By Christopher Doering and Rachelle Younglai
WASHINGTON (Reuters) - Regulators moved on Friday to bring more transparency to the sprawling derivatives market, hedge funds and private equity, all dimly lit corners of the financial world getting more scrutiny.
Proposed rules issued by the Commodity Futures Trading Commission and the Securities and Exchange Commission showed regulators stepping cautiously as they implement hundreds of new regulations mandated in July by Congress.
Shining a brighter light on derivatives was one of the key goals of the landmark Dodd-Frank reforms, pushed through by Democrats and President Barack Obama over the resistance of most Republicans and a host of Wall Street lobbyists.
The CFTC's and SEC's proposed rules target a range of derivatives including credit default swaps, which were implicated in the downfall of troubled giants Lehman Brothers and AIG during the 2007-2009 credit crisis.
Swaps in interest rates, currencies, credit risk or other underlying values, are a big chunk of the $583-trillion global market for derivative contracts traded over-the-counter (OTC), or among private firms, rather than on exchanges.
Until now, the market has been virtually unregulated, despite its tremendous size. Its opacity has made it a lucrative business for the largest OTC derivatives dealers: Bank of America, Goldman Sachs, Citigroup, JPMorgan Chase and Morgan Stanley.
The CFTC and SEC, following through on Dodd-Frank, have proposed new standards for OTC swap reporting and record-keeping. The CFTC's proposal on the timing of swaps reporting met some skepticism.
"This proposal merely repeats the vague statutory direction provided in the Dodd-Frank Act," said Scott O'Malia, a Republican CFTC commissioner, in prepared remarks.
In its proposal on Friday, the CFTC did not set specific time limits for reporting most swap trades. It said only that they be submitted "as soon as technologically practicable." It proposed that data on standardized block trades and large notional swaps be held for 15 minutes before being released.
The legislation approved in July is known as the Dodd-Frank Act after its Democratic co-authors Senator Christopher Dodd and Representative Barney Frank.
'REAL-TIME' STANDARD MANDATED
Much of the world's derivatives trading is done in New York and London. The leaders of the Group of 20 (G20) leading economies agreed in 2009 that derivatives must become less risky and more transparent. A report on the issue is expected from G20 regulators in January.
Dodd-Frank called for requiring market participants to report swap trades in "real-time" and left it up to regulators to define what that means -- one of many Dodd-Frank details still to be fleshed out in the implementation phase.
"I am not convinced we are doing the best thing by mandating a 15-minute time limit to report block trades and large notional swap trades between dealers and end users, while providing little to no direction on the reporting of all remaining trades," O'Malia said.
The agencies will evaluate comments from the public on their proposals over the next two months, with changes possibly resulting. Under Dodd-Frank, the deadline for final implementation of most new derivatives rules is April 2011.
The CFTC's preliminary recommendation came on the same day the SEC proposed rules for security-based swaps. Taken together, the agencies' proposals gave an early outline of not only when, but where and how swap data will be disclosed.
Dodd-Frank opens a business opportunity to play a data handling and warehousing role for Depository Trade & Clearing Corp and major exchanges, such as CME Group Inc and IntercontinentalExchange. ICE this week applied to make its ICE Trust unit a registered clearer under the CFTC.
HEDGE FUNDS TARGETED
The SEC on Friday also proposed, under another Dodd-Frank mandate, requiring hedge funds and private equity firms with more than $150 million in assets under management to register with the investor protection agency.
This rule is designed to help the SEC root out fraud and abuse in the $1.65-trillion hedge fund business.
Recently, the hedge fund sector, which includes giants such as Bridgewater Associates and Paulson & Co, has not posted the immense profits that some years ago made it famous.
Many hedge funds are already registered with the SEC, taking some of the edge off the agency's proposals. "They are not going to be hard to comply with," said Ron Geffner, who works with hedge funds as a partner at Sadis & Goldberg LLP.
The European Parliament on November 11 approved new rules to regulate managers of hedge funds and private equity beginning in 2013. EU member-states had already approved the package.
The implementation deadline for the SEC rule on hedge fund and private equity firm registration is April 2011.
(Additional reporting by Ayesha Rascoe and Dave Clarke in Washington, Jonathan Spicer in New York; Writing by Kevin Drawbaugh; Editing by Jackie Frank and Tim Dobbyn)
Source: www.reuters.com
11/14/2010
Opinion: If G-20 fails so be it but G-2 must succeed
The world’s biggest economies have begun the G20 meeting in Seoul and the intensifying ‘currency war’ between America and China must be addressed before all other issues, including G20 President Sarkozy’s ambitious world economy reform plans.
This summit was supposed to be Nicolas Sarkozy’s chance to try and persuade world leaders to accept changes in the way the world economy and markets work.
France would like to see the world’s richer economies introduce formal mechanisms to reduce the dramatic and volatile fluctuations in exchange rates and basic commodity prices, such as wheat, which he says are partially responsible for speculation and the economic imbalances we are seeing today. He would also like to see the introduction of a tax on market transactions.
Another project involves the widening of G20’s responsibilities to include issues such as the impact of climate change on economies and economic development.
Although Sarkozy’s efforts are laudable in principal they are also fatally flawed because of their ‘French approach’ to issues, which is based upon principles of state and G20 intervention, protectionism and legislation, excesses of which both China and America will not permit under any circumstances. Also, the sheer size of the task he has set himself may well be the reason he will fail. However it must also be said that his G20 agenda has found a lot of support in France and he knows that if he fails at least he will be credited for having tried, that which will not hurt his 2012 reelection chances, particularly if he accuses America and China of sabotaging his plans.
It could even be argued that it doesn’t really matter of G20 doesn’t work out for Sarkozy as long as progress is made on the biggest single issue, that of how to resolve the major differences over currencies which are poisoning the world economic atmosphere and will lead to turmoil if they are not reconciled.
The three main trading blocs are America, China and Europe. However, divisions within Europe have resulted in a lack of a coordinated effort to bring it the Euro down, with individual countries’ interests coming first. Germany has a surplus economy and is reluctant to accept a real stimulus package for the Euro as it fears inflation, France sees things in terms of protectionism, and the need to shore up deficit economies like those of Greece, Spain and Portugal are narrowing the options. Opinion is divided on whether the Euro should be artificially devalued and if so to what extent, but nobody doubts that Europe is falling behind.
