Link to french article : {http://bit.ly/1kLCHTH}
Link to translation (Google) : { http://bit.ly/1hzZou3}
The German economy is likely to become the lowest in the euro area"
Albert Edwards, who works at Société Générale in London, is known for his pessimistic predictions. Currently, he fears a wave of devaluations in emerging countries and China. The risk? Emphasize deflation in Europe and a return to recession.
You predicted that the end of the bubble in emerging countries would lead to a more serious than "subprime" crisis. What worries you?
Emerging countries themselves worry me unless the impact of the slowdown in their economies over the United States and Europe. They are more durable and resistant to the eve of the crisis that has hit in the late 1990s, but precisely because they are bigger, their slowing down will do more damage in the West. A combination of factors creates a critical situation. First, the Fed tightens monetary and every time it happened, a major crisis ensued policy. This time, the problem is that the liquidity created in the West over the last five years have largely dumped in developing countries and that this stream dries up. This money is draining more pronounced these countries created currency to buy dollars to prevent their currencies from appreciating to continue exporting. As foreign exchange reserves decline with the economic downturn, they can not afford it, which is to apply additional round of monetary tightening.
Any other factor you care?
All these western cash generated significant inflation in emerging areas and made the exchange rate real (adjusted for price inflation) of these economies less competitive. As proof, the relocation trend reverses. Today, emerging countries will be forced to counter deflationary forces that affect devaluing their currencies and exporting their deflation.
Are you worried that we are witnessing a wave of devaluations?
Absolutely, and I think even China will unfortunately have to use the lever. Another phenomenon indeed conspire to increase the risk. Japan is bankrupt and has now decided to devalue the yen to export its deflation. If the Fed tightens monetary policy and the yen depreciates, Korea will have to devalue its currency and Thailand, etc.. And if Asia devalues, other emerging regions will have to follow, especially Brazil. China, the real exchange rate is so competitive, can not sit idly. The yuan is also trying to depreciate.
Who will be most affected, Europe or the United States?
Europe is at risk of a deep recession. Germany is likely to be particularly affected and become the lowest in the euro area economy. Its industries are indeed in direct competition with many Japanese or Korean manufacturers to export goods, cars ... The devaluation of the yen and other currencies against the euro would be very bad news for this country, considered the most virtuous of Europe.
How Germany can react?
I think the impending crisis will force it to soften its dogma in favor of restrictive monetary policies and a strong currency. This could be good news collateral, even if the crisis from emerging countries can also awaken fears of a collapse of the euro area.
Is deflation threatens the West?
In Japan, both inflation and inflation expectations have collapsed. But in Europe and the United States, a certain degree of trust or blindness persists: inflation has fallen, but the central banks have managed to ensure that inflation expectations do not move. The risk is that the market starts to panic seeing that inflation does not rise, as in 1997 with the Asian crisis in 2008 and the Great Recession ...
Discourage you invest in emerging Scholarships?
Everything has a price. The actions of some emerging countries are comparatively cheap, and I do not will invest at this time on the actions of developed countries. However, the risk for a foreign investor is to end up with assets in one currency may be devalued by 20% ...