The Largest Global Imbalances

Discussion in 'Economics' started by aeliodon, Sep 18, 2007.

  1. I beleive free markets are the best way to price currencies and securities. Governments disagree. They often intervene in the markets thru either fiscal, monetary, or trade policy and create imbalances. This imbalances eventually MUST correct. However they may also persist longer than you can remain solvent in trying to fade them. And the longer the persistance of these imbalances - the stronger the eventual correction will be.

    Okay so off the top of my head here is my list:

    1 USD status as the world's reserve currency. We cannot continue to print dollars and live beyond our means by exporting inflation to the rest of the world. This tyranny cannot last is already unraveling. USD now trading at the lowest level in many years and perhaps decades.

    2 The Yen's 0% yeild. Japan's economy is almost entirely reliant on exports to the US and EU. Now that China is the largest exporter, as China learns how to cheaply produce more high tech goods they have the potential to destroy Japans export market. I think Japan must focus on developing an economy based on internal demand for their own goods but more importantly a service based economy rather than external demand for manufacured goods.

    3 Overvalued Chinese YUAN.
  2. Today (by cutting rates) Ben Bernancke single handedly made all the worlds natural resources more expensive for the ENTIRE WORLD. Gold at 27 year highs. Oil at all time highs. All commodities soon to be at all time highs for EVERY PERSON ON THE PLANET - just to bail out Wall Street gamblers.

    This tyranny cannot last.
  3. Great! Post wildly incorrect statements on multiple threads, just in case someone missed how foolish they were.
  4. Stop stalking loser.
  5. S2007S


    agree 100000%
  6. maxpi


    Ivan, if you would not quote idiots/trolls many of us would not know they exist :cool:
  7. poyayan


    Hrm... it is only expensive if US dollar is your currency. The dollar will be weaker and that cancel somewhat with the increase price of commodities.

    On the other hand, this will make China's economy even more inflationary and this will put more pressure on them to de-peg the currency with US dollar.

    However, the moment they de-peg with US dollar is also the day that they don't need to buy US dollar, which will make US interest rate either go up or/and US dollar gets weaker.

    From then on, the abnormal situation that U.S. consumer is the only driver of global economy should end. We will be looking at higher price and smaller paycheck, but our account will be balanced.

    In the end, wage difference is the problem here. Will wage in China inflate to our level or US dollar become peso and deflate to their level.

    Either way, it is bad.