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HomeChina Ups the Ante
Posted by Larry Doyle on March 23rd, 2009 11:12 PM |
In ten days, the leaders of the G-20 will meet for the most highly anticipated financial conference since Bretton Woods in 1944. In a bold and aggressive move prior to this conference, China’s central bank called today for the replacement of the U.S. dollar as the international reserve currency.
I have written about the tension in U.S.-Chinese relations over the last few months. The essence of this tension is captured in the Prisoner’s Dilemma and A Question of Honor.
Make no mistake: the timing, tone, and substance of this message so close to the start of the G-20 is another major shot across our bow. The ramifications for a change in this international reserve currency are enormous, both politically and economically. Check out current, worthwhile discussions on this topic collected from a variety of sources at Memeorandum.com. In addition, I recommend reading the following article from the Financial Times:
China calls for new reserve currency
By Jamil Anderlini in Beijing
Published: March 23 2009 12:16 | Last updated: March 24 2009 00:06China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund. (more…)
Let’s Revisit Europe: The Weakest Link
Posted by Larry Doyle on March 17th, 2009 5:15 AM |
I thank our loyal reader in Michigan, Mr. Fiscal Liberal, for sharing with us a piece written by Simon Johnson, the former chief economist of the International Monetary Fund, a professor at the MIT Sloan School of Management, and a senior fellow at the Peterson Institute for International Economics.
Mr. Johnson writes about the growing problems in Europe. I am hard pressed to see how the European situation, both in the East and West, can not end badly. There are too many economies that are effectively insolvent or on the brink of insolvency. I believe this is the region of the world which will experience increased economic strife leading to social unrest and political change. Can the problems in Europe be contained given the massively interconnected world of global finance?
Thank you again FL for sharing this very enlightening piece from Simon Johnson!!
G-20s Real Agenda Should be Saving Europe from Itself
By Simon Johnson
Last Updated: 10:28AM GMT 16 Mar 2009The media coverage of the G20 finance ministers meeting this weekend was dominated by the apparent battle between those who support more fiscal stimulus and those who want to impose more regulations on the financial system.
This, we are led to believe, is the big debate facing the full G20 heads of government summit early next month: the US is pushing for a bigger global fiscal stimulus (2pc extra government spending from everyone, to be monitored by the IMF), while the continental Europeans are holding out for greater regulation. Gordon Brown is trying hard to cast himself as the broker for any apparent deal. (more…)
The Global Economic Horizon
Posted by Larry Doyle on March 14th, 2009 2:45 PM |
While there is nothing like a nice 10% rally in equity markets to salve a wounded soul, let’s not get overly ebullient. The global economy is facing a host of issues the likes of which it has not seen in a long time, if ever.
I truly relish the honest perspectives offered by a number of our Thought Leaders. A recent piece posted by Professor Ken Rogoff, a former chief economist for the International Monetary Fund, and currently a professor of Economics and Public Policy at Harvard, lays out a logical road map for global interest rates, economic growth, sovereign defaults, and inflation. Let me preface Rogoff’s piece by stating the road will be long and steep!
What does Rogoff think about the prospects here in the United States under the Obama administration? He writes, “US long-term growth could be particularly dismal, as the Obama administration steers the country toward more European levels of welfare assistance and income redistribution.”
I strongly recommend Rogoff’s What is the Deficit Endgame? Please access a wealth of other global perspectives at the Thought Leaders link (in the left sidebar), which provides access to leading global economists and over 400 periodicals from around the world.
LD
A Question of Honor
Posted by Larry Doyle on March 13th, 2009 1:00 PM |
On January 31st, I wrote a lighthearted piece, Know Your Customer, about my personal experience with an Asian counterparty. The lesson I learned from that experience back in the late 1980’s was that business dealings in Asia are ultimately “a question of honor.” Are you honorable in your manner? Are you honorable in your engagement? Are you honorable on a going forward basis? Are you honorable in both word and deed? Obviously in a meaningful relationship, this code of honor must run both ways.
Our relationship with the People’s Republic of China hinges on American consumers’ purchase of Chinese exports and ongoing Chinese purchase of U.S. government debt. As I just highlighted in my most recent piece, Chinese exports fell 26% in February 2009. Numbers like that will make any government uneasy. During challenging economic periods, the tenuous nature of any economic relationship is captured in understanding the nuances of the Prisoner’s Dilemma. (more…)
Keating Undresses Geithner
Posted by Larry Doyle on March 9th, 2009 12:37 PM |
One of the few countries in the world to escape the worst of this economic tsunami is Australia. I introduced you to former Australian Prime Minister and Treasurer Paul Keating on February 18th in my piece entitled A Fresh and Honest Perspective. Keating was brutally honest in the video clip (thank you SR for providing it!!) included in that article .
I love an honest man!!
Former Australian Prime Minister and Treasurer Paul Keating
Well, Mr. Keating has spoken again and I am listening to him very closely as I strongly believe I am more educated and informed as a result. Our domestic officials and media outlets should take heed.
In an article published in this past Saturday’s Sydney Morning Herald, Obama’s Economic Saviour Savaged as Keating Let’s Rip. Keating offers a piercing review of then Treasury Officer Geithner’s structuring of an IMF led rescue plan of the Southeast Asian crisis in 1997-98. For those unaware, many countries in SE Asia had massive infusions of foreign capital in the form of debt to facilitate infrastructure development. Geithner and then IMF Chief Michael Camdessus structured a plan that injected $200 billion dollars in the form of IMF loans to refloat the economy. Keating maintains that Geithner and Camdessus totally misdiagnosed the problem and in turn the solution. (more…)
