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Trinh Profile picture
@Trinhnomics
Aug 27, 2019 • 5 tweets • 3 min read • Read on X
Another great paper highlighted by @StephenSpratt on the USD as King👑. The USD is more key than the EUR or JPY in its KEY role in global finance. If the Fed tightens, markets expect USD assets to decline & demand up. In times of stress, demand for SAFE USD assets rise 👇🏻👇🏻👇🏻
@StephenSpratt USD denominated assets are not just issued by the US but also sovereigns, quasi sov, banks, firms as demand for safe dollar assets & convenience yield drives people to issue in USD.

But key here is that they got the ORIGINAL SIN highlighted earlier on implications of weaker CNY
@StephenSpratt Imagine the Fed after a decade of ZIRP & QE creates a lot of incentives for issuance of USD-denominated debt. But when the Fed tightens, the supply of safe USD-denominated shrinks. For those that depend a lot of USD funding, the local currency depreciates MORE & 👉🏻 ORIGINAL SIN😱
@StephenSpratt Not just offshore USD issuance but onshore in the USD. B/c of the role of the USD & strong demand globally for USD assets, a lot of incentives for issuance of USD bonds/debt backed by risks collateral (junk bonds).

Author says dominance of USD in credit markets rose since 2008!
@StephenSpratt In other words, because of this relative differential in US growth vs the rest of the world (US slowing but not as bad as elsewhere), the USD is tightening global finance. Remember that I always say the FED IS MORE KEY THAN TRADE-WAR. This is why the Fed is under pressure to cut.

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More from @Trinhnomics

Trinh Profile picture
Nov 21
Guys,

Are you ready for a Trump tariff thread and what this means? This is going to be a bit of a technical one but I'll make it easy & fun & we'll go through literature & analysis.

Let's go.
We start with the basics. How does tariff work? First, as you know, the US is a big free trader. Still is despite tons of tariffs on China. So goods in the US generally are tariff free to import & hence proliferation of foreign goods in the US.

But that being said, it does impose tariffs & duties. Sometimes overtly targeting a specific product to protect domestic sector due to lobbying. Anti-dumping duties is an example. A country that is not a market economy is an easy target (China, Vietnam) as u can say those countries have subsidized excessive production & hence duties.

But comes Trump. He has been consistent since the 1980s about the US trade deficit which he has railed against in public interviews and what does he do.

He started a US-China trade-war on washing machine duties.

Before we talk about what has Trump 1.0 (=first term 2017 to 2020) & Biden (2020 to 2024) done in terms of tariffs, I want to talk about the practicality of WHO PAYS FOR TARIFFS.
The IMPORTERS pay for tariffs. By that, American importers pay for tariffs. So when an item say costs 100 goes to 125 because of a 25% tariffs, there are a few things that COMPANIES that import can do.

They can PASS ON that cost to CUSTOMERS (buyers of goods). They can ABSORB that cost. They can FIND A NEW SOURCE to import. Or the SELLER can make the item cost 80 or a 20% reduction of previous price to then when the seller pay 25% that is just 100 BUCKS of import costs so the SELLER ABSORBS this margin compression.

That 25% goes to the IRS as government revenue. Who pays for it? Well, it depends on who ABSORBS THAT COSTS of 25% but surely 25% tariffs happen.
Read 18 tweets
Trinh Profile picture
Nov 8
Two days after the elections & as Trump team prepares their team, let's talk about economic impact. This morning, I will read with you a few papers that have analyzed what he said as literal policy translation.
First, Trump 2.0 will not be as messy as Trump 1.0. Why? Well, dude is gonna prolly get enough people to approve his thousands of people that will be appointed so DC.

This is what you get when you have total power (likely House, Senate).

Second, he has done it already so got a few people in the bags to choose from and the troops in the GOP have rallied behind him.

What does that mean? Trumponomics is going to be pretty forceful, whatever that may be.
There are a few things we know that he is very consistent:
a) On domestic policy - he will like extend his Tax Cuts and Jobs Act (TCJA) or basically corporate tax cuts and also income cuts. That will help boost economic growth but WIDENS THE DEFICIT.
b) On immigration - he will at the minimum TIGHTEN the policies. Whether he will actively deport all these people that entered illegally is a question mark. Irrespective, Biden towards the end of the term got the memo that the open border thing isn't good for politics and since tightened.
That said, he said he would deport so some deportation is likely. Magnitude is question mark.
Read 15 tweets
Trinh Profile picture
Oct 25
Prabonomics Wish List: Higher Tax Revenue, More Social Welfare and Rapid GDP Growth.

