- Blog Post
- Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.
Not literally. But I am taking a few days off.
I am sure you all will find a few things to discuss. I have put a few suggestions below the fold, but there are not meant to be limiting.
Is the Treasury bluffing, or is it about to label China a currency manipulator?
Slightly more esoteric. Should Brazil be changing its tax regime to encouraging foreign money to flow into its local market when everyone and their dog already wants to go long Brazil?
What has been the biggest surprise of the past year and a half.
For me, the answer to that question would be:
- That $60 a barrel oil (sometimes closer to $70 a barrel) hasn't exerted a bigger drag on US growth - if you had asked if retail sales (including non-oil sates) would be as strong as they were in January with oil pushing $70 for a while two years ago, I would have said no way.
- That emerging market central banks would be so keen to keep adding $500b plus to their already substantial reserves every year. I expected reserve accumulation by emerging markets to peak in q4 of 2004. It almost certainly didn't (if you include the assets of various oil funds).
- That Wall Street is now so willing to bet on the central banks of emerging markets - not to bet against them. The bond market sure seem to be betting the bubble in reserve accumulation by emerging markets will continue, and continue to keep US rates down, US housing prices up, US consumption strong and US credit risk spreads low ...
- And, as a result, that a looming $1 trillion current account deficit is generating so little market strain. Maybe the markets believe current account deficits don't matter -- afterall, a lot of the (younger) traders on the Street have spent their entire career watching the US deficit rise, with no major consequences. Maybe the markets believe in dark matter. Or maybe they believe that the world's central banks will finance big US deficits no matter what. Pick your explanation -- the absence of greater signs of stress certainly has surprised me.