About the Expert
Expert Bio
Brad W. Setser is on leave.
Featured
The best single measure of the resilience of an oil- or gas-exporting economy in the face of swings in the global oil price is its external breakeven price: the oil price that covers its import bill.
Current Projects
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The IMF reserve metric isn't working: it is failing to differentiate between obviously under-reserved countries like Turkey and Argentina and adequately reserved countries like China.
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Pay attention to banking system's foreign currency exposure to the government ...
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Do not use the IMF’s current account forecast in the Fall 2020 World Economic Outlook (WEO). It is already out of date.
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A recent white paper from Lazard points out that emerging market sovereign bond holdings are often fairly concentrated among a handful of big players. The main impediment to collective action may be less that bond holders are dispersed, and more that a handful of big holders all compete against each other and the benchmark.
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Is China’s surplus with the United States back at a record level? It depends. In China’s data, China’s exports to the United States and its surplus with the United States are at all-time highs. The United States’ import data, however, shows fewer imports from China than China reports exports—which is interesting, because the norm has long been the other way around.
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China’s second quarter balance of payments data points to a significant increase in the foreign asset accumulation of the state banking system. That at least raises the question of whether China’s authorities are resisting pressure on the yuan to appreciate.
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Joe Gagnon and Fred Bergsten have called the years from 2003 to 2013 the decade of manipulation, as a host of Asian countries protected their competitive position of their exporters by intervening massively in the foreign exchange market. Is a new decade of manipulation about to start, as Asian exporters once again try to keep their currencies from rising?
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Global trade imbalances are, once again, largely the result of Chinese and American trade imbalances. China's surplus has increased even as the pandemic has reduced global trade, as has the U.S. deficit.
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If nothing changes, China’s massive trade surplus will soon be an even bigger political and economic issue…as global trade imbalances are once again being made in China.
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Large increases in dollar reserves tend to come during periods of dollar weakness, not periods of dollar strength. That is for a simple reason: many export-heavy countries still intervene heavily in the foreign currency market to try to keep their own currencies from appreciating against the dollar. Until Asia is as willing to float up as it is to float down, the dollar isn't going anywhere as a reserve currency.
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On current trends, goods exports to China will struggle to reach their 2017 level—there won't be any big gains from the Phase One deal.
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Right now the bulk of the IMF's lending capacity likely won't be used in the face of the economic, financial, and public health shock from COVID-19. Mobilizing the IMF's lending capacity likely will require a new facility. The Short-term Liquidity Line created this spring isn't actually well suited for the moment.
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Foreign Treasury sales, including large sales from reserve managers, made the Fed's job harder, not easier, in March.
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Over the last fifteen years, U.S. production of pharmaceuticals has fallen while imports have soared. It is worth asking why.
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A few things that jumped out at me about the U.S. trade data. Some no doubt are controversial.
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Selling reserves borrowed from the banks ultimately puts the health of Turkey's banks at risk.
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The euro area GDP data—thanks to Ireland—is increasingly telling us more about the tax strategies of large U.S. firms and less about the actual composition of activity in the euro area. Large investments in acquisition of their own intellectual property by U.S. firms transforming themselves into tax residents of Ireland ahead of the end of the double Irish are impacting the economic data of the entire currency union.
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In theory, there is a strong case for trade in services—specialization raises the productivity of all. Yet the actual data on U.S. trade in services tells a less appealing story. Far too much trade in high end services seems to be with low tax jurisdictions. I love the Irish, but there is something wrong when “Ireland“ is the United States’ leading export market for software services, business consulting services, and R&D services.
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Trump's trade war didn't really put a dent in China's balance of payments. And China looks like it has the kind of external balance sheet needed to weather the corona virus shock. China has a lot of domestic debt, but it remains a pretty big global creditor.
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There is a case that viruses (bird flu, swine fever, and now the coronavirus) have had almost as big an impact on Chinese-American agricultural trade as the trade war. (And more than most want to know on trade in crustaceans)
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The common denominator across many emerging economies is a shortage of dollars. But the causes differ, as do the solutions.
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China needs its own version of Rutger Bregman …