You know most of us have a tendency to blame the world when something does not go the way we wanted? Like some CEO which said it’s not his fault that the product is no longer favoured by the customers? It must be the competitors’ fault. Well, the direction of the company is determined by the CEO in the first place. He may also have been paid a lot of money. Read here: When salary packages for CEOs become way too high At least for one company that I don’t really support because they are selling way too high simply because they have lots of loyal supporters, this company has also changed its direction. It used to believe that 4 inch screen is the largest you will ever need for a smartphone. Haha. These days, their new screens are as huge as what the competitions are offering. Let’s talk a little more macro today; of country’s trade balance.
Do read this funny article about the views from the researchers of biggest economy in the world. “Asian economies escape ‘manipulator’ tag, but expect more pressure on trade” Basically, Mr. Trump is trying to reduce the trade imbalances which has resulted in the U.S. having trade deficits for such a long time that it has become a norm. The blame is on some countries which has NOT imported enough goods from the U.S and has instead exported more to them. I think the question should be, did these countries even FORCED the Americans to buy in the first place. The trade balance between Malaysia and the U.S is also in Malaysia’s favour. Yes, in case you still did not know, this is one BIG reason determining the currency strength and based on this alone, the currency with deficits should NOT be growing stronger against majority of every currency in the world.
Want to read an educational article by a bank based in the U.S? Of course it should not be an article written by some banks here in Asia, then people may say this is biased. Here’s a simple one. ‘Why does a trade deficit weaken the currency?’ So, tell me, beyond just rhetorics after rhetorics by their President, should they not do a bit more to change this imbalance? I hope he would. By the way, Bank Negara Malaysia has already said many times that they only want an orderly change for the Ringgit. Huge movements either way will just harm the businesses. A currency should ONLY be used for trade. Any other speculative purposes should just be banned altogether. It’s tough for businesses to produce awesome goods to sell to the world. It however takes just few seconds for some currency manipulators to push the currencies up and down. Well, I think if the US$ continues to strengthen without actual economic changes which is necessary, rest assured that volatility would continue because many policy people would have to come up with ever more justifications. A crisis is not too far away when chaos reigns within the currencies. Happy following.
written on 16 April 2017
Next suggested article: Stability if very important for a currency – not for speculation