First and Last Word on Metals and Mining

Monetary easing in the US had a direct impact on monetary policy in emerging markets. It works by weakening the US dollar which puts upward pressure on EMEs’ currencies. These nations’ central banks try to maintain a peg (implicit or explicit) to the dollar to defend their exports’ competitiveness. To do so the central banks must buy dollars and sell (“print”) their domestic currency. That ends up boosting foreign reserves and increasing the monetary base, creating an extremely easy domestic monetary policy.

Of course EMEs’ growth prior to to the financial crisis was not sustainable either because it was driven by the credit bubbles in the US and the EU.

This of course does not bode well for global growth in the coming years.

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Reviews

Slowing, slowing

May 10, 2014 at 5:41 am
Zurbo Zurbo

Here we have Sober Look living up to its name. Unfortunately I cannot locate the referenced BNP Paribas piece.

a year ago

2 months ago

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