INSIGHTS

In May 2020, when I was still locked down, I wrote a Newsletter where I tried to imagine what the post COVID world economy was likely to look like.

When central banks (CB’s) act in coordination, as has been the case since the Great Financial Crisis, they are debasing their currencies together.

Once again, we try to predict what the year that just started may bring in market-relevant political and geopolitical events, and the financial markets.

The pandemic, which started after we published our forecasts last year, muddled the waters to the point where even when we turned out to be right, we were right for the wrong reasons. In any event, here’s how things worked out.

On November 15th, 2020, 10 members of the Association of Southeast Asian Nations plus China, Australia, New Zealand, South Korea, and Japan, signed the Regional Comprehensive Economic Partnership (RCEP).

In the September Newsletter we looked at the dollar as investors and concluded that it would rise in the short term but decline in the medium-term. In this Newsletter we will deal with a more long-term theme that might strengthen the traditionally inverse relationship between the yellow metal and the greenback.

The last time we dealt with the US dollar was in our July 2019 Newsletter. At that time, the trade war with China was already well advanced and, to make sure Europe did not feel left out, President Trump started to lambast Europe for manipulating the Euro lower.

It is tempting to say that the increasingly aggressive rhetoric against China is really for domestic consumption at a time when the US president is headed for an election.

When a man like Stephen S. Roach publicly questions the role of the US dollar as the world reserve currency, and his thoughts are published in Bloomberg(!), then something momentous may well be afoot.