I wish I had written this piece by Stephen Roach, formerly one of Morgan Stanley’s economists (and noted bear), now head of Morgan Stanley Asia. Roach does an elegant job of drawing connections between some issues that other commentators have treated separately. Roach sees the oft-decried global imbalances (shorthand for countries like China, Japan and […]
Read more...Yet another cash infusion for an investment bank suffering losses by the Chinese (the first was Bear Stearns). China state-controlled China Investment Corp, is buying securities that offer a current yield of 9% and convert into as much as 9.9% of the firm. However, the investment fund will receive no board seat or management role. […]
Read more...The Economist put “The Panic About the Dollar” on its cover, which led to a speedy and lengthy analysis by Brad Setser who along with Menzie Chin are probably the most active and best informed bloggers on the currency beat. Although the Economist isn’t what it used to be, the two pieces (the leader and […]
Read more...China is suffering from rising inflation, as well as a runaway stock market bubble, both side effects of its rapidly growing foreign exchange reserves. But rather than raise interest rates, which would rein in price growth but also increase the price of the yuan, the Chinese are instead engaging in extreme measures to combat domestic […]
Read more...America is getting more support in its efforts to pressure China to let the yuan appreciate. Bloomberg reports than the Bank of England’s governor Mervyn King is lining up with Jean-Claude Trichet and Hank Paulson: Bank of England Governor Mervyn King is joining Jean-Claude Trichet and Henry Paulson to demand that China allow the yuan […]
Read more...The Chinese have demonstrated, convincingly, that their military technology is superior to America’s, via having a cloaked sub slip, undetected, within striking distance of a US aircraft carrier during war games. This has to rate as one of the most important news stories of the year, yet it has been reported (in English, anyhow) only […]
Read more...A good article from the Associated Press, “World’s Coal Dependency Hits Environment,” doesn’t appear, at least according to Google News, to have been picked up elsewhere, which is a shame. While the title refers to “world’s,” the story is largely about China. We’ve discussed the environmental damage done by coal-fired electrical plants, yet China and […]
Read more...At Vox EU, Shang-Jin Wei argues in “Don’t over-sell the benefits of a change in the Chinese exchange rate policy,” that the upside of an end to the dirty float of the yuan (or as he prefers, the renminbi), has been overstated. His analysis is elegant and persuasive, and the piece is colorfully written as […]
Read more...Whoever wrote the headline to former Treasury Secretary, now Harvard professor Larry Summers’ latest comment in the Financial Times did him a disservice. The lead-in, “How American must handle the falling dollar,” implies that Summers has a specific, hard-headed program. Instead, the piece offers a succinct and subtle analysis of what is wrong with our […]
Read more...John Plender in the Financial Times wrote a very solid piece, “Credit squeeze could be harbinger of a Chinese crash,” which looks at the major financial train wrecks of the past century and finds a common element: immature but rapidly growing economies acting as major global creditors. The efforts to manage the resultant imbalances lead […]
Read more...In an odd happenstance of timing, the IMF published a report on Wednesday that declared the dollar to be overvalued. As we have noted before, this isn’t the first time they’ve come to this conclusion (they issued a similar finding at the beginning of August). That view, by the way, isn’t one that has made […]
Read more...I’ve been having so much with SIVs that I am late to this piece from Bloomberg. It describes how Paulson will face a great deal of criticism from his G-7 peers this week due to his stance on regulation (more accurately, the desirability of a lack thereof) and the dollar. The writer believes Paulson is […]
Read more...Yale Professor Jeffrey Garten has long argued that letting the dollar fall will do little to remedy America’s chronic balance of payments deficit. In a recent Newsweek article that picks up on themes he presented in a 2004 New York Times op-ed, namely, that America is so addicted to imports that a big fall in […]
Read more...In an interview published in today’s Financial Times, soon-to-retire IMF managing director Rodrigo Rato declares the dollar to be undervalued. Now we have noted that some technically minded traders see the dollar as oversold at current levels. But “oversold” is not the same thing as “undervalued.” Oversold suggests that there will be a near-term rebound, […]
Read more...In a further blow to the dollar’s standing, Vietnam and Qatar both announced that they are cutting their holdings of dollar assets. Note that this isn’t merely “diversifying away from the dollar” which could be accomplished by effectively reducing ongoing dollar purchases (both run trade surpluses which oblige them to buy dollars) via exchanging them, […]
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