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Browsing Category
Markets
The strong dollar, the carry trade and market volatility
I have been meaning to write this post for a few days. And as the information comes in from Brazil, from China, from equity markets, it seems all the more compelling that this is indeed an important period in market and economic history. I…
The Chinese currency crisis: a mental model on catalysts, contagion and vulnerability
Many markets have now recovered from the initial wave of selling associated with the Chinese mini-devaluation catalyst. This should be expected. Some of these markets will surely continue higher. Nevertheless, the Chinese devaluation still…
Chinese devaluation crisis has limited US impact so far
My base case is that the US stock market correction will not extend to major losses without a U.S.-based economic slowdown. Therefore, as potent as the Chinese devaluation crisis is as a signal for increasing global deflationary pressures,…
The Chinese currency devaluation is now a crisis
After hard selling into Friday’s close in the U.S. and a global selloff in stocks today, it is clear that the Chinese mini-devaluation has begun a crisis, despite the Yuan appreciating for a seventh day. The mini-devaluation is merely a…
Chinese currency and US monetary policy as the deflationary environment continues
The macro environment right now is disinflationary as many countries struggle with product and labour ‘overcapacity’. The missing element is demand to meet supply. I want to talk about Fed monetary policy and the new Chinese currency regime…
China’s stock markets and revisiting 2011 predictions
By Michael Pettis
originally written on 31 Jul 2015
I plan to post a new entry very soon but before doing so I wanted to say a few things about the stock markets, which continue to be insane (but not unexpectedly so) and then repost a…
China’s new currency regime virtually guarantees currency depreciation
For several months now, I have been hearing stories about the risk of capital flight and capital outflows out of China. At the same time, perhaps as a result of these outflows, traders have recently been trading CNY/USD at the upper end of…
Bearish signals: Yield curve flattens, spreads widen, China devalues as Fed prepares hikes
Yesterday I mentioned markers of economic and financial weakness that I believe show cracks in the facade of benign economic data out of the US and Europe. Today I want to briefly go through a few of these data points and highlight what…
China’s outright devaluation is a game changer in the currency wars
Back in March, I was saying that China would be hard-pressed to maintain its dollar peg if a strong dollar persisted. The deflationary pressures in China are simply too large. Today we learned that it has finally succumbed to that pressure…
More on king dollar and EM (and shale producer) vulnerability
Last week the Fed admitted to having mistakenly made public forecasts by staff economists which suggested that the Fed is indeed on a 2015 rate hike path. As a result, policy divergence is now set to widen, with the result being a bid for…