Quick Summary:
Economics can explain the recent events surrounding the demise of the global emerging markets where countries with weak current account deficits face fund withdrawals and see their currencies crashed and burned. This theory that has caught my fancy (Read more...)
- The Impossible Trinity is an economic theory that states that a country can only control two of the following three levers: Exchange Rate, Free Capital Movement and Monetary Policy.
- The recent Emerging Markets Crisis is a real world manifestation of this theory.
- Countries in ASEAN often chose to control their exchange rate and free capital movement thereby allowing US interest rate to dictate our domestic interest rate.
- This has created stock market and property bubbles in this part of the world and the recent tapering by the US Fed is causing these bubbles to deflate.
- It is not easy for so-called Emerging Markets to actually emerge to become developed countries.
Economics can explain the recent events surrounding the demise of the global emerging markets where countries with weak current account deficits face fund withdrawals and see their currencies crashed and burned. This theory that has caught my fancy (Read more...)
