The Netflix series House of Cards is possibly the best thing on TV, but now trading analysts can watch guilt free as the show dishes out important lessons on the market. Yes, you read this correctly, I am telling you that you can watch your TV without having to be on the shouty business channels and still glean useful market information.
Take episode 6 of the second series (don’t worry, there won’t be any spoilers, I promise). The show’s anti-hero Frank Underwood, the wonderfully scheming, amoral vice president of the US played by Kevin Spacey, meets Chinese businessman, Mr Feng, to discuss a trade deal. The businessman is a big cheese, worth close to $50bn, and wants the US to call China a currency manipulator on the world stage.
Come again? China wants to be called a currency manipulator?
Apparently so (according to the TV show). This even had Frank confused. Mr Feng says that businessmen like him want a free-floating currency; however Beijing can’t be seen to be giving in. So the only way the RMB will float freely will be if it looks like America forced China’s hand by labelling it a currency manipulator. I won’t spoil the rest of the plot for you, but it was an interesting way to look at the on-going US/China trade battles and it suggests that with the CNY nothing is ever as it seems.
Let’s, for argument’s sake, assume that the House of Cards writers don’t have a fly on the wall in Beijing and instead they just dreamed up this idea thinking it made a good addition to the story. It doesn’t sound too far-fetched for a number of reasons including:
- China is a huge economy, it’s a big hitter on the global stage, its major businessmen and women are as important as their US and European counterparts, thus it is likely that most of them are indeed progressive and see a free-floating currency as an inevitability, a bit like Mr Feng. China can’t continue to be the world’s second largest economy and not have a free-floating currency since in the long term it could promote global protectionism that could hurt China’s economy.
- The politics also make sense. It is much easier for China to make the dramatic shift to a free-floating currency with all the domestic fall out that this may cause – for example a dip in exports if the currency appreciates strongly – if it can blame the US.
China isn’t the only thing to watch out for in the Netflix show. The first couple of episodes dealt with the US debt ceiling and the potential for a US default. The tactics employed by Underwood and co. to strong-arm the Republicans into passing the bill, which included arresting Senators and literally carrying them head first into the Senate, allowed the debt ceiling bill to be passed and prevent disaster.
This year the actual US politicians have been more grown up about the US’s financial position and have not pushed the country close to default as in recent years. If staffers and members of Congress watch House of Cards on Capitol Hill, they might see just how ridiculous the whole situation actually is and avoid pushing the US to the financial brink in future.
Art sometimes tells us a lot about life, and life, particularly political life in the US, is one of the most important drivers of US markets these days. I for one will continue to watch House of Cards as it is, thankfully, legitimate homework. I just hope they have a third series in the making; if they do maybe they can focus on the Fed’s normalisation of monetary policy!