Currencies

In this special report, we discuss whether the economic conditions necessary for a stronger yen (and higher JGB yields) will materialize over the next 12-to-18 months.

Commentators often use notions like debt deflation, balance sheet recession, and liquidity trap interchangeably. Yet, these are different concepts. This report develops a framework and provides a diagnosis of China’s economic malaise. A follow-up report will deal with what kind of treatment is needed for a recovery. As a trade, we recommend shorting the EM equity index.

In this special report, we discuss whether the economic conditions necessary for a stronger yen (and higher JGB yields) will materialize over the next 12-to-18 months.

Numerous divergences have opened up between global risk assets and global business cycle variables. These gaps are unsustainable, and odds are that the recoupling will occur to the downside with risk assets selling off.

China has generated 41 percent of the world’s economic growth through the past ten years, al-most double the 22 percent contribution from the US. Now that the Chinese growth engine is failing, we explain why it is arithmetically impossible for world growth to maintain the altitude of the past few decades. And we discuss an important investment implication.