Worse, Europe’s inefficiency is leaving the door wide open to what it fears most – a G2 duopoly consisting of America and China. European anger at this possibility is being expressed by many analysts and economists alike. That sentiment was aptly summed up in a recent article in Le Figaro which slams American “selfishness” and Chinese “duplicity.” That may or not be true but one thing is certain, and that is that Europe has found itself sidelined and the Chinese and Americans must find ways to absorb their trade imbalance if they want to be in a position to create a future world economy which would be primarily based on their economies. Failure to do so would not only be catastrophic for them, but for the rest of the world too.
The broad reasons for the ongoing “currency war” between the Yuan and the Dollar are well-known. American deficits are being financed by Chinese surpluses, and although this is keeping the weak American economy afloat it is not likely to move it forward unless China gives it some more rope in the form of a stronger Yuan, which would encourage American exports and jobs. America does not want to adopt an austerity economy because of fears of inflation which would be fueled by the Yuan.
But it is precisely because it is a surplus economy that China is unwilling to budge on the Yuan, fearing for its own exports even though it agrees in theory that the most effective single step forward would be an ‘arrangement’ which would suit both them and the Americans.
American complaints about huge Chinese surpluses at a time when the Chinese economy is booming compared to a weak American recovery did lead to China to de-peg the Yuan from the Dollar in June, but the extent to which it did so was deemed to be insufficient, not only by America but by the rest of the world as well.
China’s defense is that over-strengthening the Yuan could seriously affect its exports and its economy.
That situation led to the recent injection of a massive $600bn into the American economy as a “quantitative easing” (QE) measure designed to devaluate the dollar, help kick start jobs and promote growth. The move is also designed to force the Chinese to either devalue the Yuan or risk seeing the world flooded with excess liquidity which would then oblige a currency reevaluation.
In other words, America and China are fighting a currency war with each country using the weapons at its disposal, but if this situation is allowed to deteriorate much longer the result could well be a worldwide recession which would suit no-one at all.
America and the Dollar no longer dominate the world economy as they did before but they cannot be allowed to fail either. China too must be encouraged to continue its economic progress.
But that will only happen if there is a compromise. China must be persuaded to let the Yuan rise in order to give world exports a chance to breath and America would be very badly-advised to continue printing money to dope the world economy. Action to reduce the present tension on currency needs to be coordinated and simultaneous and both countries must be persuaded that 50% of some progress would be far better than 100% of none. This issue will not be fully resolved at the G20 summit, but the summit must concentrate all its efforts on laying the foundations of an agreement which is desperately needed. And that means that Nicolas Sarkozy will have to wait a while before trying to reform the broader system in one fell swoop.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
Michael Cosgrove
Digital Journalist
Source:www.digitaljournal.com
This summit was supposed to be Nicolas Sarkozy’s chance to try and persuade world leaders to accept changes in the way the world economy and markets work.
France would like to see the world’s richer economies introduce formal mechanisms to reduce the dramatic and volatile fluctuations in exchange rates and basic commodity prices, such as wheat, which he says are partially responsible for speculation and the economic imbalances we are seeing today. He would also like to see the introduction of a tax on market transactions.
Another project involves the widening of G20’s responsibilities to include issues such as the impact of climate change on economies and economic development.
Although Sarkozy’s efforts are laudable in principal they are also fatally flawed because of their ‘French approach’ to issues, which is based upon principles of state and G20 intervention, protectionism and legislation, excesses of which both China and America will not permit under any circumstances. Also, the sheer size of the task he has set himself may well be the reason he will fail. However it must also be said that his G20 agenda has found a lot of support in France and he knows that if he fails at least he will be credited for having tried, that which will not hurt his 2012 reelection chances, particularly if he accuses America and China of sabotaging his plans.
It could even be argued that it doesn’t really matter of G20 doesn’t work out for Sarkozy as long as progress is made on the biggest single issue, that of how to resolve the major differences over currencies which are poisoning the world economic atmosphere and will lead to turmoil if they are not reconciled.
The three main trading blocs are America, China and Europe. However, divisions within Europe have resulted in a lack of a coordinated effort to bring it the Euro down, with individual countries’ interests coming first. Germany has a surplus economy and is reluctant to accept a real stimulus package for the Euro as it fears inflation, France sees things in terms of protectionism, and the need to shore up deficit economies like those of Greece, Spain and Portugal are narrowing the options. Opinion is divided on whether the Euro should be artificially devalued and if so to what extent, but nobody doubts that Europe is falling behind.
Worse, Europe’s inefficiency is leaving the door wide open to what it fears most – a G2 duopoly consisting of America and China. European anger at this possibility is being expressed by many analysts and economists alike. That sentiment was aptly summed up in a recent article in Le Figaro which slams American “selfishness” and Chinese “duplicity.” That may or not be true but one thing is certain, and that is that Europe has found itself sidelined and the Chinese and Americans must find ways to absorb their trade imbalance if they want to be in a position to create a future world economy which would be primarily based on their economies. Failure to do so would not only be catastrophic for them, but for the rest of the world too.
The broad reasons for the ongoing “currency war” between the Yuan and the Dollar are well-known. American deficits are being financed by Chinese surpluses, and although this is keeping the weak American economy afloat it is not likely to move it forward unless China gives it some more rope in the form of a stronger Yuan, which would encourage American exports and jobs. America does not want to adopt an austerity economy because of fears of inflation which would be fueled by the Yuan.
But it is precisely because it is a surplus economy that China is unwilling to budge on the Yuan, fearing for its own exports even though it agrees in theory that the most effective single step forward would be an ‘arrangement’ which would suit both them and the Americans.
American complaints about huge Chinese surpluses at a time when the Chinese economy is booming compared to a weak American recovery did lead to China to de-peg the Yuan from the Dollar in June, but the extent to which it did so was deemed to be insufficient, not only by America but by the rest of the world as well.
China’s defense is that over-strengthening the Yuan could seriously affect its exports and its economy.
That situation led to the recent injection of a massive $600bn into the American economy as a “quantitative easing” (QE) measure designed to devaluate the dollar, help kick start jobs and promote growth. The move is also designed to force the Chinese to either devalue the Yuan or risk seeing the world flooded with excess liquidity which would then oblige a currency reevaluation.
In other words, America and China are fighting a currency war with each country using the weapons at its disposal, but if this situation is allowed to deteriorate much longer the result could well be a worldwide recession which would suit no-one at all.
America and the Dollar no longer dominate the world economy as they did before but they cannot be allowed to fail either. China too must be encouraged to continue its economic progress.
