The Jacob Shapiro Podcast The Reverse Currency Crisis That Isn’t
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May 9, 2025 This week, the hosts dive into the intricacies of the Asian reverse currency crisis, revealing a story shaped more by market dynamics than doom. They tackle the implications of a rising Taiwanese dollar and its effects on global finance. There's a surprising discussion on Trump's proposed tariffs on foreign films, questioning American soft power. The pair also examine Saudi Arabia's return to high oil production, and the ongoing retail challenges from supply chain disruptions and dwindling inventories. Buckle up for a ride through a shifting economic landscape!
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Understanding the 1997 Asian Financial Crisis
- The 1997 Asian financial crisis was caused by pegged Asian currencies and carry trades collapsing.
- Post-crisis, nations shifted to running current account surpluses and accumulating US dollar reserves for protection.
Unwinding of Carry Trade Balance Sheets
- Recent surges in Asian currencies reflect unwinding of massive balance sheets offsetting US assets and local liabilities.
- Institutions are forced to buy local currency by selling US dollar assets, driving currency appreciation.
US Dollar Losing Risk-Off Status
- The US dollar is no longer a risk-off asset; capital flees the dollar in risk-off events.
- Asian nations will unwind their US dollar reserve accumulation, leading to stronger local currencies and more diverse surplus/deficit positions.