Um, how come this story is in the Sydney Morning Herald (as of about 20 hours ago) and not the US/UK business media? This is a pretty major development. Yes, commodities heavy Australia is most affected, but Oz is hardly alone in seeing the ramifications. While the US dollar is weakening, the Australian dollar has […]
Read more...The optimists that have long assumed that the dollar will continue to reign supreme due to lack of alternatives have just have their sanguine views challenged as China threw down the gauntlet on coming up with an alternative, non-country-specific, reserve currency. The US in fact had this option at the time of Bretton Woods and […]
Read more...Japan once had robust exports and a de facto two-tier economy. Yet the image of the dreadful domestic economy dominated as Japan has been characterized as having a lost nearly two decades. I’ve long harbored the suspicion that Japan played up the stagnant domestic economy so no one would bust its chops over its booming […]
Read more...Michael Pettis put up a long and useful post on the options open to China given a decline in US consumption and therefore its trade deficit, both of which he deems to be inevitable. Pettis argues that all things being equal, growth in China would probably be lower than most assume, 5%-6%. Note that while […]
Read more...Frankly, it is hard to know what to make of the ongoing noise form China regarding the dollar. The most sensible explanation is that China is playing to a domestic audience. China, after all, purchased dollar assets as a integral part of its development strategy. Independent of the fate of the dollar, successful developing economies […]
Read more...I am beginning to feel as if I am being gaslighted. For those not familiar with the reference. Gas Light was a 1930s play in which a scheming husband keeps turning the gas lights in his house up and down, then keeps telling his wife that she is crazy when she comments on the changes. […]
Read more...China is not playing nicely in the sandbox. The nitty gritty of trade seldom gets the attention it warrants, but enough mercantilist measures can trigger retaliation, which most observers agree would merely precipitate a race to the bottom. And China, which in many ways has the most to lose from protectionism, has been tempting fate. […]
Read more...The bits of evidence that provided the strongest support to green shoots backers have been the rise in stock prices and possible signs of slowing in job losses. However, the rally warrants considerable critical scrutiny. First. violent rallies are more characteristic of bear market head fakes than new bull markets. And this rally has featured […]
Read more...The Japanese have a wonderful expression that I will take some liberty in translating. They use it to signify when someone is trying to claim great distinctions among low levels of activity or achievement. The phrase is roughly “A height competition among peanuts.” Reader DoctoRx flagged this Bloomberg report as a Pangloss item. What is […]
Read more...So much for the green shoots theory, at least as far as an early Chinese recovery is concerned. From AFP (hat tip reader Michael): Chinese exports fell 22.6 percent in April from a year earlier in the sixth straight monthly decline, state media said Tuesday,… Exports from the world’s third-largest economy totalled 91.94 billion dollars […]
Read more...We’ve mentioned earlier that it was inevitable that China would reduce its purchases of Treasuries, independent of its desire to diversify away from them. With trade falling (although China still has a high surplus) and hot money inflows reversing direction, China has less reason to buy foreign assets. From the New York Times: Reversing its […]
Read more...Willem Buiter takes no prisoners, In his latest post, “The green shoots are weeds growing through the rubble in the ruins of the global economy”, he dispatches the idea that recovery is around the corner (citing Carmen Reinhart and Kenneth’s latest paper on the resolution of financial crises) and points out that the fiscal state […]
Read more...Barry Eichengreen, an expert on the Great Depression, and Kevin O’Rourke, take issue with the notion that the current downturn is less severe than the Great Depression. While the slump in the US is not as bad, that mis-states the global picture. Note that many economists expect the US to suffer less than the big […]
Read more...In a world of floating rates, driving the value of one’s currency down takes a bit of doing, but as China (since 1994) and Japan (circa 2003) have demonstrated, central banks can lower currency prices. And trashing one’s currency is part of the standard program recommended for countries facing deflation. The preferred method these days […]
Read more...Note the dramatic fall in Japanese exports in February was relative to the year-ago level, but that does not make the outcome any less ugly. From Bloomberg: Overseas shipments fell 49.4 percent from a year earlier, the sharpest decline since at least 1980, when the government started to keep comparable data, the Finance Ministry said […]
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