But that will only happen if there is a compromise. China must be persuaded to let the Yuan rise in order to give world exports a chance to breath and America would be very badly-advised to continue printing money to dope the world economy. Action to reduce the present tension on currency needs to be coordinated and simultaneous and both countries must be persuaded that 50% of some progress would be far better than 100% of none. This issue will not be fully resolved at the G20 summit, but the summit must concentrate all its efforts on laying the foundations of an agreement which is desperately needed. And that means that Nicolas Sarkozy will have to wait a while before trying to reform the broader system in one fell swoop.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
Michael Cosgrove
Digital Journalist
Source:www.digitaljournal.com
Difference of opinion at G-20 summit over what ails the global economy
Seoul: As a further indication of the fact that the pre-Summit negotiations of the G-20 are not going very smoothly, India has said that “there are no universally agreed upon diagnoses of what ails the global economy.”
Prime Minister Manmohan Singh conveyed this to British Prime Minister David Cameron, and President Philip Calderon of Mexico on Thursday during his bilateral meetings with them. This indicates that it disagrees with the United States' perception that only China's current account and capital account surpluses are to blame for the global economic predicament.
Dr. Singh also met the Prime Minister of Ethiopia in a bilateral meeting.
According to informed sources, the final G-20 communiqué could run to about 70 pages, reflecting the divergent views.
It has been evident that far too many differences of opinion on key issues of who has to do what have emerged and delegates have even been heard to “raise their voices,” according to an informed source.
The main issue is an old one, namely, that the U.S. and its allies do whatever they want to and then expect others to adjust their policies accordingly. The American decision to pump in $600 billion over the next few months has left everyone jumpy as to the consequences for their economies.
Brazil has already spoken out sharply against this. A Chinese official said on television that if America catches a cold it can't look for Chinese medicines.
China has already taken pre-emptive action against capital surges by asking Chinese banks to deposit more money with the Central bank. Many G-20 members have already put sand in the machine so that destabilising dollar inflows do not cause problems for them.
As a result of the U.S. decision, there are not many takers for the latest American proposal which seeks, as it were, to walk on four legs. In a letter to the G-20, U.S. Treasury Secretary Timothy Geithner, along with Tharman Shanmugaratnam, Singapore Finance Ministerand Wayne Swan, Finance Minister of Australia, have spelt out the four things that the world needs to do.
First, they say, global economic growth must be strengthened; second, in a manner of reminiscent of national policies, they say, global growth must also be balanced across countries so that some countries do not grow at a breakneck speed, while others languish; third, the first two objectives require the world to create “a new framework for cooperation to allow exchange rates to reflect economic fundamentals and support needed structural reforms;” and fourth, no protectionism, please.
The first and the last items are the only ones on which there is no disagreement. But the second and third suggestions are causing problems.
Informed sources told Business Line that India is sitting pretty during all these negotiations as it does what economic theory prescribes, namely, run a deficit on the current account which is financed by a surplus on the capital account. This is in contrast to “some countries” which run a surplus on both accounts.
India is, therefore, focusing on development by asking the developed world to invest in infrastructure in the developing countries. This is a relatively non-controversial issue.
However, India is being asked to endorse the currency adjustment suggestions and is looking for alternative and more ambiguous wording.
Source: www.indiaeveryday.com
Prime Minister Manmohan Singh conveyed this to British Prime Minister David Cameron, and President Philip Calderon of Mexico on Thursday during his bilateral meetings with them. This indicates that it disagrees with the United States' perception that only China's current account and capital account surpluses are to blame for the global economic predicament.
Dr. Singh also met the Prime Minister of Ethiopia in a bilateral meeting.
According to informed sources, the final G-20 communiqué could run to about 70 pages, reflecting the divergent views.
It has been evident that far too many differences of opinion on key issues of who has to do what have emerged and delegates have even been heard to “raise their voices,” according to an informed source.
The main issue is an old one, namely, that the U.S. and its allies do whatever they want to and then expect others to adjust their policies accordingly. The American decision to pump in $600 billion over the next few months has left everyone jumpy as to the consequences for their economies.
Brazil has already spoken out sharply against this. A Chinese official said on television that if America catches a cold it can't look for Chinese medicines.
China has already taken pre-emptive action against capital surges by asking Chinese banks to deposit more money with the Central bank. Many G-20 members have already put sand in the machine so that destabilising dollar inflows do not cause problems for them.
As a result of the U.S. decision, there are not many takers for the latest American proposal which seeks, as it were, to walk on four legs. In a letter to the G-20, U.S. Treasury Secretary Timothy Geithner, along with Tharman Shanmugaratnam, Singapore Finance Ministerand Wayne Swan, Finance Minister of Australia, have spelt out the four things that the world needs to do.
First, they say, global economic growth must be strengthened; second, in a manner of reminiscent of national policies, they say, global growth must also be balanced across countries so that some countries do not grow at a breakneck speed, while others languish; third, the first two objectives require the world to create “a new framework for cooperation to allow exchange rates to reflect economic fundamentals and support needed structural reforms;” and fourth, no protectionism, please.
The first and the last items are the only ones on which there is no disagreement. But the second and third suggestions are causing problems.
Informed sources told Business Line that India is sitting pretty during all these negotiations as it does what economic theory prescribes, namely, run a deficit on the current account which is financed by a surplus on the capital account. This is in contrast to “some countries” which run a surplus on both accounts.
India is, therefore, focusing on development by asking the developed world to invest in infrastructure in the developing countries. This is a relatively non-controversial issue.
However, India is being asked to endorse the currency adjustment suggestions and is looking for alternative and more ambiguous wording.
Source: www.indiaeveryday.com
11/13/2010
Japan: A cautionary tale
CNN) -- As the G-20 meeting wraps up, many leaders -- including U.S. President Barack Obama -- will take a short flight from Seoul, Korea, to Yokohama, Japan, for a summit of Asia-Pacific leaders.
They are taking a flight into the feared future of the developed world.
Japan's economy is beset by the three D's that other nations long to avoid: Deflation, staggering deficits and aging demographics.
"Japan is the one facing the worst problems," says Piero Ghezzi, managing director and head of emerging markets research at Barclay's Capital.
"After Japan are the fragile European countries that are in very dire straits: Greece, Ireland and Portugal ... Spain and Italy, too, but their problems are of a different order," Ghezzi said. "After that, the U.S."
