Interesting macroeconomic developments abroad

by Zain Jaffer

Over the past few months our financial outlook has been influenced by the movement of the markets from the Fed tightening and interest rate increases, and macro developments including the impact of the war in Ukraine. 

We are all familiar with the narrative. The U.S. printed too much money to give away during the pandemic, and this was used to buy a lot of stocks and crypto, thus creating asset bubbles. The excess liquidity also made people buy things left and right, thus inflation is high. The only way the Fed can bring inflation under control is to raise interest rates to make debt more expensive, and do tightening by not buying bonds. Thus there is less liquidity for discretionary purchases like Tesla EVs, iPhones, and crypto. Instead most of that money gets sucked up by higher monthly loan payments, and all that. Finally since a lot of the indicators that the Fed uses are lagging, and controlling inflation is not an exact science, most likely a soft landing is not possible. More likely we will end up with a recession sometime this 2023. So that’s the typical public narrative from the economists and business leaders these days.

However it is easy to be caught up in a parochial US centric mindset. The belief that it is only events that happen here locally that matters. This is not true. Let me give you a few developments abroad that will hopefully give you a more holistic view of the situation ahead.

First, not everyone globally is tightening. While US Fed overnight lending rates to banks are currently just below 5%, the Bank of Japan actually holds their lending rate at around -0.1% [1] So the Japanese government, while realizing that there is inflation, do not want to get back to the lost decade where their GDP did not grow for a long time. 

Another development which really impacts us bigtime is the desire of the BRICs (Brazil, Russia, India, China) and Saudi Arabia to revisit the use of the US dollar as a petrodollar to be the standard to pay for all petroleum purchases. Right now, China has the Petroyuan, an alternative to the USD for oil and petroleum payments. The Petroyuan is backed by gold that is redeemable on the Shanghai and Hong Kong stock exchanges. [2] 

Renowned economist Nouriel Roubini (a.k.a. “Dr. Doom”) predicted in a recent February 2023 Financial Times opinion piece that, “Finally, new technologies including CBDCs, payment systems such as WeChat Pay and Alipay, swap lines between China and other countries, and alternatives to Swift, will hasten the advent of a bipolar global monetary and financial system. For all these reasons, the relative decline of the US dollar as the main reserve currency is likely to occur over the next decade.” [3]

Also for China, just coming out of a long pandemic freeze, the government is intent on jumpstarting their economy, once the fastest growing in the world. Last February 17, China released  632bnYuan (around $92bn) into their economy. [4] This might not be the last liquidity injection given their size, but the Chinese do not really care about events in the US as they have their own problems restarting their economy. 

Although they have an official ban on crypto in place, this ban does not apply to their Hong Kong territory. Many crypto and blockchain companies are now considering moving to Hong Kong, which might impact US leadership in this arena. 

The Chinese are not too keen on new real estate given the oversupply of unused and unoccupied properties they built during these last few years, particularly with the massive collapse of their giant real estate firm Evergrande.[5] There are literally new Chinese towns with tall buildings but with no people in those.

No one can tell the future, and what will happen to the markets. But one way to incorrectly miss what is happening is to simply limit yourself to US centric business and economic news. There are many developments happening overseas that can impact the markets here.



  1. BoJ uncollateralised overnight call rate – Japanese central bank’s current and historic interest rates (
  2. What Is The Petroyuan? | FXCM Markets
  3. A bipolar currency regime will replace the dollar’s exorbitant privilege | Financial Times (
  4. China Ramps Up Economic Support With Biggest Ever Cash Injection – Bloomberg
  5. Why China’s Evergrande Crisis Could Be Worse Than the U.S. Crash – Bloomberg