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  • Trade Balances, Capital Flows And Exchange Rates: Worth Considering When Making Foreign Investments [View article]
    Really enjoyed this article. One thing I am fascinated by is that much of our economic orthodoxy and statistical analysis is based on a gold standard/Bretton woods type monetary regime (fixed FX rate). Economists study balance of payments and capital flows data but fail to analyze the data in light of a freely floating fiat system.
    I generally agree with your conclusion because the troubles facing the EURO and Japanese financial systems are a boon to America’s financial system, however, I think legislation like FACTA is doing irreparable harm to the global recovery as it is making it much more difficult for Americans to do business abroad (decreasing capital mobility >> velocity). So therefore we will have a stronger dollar (like you say), but we won’t be able to capitalize on it like we should because of the short sightedness of policymakers.
    I also completely agree with your comment regarding China; as their policymakers gear their economy towards a more consumption based, versus fixed investment based economy, they will have slower economic growth than they have had in the past. Also important to note that they run a trade deficit with all of their major trading partners except the US, a stronger RMB will add pressure to this trend.
    Nov 20 01:54 PM | Likes Like |Link to Comment
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