Collision course: China and Japan...Starring the Eurozone, with US in a cameo

Countries have interests.  Most have allies.  All have enemies (real, perceived, and of the manufactured variety).  In times of economic turmoil enemies appear more menacing.  The normal jockeying for position by a country during the good times, may often be perceived as a threat (or opportunity to manufacture a threat) by another during the bad times.  It seems China and Japan, because of the inordinate impact of global rebalancing on current account surplus countries, may be locked into this game of "perceived or real" threat for some time.  Interestingly, the key global economic policy choice being made inside the Eurozone could grease the slides along a collision course for China and Japan.  The impact of such a collision would likely lead to an end of the euro currency regime as we know it, but the potential impact on the global economy would be even worse.  

Read on ...

Currency Currents 24 July 2013

Comment