Japan PM Kan speaks
The tale of twin sisters
Leaders from 21 Pacific Rim nations are gathering Saturday in Japan for the annual APEC (Asia-Pacific Economic Cooperation) summit.
It's the first summit since China became the world's second largest economy this year, taking a mantle Japan held since 1968 when its economy soared out of the ashes of World War II. The bubble burst in 1989, and the country has achieved only anemic growth.
Japan is saddled with the world's largest government debt baggage -- estimated to be 225 percent of GDP, and forecast to grow to 250 percent by 2015. By comparison, the U.S. debt is 93 percent of GDP, UK debt is 76 percent and for China it's 19 percent.
"Japan has additional problems like terrible demographics," Ghezzi said.
The aging population means fewer replacement workers who must shoulder the burden of public debt.
"The number of young people supporting our elderly is going to be 2-to-1 in the very near future," said Kathy Matsui, chief Japan strategist for Goldman Sachs Japan. Japanese governmental figures show 40 percent of the population will be over the age of 65 by 2050.
"Unless you allow immigration, it's very difficult to reverse," Ghezzi added. "It's structural, and almost irreversible."
To be sure, Japan remains a strong economy -- although it has slipped to the third largest this year -- there are no likely contenders to knock it further back in the global pecking order in the near future.
But prospects have been diminished by the steady corrosion of deflation, as Japanese consumers delay spending -- why buy today when it will be cheaper tomorrow? That has hurt the domestic job market. Once the land of lifetime employment, approximately one third of 20-to-30-year olds don't have full-time jobs, according to Japan's Ministry of Internal Affairs and Communications. The ministry's figures also show that the highest rate of unemployment is among people under age 25.
An aging population prefers deflation, which influences monetary policy, says Avinash Persaud, chairman of Intelligence Capital and an advisor to several G-20 government boards.
"Europeans and Japanese don't mind a deflationary environment," Persaud said. "Both are filled with older people, with fixed income bond investments. As a retired person on a fixed rate, then deflation is a good thing."
But it is bad for the Japanese economy as a whole and only made worse by Japan's rising yen. The credit crisis led currency speculators to dump the falling U.S. dollar for yen, causing the Japanese currency to hit 15-year highs against the dollar. That has hit export-dependent Japan hard, forcing companies like Toyota, Nissan and Sony to accelerate production outside of Japan.
In an interview with CNN's Kyung Lah earlier this week, Prime Minister Naoto Kan placed part of the blame on U.S. monetary policy. The U.S. Fed announced plans to pump $600 billion into the economy, driving the value of the U.S. dollar even lower.
"With regard to the strong yen, the basic cause is the U.S. economy was undergoing changes with everything being skewed to a weak dollar," said Kan. "Should there be excessive fluctuations in exchange markets, then we need to take resolute actions. In fact, we've already intervened in the market once. This remains an option we can take again."
But in the meantime, the younger generation has fewer expectations of a brighter future.
"Japan is a difficult place to live for young people," 30-year-old Toshiko Kubo told CNN in Tokyo. "Young people don't have goals. We can't have dreams. Even if we have a dream, there's no way to make it come true."
By Kevin Voigt, CNN
Source CNN
www.cnn.com
They are taking a flight into the feared future of the developed world.
Japan's economy is beset by the three D's that other nations long to avoid: Deflation, staggering deficits and aging demographics.
"Japan is the one facing the worst problems," says Piero Ghezzi, managing director and head of emerging markets research at Barclay's Capital.
"After Japan are the fragile European countries that are in very dire straits: Greece, Ireland and Portugal ... Spain and Italy, too, but their problems are of a different order," Ghezzi said. "After that, the U.S."
Japan PM Kan speaks
The tale of twin sisters
Leaders from 21 Pacific Rim nations are gathering Saturday in Japan for the annual APEC (Asia-Pacific Economic Cooperation) summit.
It's the first summit since China became the world's second largest economy this year, taking a mantle Japan held since 1968 when its economy soared out of the ashes of World War II. The bubble burst in 1989, and the country has achieved only anemic growth.
Japan is saddled with the world's largest government debt baggage -- estimated to be 225 percent of GDP, and forecast to grow to 250 percent by 2015. By comparison, the U.S. debt is 93 percent of GDP, UK debt is 76 percent and for China it's 19 percent.
"Japan has additional problems like terrible demographics," Ghezzi said.
The aging population means fewer replacement workers who must shoulder the burden of public debt.
"The number of young people supporting our elderly is going to be 2-to-1 in the very near future," said Kathy Matsui, chief Japan strategist for Goldman Sachs Japan. Japanese governmental figures show 40 percent of the population will be over the age of 65 by 2050.
"Unless you allow immigration, it's very difficult to reverse," Ghezzi added. "It's structural, and almost irreversible."
To be sure, Japan remains a strong economy -- although it has slipped to the third largest this year -- there are no likely contenders to knock it further back in the global pecking order in the near future.
But prospects have been diminished by the steady corrosion of deflation, as Japanese consumers delay spending -- why buy today when it will be cheaper tomorrow? That has hurt the domestic job market. Once the land of lifetime employment, approximately one third of 20-to-30-year olds don't have full-time jobs, according to Japan's Ministry of Internal Affairs and Communications. The ministry's figures also show that the highest rate of unemployment is among people under age 25.
An aging population prefers deflation, which influences monetary policy, says Avinash Persaud, chairman of Intelligence Capital and an advisor to several G-20 government boards.
"Europeans and Japanese don't mind a deflationary environment," Persaud said. "Both are filled with older people, with fixed income bond investments. As a retired person on a fixed rate, then deflation is a good thing."
But it is bad for the Japanese economy as a whole and only made worse by Japan's rising yen. The credit crisis led currency speculators to dump the falling U.S. dollar for yen, causing the Japanese currency to hit 15-year highs against the dollar. That has hit export-dependent Japan hard, forcing companies like Toyota, Nissan and Sony to accelerate production outside of Japan.
In an interview with CNN's Kyung Lah earlier this week, Prime Minister Naoto Kan placed part of the blame on U.S. monetary policy. The U.S. Fed announced plans to pump $600 billion into the economy, driving the value of the U.S. dollar even lower.
"With regard to the strong yen, the basic cause is the U.S. economy was undergoing changes with everything being skewed to a weak dollar," said Kan. "Should there be excessive fluctuations in exchange markets, then we need to take resolute actions. In fact, we've already intervened in the market once. This remains an option we can take again."
