There are a few truly macro trends that, if they change, the world must change around them. The direction of cross-border capital flows is one of these.
Fantastic read yet again!
Japan's economic development could be worth it's own full read. Boom, bust and lost decades. Would make a great read I'm sure!
I've been fan of Michael Pettis work! And you're now my 2nd favourite writer in economics...I love to read your work...
One suggestion...It would be great if you can publish your work in a book...I don't think there is any book out there which talks about Economic identities (like accounting identities)...
Would be great to read such a work!
Great thread too Peter. I'm also reminded of the Druckenmiller Deutschmark reunification trade 1989ish, where the Bundesbank afraid of inflation kept rates high, while the fiscal spending was turned up to an 11. The result was massive appreciation of the Mark. Something similar is happening now with USD, but a strengthening USD will have massive implications (negative) on risk assets.
Hi Peter. Excellent post. I have followed Michael Pettis' work for a while as well. You mentioned the ASX and as an Australian I have watched the ASX basically go nowhere for 15 years. However, as you would be aware our property market is very bubbly and I think much of it is explained by Michael's work and your post. Most people I talk to still seek the answer elsewhere - immigration, planning laws etc. I would be interested to know your thoughts as I can clearly make a link between the surplus countries and Australia's property bubble. Thanks Steve
I think we are seeing some of the imbalance related stress show up in Japan. With a smaller current accout surpluses than in previous years, the need to keep stimulus going is clear and it of course help in keeping the Yen depreciating to support exports.
“Perhaps one of the 3 surplus countries, either Germany, Japan or China, may be able to switch to being a deficit country. “ - why did you word it that way? Why not switch to balanced country? Or does balance simply not exist, and all we can hope for is less imbalance?
Do you have recommended reading list on this topic?
The system seems very stable. Consider the absorption by the West of the resources of the ex-Soviet block, and then the change in Russia to autarky, and at the same time the mammoth increase in Chinese manufacturing, and everything seems to trundle along. And yet people like Ray Dalio think that it will come undone at a certain point. Do you have a comment on this?
You're publications are fire! Great work.
What's your thoughts on Canada - the reliance on Real-estate to boost GDP has dominated. In part to blame is the political games that increased the supply/demand imbalances in houses we see today- igniting the ramifications of unaffordability. With more reliance now seemingly to come from importation of labor, since post GFC, the surplus of cash to boost levered retail and commercial players seems to have cushioned the markets resilience. That's my quick thought, would love to hear yours, and you're insight in the potential fate of Canada's economy (if you have an outlook on it).