Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

The World Economy Is Sinking … Will China Bail It Out Again?

Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Macroeconomics

<p>The decision by President Nixon in August 1971 to suspend the dollar's convertibility into gold was triggered by domestic and political considerations, but pressures within the Bretton Woods system had been rising since the mid-1960s as the credibility of the anchor currency became increasingly questioned as the US economy overheated. Subsequently, floating exchange rates and the removal of capital controls helped to facilitate the rise of global capital markets via portfolio investment and direct foreign investment.</p>
<p>Accelerated financial deregulation and innovation in individual countries after the collapse of Bretton Woods also boosted the growth of global financialisation, but this process also prevailed from the mid-nineteenth century to the start of the First World War. Meanwhile, the size of cross-border capital flows were also greatly enhanced by the growth of international trade following the General Agreement on Trade and Tariffs (GATT)  which was effectively inhibited by the Bretton Wood system. </p>
<div>Despite running chronic current account deficits since the mid-1980s, there have been few US currency crises and this reflects changing trade relationships and the different attitudes of partners, notably China, towards floating exchange rates. China and other ASEAN countries have attempted to replicate the export-led growth strategy of Germany and Japan during Bretton Woods with undervalued exchange rates, thereby simply recycling their current account surpluses in dollar-denominated assets.</div>
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<p>Countries with flexible exchange rates have been able to enact significant direct support to households via fiscal policy easing during the COVID-19 pandemic compared to Asian countries who preside over pegged currencies. The lack of large fiscal stimulus in Asia reflects heavy reliance on dollar funding in banking systems and its continued importance as the dominant reserve currency in the region.     </p>

The decision by President Nixon in August 1971 to suspend the dollar's convertibility into gold was triggered by domestic and political considerations, but pressures within the Bretton Woods system had been rising since the mid-1960s as the credibility of the anchor currency became increasingly questioned as the US economy overheated. Subsequently, floating exchange rates and the removal of capital controls helped to facilitate the rise of global capital markets via portfolio investment and direct foreign investment.
Accelerated financial deregulation and innovation in individual countries after the collapse of Bretton Woods also boosted the growth of global financialisation, but this process also prevailed from the mid-nineteenth century to the start of the First World War. Meanwhile, the size of cross-border capital flows were also greatly enhanced by the growth of international trade following the General Agreement on Trade and Tariffs (GATT)  which was effectively inhibited by the Bretton Wood system. 
Despite running chronic current account deficits since the mid-1980s, there have been few US currency crises and this reflects changing trade relationships and the different attitudes of partners, notably China, towards floating exchange rates. China and other ASEAN countries have attempted to replicate the export-led growth strategy of Germany and Japan during Bretton Woods with undervalued exchange rates, thereby simply recycling their current account surpluses in dollar-denominated assets.

Countries with flexible exchange rates have been able to enact significant direct support to households via fiscal policy easing during the COVID-19 pandemic compared to Asian countries who preside over pegged currencies. The lack of large fiscal stimulus in Asia reflects heavy reliance on dollar funding in banking systems and its continued importance as the dominant reserve currency in the region.     

Legacies of August 1971: More Global Financialisation and Limited Fiscal Policy Discretion in Asia