From the US with love: “Lessons on trade and reserve currency”

Trump is over blaming trade deficit for America’s current situation. But US has trade deficit to 101 countries, not especially to China. This is no longer a bilateral problem, but rather a multilateral problem which origins from America itself. One other reasons why America suffers a negative trade deficit is due to the international status of the US dollar. If there is an international crisis, the demand for dollar will increase because people consider dollar as the safest asset. Therefore dollar appreciates, whcih is bad for US’s international trade.

Morgan Stanley positive on A-Shares. But…

Morgan Stanley said in a report that the likelihood of a new bull run in China’s A-share market has increased as the country is believed to be capable of managing its debt problem and avoiding financial shocks. The bullish sentiment was based on its positive views about China’s ability to rebalance its economy. I think actually rebalancing is not happening fast enough in China. When a central bank lowers interest rate, the investment tends to go up. So the goal of rebalancing the economy cannot be achieved with the loose monetary policy.

Draghi discute di Europa, ma non mi convince

Oggi commento, paragrafo dopo paragrafo, il discorso di Draghi tenuto in Slovenia.Il Predidente della BCE, ammette che, ad oggi, la zona Euro non soddisfa le condizioni per avere una moneta comune. Tuttavia lo potrebbe diventare se 1) nessuno stato commettesse errori di politica economica; 2) se si facessero riforme strutturali; 3) se ci fosse maggior rigore nei deficit e 4) se si arrivasse ad un unione finanziaria. La differenza tra chi sostiene l’Euro e chi no si risolve quindi nella fiducia o meno che tali quattro punti si realizzino in tempi brevi.

Italexit? Mediobanca says Italy would save money

With the passing of time, as more and more analysts do their analysis based on numbers and not on slogans, the cost for Italy to leave the Eurozone seems to magically get smaller and smaller. Before, pundits were predicting a total collapse of the economic system; later on some economists estimated the actual costs. Last week, even the ECB broke the tabu and estimate in 350bn the cost of italy leaving the Euro. Today, Mediobanca, published a report arguing that if Italy were to leave the Eurozone, it would actually SAVE money, 8bn, not much. But it is now clear that we are getting closer to a more serious debate. I, for my part, have been saying that the Euro would bring disaster to Italy since the late 90s.

China economic outlook

Geraci and Prof Liu Baocheng from University of international business & economics were guests at CCTV Dialogue on 24, December, 2016. The talks mainly concerns Private capital outflow and challenges in manufacturing sector. Geraci belives the top concern for China is to stabilize the financial system. The west and other emerging markets have had experience of crisis, so China needs to be very careful. China should slow down reforms in the financial markets.

Fed’s rate rise: little impact on China

The rate hike operated by the Fed should not lead to particularly negative consequences for China because China is taking a step back in the reforms of the financial system and closing into itself. As soon as any government makes the choice to open the country’s capital account, there’s little that any central bank can do to defend its currency. China, therefore, does well to re-trench and disconnect from the world of international finance by adopting restrictive measures on the export of capital.

Is Trump, unlike Yellen, starting to be sensible?

Mr Trump’s advisers have suggested the Fed’s ultra-stimulative policies are unfair by penalising savers and have led to unequal implications for different segments of society. During the campaign Mr Trump was ferociously critical of Janet Yellen, the Fed chair, for her low-rates policies, but she is not expected to resign before her term expires in 2018