True exoticism isn't traveling to the other side of the world to discover the differences between an Asian McDonald's and one at home. Exoticism is time travel. Not in the future, since science fiction is inevitably a projection of the present, but also in the near past, so strange and so alien.
There was a time, from the origin of our species up to a century and a half ago, when the concept of privacy was practically unknown and even the body of the sovereign was public. The Sun King provided for the body's needs every morning in a large room and in the meantime talked about state affairs with guests and courtiers. However, he had the privilege of being able to sleep alone, if he wanted. The bedroom, from the Neolithic onwards, however, was a concept known only to the upper classes of the cities. In the countryside of the world, the vast majority of human beings, once they came out of the caves, had always lived in common in what today we would call a one-room apartment without a bathroom, whether it was a Central Asian yurt, an African hut or a Po Valley tree farm. of hooves.
In this one-room apartment we all slept together trying to face the freezing winter nights without wasting heat. In the Chinese countryside of 7 thousand years ago people slept on stones that had previously been placed near the fire, in the Roman domus the fireplace was already in use, but thick clothing and heavy blankets were still essential for survival. With ten or twenty people all together the nights were busy and the blankets, pulled all over the place, regularly turned out to be too small and inevitably left someone uncovered.
Today we have thermostats and electric blankets, while at MIT they already have a film of polymers powered by solar energy that, applied to pajamas, can regulate the temperature on command. However, the concept of a blanket that is too short remains, as a metaphor, when in economics we speak of scarce resources to distribute.
Globally, as is well known, the scarce good of our years is growth, which is the blanket that protects us from mass unemployment and social instability. This blanket is so precious that the various countries try whenever they can to get it on their side by devaluing their currency. But since my devaluation is the revaluation of others, it is customary to say that realignments are zero-sum. If I devalue, I export more and import less, but at the expense of my neighbors. Global growth remains unchanged and currency warfare only generates instability and confusion, so it can even be negative-sum if my competitive advantage becomes smaller than the damage it creates to others.
This, at least, is what they say, shaking their heads, especially when it's the others who devalue. Like all cliches (and like many of the rules that are studied in economics textbooks) the zero-sum theory is sometimes valid, but not always.
There are in fact two cases in which pulling the blanket can result in positive sum and produce more heat for everyone.
The first case is when you pull the blanket all together, spreading it apart (the blanket is supposed to be elastic in this case). If all countries simultaneously create new monetary base through Quantitative Easing it is as if they all devalue towards each other. Exchange ratios ultimately remain unchanged and a stimulus is created. If the stimulus sets in motion unused resources it creates growth, if unused resources no longer exist it only creates inflation. If the unused resources still exist, but have no desire or way to be used, the stimulus returns to the sender (the banks redeposit the Qe money in the central bank) and nothing happens. In recent years we have seen that the stimulus has partly had the first effect and partly the third. In the end, although less than expected, it was positive.
The second case of a positive-sum blanket is when the blanket, without changing shape or size, is moved from side to side in a spirit of cooperation. We are all cold, but if someone has a fever (and it happens to everyone in turn) we agree to remain with one leg or arm uncovered to cover the sick person well. If it is a small child we do it willingly, if it is a distant relative we are less happy but we do it anyway. It is the spirit with which we go to help the neighbor whose house is on fire because we know that the fire could come to us too.
In these post-2008 years, the blanket was first pulled by the United States, which invented (or rediscovered) Qe and decided that if they didn't heal themselves, no one would be healed anyway. The others accepted. The yen went up to 80, the euro up to 1.50 and the renminbi continued to strengthen until last August.
The United States recovered and Japan fell ill instead, which in 2013 and then again at the end of 2014 devalued until it took 125 yen to buy a dollar. None of the neighbors jumped for joy but Abe was good at convincing the world that devaluation, accompanied by other fiscal and structural measures, would give us back a healed Japan.
In the spring of 2014 it was Europe, with its southern half exhausted after three years of austerity, that fell ill and was cured with Qe and devaluation. Again the neighbors agreed to move the blanket. An implosion of Europe in a fragile world would have been devastating.
In 2013 many newcomers also began to fall ill. Fever rose again in 2015 for many of them who produce raw materials and reached dangerous levels in some cases. And so last year they were allowed to pull the blanket aggressively. Today they are not healed, but they still survived a very serious crisis and, albeit staggering, they are back on their feet.
In August 2015, China stopped pretending to be sane and made it clear to its neighbors that it could no longer hang on to an ever stronger dollar. In September, Yellen officially declared that the United States was also starting to run out of breath. This idea was then reiterated by Yellen herself two weeks ago. Moreover, from September to today, the American economy has grown very little. For some time, therefore, it has been the United States (officially on behalf of China) that has been pulling the blanket over. All the others repaid roughly a quarter of their devaluation against the dollar.
The G 20 in Shanghai at the end of February is confirmed every day more like a small Plaza (the 1985 agreement that stopped the rise of the dollar). In the weeks that followed Shanghai we saw a new European maneuver designed so as not to weaken the euro. Japan, for its part, by refusing to further widen its Qe, has implicitly renounced to bring the yen back to 125 (it is now at 108) even if its economy has lost a significant part of the progress due to the first Abenomics. Korea has agreed to revalue together with the yen and even New Zealand, by refraining from lowering rates, has agreed not to devalue any more.
On the one hand, there is a sense that overstretching QE is pointless and that negative rates, beyond a certain extent, are profoundly destabilizing. On the other hand, there is the American request for a truce on the dollar.
Now the blanket is optimally positioned, because nobody is too comfortable and nobody is too bad. The country that is better off, looking at the numbers, is Germany, which is also the one that complains the most.
Germany, as a mercantilist country that never exports enough and never has as low an exchange rate as it would like, has developed over the years a great skill in posing as a victim. First unification, then the disastrous German investments in bubble technology of 1999-2000, then the dead weight of the rest of the Eurozone, then 2008, then Greece and Italy, now China where it is more difficult to export , Brexit, Greece again, Italian banks, refugees, in short, Germany is never short of excuses to complain not only within the eurozone but also towards the rest of the world. However, we must be careful of criticizing it too much, we in Italy, because this German ability to keep the euro low even in the presence of a current account surplus is very convenient for us.
The current balance of exchange rates can hold as long as its two weak links, China and America, hold. For America there is not too much to worry because she has an unparalleled structural solidity. For China, there is the question of how long it can go on with credit stimulus, but for the question of how long it can go on with credit stimulus, but for the moment things are under control.
America, ever closer to full employment, needs to raise rates, but it can't do it with a dollar that's too strong. The blanket will therefore be adjusted until China is able to absorb an American rise without devaluing. In practice, there will be an upturn on the day when the American and Chinese economies do well at the same time. The next check will be in June, but if America goes slow as it is now, the rise will be postponed again.
In this warm and perhaps even chilly climate, bags and bonds float without too many problems. The rebalancing of portfolios after the panic selling of January and February is complete and there is very little room to go higher. In a stable (or simply perceived as stable) world it would still take an external shock to make the markets retrace. More than lightening, therefore, in this phase, it is a question of repositioning towards cyclical and emerging markets in the reasonable hope that the American economy, thanks to the weaker dollar, will accelerate again.
