| [December 13, 2016] |
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Kroll Bond Rating Agency Publishes Macro-Market Research: Shall We Thank 'Uncle Xi' for the Resurgent U.S. Economy?
Kroll Bond Rating Agency (KBRA) has released a new Macro-Markets report
entitled "Shall We Thank 'Uncle Xi' for the Resurgent U.S. Economy." The
report makes the following key points:
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As 2016 comes to an end, one of the last details of the year involves
awaiting the decision by the Federal Open Market Committee (FOMC)
whether or not to raise short-term interest rates by a whole quarter
of a point. In many respects, the November election that has brought
President-elect Donald Trump to the verge of the American Presidency
also rendered the deliberations of the FOMC irrelevant.
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It is worth asking whether the renewed exuberance coursing through the
veins of Wall Street is really due to the prospect of tax cuts and
public spending promised by Mr. Trump, or rather the cumulative effect
of eight years of extraordinary monetary policy actions. While KBRA
has long believed that the positive effect of zero interest rates and
trillions of dollars in open market purchases of debt were ebbing, in
many respects the benefits were cumulative and seem to have become
fully maifest just as the central bank is trying to normalize policy.
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Just as capital inflows from China helped to stoke the housing boom of
the 2000s, ending with financial disaster in 2008, inflows from China
more recently have helped to reflate sagging asset prices and then
some, and arguably complemented the Fed's actions in this regard.
China remains the largest holder of U.S. Treasury debt and Chinese
citizens have been spending the dollars provided by the sale of
Treasury debt by the Bank of China to purchase real estate and other
assets in the U.S.
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Instead of attacking China as a currency manipulator, perhaps Mr.
Trump ought to extend holiday greetings to Chinese Communist Party
General Secretary Xi Jin Ping and maybe even thank him for adding
another trillion in stimulus to the extraordinary monetary actions of
the FOMC since 2008. In many respects, the decision by Xi to allow
Chinese nationals to have access to dollars and to spend these funds
freely offshore may be at least partly responsible for the strong
economic situation that now greets the new U.S. leader.
To view the report, please click here.
About Kroll Bond Rating Agency
KBRA is registered with the U.S. Securities and Exchange Commission as a
Nationally Recognized Statistical Rating Organization (NRSRO). In
addition, KBRA is recognized by the National Association of Insurance
Commissioners (NAIC) as a Credit Rating Provider (CRP).
View source version on businesswire.com: http://www.businesswire.com/news/home/20161213006381/en/
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