When the US financial crisis in 2008, the dollar index fell below the 70 mark at the lowest point. At that time, Europe formed a group to go to the United States to purchase travel, and the euro almost reached a historical high of around 1.6. Now the US dollar index broke through 110 and was around 113, the euro fell to around 0.96, and the pound fell to 1.10 level. Now is the time for the United States to cut leeks, but the one that was most hurt was the hardest-hit American allies. Although emerging market countries also suffered three kills in the exchange rate stock and bond markets, they were lucky enough to escape the disaster compared to Europe.
According to recent data, the yen fell below 146. After the Japanese Ministry of Finance interfered with the foreign exchange market, it still failed to hold on and continued to fall. This is closely related to the Bank of Japan's negative interest rate policy. As the spread of becomes larger and larger, more investors realize that the depreciation of the yen still has greater room for decline. Under the policy of negative interest rate , the benchmark spread of the US-Japan benchmark has reached 335 points, which cannot support the yen. The yen can only continue to fall as the Federal Reserve raises interest rates. In this way, Japan, as a hardcore ally of the United States, has suffered the greatest harm, which is actually very similar to Europe.
The market says that the rise of the US dollar is to cut leeks, cutting it over and over again to the closest allies. Europe and Japan not only have no complaints, but have also been applauding the Federal Reserve, because the Federal Reserve controls US inflation and will reduce European inflation. Therefore, Europe also expects the Federal Reserve to continue hiking rate . At the same time, the EU Central Bank is also raising interest rates tightly. But the problem is that the euro has depreciated to such a serious level, which is tantamount to a destruction of the European economy. Europe is about to fall into recession, which shows that Europe has suffered a lot of harm.
For emerging market countries, the exchange rate depreciation caused by the rise of the US dollar is relatively controllable. As long as you increase the interest rate hike, you can stabilize the exchange rate. The key is the repayment of US dollar debt. As the US dollar rises rapidly, the US dollar debt of emerging countries is also expanding, and more local currencies are needed to repay it. Moreover, international creditors do not want their own currency to only recognize the US dollar, which increases the difficulty for emerging countries to repay US dollar debts. Once defaults occur, a debt crisis will break out. This is the biggest thorny problem for emerging market countries to face the appreciation of the US dollar.
In terms of inflation and the decline in local currency, emerging market countries are actually much better than Europe. One is that the depreciation of local currency is relatively controllable, and the other is that inflation is relatively controllable. Although the inflation in countries like Brazil is both double-digit, Europe has now reached double-digit numbers. Moreover, Brazil has been in high inflation all year round. The current inflation cannot trigger more social turmoil. On the contrary, strike waves are constantly erupting in Europe, and the number of corporate bankruptcies has risen rapidly. The problems caused by depreciation and inflation in Europe are more complex and serious. Emerging market countries are better and the social economy is relatively stable.
In terms of globalization, it is obviously not something that the United States and Europe and other allies can control each other. In and outside the cycle of the United States and Europe cutting each other, the vast number of emerging countries are booming, developing countries economic growth is accelerating, a new global governance order is about to emerge, and the G20 mechanism is operating efficiently. These can promptly correct the traditional cycle of the United States and Europe cutting each other. A new world governance order is gradually being established. The United States and Europe can carry out wealth turnover in a cyclical way, but the world does not need such a cycle. The world economy needs to establish a new governance order to promote common growth, rather than falling into a cycle of mutual cutting each other.
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