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Global imbalances alive and well
Weekly investor research
09 February 2015
China racks up another record trade surplus – this time USD 60bn – just weeks after the US recorded a trade deficit of USD 47bn.
Why the imbalance? Because the US has replaced decades of debt-fuelled stimulus with years of hyper-easing by the Fed. This
is keeping spending going, but it is against the backdrop of low productivity and still enormous debt burdens that will make
it hard to materially tighten policies. By contrast, China’s demand for imports is waning because the country is engaging so
seriously in reforms. The continued accumulation of trade imbalances is unsustainable and will end in the time-honoured fashion
– with inflation and currency realignments. We discuss the Petrobras scandal in Brazil, Ukraine’s devaluation, India's macro
numbers and the new diplomatic push in Eastern Ukraine. We end by putting the latest US employment numbers into context.