tag:blogger.com,1999:blog-129869532011-06-13T16:40:14.733-04:00Covering economics, foreign policy, monetary policy, currencies and the financial markets.bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.comBlogger361100tag:blogger.com,1999:blog-12986953.post-82568153592396931192011-06-13T16:33:00.001-04:002011-06-13T16:35:30.962-04:00

It's here...Economics

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1147453508830298812006-05-12T13:00:00.000-04:002006-05-12T13:05:52.416-04:00

Is the carry trade about to unravel? While the recent speculation that the Fed is nearing the end of its tightening cycle may have been premature, the attention that the speculation focuses on economic cycles is timely. The economic expansion in the United States has been running ahead of its peers in Europe and Japan. Whether the Fed pauses at its next meeting or not, interest rate differentials

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1138143570590890652006-01-24T17:56:00.000-05:002006-01-24T18:02:35.956-05:00

Who cares about global imbalances anymore? Investors don’t seem to pay them much mind, as Morgan Stanley is reporting that the common perception voiced at its annual MacroVision seminar last week was that imbalances would unwind gradually into a soft landing as steady consumer demand in the US is augmented by growing demand abroad. Some economists are also suggesting that imbalances either don’t

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com3tag:blogger.com,1999:blog-12986953.post-1132343702637316212005-11-18T14:54:00.000-05:002005-11-18T15:28:53.586-05:00

Two of the most impressive phenomena of the past couple of months have been the ruddy health of American consumers and the strength of the US dollar. Despite recent news reporting the cooling of the US housing market, domestic consumption and economic growth have not slowed appreciably, and the markets are pricing in at least 50bp more of Fed tightening in the months ahead. Asian economies have

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1131406296034715962005-11-07T18:30:00.000-05:002005-11-07T18:36:23.640-05:00

One of the most frequent criticisms lobbed at China is that its export led growth model is distorting the world’s trade and current account balances. Indeed, over the course of the past year, these global imbalances have worsened – over the first half of 2005, China’s trade surplus (on the strength of 30% y-o-y export growth) outstripped that for the whole of 2004. And China’s current account

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1130965141280051082005-11-02T15:56:00.000-05:002005-11-02T15:59:01.293-05:00

Menzie Chinn and Hiro Ito have published some empirical findings that cast doubt on the global savings glut hypothesis propounded by Fed chairman-elect Bernanke and others (hat tip to Econbrowser). Their paper, entitled Current Account Balances, Financial Development and Institutions: Assaying the World ‘Savings Glut,’ attempts to quantify the determinants of current account deficits while

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1130353253622205242005-10-26T14:55:00.000-04:002005-10-26T15:01:49.473-04:00

Leaving aside for the moment the much trickier questions of when and how the US current account deficit will be unwound, what can we expect will happen to the US economy when foreigners become less willing to subsidize our domestic consumption? (if you can’t put it aside, see Brad Setser’s remarks at the Joint Economic Committee of Congress here and Nouriel Roubini’s PowerPoint presentation here

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1128463847738337542005-10-04T18:05:00.000-04:002005-10-04T18:12:52.230-04:00

A penny saved may be a penny earned, but in China a penny saved is usually invested in an infrastructure project or an increase in manufacturing capacity. China’s gross domestic savings rate, after averaging 40% or so of GDP for most of the 1990’s, has grown over the past couple of years to close to 50% of GDP. This is an unprecedented number, and while a portion of this saving has been invested

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com1tag:blogger.com,1999:blog-12986953.post-1126820758256720002005-09-15T17:43:00.000-04:002005-09-15T17:51:13.126-04:00

James Carville is supposed to have once said, “I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter… but now I want to come back as the bond market. You can intimidate everybody.” It seems that Asian policy makers are taking his advice to heart. The Asian Bond Market Initiative (ABMI), a cooperative effort on the part of the

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1126037934197546322005-09-06T16:13:00.000-04:002005-09-06T16:18:54.206-04:00

