Unbalanced, and thus blisteringly honest.
Fred Goodwin, “Mr Macro” strategist at Nomura, unplugged:
Is there any justice?
When a child misbehaves, parents send them to their room and take away Facebook privileges. When someone is convicted of crime, society sends them to prison. What then, should be done to a country seen to be gaming the system for economic advantage?…
Here’s a perp walk of sorts (click to enlarge):
NB — ranks based on reserve accumulation as per cent of GDP over 12 months, current account balance also as per cent of GDP, and real effective exchange rate deviation from previous decade average. But never mind that. Feel the anger:
So the world is precariously unbalanced. Should you care?
Is anything likely to change?
This whole paper could be a waste. Global rebalancing may not occur for years, if at all…
China has a good deal. It has an undervalued currency that is at the heart of the export growth model. Why change it? Moreover, they went to school [in] Japan. In the 1980s the US ganged up on Japan, forced through the Plaza Accord and a major USD devaluation. The end result was the twin housing and equity bubbles which 20 years later Japan has still not recovered from. Why sign up for that?
Cue objections (Congress, US capital controls, threat of dollar collapse):
It is a mad, mad, mad world. A communist country is becoming the most dominant economic power, using a manipulated currency to buy assets on the cheap. Hardly any other financial market freely trades. It is against this backdrop that an unprecedented global imbalance persists. This cannot possibly end with “they lived happily ever after.”
Merry Christmas and a Happy New Year, Mr Macro.
Related links:
A balanced take on imbalances – FT Alphaville
Currency wars – ‘The crisis is upon us’ – FT Alphaville
25 interventions in a one week band, redux – FT Alphaville