Thursday, December 15, 2016

USD Zombie Battle Royal Waging

USD zombie Japan now getting on top of USD zombie China as both battle for external share of USD balances.

Meanwhile Trump threatens complete elimination of USDs available to all external USD zombies!

Action? You better believe it!

Both currencies circling the toilet bowl as the USD zombies become evermore desperate and lower terms of trade in the face of this nightmare scenario for them.

How low can they go?!?!?

Fed induced increases in USD interest income to the rescue?!??!!

Stay tuned!!!!!!!!


Andrew said...

Can you please explain this more?

Matthew Franko said...

looks like they are lowering the price of their exports in USD terms meanwhile the price of their USD denominated imports are staying the same...

Exchange rate of yuan has gone from about 6 to about 7 and the JPY has gone from about 100 to 118....

Japan has been experiencing some pretty significant domestic fiscal drag so they may be trying to make it up via the external markets ... China has still been growing and having decent fiscal but they may need some USD priced imports which are maintaining price levels meanwhile they are reducing their export prices in USD terms...

Tom Hickey said...

The drop in China's US treasury holding is due to defending the peg, which is eating up USD reserves.

China really, really needs to abandon the peg and cut loose from the USD, float the currency, and regain currency sovereignty.

Then they should focus on expanding the domestic economy and increasing the consumption/investment ratio, which is now between 30/70 and 60/40. A developed economy has a ratio close to 80/20 (as in the 80-20 rule).

Tom Hickey said...

The "one trick" needed for success is continual asking what is most important to change right now and prioritizing that.

For the US it is employment. For China is consumption/investment ratio.

I think the Chinese leadership gets that.

I think that Trump gets that too.

We'll see how successful they are at accomplishing this.