But in the meantime, the younger generation has fewer expectations of a brighter future.
"Japan is a difficult place to live for young people," 30-year-old Toshiko Kubo told CNN in Tokyo. "Young people don't have goals. We can't have dreams. Even if we have a dream, there's no way to make it come true."
By Kevin Voigt, CNN
Source CNN
www.cnn.com
11/12/2010
Obama: 'Hard-won consensus' at G-20
Seoul, South Korea (CNN) -- The G-20 summit wrapped up Friday in South Korea, with leaders of the world's top economies acknowledging that "risks remain," as some countries enjoy strong growth and others muddle along.
U.S. President Barack Obama touted a "hard-won consensus" on steps to monitor world trade and economic recovery, aimed at balancing growth globally.
"Uncoordinated policy actions will only lead to worse outcomes for all," the leaders said in a joint declaration.
At the summit, they agreed to steps that include moving toward more market-determined exchange rate systems and refraining from the competitive devaluation of currencies.
It remains to be seen how such steps play out, as countries struggle with their own political and economic priorities, however. They're aimed at limiting economic volatility around the world.
Obama highlighted summit priorities such as economic growth, deficit reduction and the need for economies to better balance imports and exports.
Obama's trip is part of a 10-day Asia tour that is aimed at strengthening the United States' trade and military ties with a region that has thrived economically.
During the summit, American and South Korean negotiators failed to reach an agreement on a new trade pact, creating new delays and obstacles for an accord that the White House has said could translate to an additional $10 billion in U.S. exports and 70,000 American jobs.
A long-running dispute over U.S. access to Korea's auto and beef markets was largely responsible for the failure, according to the White House.
South Korean President Lee Myung-bak has agreed to send a team to Washington to continue work on the trade pact.
Among the hurdles negotiators are trying to overcome: Korean conglomerates known as chaebols, which have kept a firm grasp on the union-strong country's marketplace, drawing complaints from foreign companies that have tried to do business there.
After the G-20, Obama was to head to Japan late Friday afternoon. He is to attend the APEC summit, which will be held in Yokohama on Saturday and Sunday.
Twenty-one countries form the Asia-Pacific Economic Cooperation, which focuses on economic coordination in the Asia Pacific region.
Grappling with a troubled U.S. economy, the Obama administration has highlighted the strengthening of economic and military ties during the president's Asia tour. Obama started his trip with a three-day stay in India, before heading to Indonesia and then to South Korea.
In India, Obama unveiled about $10 billion in contracts for U.S. exports to India. It is Asia's third-largest economy and one of the world's few growth markets.
In Indonesia, the president focused on the two countries' shared principles of unity and tolerance when he delivered a highly anticipated speech at the University of Indonesia. His visit was long-awaited Indonesia, where he spent four years as a child.
In South Korea, Obama met with a roster of world leaders such as Chinese President Hu Jintao and German Chancellor Angela Merkel. They represent economies that export much more than they consume.
Obama also paid tribute to American troops while he was in South Korea. He praised South Korean troops and Americans who fought during the 1950-53 Korean War.
In Japan, he'll attend the APEC summit, attend a leaders retreat and visit the Great Buddha of Kamakura.
The president will head back to the United States on Sunday.
By the CNN Wire Staff
Source: CNN
www.cnn.com
U.S. President Barack Obama touted a "hard-won consensus" on steps to monitor world trade and economic recovery, aimed at balancing growth globally.
"Uncoordinated policy actions will only lead to worse outcomes for all," the leaders said in a joint declaration.
At the summit, they agreed to steps that include moving toward more market-determined exchange rate systems and refraining from the competitive devaluation of currencies.
It remains to be seen how such steps play out, as countries struggle with their own political and economic priorities, however. They're aimed at limiting economic volatility around the world.
Obama highlighted summit priorities such as economic growth, deficit reduction and the need for economies to better balance imports and exports.
Obama's trip is part of a 10-day Asia tour that is aimed at strengthening the United States' trade and military ties with a region that has thrived economically.
During the summit, American and South Korean negotiators failed to reach an agreement on a new trade pact, creating new delays and obstacles for an accord that the White House has said could translate to an additional $10 billion in U.S. exports and 70,000 American jobs.
A long-running dispute over U.S. access to Korea's auto and beef markets was largely responsible for the failure, according to the White House.
South Korean President Lee Myung-bak has agreed to send a team to Washington to continue work on the trade pact.
Among the hurdles negotiators are trying to overcome: Korean conglomerates known as chaebols, which have kept a firm grasp on the union-strong country's marketplace, drawing complaints from foreign companies that have tried to do business there.
After the G-20, Obama was to head to Japan late Friday afternoon. He is to attend the APEC summit, which will be held in Yokohama on Saturday and Sunday.
Twenty-one countries form the Asia-Pacific Economic Cooperation, which focuses on economic coordination in the Asia Pacific region.
Grappling with a troubled U.S. economy, the Obama administration has highlighted the strengthening of economic and military ties during the president's Asia tour. Obama started his trip with a three-day stay in India, before heading to Indonesia and then to South Korea.
In India, Obama unveiled about $10 billion in contracts for U.S. exports to India. It is Asia's third-largest economy and one of the world's few growth markets.
In Indonesia, the president focused on the two countries' shared principles of unity and tolerance when he delivered a highly anticipated speech at the University of Indonesia. His visit was long-awaited Indonesia, where he spent four years as a child.
In South Korea, Obama met with a roster of world leaders such as Chinese President Hu Jintao and German Chancellor Angela Merkel. They represent economies that export much more than they consume.
Obama also paid tribute to American troops while he was in South Korea. He praised South Korean troops and Americans who fought during the 1950-53 Korean War.
In Japan, he'll attend the APEC summit, attend a leaders retreat and visit the Great Buddha of Kamakura.
The president will head back to the United States on Sunday.
By the CNN Wire Staff
Source: CNN
www.cnn.com
11/10/2010
Finally, a talking-shop worth having
The G20 has been a mild success. If it sticks to boring, pragmatic incrementalism, it might just remain one
ONE of the few winners from the global financial crisis was the G20, a group of the world’s biggest economies. These countries’ leaders have met four times in the past two years to chart a common response to the global recession and find ways to prevent a repeat. With big players from the emerging and rich worlds around the table, the G20 has a legitimacy that is lacking in other economic clubs, such as the rich-country-only G7. In the darkest moments of the crisis the G20 yielded impressive results, from a common commitment to fiscal stimulus to more resources for the IMF. Optimists hoped it could become something all too rare in international economic diplomacy: a talking-shop worth having.
