can Mr Bernanke truly be assured that his money tap will save the day for him then? You know how in the 1960s it was taken as axiomatic that you could not have high inflation with high unemployment and low economic growth at the same time. A few years later along came stagflation and what a surprise it was to people who thought that a national economy was a machine that they could drive as easily as they could a car. I wonder if Mr Bernanke may not soon find himself similarly disillusioned.