China's Yuan Strengthens as Petrodollar Talk Dominates
There has been too much talk of petrodollars. And not enough talk of Chinese dollars China isn't really de-dollarizing. Rather the contrary. A new blog 1/ https://t.co/6NT3Onlp9U
Growth Boom and Surplus Can't Stop Currency Decline
Massive growth acceleration Massive external surplus Yet its currency weakened amid the growth surge hmmm https://t.co/r5svYHvizk
Yen Jumps 3% on Speculation of Japanese Intervention
Yen intervention? Bloomberg: "The yen surged as much as 3% as traders speculated Japan is intervening in the foreign-exchange market, hours after officials delivered a “final” warning to investors against selling the currency" https://t.co/ePYGtzQpwG
UAE Reserves at $285B; March Data Will Test Stress
Counterpoint: the UAE ended February with USD 285b in fx reserves. The first real indicator of stress will come when the Emirates releases data (soon I expect) on end March reserves 1/ https://t.co/eO790Q1e0x
Swaps with Richer Kingdoms Outpace US Treasury Limits
True, if you extend a swap to a kingdom with more assets than the US Treasury ...
China Avoided WTO Case by Skipping Procurement Pact
There was never a WTO case -- China never signed up to the government procurement agreement, and the criteria for the lists were designed so as never to explicitly say only Chinese made products quaified ... 1/2
China's EV Subsidies Favor Domestic over Imported Components
China also has made an art out of local content requirements (i.e. "made in China") -- remember no imported car or imported battery ever qualified for China's EV subsidy list ... 1/2
EU’s Surplus Driven by Ireland’s Tax Tricks, Not Trade
Indeed, without Ireland (tax avoiding US Pharma MNEs) the EU customs surplus disappears. the EU should be thought of similarly to Japan; its current account surplus (ex Ireland) comes from investment income not trade 1/2
China Loses Monopoly on Military‑critical Rare Earth Samarian
A bit of good supply chain news; China no longer has a monopoly on the refining of Samarian, a rare earth with important military uses 1/ https://t.co/Co909XqIbs
Dollar's Global Dominance Pre‑dated and Survives Petrodollars
Enjoyed Brendan Greely's big story on petrodollars -- which debunks a lot of dated theorizing about the role oil plays in the dollars global role. He is right -- the offshore dollar system predates the arrival of "petro" dollars and has...
Chinese State Banks Do More Than Just FX Intermediation
. @GagnonMacro asked a good question, one that others at Peterson have also raised (and I know from other sources that it can also be traced back to the PBOC), namely aren't the Chinee state banks just intermediating domestic fx...
Chinese State Banks Boost Dollar Holdings, Fuel US Asset Demand
Gonna keep repeating this until it registers -- The PBOC may or may not be reducing its real Treasury holdings; it could just be moving out of US custodians But the state banks are clearly adding to their dollar portfolios, and thus...
Petrodollar Debate Ignoring Pre‑Crisis Global Surplus Figures
There is something about the petrodollar debate that seems to make its participant believe it can be conducted in the absence of solid numbers -- A reminder, prior to the crisis in the Strait, the global surplus as in Asia (manufacturing...
China Weaponized Rare Earths Against Japan in 2010
Will set aside the debate over the merits of Lighthizer's trade war with China in 2018 China clearly weaponized rare earths against Japan in 2010. This Chinese move wasn't simple a response to the 301 1/2
2025: China's Surplus Increasingly Recycled Through State Banks
100% wrong substantively. The key change in 2025 is that a rising share of China's surplus is being recycled through the state banks. They aren't the PBOC but they aren't exactly private either 1/2 https://t.co/VGghVlVzkz
Asia Already Serves as Major Dollar Funding Hub
Don't get it -- Asia is already a big dollar funding center. China's state banks have a ton of dollars ... As to Hong Kong banks As for that matter do firms like TSMC and Samsung at current chip...
