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Here's How The US Benefits From Emerging-Market Woes In This Yin-Yang Global Economy

Sam Ro   

Here's How The US Benefits From Emerging-Market Woes In This Yin-Yang Global Economy

There's no question that the world has become increasingly globalized as shipping costs have tumbled and trade restrictions have come down.

But this doesn't necessarily mean that macroeconomic forces have a uniform effects on all of us.

Morgan Stanley's Joachim Fels philosophizes on this a bit.

He notes that the recent data out of the emerging markets and developed markets "illustrate the yin-yang character of the global economy and markets."

From Fels:

One prime example of the yin-yang global economy is that better growth in the US may actually be bad news for EM, for two reasons: to the extent that is driven by re-industrialization it harms the manufacturing platforms in EM; and to the extent it pushes up real interest rates, it harms those highly leveraged EM economies that have relied on capital inflows from DM for too long. But it also runs the other way: the turmoil in EM may be good news for DM consumers as it pressurizes commodity prices, makes other imports from EM cheaper due to DM currency appreciation, and may allow DM central banks to keep policy expansionary for longer due to (more) imported disinflation.

So, what's bad for the emerging markets might actually be good for the developed ones.

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