2011-01-10

Brazilian real caught between a rock (USD) and a hard place (CNY)

The Brazilians are screaming the loudest about the currency war because they are getting hit from two sides, the U.S. and China. Here's the latest coverage from the Financial Times, the latter article discusses capital controls.

Trade war looming, warns Brazil

Tensions rise in currency wars
“These are very tough intellectual questions to which there are no crisp answers but there is a good case for emerging markets to limit inflows now to prevent a crisis in four or five years’ time,” Professor Rogoff says.
The flows are the crisis, usually countries usually enjoy the economic boom associated with the inflows, just as they enjoy the inflationary boom. When the "crisis" hits and a major recession, financial panic and/or currency crisis erupts, this is just the reality of economic conditions breaking through the artificial prosperity built by government or central bank policy.

No comments:

Post a Comment