The former "superstar" surplus countries Japan, Germany & China will feel the flipside of creating headfake economies that are uniquely leveraged to exporting to spent up consumers in the UK/US as a new age of frugality with dramatically higher consumer saving rates is looming in North America. http://www.ft.com/cms/s/0/27c46bec-0c0c-11de-b87d-0000779fd2ac.html
Indeed. Exports have plunged by truly shocking amounts in China, Japan, Korea and now, Germany. Scary times. The V that was supposed to be a U is now looking to be an L.
Japan was fucked up before the crisis. China has a horrible political system and unrest is always on their mind. Germany? They're being begged by Europe to save them. Hell so is China. Export driven countries might be vulnerable to a world wise economic slump, but their fundamentals are a hell of a lot better. Strong currency, low national debt. They still have "bullets" in their chamber if worse comes to worse. Like America was in the 70s.
While I agree with you on your other points, how is having a 'strong currency' a 'better fundamental' for an export economy?
They can lower interest rates, devalue their currency. Maybe embrace finance like the US did in the 80s. Or like in the 1980s, you increase the national debt by trillions. Is it great economic policy? No, but it does stave off the catastrophe. There are more economic tools at their disposal than a bad country like the US has today. I mean the US is in such dire shape that to protect their currency they are ready to go in global depression, every other option market participants can see through it and short the dollar.
Agreed, we're talking about the same thing. I am saying that in the end a weak currency is a good thing, while you're saying that the forward-looking ability to devalue the currency is a good thing.
? the US is not doing anything to protect the $. the US is unwilling to endure any pain and will inflate the dollar out of existence. a weak currency is a terrible thing and is a reflection of a nation's character. it reflects a nation on the decline. germany and china and the far east will adjust and trade much more amongst themselves.
CORRECTAMUNDO! When the currency has weakened "enough", nearly all of its citizens are BANKRUPTED!! Only short-sighted politicians and exporters argue for a weak currency.. and they're just "talking their own [selfish] book".
Maybe, but we're talking about a catastrophic weakening being very bad. On the other hand, a moderate weakening of the ccy can work wonders. Look at trade-weighted GBP, down almost more than 25% from its 2007 peak. Currently, it's the only thing properly helping the UK Plc survive.