By Jack Crooks, Currency Analyst
www.worldcurrencywatch.com

Though it is fashion to blame the U.S. for all the ills now flowing into the global economy, I don’t think it’s quite that simple.

Remember the “global savings glut.” In short, it was the massive current account surplus accumulation of the East thanks to the massive consumption of the West. This was buoyed by the Massive “global savings glut” allowing for the creation of rocket science products called derivatives.

And yes, we’ve seen it all before. In fact, only the names at the top of the central banks have changed.

It’s All Been Done Before…

Let’s set the stage and go back a few decades. Those of you, like me, with grey hair now unfortunately growing on your face (guess it beats the alternative) may remember that back in the mid-70’s our major international banks were recycling petrodollars (OPEC stash). This led to the international lending/debt boom that eventually caused the crisis of 1982.

This time not only did we have OPEC recycling its stash through the major financial systems, we added the “global savings glut” to the party. This time around Asia had to recycle its massive current account surpluses generated by the usual way they do — suppress their currencies, and put up barriers for Western goods to flow in freely.

“Of course, if Mr. Westerner wants to build a plant and transfer hundreds of millions of technology for us to take at will — well then, come on in. We will continue to enjoy almost 100% free access to your markets while your own policymakers help us by spouting the mantra of ‘free trade.’ It’s a beautiful thing,” says the proud Easterner as he criticizes the extravagance of the West.

(Guess what Mr. Know-it-all Easterner, that double-digit fall in your exports shows that Mr. Westerner is finally getting some religion and starting to consume less and save more; so lighten up — relax.)

But I digress…