http://www.forexconspiracyreport.com/monetary-policy-no-longer-made-in-america/
Monetary Policy No Longer Made in America
With increasingly interconnected global financial markets U.S. monetary policy is no longer just made in America. This point is brought up in an article in Bloomberg Business, saying that U.S. monetary policy is increasingly made in China, and elsewhere.
Here’s something else for Donald Trump to fulminate about. U.S. monetary policy is increasingly being made in China, not in the good old U.S. of A.
That’s an exaggeration, of course, but it’s more than just misleading click bait. It’s indicative of a broader reality that Federal Reserve policy makers more and more recognize. No central bank – even the world’s most powerful – is an island. With increasingly interconnected global financial markets, what happens overseas often quickly redounds on the U.S., and vice versa.
As an example the Fed backed off a rate increase last September citing “risks around China.”
The direct effect of a cheaper Yuan is minimal for US exports as US exports to China are less than 1% of GDP. The larger issue is that China is a big consumer of raw materials and when its industrial plant slows down so do orders to developing nations for iron ore, coal, oil and a whole host of other commodities. That is what has hurt emerging markets and by extension the global economy. And it is why to a great degree monetary policy of the Fed is no long solely made in America.
3. This point is brought up in an article
in Bloomberg Business, saying that
U.S. monetary policy is increasingly
made in China, and elsewhere.
4. Before We Continue…
Click the links below to get your
FREE training materials.
Free Weekly Investing Webinars
Don’t miss these free training events!
http://www.profitableinvestingtips.com/free-webinar
Forex Conspiracy Report
Read every word of this report!
http://www.forexconspiracyreport.com
Get 12 Free Japanese Candlestick Videos
Includes training for all 12 major candlestick signals.
http://www.candlestickforums.com
5. Here’s something else for Donald Trump
to fulminate about. U.S. monetary policy
is increasingly being made in China, not
in the good old U.S. of A.
7. It’s indicative of a broader reality that
Federal Reserve policy makers more and
more recognize.
8. No central bank – even the world’s most
powerful – is an island.
9. With increasingly interconnected global
financial markets, what happens
overseas often quickly redounds on the
U.S., and vice versa.
10. As an example the Fed backed off a
rate increase last September citing
“risks around China.”
11. The direct effect of a cheaper Yuan is
minimal for US exports as US
exports to China are less than 1% of
GDP.
12. The larger issue is that China is a big
consumer of raw materials and when
its industrial plant slows down so do
orders to developing nations for iron
ore, coal, oil and a whole host of
other commodities.
13. That is what has hurt emerging
markets and by extension the global
economy.
14. And it is why to a great degree
monetary policy of the Fed is no long
solely made in America.
16. A serious issue for many emerging
economies including that of China is
that much of business debt is
denominated in US dollars while
profits come in the local currency.
17. An exception is the oil producers
(and coffee producers) whose
products are denominated in US
dollars.
18. An increasingly weak local currency
drives investment capital to the USA
and sends the currency downward in
a death spiral.
19. However, producers of commodities
still denominated in dollars can do
well if their expenses are all local.
20. The issue for oil producers is the glut
in crude oil and historically low
prices.
21. Although US oil companies are
hurting the US consumer has money
in his pocket as noted in an article on
our sister site,
ProfitableInvestingTips.com, Where
Are Consumers Spending the
Money They Are Saving on
Gasoline?
23. China’s currency reserves are
shrinking as we noted in our
article, What Is a Trillion Dollars in
Yuan? One thought is this.
24. The problem for China is that a falling
Yuan is a self-fulfilling prophecy.
25. Wealthy Chinese take money out of the
country because they fear that the
currency will devalue as the economy
weakens and by their actions cause both
a weaker currency and a cheaper Yuan.
26. This view is reinforced by the large
number of wealthy Chinese who are
buying property or businesses in the
West, but equally important in this
equation are Chinese companies who
accumulated debt in cheaper dollars
and are paying off debt as the dollar
rises and Yuan falls.
27. The sum total of the exchange of
currencies across the interconnected
globe is that monetary policy is no
longer totally made in America.