Thursday, November 19, 2009
Macro Man's feeling a bit under the weather this morning, so today's post will be mercifully short.
What do these four countries have in common:
Brazil, Indonesia, South Korea, Taiwan
a) They all have trade surpluses, according to the last monthly data
b) They all saw the value of their FX reserve holdings rise by at least 1.5% in the last monthly reserve data
c) In the last month, they have all announced either the contemplation or imposition of capital controls or punitive taxes/restrictions on foreign access to domestic asset markets.
d) All of the above.
The answer, of course, is (d). Macro Man has been murmuring darkly about protectionism for most of the three-plus years of this blog's existence, and the drumbeat is growing louder.
Here are the stories on Brazil (which also closed an ADR loophole yesterday), Indonesia, South Korea, and Taiwan.
Now clearly, this is a) taking the piss, and b) not good news in the long run for global trade and risky assets. As yet more countries adopt a "we want you to buy our trinkets, and we want to buy your financial assets, but we don't want you to buy our financial assets" policy, the risk of a pushback must be rising.
Sadly, the Obama administration has resembled its predecessor in lacking the backbone to tell Voldy, et al to "shove it", and now the Europeans have even joined the Yanks in making an annual pilgrimmage to kow-tow to the Dragon Throne.
Maybe this will end well.....but Macro Man struggles to see how.