Those hopes can be realised even though there are signs that the G20’s utility has faded as the world economy has recovered. The leaders’ last meeting, in Toronto in June, was a washout. It did nothing to reconcile widening divisions, particularly between Europeans and Americans, over the merits of short-term budget austerity. That feebleness has raised the stakes for the next gathering, in Seoul on November 11th-12th.
Global currency tensions are rising as America’s Federal Reserve embarks on a second round of “quantitative easing” (printing money to buy bonds, see article), as China resists allowing the yuan to strengthen much and as other emerging economies face a surge of capital inflows. If the G20’s leaders manage no more than another mealy-mouthed communiqué, many people will begin to suspect that it—like so many other of the Gs—is a waste of time.
That would be a pity. For behind the scenes, under the energetic chairmanship of South Korea, the G20 has notched up a few notable accomplishments in recent weeks. There has at last been some progress in overhauling the IMF. A reform of the “quotas” that determine countries’ heft will increase the clout of emerging economies. Over-represented European countries have been cajoled into giving up two seats on the board. The IMF has also revamped its lending schemes so that well-run countries have access to large amounts of cash if a crisis hits. South Korea argued, rightly, that such a safety net is essential if emerging economies are able to withstand financial crises without piling up ever-larger foreign-exchange reserves. These are small but important improvements. And, thanks to the G20, they were done quite quickly (at least by the glacial standards of international institutions).
If the Seoul summit is to be a success, the G20’s leaders must apply the same approach—call it urgent incrementalism—to today’s main challenge: rebalancing global demand so that it relies less on overindebted America and more on domestic spending in vibrant emerging economies, particularly China. The process will take several years, and is complicated by domestic politics. In America the Republican victory in the mid-term elections reduces the already slim chances of progress either on short-term fiscal stimulus or medium-term deficit reduction. Fiscal gridlock means extra reliance on quantitative easing to boost the economy. That, in turn, will provoke extra capital flows to emerging economies. And since the main emerging economy, China, keeps its capital account closed and its currency pegged, the pressure on others is all the greater.
A Korean lesson for France
The G20 meeting will not magically resolve these tensions. But it can help manage them. It can provide a common analysis of how far countries’ currencies are over- or undervalued and where current-account balances ought to head. America has proposed limiting these imbalances to 4% of GDP. That is too rigid, but there is plenty of scope for the G20 to agree on the ranges countries’ current-account balances should reach.
Incrementalism, however, even of the urgent sort, may not be grand enough for France, which takes over the leadership of the G20 on November 12th. Nicolas Sarkozy, France’s president, has made clear that he wants a debate “without taboos” on the future of the international monetary system. He wants to tackle big subjects, such as the dollar’s role as a reserve asset (see article). Unfortunately, history suggests that big-picture debates on the future of the international monetary system rarely yield results, while diverting attention from smaller, practical goals. France should take note. The G20 will remain worth having only if it sticks to the art of the possible.
Source: The Economist
www.economist.com
ONE of the few winners from the global financial crisis was the G20, a group of the world’s biggest economies. These countries’ leaders have met four times in the past two years to chart a common response to the global recession and find ways to prevent a repeat. With big players from the emerging and rich worlds around the table, the G20 has a legitimacy that is lacking in other economic clubs, such as the rich-country-only G7. In the darkest moments of the crisis the G20 yielded impressive results, from a common commitment to fiscal stimulus to more resources for the IMF. Optimists hoped it could become something all too rare in international economic diplomacy: a talking-shop worth having.
Those hopes can be realised even though there are signs that the G20’s utility has faded as the world economy has recovered. The leaders’ last meeting, in Toronto in June, was a washout. It did nothing to reconcile widening divisions, particularly between Europeans and Americans, over the merits of short-term budget austerity. That feebleness has raised the stakes for the next gathering, in Seoul on November 11th-12th.
Global currency tensions are rising as America’s Federal Reserve embarks on a second round of “quantitative easing” (printing money to buy bonds, see article), as China resists allowing the yuan to strengthen much and as other emerging economies face a surge of capital inflows. If the G20’s leaders manage no more than another mealy-mouthed communiqué, many people will begin to suspect that it—like so many other of the Gs—is a waste of time.
That would be a pity. For behind the scenes, under the energetic chairmanship of South Korea, the G20 has notched up a few notable accomplishments in recent weeks. There has at last been some progress in overhauling the IMF. A reform of the “quotas” that determine countries’ heft will increase the clout of emerging economies. Over-represented European countries have been cajoled into giving up two seats on the board. The IMF has also revamped its lending schemes so that well-run countries have access to large amounts of cash if a crisis hits. South Korea argued, rightly, that such a safety net is essential if emerging economies are able to withstand financial crises without piling up ever-larger foreign-exchange reserves. These are small but important improvements. And, thanks to the G20, they were done quite quickly (at least by the glacial standards of international institutions).
If the Seoul summit is to be a success, the G20’s leaders must apply the same approach—call it urgent incrementalism—to today’s main challenge: rebalancing global demand so that it relies less on overindebted America and more on domestic spending in vibrant emerging economies, particularly China. The process will take several years, and is complicated by domestic politics. In America the Republican victory in the mid-term elections reduces the already slim chances of progress either on short-term fiscal stimulus or medium-term deficit reduction. Fiscal gridlock means extra reliance on quantitative easing to boost the economy. That, in turn, will provoke extra capital flows to emerging economies. And since the main emerging economy, China, keeps its capital account closed and its currency pegged, the pressure on others is all the greater.
A Korean lesson for France
The G20 meeting will not magically resolve these tensions. But it can help manage them. It can provide a common analysis of how far countries’ currencies are over- or undervalued and where current-account balances ought to head. America has proposed limiting these imbalances to 4% of GDP. That is too rigid, but there is plenty of scope for the G20 to agree on the ranges countries’ current-account balances should reach.
Incrementalism, however, even of the urgent sort, may not be grand enough for France, which takes over the leadership of the G20 on November 12th. Nicolas Sarkozy, France’s president, has made clear that he wants a debate “without taboos” on the future of the international monetary system. He wants to tackle big subjects, such as the dollar’s role as a reserve asset (see article). Unfortunately, history suggests that big-picture debates on the future of the international monetary system rarely yield results, while diverting attention from smaller, practical goals. France should take note. The G20 will remain worth having only if it sticks to the art of the possible.
