“China is expected to overtake the United States in 2026 in nominal GDP in US dollar terms and maintain its position as the largest economy to 2050. India is expected to move up the rankings to third place, with real growth averaging close to 5% up to 2050. Indonesia and Mexico are expected to leap into the top ten world economies from 16th and 15th place in 2014 to fourth and ninth place respectively by 2050. We do not expect the representation of Western economies within the top-ten listing to become insignificant. The United States, Germany, the United Kingdom and France will all move down the rankings, but only Italy will lose its place within the top ten.”


From  the GMO  Quarterly Letter

 1. Pressure on GDP growth in the U.S. and the balance of the developed world: count on 1.5% U.S. growth, not the old 3%

2. The age of plentiful, cheap resources is gone forever

3. Oil

4. Climate problems

5. Global food shortages

6. Income inequality

7. Trying to understand deficiencies in democracy and capitalism

8. Deficiencies in the Fed

9. Investment bubbles in a world that is, this time, interestingly different

10. Limitations of homo sapiens



# Content added 12th August:

China’s Latest Currency Actions Are Market Driven

by  Peterson Institute for International Economics

|China’s central bank took a potentially major step toward a more market-determined exchange rate on August 11, when it announced a revision in the process for fixing the central parity exchange rate, the starting point for daily trading of the renminbi (RMB) in the onshore market…China’s move is consistent with long-standing advice from the IMF and from the US Treasury, both of which have repeatedly called for China to adopt a more market-determined exchange rate policy. We should expect this to lead to greater volatility and two-way movement in the value of the RMB vis-a-vis the dollar.

Link to read Lardy article


11th August posting:

Following this morning’s  fall in the Chinese Remninbi Anthony Doyle’s   Bond Vigilantes Quick Comment  is informative :

“The People’s Bank of China (PBoC) has announced this morning that it is improving the pricing mechanism of the daily fixing rate of the remninbi. It will do this by referencing the previous day’s closing rate and by taking into account “demand and supply conditions in the foreign exchange markets” as well as exchange rate movements of other major currencies. As a result, the USDCNY (US dollar to Chinese Yuan Renminbi rate) was fixed higher by 1.9% as a one-off adjustment and represents a record weakening of the Chinese currency. It is the first weakening in the exchange rate by the PBoC since 1994.”

Doyle concludes:

“…Any move to liberalise the determination of exchange rates should be viewed positively for the global economy. Given China’s level of importance as a key manufacturer of goods and its huge cache of foreign reserves, it is unsurprising that large moves in the exchange rate can have significant spillover effects for other economies and financial assets. Any further evolution of the determination of the daily fixing rate of the renminbi will continue to be closely watched, especially in an environment where the Chinese economic growth profile continues to be questioned.”

To read the Bond Vigilantes  article follow this link:

Link to Financial Times Q&A on Remninbi 

Link to Video of Fed Deputy Chairman Stanley Fischer Bloomberg interview yesterday where he mentions concerns with low US inflation and reservations on not moving interest rates until inflation “normalised.”