With oil breaking the $70 per barrel threshold last week, and exports from China and the rest of Asia rising steadily, what is happening to all those petro and textile dollars being earned overseas? The US current account deficit is on track to top $800 billion this year, but as it continues its inexorable rise, the deficit’s effects on international financial markets have not played out as

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1124810731374906172005-08-23T11:21:00.000-04:002005-08-23T11:49:32.403-04:00

Asian economists and central bankers do not get as much coverage in the American press as they deserve. For all the hand wringing over the implications of America’s twin current account and trade deficits, perhaps the fundamental point to be made is that when it comes time for an adjustment, the decisions as to the scope, speed and magnitude of the adjustment will come from Asia, not the US.

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1122915158213113992005-08-01T12:50:00.000-04:002005-08-01T12:59:00.980-04:00

Now that we’ve had a week and a half to see China’s new exchange rate regime in action, several features of the new regime are becoming clearer. First, while the political ramifications of the move seem clever – the PBoC took a bit of the steam out of the protectionist sentiments on the floor of the US Congress, and it marked the first time that other Asian currencies (the Yen, Won and Ringgit,

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com1tag:blogger.com,1999:blog-12986953.post-1122050556311885162005-07-22T12:42:00.000-04:002005-08-01T12:59:46.186-04:00

One year non-deliverable forward (NDF) contracts on the renminbi were pricing in a further 6% rise from today’s level of 8.11 to the dollar. The offshore NDF contracts had the renminbi at 7.64. (For more on NDF’s, see this previous post.)The Malaysian ringgit, the other currency to follow China’s move away from a hard peg and towards a managed float based on a basket of currencies, also saw

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1121965892332789622005-07-21T13:09:00.000-04:002005-08-01T13:00:40.703-04:00

The big news this morning has been the Chinese decision to revalue the renminbi. Pegged to the dollar at a rate of 8.28 for the past ten years, the renminbi has been revalued by 2.1%, to 8.11. Perhaps of greater importance, the Chinese have also decided to abandon the dollar peg. Henceforth, China will run a managed float whereby the exchange rates of the renminbi will be referenced to a basket

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1120673232410076402005-07-06T14:02:00.000-04:002005-07-06T14:08:01.336-04:00

What exactly is the nature of the relationship between capitalism and democracy? It is, if not an age old question, one that has puzzled and motivated scholars at least since Adam Smith penned The Wealth of Nations. Interestingly, in those days, the field in which Smith wrote was known as Political Economy – the two disciplines had not yet split apart and developed their own specialties and

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1120166326080874482005-06-30T17:18:00.000-04:002005-06-30T17:24:22.136-04:00

The Fed continued tightening today, raising the federal funds rate 25 bp to 3.25%. Amazingly, the bond markets rallied, and long term rates fell more than short term, further leveling out the yield curve. The 10 year note finished at 3.92%, down 6 ½ bp, while the 2 year note dropped 1 ½ bp to 3.64%. Only 28 bp in yield now separate the 2 year from the 10 year note. What can we make of this?

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com1tag:blogger.com,1999:blog-12986953.post-1119848852793478172005-06-27T06:05:00.000-04:002005-06-27T01:09:47.006-04:00

The Chinese reiterated this past weekend their insistence that they will not be pressured into floating the renminbi. For those trying to predict the future course of Chinese monetary policy, the most important factors to follow involve the challenges facing Chinese policy makers as they modernize and integrate into the global economy. China is not going to float the renminbi in the short term,

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1119630122696024762005-06-24T12:20:00.000-04:002005-06-24T12:22:02.703-04:00

Treasuries are up this morning, pushing the yield down another 3bp. Over in Germany, the 10-year Bund set another record on speculation that the ECB might soon lower benchmark interest rates. Near the end of the trading day it was yielding 3.13%, which is lower than the dividend yield on Europe’s Stoxx 600 equity index. In a clever twist, CNOOC is promoting its takeover bid for Unocal as a

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com1tag:blogger.com,1999:blog-12986953.post-1119381194029663052005-06-21T15:10:00.000-04:002005-06-21T15:22:07.006-04:00

Behind much of the recent posturing over exchange rates and currency regimes is a real concern among politicians and policy makers that outsourcing and global competition are threatening jobs in the US and Europe. If protectionist sentiments are in fact on the rise, perhaps it is time to take a look at the political economy of international trade to see how these debates might play out.

