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One of the challenges of reading this book is El-Erian's lapses into dense IMF bureaucratese.

Other than that, it offers lots of brain fodder, for example, the four phase process by which successful emerging economies wake up to their burgeoning Fx reserves

Phase 1: Benign neglect
Starting mostly as debtors, they either ignore the growing reserves or treat them as found money.

Phase 2: Sterilization
Heavy Fx inflows drive the currency and inflation up, threatening export competitiveness and domestic welfare.

The knee jerk reaction is to sterilize the inflows and suppress the currency by issuing domestic debt or just printing money.

IOW, what Geithner called China's “currency manipulation” in a far too rare moment of political honesty.

Phase 3: Liability and asset management:
Paying off foreign debt and activating Sovereign Wealth Funds to invest the reserves abroad.

Of course, judging by the massive SWF losses incurred so far in resurrecting foreign banks, it's moot whether they managed or damaged whatever assets they started with.

Phase 4: Embracing change
Building domestic demand.

What India and Indonesia, for instance, have done far better than China, which chose to parasite off Western profligacy rather than do the hard work of building a real economy.

Says the FT: “Export-led economies are organised to export. All the incentives are to save, invest, produce and export. All the politics are organised around that system.”
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