This ended up being a lot longer than I thought it would be – mostly because I have barely slept for the last few days amd I’ve lost track of time from staring into excel spreadsheets. Anyhow, here is more analysis than I set out to write, complete with candy-colored charts!
Bloomberg mused that some countries, China and Taiwan in particular, might be particularly well-shielded against a US interest rate increase, especially on a currency outlook. Neat analysis, can we take it further? Well, starting from structuring the countries according to their various types of debts and then adding on equity market capitalization for major liquid indices in the countries gives a pretty good idea of where we are at using a rough balance-sheet view of how the countries’ financing looks. Then I pull a “quick and dirty” and place foreign exchange reserves on top of the aggregate financing total, essentially considering the currency reserves “retained earnings” and “cash” at the same time. They do act as a line of defense against tumult in global markets, a part of them can readily be used (except for in China’s case, I think a few people would really get scared if FX reserves drop for them) to meet other demands, and it is the effect of surplus cash being used to build reserves in this case, so it feels like abuse of notation that kinda works. So what do the charts look like after these additions then?
Seeking Symmetry in Securities 