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1119284266271764402005-06-20T12:11:00.000-04:002005-06-20T12:17:46.280-04:00

Oil is flirting with $60 this morning, while the dollar is rising and US Treasuries are falling. See Brad Setser for more on oil’s impact on the so-called global savings glut. Stephen Roach at Morgan Stanley is warning of an impending slowdown in Asian economic growth, which he warns will have a big impact on the global economy. Among the more interesting data points he cites to make his

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1119021049249456402005-06-17T11:07:00.000-04:002005-06-17T11:10:49.256-04:00

The US current account deficit has reached an all-time high. The Commerce Department reported that the deficit rose to $195.1 billion in the first three months of the year, up from $188.4 billion for the last quarter of 2004, which was the previous record. At this rate, the US current account deficit will equal 6.4% of GDP in 2005, but given that the trade deficit is still growing (to $57

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1118852011759510842005-06-15T12:11:00.000-04:002005-06-15T12:13:31.773-04:00

With all the recent talk of a Bretton Woods II international monetary system, perhaps it is time to take a look back at the end of the original Bretton Woods system and see if it provides any lessons for the management of the current system. The closing of the “gold window” on August 15, 1971 by President Nixon ended the convertibility of the US dollar into gold and triggered the collapse of

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1118427770255661042005-06-10T14:22:00.000-04:002005-06-10T15:12:10.316-04:00

click table for larger image April’s US trade balance numbers are in (here is the official data), and initial reactions are up from Dave at Macroblog, Edward at AFOE, and the General at Globblog. A US trade deficit of $57 billion for the month is not quite what I’d call good news, but since it came in below expectations (although just barely, apparently the consensus estimate was $58 billion)

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1118262062576504972005-06-08T16:19:00.000-04:002005-06-08T20:56:21.000-04:00

Calls for a renminbi revaluation are becoming rather more pronounced these days. Senators Chuck Schumer and Lindsey Graham weighed in today in an op-ed in the NY Times that plugs their proposed legislation imposing trade tariffs unless the Chinese revalue. Notwithstanding the fact that such threats merely reinforce China’s determination not to be seen as bowing to foreign pressure to revalue,

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1118069384913673142005-06-06T10:40:00.000-04:002005-06-06T10:49:44.916-04:00

The Bond and FX markets are not generally known for their transparency, but by one account the week of May 25 – June 1 was a busy one for some of the world’s central banks. The Federal Reserve statistics on “marketable securities held in custody for foreign official and international accounts,” – generally held to be a measure of foreign central bank holdings of US Treasuries, showed an

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1117746107812766542005-06-02T17:01:00.000-04:002005-06-02T17:01:47.820-04:00

Lost in the arguments over whether and when China should fix or float its exchange rate are either analyses of the effectiveness of China’s capital controls or meaningful price signals from the markets. For the time being, China’s policy makers will continue to be able to make exchange rate decisions according to domestic considerations simply because they can. Capital controls restrict

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com2tag:blogger.com,1999:blog-12986953.post-1117659175488580712005-06-01T16:52:00.000-04:002005-06-01T17:07:28.046-04:00

Now that both the French and the Dutch have rejected the EU constitution by larger than expected margins, jittery investors have sent the Euro to eight month lows against the Dollar. Meanwhile, the interest rate “conundrum” has continued apace. The yield on the 10 Year Treasury is down to 3.90% this afternoon, its lowest level in over a year. Over in Euroland, the yield on the benchmark