A thread on Indonesia's 8th President who will lead Southeast Asia's largest economy & fourth most populous in the world in the next five years. Let's go! 🇮🇩
First, what is Prabonomics? Well, we don't know yet but he won on the promise of continuity of Jokonomics that comprised of infra capex, fiscal prudence, and downstreaming of metals (nickel).

Still, let's talk about his objectives. On the economy, he wants:

GDP to rise by 8% in the next 2-3 years (Jokowi only managed 4.1% on average in 10yrs and excluding Covid years then 5.1%) so that is raising GDP growth by 3-4% higher than its current batting average.Image
How will achieve this 3-4% higher average GDP growth?

Well, more social welfare spending is where we wants to do it. Basically, more free school food, more housing, more self sufficiency of food.

So a mix of social capital & some infra but generally more about social welfare vs the emphasis on highways and new capitals.

How much more? Well, he floated IDR450trn or 30bn for free school lunch for 81m Indonesian or 2% of GDP.
Read 20 tweets
Trinh Profile picture
Oct 14
Here is a short thread on why China fiscal policy, specifically central government support, is sorely needed & monetary support so far is not enough.
First, China got triple D problems - deflation, debt, demographic. All going badly.

Regarding deflation, it reflects an imbalanced economy where supply-side support for a long time has led to too much supply relative to demand domestically.

The easiest way to see it? China's producer price index. It's -2.8%YoY for September 2024. Meaning, producers get less money for the same stuff they make vs last year.

Okay, how is this bad? Margin compression. Your revenue is lower if you are a producer. Or DECLINING INDUSTRIAL PROFITS.
The positive side of this equation is that as they produce so much stuff that is not in demand and prices are cheap, then they can sell ABROAD (exports) for much cheaper than the competition.

A cheaper yuan (meaning depreciated) also helped. All those reasons led to China gaining global market share in manufactured goods to the chagrin of big traders like the EU, South Korea, Japan, and even the not big trader like India that has a about USD100bn of deficit w/ China.

Okay, so it's a bright spot as it gets more income than it spends (imports) so it has a trade surplus.

But that is also a source of geopolitical tensions as other countries are not happy w/ their firms going out of business as they can't compete w/ Chinese goods that are literally deflated.

So tariffs are going up, started by Trump in 2018 but frankly increasingly the EU and likely more and more...
Read 12 tweets
Trinh Profile picture
Oct 4
Great story about India rice policy. What I find interesting about this is of course the agriculture gets the most subsidy in the budget & one can say that India gives so much more to farmers and the sector than any sector by a wide margin.

That is a distortion that favors them as they are a powerful vote bank. But at the same time, the government also banned the exporting of rice when rice surged and that meant farmers couldn't make more money.

What India does with farming is very interesting. As it is a country with food surplus and the budget gives most weight to farming while most farmers remain very poor and more than 75% work for sub minimum wage.
India's central government expenditure budget. Rural development + agriculture gets so much.

There is a lot of talk about production linked incentives but it really just got 1.5bn in FY25. So that means this budget is just mostly agrarian.

Meanwhile, farmers were blocked from exporting rice, causing rice to rot. This is a policy to prevent rice price from rising, causing CPI to spike.

This is a sector worth paying attention to as most Indians live in rural areas & they matter even if farming is only 16% of GDP.Image
One of the reasons India deal with w/ the energy and thus the food crisis is that it is a country that has a SURPLUS in food. As in they EXPORT food.

So to make sure domestic prices & supply stay ample during GLOBAL SHORTAGES due to shocks, India curbed food exports from wheat to rice and sugar.

Meaning, India exported less & so the Philippines saw a huge increase in rice price imported (btw, good for Vietnam & Thailand obvs).

Modi reversed his non-basmati white rice introduced in July 2023 but still have export duty on parboiled rice and minimum price imposed on shipments abroad of the white variety of grain.
Read 8 tweets
Trinh Profile picture
Sep 4
The best research on India is written by the @RBI and it's called the RBI Bulletin (very similar to BOE bulletin) & it's amazing. Go to the state of the economy for charts/details on what's going on in India & then they always have essays on specific issues.

Central banks are consistently the best place to get information on a particular country. I also like the RBA website as well. Enjoy!

We can read some of these together in case you find it intimidating reading central bank language.

rbidocs.rbi.org.in/rdocs/Bulletin…
Some charts of interest from my reading.

India annual installed capacity of solar + wind + other renewables > coal, oil and gas since 2017. Image
India merchandise export contribution:

Positives = Electronic goods + engineering goods + pharma

Bad = petroleum, jewels/gems, rice & ceramics Image
Read 7 tweets

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