kent nickell
Well-known member
http://cib.natixis.com/flushdoc.aspx?id=49060
There is therefore the possibility of a twofold exchange rate war:
- between OECD countries, to gain market share in emerging markets;
- between the United States on the one hand and China and oil-exporting countries on the other hand, with this latter group of countries preventing the depreciation of the dollar
The above analysis by Natixis is interesting... It essentially says that the developed countries (OECD) such as the US are extensively deleveraging and can't fuel their economies with debt-driven imports any longer so need to increase their exports... The only markets left to export to are the emerging markets and oil exporting markets such as India and Brazil etc. However the OECD countries are not set up to competitively export to these countries and need to devalue their currencies to expedite this...
However China and the oil-exporting markets are not going to want their currencies to appreciate against the dollar so they will fight this by accumulating large dollar reserves..
I'm not sure where this leads to... It is good news for funding our fiscal deficits... If these deficits are used well to help sustain people through this difficult period, make health care more efficient and also used to help make our exports more competitive that would be good... However, more competitive may come with the price of wage reduction....
There is therefore the possibility of a twofold exchange rate war:
- between OECD countries, to gain market share in emerging markets;
- between the United States on the one hand and China and oil-exporting countries on the other hand, with this latter group of countries preventing the depreciation of the dollar
The above analysis by Natixis is interesting... It essentially says that the developed countries (OECD) such as the US are extensively deleveraging and can't fuel their economies with debt-driven imports any longer so need to increase their exports... The only markets left to export to are the emerging markets and oil exporting markets such as India and Brazil etc. However the OECD countries are not set up to competitively export to these countries and need to devalue their currencies to expedite this...
However China and the oil-exporting markets are not going to want their currencies to appreciate against the dollar so they will fight this by accumulating large dollar reserves..
I'm not sure where this leads to... It is good news for funding our fiscal deficits... If these deficits are used well to help sustain people through this difficult period, make health care more efficient and also used to help make our exports more competitive that would be good... However, more competitive may come with the price of wage reduction....