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1117156619367827072005-05-26T22:16:00.000-04:002005-05-27T10:42:09.820-04:00

I feel compelled to point out an exceptionally clear and coherent post on the implications of the US' twin current account and fiscal deficits that I have only just come across. Nouriel Roubini's Contemporary Rashomon Tale lays out the varying interpretations of the issue - from Ben Bernanke's Global Savings Glut hypothesis to Richard Cooper's take - and then forcefully drives home his own view

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1117074423580477322005-05-25T22:27:00.000-04:002005-05-25T22:41:16.146-04:00

Asian Financing of Current Account DeficitHere is an interesting chart from the press handout of the most recent OECD Economic Outlook (#77). It shows, first, $300 billion worth US Treasury purchases by Asian central banks in 2004. The second chart shows how the Euro has taken the brunt of the fall of the US dollar, while the real exchange rate of the Yen has in fact declined against the dollar

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1117041795612993092005-05-25T13:21:00.000-04:002005-05-25T13:23:15.616-04:00

Here’s a brief look at some of the interesting posts in the blogosphere today: A Fistful of Euros has a good discussion of the controversies over at the ECB as to the future course of Eurozone monetary policy. Macroblog has picked this up and run another discussion here. And here is one more. Some commentary on the most recent OECD Economic Outlook. Tim Worstall on trade barriers

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1116973377669862192005-05-24T18:20:00.000-04:002005-05-24T18:22:57.683-04:00

Economic development has proved elusive for many of the world’s countries. However, while “globalization” has proved a convenient whipping boy for critics of neo-liberal economics, the primary causes of poverty and under-development lie not in the international arena, but are usually attributable to domestic factors. Put simply, developing countries lack the technical expertise and know-how

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1116619462574234602005-05-20T16:04:00.000-04:002005-05-24T02:07:08.910-04:00

EconomicsEver since World War II the US dollar has been the world's major reserve currency. At first, this status was enshrined in the Bretton Woods international monetary system, whereby the dollar was pegged to gold and the rest of the world's currencies pegged to the dollar. But in 1971 the Nixon administration, faced with a burgeoning balance of payments deficit and a threatened run on the

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com2tag:blogger.com,1999:blog-12986953.post-1116617678895550232005-05-20T15:03:00.000-04:002005-05-20T17:38:40.980-04:00

The Bush administration's disdain for international diplomacy and preference for unilateral initiative has been much noted and remarked upon over the past few years. Administration opponents tend to see unilateralism as a myopic failure to use international institutions and allies to leverage American international power. The first Gulf War, after all, was largely financed and paid for by the

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1116441653645856612005-05-18T14:39:00.000-04:002005-05-25T14:02:14.290-04:00

I. Introduction In May 2004, ten countries from eastern and central Europe officially joined the European Union, ushering in a new era for the EU, and quickening the pace of economic convergence among the nations of the continent. Unfortunately, the process of convergence will bring with it a host of problems for both the accession countries and the current members of the EU. One of the

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0tag:blogger.com,1999:blog-12986953.post-1116433212935429422005-05-18T12:04:00.000-04:002005-05-22T16:24:34.070-04:00

In their latest half-hearted attempt to come up with an economic policy, the Bush administration has criticized China for allegedly undervaluing its currency against the dollar. Worried, perhaps, at the continuing loss of textile manufacturing jobs across the South, the Bushies have decided once again to obscure the terms of the debate instead of crafting policies to encourage long-term economic

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com2tag:blogger.com,1999:blog-12986953.post-1116390138211075802005-05-15T00:12:00.000-04:002005-05-23T21:59:27.530-04:00

British MP George Galloway has just shown what a bunch of witless careerists American politicians are. His grandstanding display at yesterday's Senate commit hearing was amusing theatre, but it points to flaws both in America's political system and to the Democratic party more generally.I've always thought it a shame that politicians could get away with calling themselves 'public servants' as if

bchttp://www.blogger.com/profile/06674670581484612171noreply@blogger.com0