We have a great selection of Exclusives this week. Macro expert, Anton Tonev, argues that focusing on money supply growth for inflation trends is a mistake, rather it’s all about supply-side issues. And there, they point to lower, not higher inflation. John Butler forcefully makes the point that the biggest problem with MMT-style policies is its distortions of market prices.
We then have a focus on Asia. Our market-based tracker of Chinese growth suggests that activity is still strong – notably iron ore, and bond yields are giving bullish signals. On currency, we highlight how EM FX is not benefiting from dollar weakness – we flag the Indian rupee is potentially vulnerable. Finally, we think Taiwan markets, and especially the currency, could be affected by the US Treasury report on currency manipulation, which we wrote on last week.
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We have a great selection of Exclusives this week. Macro expert, Anton Tonev, argues that focusing on money supply growth for inflation trends is a mistake, rather it’s all about supply-side issues. And there, they point to lower, not higher inflation. John Butler forcefully makes the point that the biggest problem with MMT-style policies is its distortions of market prices.
We then have a focus on Asia. Our market-based tracker of Chinese growth suggests that activity is still strong – notably iron ore, and bond yields are giving bullish signals. On currency, we highlight how EM FX is not benefiting from dollar weakness – we flag the Indian rupee is potentially vulnerable. Finally, we think Taiwan markets, and especially the currency, could be affected by the US Treasury report on currency manipulation, which we wrote on last week.
Enjoy!
Bilal
Inflation In The 21st Century Is A Supply-Side Phenomenon (3 min read) In his latest Global Strategy Weekly, Albert Edwards explains why he thinks the surge in the money supply is deflationary. As usual, he counters the consensus here, even though he gives credit to people like Russell Napier who correctly identifies the changing nature of US money supply but concludes that this is highly inflationary.
(Anton Tonev│ 6th August, 2020)
MMT: A Free Lunch? Or A Stale, Old Lunch In A Shiny New Lunchbox? (Part II) (8 min read) In Part I of this series I examined a few popular, mainstream critiques of Modern Monetary Theory (MMT) and concluded that they were not particularly persuasive. In particular, I disagreed that there was necessarily a natural conflict between monetary and fiscal authorities – that is, that they are consistently independent of one another.
(John Butler│ 6th August, 2020)
Indian Rupee Weakness Expected (2 min read) USD/INR has struggled to break below 74.50 over the past month even as the dollar (DXY) has weakened. This reflects a broader dynamic in FX markets, where dollar weakness is less pronounced in EM markets. Indeed, other similarly yielding EM currencies, such as the South African rand (ZAR) and Mexican peso (MXN), have recently suffered from notable bouts of weakness.
(Bilal Hafeez│ 6th August, 2020)
Taiwan Dollar Strength Could Continue (1 min read) The Taiwan dollar (TWD) has recently started to show some strength – it was up almost 1% against the dollar in the second half of July before giving back some gains in recent days. A weak GDP print likely caused some of the weakness.
(Bilal Hafeez│ 6th August, 2020)
China Growth Tacker – Iron And Bonds Signal Positive Momentum We recently published a note on how to track Chinese growth in real-time using financial and commodity market prices. In these weekly reports, we will update the indicator to help us track growth.
(Bilal Hafeez│ 6th August, 2020)
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)