About ten years ago I published an article in Foreign Policy that I just recently re-read. In the article I extended one of the arguments I made in my book, The Volatility Machine, that the globalization process is driven primarily by monetary expansion and the consequent increase in risk appetite. What was new in this …
Read More…Category: Global liquidity
The capital tsunami is a bigger threat than the nuclear option
Since this is another long posting, it might make sense to summarize briefly its two parts. In the first part, expanding on an OpEd piece of mine published by the Wall Street Journal on Monday, I argue that China’s “nuclear option”, which has generated a great deal of nervousness among investors and policy-making circles in …
Read More…The USG doesn’t need foreigners to finance the US fiscal deficit? Who knew?
I usually don’t post a new entry so soon after the last post, but there was an interesting article in today’s Wall Street Journal by Andrew Batson. China is center stage when it comes to fears that buyers will one day spurn U.S. Treasurys. The bond market has been the source of much political theater …
Read More…What should have been discussed during the SED meetings (Part 2)
In my last entry I tried to set out the necessary shifts over the next few years as the world, and especially China and the US, works out its imbalances. These shifts will take place, I am pretty sure, but they can do so under a “good” scenario and a “bad” scenario. So what does …
Read More…The dollar must be replaced – yet again
Beijing music and art Things have been so busy that I haven’t been posting as much as I would like. Besides my increased writing commitments and the constant barrage of news, I would like to mention that over the past weekend we completed the second annual festival of experimental and avant garde music, featuring …
Read More…The fun part – assigning blame
The piece I wrote for YaleGlobalOnline, which I mentioned in my last entry, was published today, and is called “US and China Must Tame Imbalances Together.” In the article I try to argue that the roots of the current financial imbalance – or, more accurately, of the latest and strongest stage of the current financial …
Read More…Can China adjust to the US adjustment?
After dropping as low as 1679 on Tuesday the Chinese stock markets managed nonetheless managed to put in a decent week, with the SSE Composite closing the week at 1748, up 1.1% for the week, helped by Tuesday’s Obama-inspired global rally. A lot of people have asked me what I think the bottom of the …
Read More…China still needs a one-off maxi-revaluation, but smaller than before
The Chinese stock market had a fairly volatile day, with the SSE Composite bouncing up and down by 1% or more several times during the day before it closed at 2306, down 0.8% for the day. I think we have to go back to end of 2006 before we can find a lower close. We …
Read More…Chinese savings and US deficits
I was just sent a very interesting paper by German economist Jorg Bibow of the Levy Economics Institute of Bard College (The International Monetary (Non-)Order and the “Global Capital Flows Paradox”). In it the author considers the “paradox” of high and rising capital flows from developing to developed countries during the past decade. This is …
Read More…More, or less, RMB appreciation?
Most PBoC watchers have always believed that the PBoC has been among the most vocal supporters of a stronger currency, and has argued in the past that an appreciating RMB is the best way to fight inflation. Yesterday, however, Zhou Xiaochuan, governor of the PBoC, surprised a number of people at his NPC-related press conference. …
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