United States, Stephen Roach, Brent Johnson discussed on Adventures in Finance: A Real Vision Podcast

Automatic TRANSCRIPT

Is the US has straw and it's going to suck up assets from elsewhere. In the world, original reasons that the Johnson gave as the primary drivers at least where US tightening monetary policy, rising rates in the US while the world was loosening and and but he goes on to say that tightening was never the only reason I think touches on some of the points that you're alluding to which is the US is a global. Global. Superpower our control the sea lanes we have historically at least the last month, or so notwithstanding along a tradition of a rule of law, and still do on a relative basis compared the rest of the world. We control the Global Monetary System in global capital flows with the deepest and most liquid capital markets in the world, and and of course as you as you said at the biggest consumer economy driven by this massive this massive. Glut of dollar debt that the world needs to make trade flows work in terms of the the dollar, the dollar settlement of international loans. Stephen Roach very much the opposite argument. You know it's interesting I read roaches original Bloomberg op Ed piece that he wrote and the basis of his arguments something he calls the the Tina idea which is, there is no other alternative and that's been a something that we've thought for a long time. Brent Johnson makes argument. You make that argument in some. In some permutations, the impression that I got was that Roach is obviously a someone who has had a very long and extremely distinguished career I Morgan Stanley. And now I believe at. and I got the impression from reading that piece of he was looking back over this long and distinguished career and kind of issuing a warning. A, warning to all of us, saying guys don't get complacent. The United States is not the only productive economy in the world, just because the the the dollar has been the backbone of international financial and monetary system as since Bretton, woods. It doesn't mean that will always be the case. A. In that warning I sent a certain degree of politicisation of his economics meaning that. If you're an investor in you're thinking about. How do I play this? You have to be very careful because he has alterior motive and that's always difficult when you're thinking about timeframes in which to to look at that because I think yes, there is no alternative over the short term for sure that means that this whole concept of a thirty five percent reduction is very much a a tail risk case that I don't see panning out. I see more likely a liquidity crunch in which people want dollars panning out with the dollar being still the reserve currency, also the currency of debtors who need dollars and therefore will. Will will bid for dogs and again I think it's like a a a dog with the tail. Wagging the dog that is is that the capital count is driving the current account Stephen Roach is making it seem as if you know the US, profligate and you know people don't save I would say it's actually the excess savings of other countries. People wanting dollars. The reason that they're saving excesses is because they want dollars. They want to use the world's reserve currency, and that drives the current account, so the capital is driving the current account. Stephen Roach is making it seem as if the current account is driving the capital cal and. By his argument. Yup. All important points but I think you really hit the nail precisely on the head when you talk about the distinction in the different time France, you know. This is something that we've talked about in the show as being so crucial branch..

Coming up next