And Now for the Winners —
1 December 2008While everyone is watching GDP figures to understand who the winners and losers are in the global economic crisis, one could also pick a different ruleset, if one sensed there were a different game on altogether.
Currencies, for instance.
Here is a quick quiz:
Q: How many world currencies fell against the dollar since the crisis began?
A: All but three.
Can you name them?
China, Hong Kong (i.e., China), and Japan.
Is this fight about GDP, or about currencies? If you had an export-driven economy, which would you pick?
If you are not from one of these two countries, are you really planning on exporting to them? Really? Have you thought this through?
4 Responses to “And Now for the Winners —”
December 2nd, 2008 at 6:08 am
What We Value Is What We Save In a Crisis
from London Banker by London Banker
“When a woman thinks that her house is on fire, her instinct is at once to rush to the thing which she values most. It is a perfectly overpowering impulse, and I have more than once taken advantage of it. . . . A married woman grabs at her baby; an unmarried one reaches for her jewel-box.”
— Sherlock Holmes from A Scandal in Bohemia, by Arthur Conan Doyle
When a central bank thinks its house is on fire, it too will rush to save the thing valued most. In the United States, the central bank has rushed to save the bonuses and dividends of its Wall Street clientele by hiding away the bad assets that can no longer be foisted on gullible investors. In Europe too the response of central banks has been to save the wholesale banking and securities industry rather than the consumers and businesses underlying the real economy’s longer term productive strength.
For a comparative of what is valued elsewhere, it is worthwhile to look at what is being saved. I received in my inbox yesterday documents outlining the efforts being taken by the Hong Kong and Chinese authorities to address the liquidity crisis in their respective jurisdictions. They are available online here (Hong Kong) and here (PRC). The contrasts with the West are striking, and humbling.
http://londonbanker.blogspot.com/2008/11/what-we-value-is-what-we-save-in-crisis.html
Clues to some of the the answers are here. Tim
December 3rd, 2008 at 5:43 am
Does exchange rate flexibility speed up current account adjustment?
Menzie D. Chinn Shang-Jin Wei - VOX
1 December 2008
This column examines whether the pace at which a country’s current account balance adjusts to its average value depends upon the exchange rate regime.
Conclusion: The conventional wisdom on the benefits of exchange rate flexibility for current account adjustment is greatly exaggerated. The fact that policymakers are basing their prescriptions upon unverified propositions lends even greater urgency to a comprehensive rethinking of the flexibility dogma.
http://www.voxeu.org/index.php?q=node/2632
December 8th, 2008 at 1:10 pm
Fuld Was Not Alone
CNBC’s Dylan Ratigan, host of ‘Fast Money’ and ‘Closing Bell’, tells TSC’s Debra Borchardt that Dick Fuld isn’t the only bank CEO to be blamed for the financial meltdown.
http://link.brightcove.com/services/link/bcpid1459183594/bclid1137812485/bctid4123830001
Don’t forget the other “winners”.
January 1st, 2009 at 10:04 pm
I may be mistaken, but Euro has also not fallen against Dollar. It is world currency too.