Chinese Tariffs Spurred Crucial Foreign Tech Investment
Correct Chinese tariffs were instrumental in creating the incentives for European, US and Japanese investment in China back when China needed foreign investment for technology and know how transfer
Tooze Delivers Concise History of the Exchange Stabilization Fund
Tooze is on a roll -- great instant history of the Exchange Stabilization Fund 1/2
Wave of Account Hacks Prompts Call for Platform Action
A number of folks accounts have been hacked recently, including it seems Robin Brooks -- please read this X needs to do something; I haven't been hacked but I have seen a wave of bad impersonators https://t.co/t06AZKPM5y
FT: Treasury's ESF Cash‑strapped Compared to Emirates' Central Bank
The FT notes that the Treasury's ESF appears cash constrained relative to even the Emirates' central bank, let alone the Emirates sovereign funds 1/ https://t.co/pOSa75xpDy
Qatar's $600B Surplus Faces First Deficit in Decade
Qatar's accumulated current account surplus (which excludes capital gains on the QIA's investments) over the last 40ys is USD 600b give or take Qatar can afford a few months of deficits . But it still hurts https://t.co/zcG5etAkVY
UAE Central Bank’s Cash‑Equivalents Share of Reserves Fell
Alex hasn't quite internalized how bad my eyes are and how much I need BIG FONTS ... but this is super interesting -- the UAE has a ton of cash equivalents on its central bank balance sheet (the various bars). ...
Tooze and IMF Overlook Exchange Rates in Imbalance Analysis
I cannot criticise Tooze for leaving out the exchange rate as a central variable when the IMF (... the IMF ... lest we forget, whose mandate is around exchange rates and the balance of payments) also left the exchange rate...
Tim Cook Turns Apple Into Ireland’s Top Taxpayer
Tim Cook also did wonders for Ireland and the Irish fisc ... Apple is almost certainly now the largest Irish tax payer and its 2014 decision to put on a Green Jersey set out a tax model that a lot of other...
Middle East Still Holds Trillion in Dollar Assets, Not Switching
Tony Nash is right that the Middle East isn't de dollarizing. Iran wants sanctions relief so it (in some ideal world) can re dollarize and stop selling to China at a discount ... 1/2
EU Positions Itself as Emerging Geopolitical Commission
So this may indeed turn out to be the "geopolitical Commission" EU working to secure its Western as well as Eastern flank ... 1/2 https://t.co/E5tZDyX9CS
IMF Misjudges UAE's Need for Bailout
I would be the last person to accuse the IMF of hard headed surveillance of the GCC countries (the IMF treats fiscal and BoP surplus countries as model pupils ... see its treatment of Singapore) But for what it is worth,...
Bloomberg's Argentina Report Beats Bank Sales Pitch
Some excellent reporting here from Bloomberg (on Argentina) More hard hitting that a lot of investment bank research/ bonds salesmanship 1/ https://t.co/fM2uaDPWmh
Administration Worries About Dwindling GCC Investment Inflows
Good Politico story on the Administration's concerns about the loss of GCC investments here ... https://t.co/JySqztN8q4
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A bit more on the GCC swap line puzzle (why the ask, and why is Bessent apparently keen to say yes to a set of countries with tons of assets) There doesn't seem to be any shortage of good collateral (Treasuries)...
Korean Equities Soar While Currency Fundamentals Crumble
Crazy retail outflows into levered US stock funds -- and a national pension service that is a structural source of weakness in the won (by design) and that the Koreans have had trouble turning off even when it worked at cross...
US Flips From Trillion Promises to Billion Bailouts
Amazing how fast the US has swung from hyping the "trillions" it was going to get from the oil sheiks and Asia ... to talking about providing those same countries with billions in bailouts (swaps ... ) 1/ https://t.co/rAOp6Do3pc
US ESF's Dollar Holdings Too Small for GCC Support
ESF isn't all that big -- And its liquid dollar assets are actually quite small Lines for all US allies in the GCC would be small v many countries existing reserves (let alone their SWFs) and would have to be funded out...
GCC Nations Turn Net Drains on Offshore Dollar Liquidity
The UAE's request for a swap line -- presumably after a big fall in the central bank's $285b in reserves in March/ early April -- confirms that the GCC countries are now a net drain on offshore dollar liquidity. The Saudis...
