Tag Archives: finance

The cost of Renminbi adjustment

Yang Yao, Edi­tor of the Chi­na Eco­nom­ic Quar­ter­ly, points out that Obama’s health bud­get cal­cu­la­tions may depend on Chi­nese sav­ings

Stop­ping the sale of Trea­sury bonds to Chi­na would ben­e­fit the US. First, it would pre­vent Chi­nese sav­ings depress­ing demand for Amer­i­can goods. Sec­ond, it would dis­cour­age the US gov­ern­ment from deficit spend­ing and pre­vent sky­rock­et­ing gov­ern­ment debts. Third, it would avoid a trade war, which would ben­e­fit no one. The incon­ve­nient truth, how­ev­er, is that the Trea­sury needs cheap Chi­nese sav­ings to finance many more urgent spend­ing needs, includ­ing the new health­care plan.” Extract from FT.com

Another small step

But it’s impos­si­ble to ignore the sig­nif­i­cance of this con­tin­u­ing inter­na­tion­al­iza­tion of the rem­min­bi.

Although it has no short-term impli­ca­tions for the full con­vert­ibil­i­ty of the ren­min­bi, the announce­ment pro­vides bal­last to the vol­ley of polit­i­cal sig­nals Bei­jing has been send­ing in recent months over its dis­sat­is­fac­tion with the US dol­lar.” Extract from Finan­cial Times

Budget transparency turns murky

So much for the Government’s “Oper­a­tion Sun­shine” that was sup­posed to make bud­get pro­gram expen­di­ture more trans­par­ent and account­able.

On the biggest sin­gle pro­gram item, Defense—a stag­ger­ing 2.3% of GDP or $27 bil­lion dol­lars next year alone—it seems to be a case of re-neg­ging and obscu­ri­ty.

As the first bud­get after a new Defence White Paper, there is a glar­ing absence of sub­stan­tive infor­ma­tion on fund­ing, invest­ment and reform. The best that can be said is that the bud­get is con­sis­tent with a White Paper that’s silent on when any­thing will occur or what things will cost. All we are offered is a vision of what the defence force will look like in 2030.” Extract from Aus­tralian Strate­gic Pol­i­cy Insti­tute

The ASPI’s chief ana­lyst has described the Bud­get papers as “delib­er­ate­ly vague”.

More transparency in the Federal budget

The bud­get to be intro­duced next Tues­day will be the first to ful­ly imple­ment the rec­om­men­da­tions of the (for­mer Sen­a­tor Andrew) Mur­ray Review on cut­ting gob­bledy­gook and slop­pi­ness out of bud­get esti­mates and on enforc­ing more rig­or­ous report­ing and audit of gov­ern­ment use of our mon­ey.

All of this is a good thing. It is being man­aged by Lind­say Tanner’s Min­istry of Finance. But the pro­gram still falls some way short, in my view, of where the Aus­tralian gov­ern­ment should be in report­ing pub­lic expen­di­ture; espe­cial­ly con­sid­er­ing the amount of our cash that they’re slop­ping around in the name of ‘stim­u­lus’.

What is to be done?”

Lenin rec­om­mend­ed it. Now Simon John­son moves from blam­ing the elites to orga­niz­ing against them.

We have to break up any bank that’s ‘too big to fail’ so that we can have a func­tion­al free mar­ket. We need seri­ous reform that fix­es the root caus­es in our polit­i­cal and eco­nom­ic sys­tem: exces­sive influ­ence of banks, dan­ger­ous com­pen­sa­tion sys­tems, and mas­sive con­sol­i­da­tion that does noth­ing to serve the pub­lic inter­est.” Extract from A New Way For­ward

A spoon-full of toxin

When ‘Uncle Joe’ Stiglitz crit­i­cizes a pro­gram for ‘social­iz­ing loss­es’, there must be some­thing seri­ous­ly wrong.

The Geit­ner Plan for the U.S. bank­ing sys­tem appears on the sur­face to be a way to cre­ate and isloate bad banks. These new insti­tu­tions will be built by a part­ner­ship of gov­ern­ment and pri­vate investors who will buy-up and hold the ‘tox­ic’ assets pend­ing the mar­ket plac­ing a firm and less pan­icky val­u­a­tion on them.

Once removed from the mainstream—so the the­o­ry goes—the tox­ic assets will have a less poi­so­nous effect on the finan­cial sys­tem. Mean­while, time will drain the tox­in from the assets of the bad banks. If the government’s pri­vate part­ners in the deal price the tox­ic-asset-pur­chas­es cannily,they will make a prof­it from their even­tu­al re-sale and the gov­ern­ment could even make a prof­it on it’s cred­it-sub­si­dies. A ‘win-win’.

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p>But that’s a myth as <a href=“http://www.nytimes.com/2009/04/01/opinion/01stiglitz.html?_r=3&partner=rss&emc=rss&pagewanted=all” title=“Op-Ed Con­trib­u­tor — Oba­ma

Renminbi reserve currency?

A devel­op­ment worth watch­ing:

Econ­o­mists say the SDR plan is unfea­si­ble for now but see Beijing’s cur­ren­cy swap deals [with Argenti­na, Malaysia, Indone­sia, South Korea, Belarus] as pieces in a jig­saw designed to pro­mote wider inter­na­tion­al use of the ren­min­bi, start­ing with mak­ing it more accept­able for trade and aim­ing at estab­lish­ing it as a reserve cur­ren­cy in Asia, some­thing that would also enhance China’s polit­i­cal clout” Extract from Finan­cial Times