{"id":11863,"date":"2015-09-05T07:30:59","date_gmt":"2015-09-05T12:30:59","guid":{"rendered":"http:\/\/olduvai.ca\/?p=11863"},"modified":"2015-09-05T07:30:59","modified_gmt":"2015-09-05T12:30:59","slug":"this-time-may-be-different-desperate-central-banks-set-to-dust-off-asia-crisis-playbook-goldman-warns","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=11863","title":{"rendered":"“This Time May Be Different”: Desperate Central Banks Set To Dust Off Asia Crisis Playbook, Goldman Warns"},"content":{"rendered":"

“This Time May Be Different”: Desperate Central Banks Set To Dust Off Asia Crisis Playbook, Goldman Warns<\/a><\/h3>\n

Early last month, Bloomberg\u00a0observed<\/a>\u00a0that plunging currencies were \u201chandcuffing bankers from Chile to Colombia.\u201d The problem was described as follows:<\/p>\n

\n
Central bankers in commodity-dependent Andes economies aren\u2019t even considering interest-rate cuts to revive growth, even as prices for oil, copper and other raw materials collapse.<\/em><\/div>\n

That\u2019s because the deepening price slump is also dragging down currencies in Colombia and Chile — a swoon that\u2019s fanning inflation and tying policy makers\u2019 hands.<\/em><\/strong><\/p><\/blockquote>\n

That was six days\u00a0before<\/em>\u00a0China\u2019s decision to devalue the yuan.<\/p>\n

Needless to say, Beijing\u2019s entry into the global currency wars did nothing to help the situation and indeed, since the yuan devaluation, things have gotten materially worse.\u00a0The real, for instance, has plunged 10.5%, the Colombian peso is down 6.6%, the Mexican peso is off 4.4%, and the Chilean peso is down a harrowing 8% (thanks copper).<\/strong>\u00a0And again, that\u2019s\u00a0just since<\/em>\u00a0China\u2019s devaluation.<\/p>\n

Meanwhile, plunging commodity prices, falling Chinese demand, and depressed global trade aren\u2019t helping LatAm economies. Just ask Brazil, where the sellside GDP forecast cuts are coming in fast (Morgan Stanley being the latest example) now that virtually every data point one cares to observe shows an economy that\u2019s sliding into depression.<\/p>\n

Of course a plunging currency, FX pass through inflation, and a soft outlook for growth is a pretty terrible place to be in if you\u2019re a central bank, but that\u2019s exactly where things stand for the \u201cLA-5\u201d<\/strong>\u00a0(believe it or not, that\u2019s not a reference to the Lakers, it\u2019s short for Brazil, Chile, Colombia, Mexico, and Peru), who very shortly will be forced to decide whether the risks associated with further FX weakness outweigh those of hiking rates into a poor economic environment.<\/p>\n

For Goldman, the outlook is clear:\u00a0LatAm central banks will, in \u201cstark\u201d contrast to counter-cyclical measures adopted during the crisis, hike in a desperate attempt to shore up their currencies and control inflation.\u00a0<\/strong><\/p>\n

 <\/p>\n

…click on the above link to read the rest of the article…<\/p>\n","protected":false},"excerpt":{"rendered":"

“This Time May Be Different”: Desperate Central Banks Set To Dust Off Asia Crisis Playbook, Goldman Warns Early last month, Bloomberg\u00a0observed\u00a0that plunging currencies were \u201chandcuffing bankers from Chile to Colombia.\u201d The problem was described as follows: Central bankers in commodity-dependent Andes economies aren\u2019t even considering interest-rate cuts to revive growth, even as prices for oil, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[90,124,130,2656,366,8387,6910,517,534,7477,1031,4318],"class_list":["post-11863","post","type-post","status-publish","format-standard","hentry","category-economics","tag-brazil","tag-central-banks","tag-china","tag-copper","tag-global-economy","tag-latam","tag-meltdown","tag-mexico","tag-monetary-policy","tag-morgan-stanley","tag-yuan","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/11863","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11863"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/11863\/revisions"}],"predecessor-version":[{"id":11864,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/11863\/revisions\/11864"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11863"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11863"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11863"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}