Chip Price Surge Rivals Oil Shock, Adds $300B Surplus
Chip price shock is by some measures as big as the current oil shock -- $300b annual increase in Korean/ Taiwan combined trade surplus v 24 based on latest data (depends of course on where oil settles for the rest...
China’s Auto Export Surge Defies EU Tariffs
The second China shock isn't going to go away on its own, or with half measures -- China's auto exports to Europe, for example, have clearly reaccelerated (even with the narrowly targeted CVDs against battery electric imports) 1/ https://t.co/pdaadEXUrD
China Can Fund Payroll Cuts without Harming Benefits
There is obviously resistance to any move to changing the structure of taxation in China, but I would note a couple of things: 1) a holiday on payroll contributions (or a big cut) need not lead to fall in benefits; the...
Taiwan Fights Chip Boom to Protect Undervalued Currency
Taiwan's willingness to do absolutely anything and everything to keep the chip boom from putting pressure on the wildly undervalued Taiwan dollar is unw=matched ... 1/ https://t.co/yVjNKHd7ci
Cut Payroll Taxes to Revive Chinese Consumption
Agree strongly with Mr. Barnett here "The cure, then, is to boost consumption in China — something no amount of tariffs can achieve. Fortunately, one powerful lever exists: a dramatic, permanent cut in the payroll tax" 1/ https://t.co/Cm8mn17CDD
Oil Spike Highlights Balance‑of‑Payments Shock Over Dollar
With oil rising again (alas), my Odd Lots episode from last week gains new relevance -- tis at least as much about the balance of payments impact of an oil shock as about the dollar https://t.co/JtgH1nPC0z
UAE Holds Strong Reserves Amid Unreported Figures, Seeks Swap Line
Interesting WSJ story about the Emirates request for a swap line -- the UAE hasn't reported its end March reserves but it went into the conflict with tons of reserves and no shortage of liquid bills in US custodians 1/ https://t.co/5Q61nzi68P
Reducing East Asia Surplus Key to Global Economic Balance
Global adjustment really does hinge on bringing down East Asia's surplus -- and of course also brining down the deficit of the US and the UK The second China shock already solved for Germany's surplus https://t.co/CQ5w2tBmTD
Podcast Appearance Urges Urgent Debate on Fixing Imbalances
Thanks Michael -- I hope my appearance on the podcast of the great @SoumayaKeynes puts some urgency back into the debate over how to fix imbalances --
FX Settlement Reveals China’s $35B March Currency Purchases
Fx settlement is in my view the single best proxy for China's true intervention. It looks like China, Inc bought about $35b in fx in March even with all the turmoil in the oil market. That's down...
EV Tariffs Fall Short; Europe Uncovers Chinese FX Meddling
Indeed -- EV tariffs (CVDs) also were clearly an insufficient response (lower than China's old WTO bound 25% auto tariff on Tesla and BYD, easy workaround with plug in hybrids) And Europe only now discovering Chinese intervention in the fx market
Higher Oil Prices Won’t Create Massive Petrodollar Surge
A new blog on a hot topic -- petrodollars The basic theme though is back when oil was at $70 there weren't actually many petrodollars -- and there won't be all that many of them even if oil settles at $100 https://t.co/NFWDnn5zbv 1/
Section 122 Tariffs Hampered by Undefined Terms
A discussion of section 122 -- balance of payments tariffs -- for those interested. Turns out that the statute never defined its key terms -- international payments problem, large and serious balance of payments deficit -- so there is a bit...
Iran Conflict Eases Yuan Pressure as Banks Shed $30B
The Iran war took the heat off China's currency. After facing strong appreciation pressure from November through February, the direction of pressure changed in March -- The state banks look to have reduced their foreign assets by ~...
FT Unveils China's “Sock 2.0
My work on this earth may be nearly over -- or at least my work of the last 4ys could be in its final chapter. The FT's Big Read is on the China sock 2.0 (one of my favorite phrases) and...
Q1 Exports Up 15% YoY, Volume Gains Likely Higher
it is actually a good number. it comes after a super strong February (new year effect + real growth) and off a high base. y/y export growth for q1 was 15% in dollar terms almost certainly more in...