Thought for the day
"Doubt is not a pleasant condition, but certainty is
absurd."
-
Voltaire (French, 1694-1778)
Word for the day
Celerity (n)
Rapidity of motion or action; quickness; swiftness.
(Source:
Dictionary.com)
Teaser for the day
Have we learned any lesson from KFA
that could be applied to SpiceJet and Air India?
This set and game goes to US
Continuing from yesterday...
I am increasingly inclined to believe that perhaps the paradigm
is shifting in global markets. I am certainly not suggesting "it is
different this time". What I am saying is "it is the same as
always".
The global market paradigms have shifted every few decades. The
shifts have been caused by a variety of factors. Sometimes it has been led by
shift in strategic and geo-political power (spread of European empires in 17th
and 18th centuries and strength of US post second War). Sometimes technology
innovation (industrial revolution in Europe and US, Japanese manufacturing
renaissance post WWII and then internet revolution in US) caused the shift. Rise
of oil economies post 1970's in middle east Asia and Chinese and Korean
manufacturing revolutions have also caused material shift in global markets.
Nature has also played vital role in causing tectonic shifts in global power
equations and market balances. Decline of great Roman empire is case for study.
In most of these market transition phases, currencies have
played a key role. Therefore it is pertinent to evaluate the current transition
in global market paradigm from this angle also. And this is where I see a
difference. In most earlier instances the emerging currency (including gold and
silver in earlier instances) has changed its relative global value during the
course of the shift. Sometimes strength in the currency or gold & silver
stock played a critical role, as in case of British and Portuguese dominance in
earlier centuries. In some cases weakness in currency supported the shift, as
in case of the rise of Korean and Chinese manufacturers causing decline of
Japanese dominance.
The present case appears no different. Japanese are trying to
regain their lost market share in global manufactured goods market by
depreciating their currency. Germans are struggling to retain their market
share by forcing the Euro down. While US has almost won the war to retain the
supremacy of dollar.
Considering that US fiscal deficit is shrinking fast, Current
account is favorable and monetary stimulus has been withdrawn - the supply of
USD to the global market is declining at a rapid pace. On the other hand, the
demand for USD shall rise at even faster clip as Japanese, Chinese and European
mints work overtime to print local currency.
This all will happen, when most emerging markets are saddled
with huge dollar denominated debts; and commodity producers who sell in USD are
facing serious erosion in demand.
I have written earlier (see here)
also that Uncle Sam may have lost a few battles, but it is certainly on course
to win the war. At this point in time no challenger is in sight.
However, we may see some resistance emerging in next decade.
More on this tomorrow.
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