Source: The Economist
www.economist.com
11/09/2010
Finally, a talking-shop worth having
The G20 has been a mild success. If it sticks to boring, pragmatic incrementalism, it might just remain one
ONE of the few winners from the global financial crisis was the G20, a group of the world’s biggest economies. These countries’ leaders have met four times in the past two years to chart a common response to the global recession and find ways to prevent a repeat. With big players from the emerging and rich worlds around the table, the G20 has a legitimacy that is lacking in other economic clubs, such as the rich-country-only G7. In the darkest moments of the crisis the G20 yielded impressive results, from a common commitment to fiscal stimulus to more resources for the IMF. Optimists hoped it could become something all too rare in international economic diplomacy: a talking-shop worth having.
Those hopes can be realised even though there are signs that the G20’s utility has faded as the world economy has recovered. The leaders’ last meeting, in Toronto in June, was a washout. It did nothing to reconcile widening divisions, particularly between Europeans and Americans, over the merits of short-term budget austerity. That feebleness has raised the stakes for the next gathering, in Seoul on November 11th-12th.
Global currency tensions are rising as America’s Federal Reserve embarks on a second round of “quantitative easing” (printing money to buy bonds, see article), as China resists allowing the yuan to strengthen much and as other emerging economies face a surge of capital inflows. If the G20’s leaders manage no more than another mealy-mouthed communiqué, many people will begin to suspect that it—like so many other of the Gs—is a waste of time.
That would be a pity. For behind the scenes, under the energetic chairmanship of South Korea, the G20 has notched up a few notable accomplishments in recent weeks. There has at last been some progress in overhauling the IMF. A reform of the “quotas” that determine countries’ heft will increase the clout of emerging economies. Over-represented European countries have been cajoled into giving up two seats on the board. The IMF has also revamped its lending schemes so that well-run countries have access to large amounts of cash if a crisis hits. South Korea argued, rightly, that such a safety net is essential if emerging economies are able to withstand financial crises without piling up ever-larger foreign-exchange reserves. These are small but important improvements. And, thanks to the G20, they were done quite quickly (at least by the glacial standards of international institutions).
If the Seoul summit is to be a success, the G20’s leaders must apply the same approach—call it urgent incrementalism—to today’s main challenge: rebalancing global demand so that it relies less on overindebted America and more on domestic spending in vibrant emerging economies, particularly China. The process will take several years, and is complicated by domestic politics. In America the Republican victory in the mid-term elections reduces the already slim chances of progress either on short-term fiscal stimulus or medium-term deficit reduction. Fiscal gridlock means extra reliance on quantitative easing to boost the economy. That, in turn, will provoke extra capital flows to emerging economies. And since the main emerging economy, China, keeps its capital account closed and its currency pegged, the pressure on others is all the greater.
A Korean lesson for France
The G20 meeting will not magically resolve these tensions. But it can help manage them. It can provide a common analysis of how far countries’ currencies are over- or undervalued and where current-account balances ought to head. America has proposed limiting these imbalances to 4% of GDP. That is too rigid, but there is plenty of scope for the G20 to agree on the ranges countries’ current-account balances should reach.
Incrementalism, however, even of the urgent sort, may not be grand enough for France, which takes over the leadership of the G20 on November 12th. Nicolas Sarkozy, France’s president, has made clear that he wants a debate “without taboos” on the future of the international monetary system. He wants to tackle big subjects, such as the dollar’s role as a reserve asset (see article). Unfortunately, history suggests that big-picture debates on the future of the international monetary system rarely yield results, while diverting attention from smaller, practical goals. France should take note. The G20 will remain worth having only if it sticks to the art of the possible.
Source: The Ecoomist
www.economist.com
ONE of the few winners from the global financial crisis was the G20, a group of the world’s biggest economies. These countries’ leaders have met four times in the past two years to chart a common response to the global recession and find ways to prevent a repeat. With big players from the emerging and rich worlds around the table, the G20 has a legitimacy that is lacking in other economic clubs, such as the rich-country-only G7. In the darkest moments of the crisis the G20 yielded impressive results, from a common commitment to fiscal stimulus to more resources for the IMF. Optimists hoped it could become something all too rare in international economic diplomacy: a talking-shop worth having.
Those hopes can be realised even though there are signs that the G20’s utility has faded as the world economy has recovered. The leaders’ last meeting, in Toronto in June, was a washout. It did nothing to reconcile widening divisions, particularly between Europeans and Americans, over the merits of short-term budget austerity. That feebleness has raised the stakes for the next gathering, in Seoul on November 11th-12th.
Global currency tensions are rising as America’s Federal Reserve embarks on a second round of “quantitative easing” (printing money to buy bonds, see article), as China resists allowing the yuan to strengthen much and as other emerging economies face a surge of capital inflows. If the G20’s leaders manage no more than another mealy-mouthed communiqué, many people will begin to suspect that it—like so many other of the Gs—is a waste of time.
That would be a pity. For behind the scenes, under the energetic chairmanship of South Korea, the G20 has notched up a few notable accomplishments in recent weeks. There has at last been some progress in overhauling the IMF. A reform of the “quotas” that determine countries’ heft will increase the clout of emerging economies. Over-represented European countries have been cajoled into giving up two seats on the board. The IMF has also revamped its lending schemes so that well-run countries have access to large amounts of cash if a crisis hits. South Korea argued, rightly, that such a safety net is essential if emerging economies are able to withstand financial crises without piling up ever-larger foreign-exchange reserves. These are small but important improvements. And, thanks to the G20, they were done quite quickly (at least by the glacial standards of international institutions).
If the Seoul summit is to be a success, the G20’s leaders must apply the same approach—call it urgent incrementalism—to today’s main challenge: rebalancing global demand so that it relies less on overindebted America and more on domestic spending in vibrant emerging economies, particularly China. The process will take several years, and is complicated by domestic politics. In America the Republican victory in the mid-term elections reduces the already slim chances of progress either on short-term fiscal stimulus or medium-term deficit reduction. Fiscal gridlock means extra reliance on quantitative easing to boost the economy. That, in turn, will provoke extra capital flows to emerging economies. And since the main emerging economy, China, keeps its capital account closed and its currency pegged, the pressure on others is all the greater.
