Interesting articles: RBNZ governor on global liquidity, United States of Petrodollars and more
Allan Bollard speech on global liquidity and its impact on New Zealand. Although part of the speech is related to New Zealand, many arguments apply to any country and are nicely presented. Quote: “Globalisation has had major effects on the New Zealand economy over the last decade or two. Monetary policy has certainly not been immune. Some of the impact has been very helpful to us in our primary task of achieving price stability. We have enjoyed a useful disinflationary impact from the flood of cheap manufactures available from China and other newly industrialising countries. We have enjoyed the benefits of trading with a buoyant world that has been enjoying good stable growth rates with stable prices. More recently however, we have had to focus on a related phenomenon which has had some unanticipated effects: the growth of global liquidity.”
PIMCO Paul McCulley on quartely global outlook. Quote: “At the end of the day, liquidity isn’t about money stock growth, but a risk-seeking state of mind. In other words, liquidity isn’t about money on the sidelines per se, but rather about the risk appetite of those on the sidelines. And when risk appetite turns, no amount of liquidity on the sidelines matters, particularly when a crowd gathers there. This is the essence of modern day finance. The human condition is, in the end, momentum-driven, not value-driven.”
Morgan Stanley post on United States of Petrodollars (a nickname for GCC countries), recommending local currencies revaluation against the dollar and pegging to the basket of currencies.