Modern Monetary Theory is becoming mainstream in developed markets. Governments are suddenly pursuing plans that lead to deficits that would have been unimaginable a decade ago. The US, UK, and Japan, for example are all engaging in record spending sprees to support the economy in the wake of Covid-19. Yet MMT has been slow to […]
Chile was once the neoliberal poster child for Latin America and the broader world of emerging markets. The nominal cause of protests that broke out in October 2019 was a slight increase in the subway fare. But it was connected to something much bigger. According to OpenDemocracy: How could a mobilization that began with an […]
We’ve written in the past about how the way deglobalization is creating a new opportunity set. Trade policy changes will drive a rearranging in company supply chains. In general the latest wave of trade policies encourage more regional supply chains. Additionally, they encourage companies to diversify suppliers across markets. Covid-19 will accelerate these changes. Investors […]
In May Xi Jinping introduced China’s “dual circulation strategy”. At first this passed without much comment, even from China insiders. However, seasoned China hands are starting to talk about the serious economic implications.Part of the reason this dual circulation strategy took so long to get attention is its vagueness. The specifics aren’t finalized yet, and […]
Often companies in emerging markets look deceptively cheap if you don’t consider the macro background. For example, we were recently looking at buying stocks in Uzbekistan. We found a rapidly commodity exchange business that was trading at 4x P/E. But is 4x P/E really cheap if inflation is rampant, and the currency is rapidly depreciating?You […]
Traditional economic theory holds that crashing currencies have a self correcting mechanism. More expensive imports drive new demand for home made replacements, helping to boost the economy. Additionally, devolution makes exports comparatively less expensive for buyers abroad. Yet experience in a world where most trade is invoiced in dollars contradicts this idea, as a recent […]
Whether its war, terrorist attacks, populism or protectionism, investors can’t escape geopolitics. This is especially true for emerging markets, where politics sometimes matters as much as economics.Geopolitical risk is becoming increasingly important. Trump has drastically altered America’s foreign policy. Radical populist leaders are rising around the world. Fiscal and monetary policy is increasingly intertwined. Covid-19 […]
Studies of extreme medical abnormalities have led to breakthroughs in understanding how anatomy and physiology works in normal people. Early studies of industrial and transport accidents led to more advanced engineering, and created the field of materials science. Extreme Economies, by Richard Davies applies this principle to apply the same concept to economics. This approach […]
Currency substitution or “dollarization” is when a country legally recognizes the US dollar as legal tender, in place of or in addition to its own. Dollarization has many advantages for emerging market countries, according to a recent article in National Review. By dollarizing, an emerging market country can eliminate exchange rate risk, and completely avoid […]
A lot of analysts are concerned that Covid-19 is going to devastate emerging markets. After all, they are less prepared to deal with massive demands on their domestic health infrastructure. Worse yet, a higher portion of the population in emerging markets likely lives in crowded conditions. This view is corroboratedd by recent stories showing a […]