A Korean lesson for France
The G20 meeting will not magically resolve these tensions. But it can help manage them. It can provide a common analysis of how far countries’ currencies are over- or undervalued and where current-account balances ought to head. America has proposed limiting these imbalances to 4% of GDP. That is too rigid, but there is plenty of scope for the G20 to agree on the ranges countries’ current-account balances should reach.
Incrementalism, however, even of the urgent sort, may not be grand enough for France, which takes over the leadership of the G20 on November 12th. Nicolas Sarkozy, France’s president, has made clear that he wants a debate “without taboos” on the future of the international monetary system. He wants to tackle big subjects, such as the dollar’s role as a reserve asset (see article). Unfortunately, history suggests that big-picture debates on the future of the international monetary system rarely yield results, while diverting attention from smaller, practical goals. France should take note. The G20 will remain worth having only if it sticks to the art of the possible.
Source: The Ecoomist
www.economist.com
11/08/2010
Germany attacks US economic policy
By Ralph Atkins, FT.com
Germany has put itself on a collision course with the US over the global economy, after its finance minister launched an extraordinary attack on policies being pursued in Washington.
Wolfgang Schäuble accused the US of undermining its policymaking credibility, increasing global economic uncertainty and of hypocrisy over exchange rates. The US economic growth model was in a "deep crisis," he also warned over the weekend.
His comments set the stage for acrimonious talks at the G20 summit in Seoul starting on Thursday. Germany has been irritated at US proposals that it should make more effort to reduce its current account surplus. But Berlin policymakers were also alarmed by last week's US Federal Reserve decision to pump an extra $600bn into financial markets in an attempt to revive US economic prospects through "quantitative easing".
On Friday, Mr Schäuble described US policy as "clueless". In a Der Spiegel magazine interview, to be published on Monday, he expanded his criticism further, saying decisions taken by the Fed "increase the insecurity in the world economy".
" They make a reasonable balance between industrial and developing countries more difficult and they undermine the credibility of the US in finance policymaking."
Mr Schäuble added: "It is not consistent when the Americans accuse the Chinese of exchange rate manipulation and then steer the dollar exchange rate artificially lower with the help of their [central bank's] printing press."
Germany's export success, he argued, was not based on "exchange rate tricks" but on increased competitiveness. "In contrast, the American growth model is in a deep crisis. The Americans have lived for too long on credit, overblown their financial sector and neglected their industrial base. There are lots of reasons for the US problems -- German export surpluses are not part of them."
There was also "considerable doubt" as to whether pumping endless money into markets made sense, Mr Schäuble argued. "The US economy is not lacking liquidity."
On the future of the eurozone, Mr Schäuble confirmed in the same interview that Berlin will push for a greater private investor involvement in future bail-outs. To ensure German taxpayers faced the smallest possible burden it was important to have the possibility of an orderly debt restructuring with the participation of private creditors, he said.
Germany's proposals for a planned new rescue mechanism have run into resistance from the European Central Bank, which fears they will add to investor uncertainty at a crucial time for Europe's 12-year old monetary union. Mr Schäuble said the new mechanism would apply only to new eurozone debt but argued the European Union "was not founded to enrich financial investors".
Mr Schäuble envisaged a two-stage process in a future crisis. The EU would put in place the same sort of saving and rescue programme as imposed this year on Greece. In a first stage, the term structure of government debt could be extended. If that did not work, then in a second stage, private creditors would have to take a discount on their holdings. In return, the value of the remainder would be guaranteed, Mr Schäuble said.
Source: CNN
www.cnn.com
Germany has put itself on a collision course with the US over the global economy, after its finance minister launched an extraordinary attack on policies being pursued in Washington.
Wolfgang Schäuble accused the US of undermining its policymaking credibility, increasing global economic uncertainty and of hypocrisy over exchange rates. The US economic growth model was in a "deep crisis," he also warned over the weekend.
His comments set the stage for acrimonious talks at the G20 summit in Seoul starting on Thursday. Germany has been irritated at US proposals that it should make more effort to reduce its current account surplus. But Berlin policymakers were also alarmed by last week's US Federal Reserve decision to pump an extra $600bn into financial markets in an attempt to revive US economic prospects through "quantitative easing".
On Friday, Mr Schäuble described US policy as "clueless". In a Der Spiegel magazine interview, to be published on Monday, he expanded his criticism further, saying decisions taken by the Fed "increase the insecurity in the world economy".
" They make a reasonable balance between industrial and developing countries more difficult and they undermine the credibility of the US in finance policymaking."
Mr Schäuble added: "It is not consistent when the Americans accuse the Chinese of exchange rate manipulation and then steer the dollar exchange rate artificially lower with the help of their [central bank's] printing press."
Germany's export success, he argued, was not based on "exchange rate tricks" but on increased competitiveness. "In contrast, the American growth model is in a deep crisis. The Americans have lived for too long on credit, overblown their financial sector and neglected their industrial base. There are lots of reasons for the US problems -- German export surpluses are not part of them."
There was also "considerable doubt" as to whether pumping endless money into markets made sense, Mr Schäuble argued. "The US economy is not lacking liquidity."
On the future of the eurozone, Mr Schäuble confirmed in the same interview that Berlin will push for a greater private investor involvement in future bail-outs. To ensure German taxpayers faced the smallest possible burden it was important to have the possibility of an orderly debt restructuring with the participation of private creditors, he said.
Germany's proposals for a planned new rescue mechanism have run into resistance from the European Central Bank, which fears they will add to investor uncertainty at a crucial time for Europe's 12-year old monetary union. Mr Schäuble said the new mechanism would apply only to new eurozone debt but argued the European Union "was not founded to enrich financial investors".
Mr Schäuble envisaged a two-stage process in a future crisis. The EU would put in place the same sort of saving and rescue programme as imposed this year on Greece. In a first stage, the term structure of government debt could be extended. If that did not work, then in a second stage, private creditors would have to take a discount on their holdings. In return, the value of the remainder would be guaranteed, Mr Schäuble said.
Source: CNN
www.cnn.com
China tees up G20 showdown with U.S.
By Alan Beattie in Washington, Geoff Dyer in Beijing, Chris Giles in London
(FT) -- China has curtly dismissed a U.S. proposal to address global economic imbalances, setting the stage for a potential showdown at next week's G20 meeting in Seoul.
Cui Tiankai, a deputy foreign minister and one of China's lead negotiators at the G20, said on Friday that the U.S. plan for limiting current account surpluses and deficits to 4 per cent of gross domestic product harked back "to the days of planned economies".
"We believe a discussion about a current account target misses the whole point," he added, in the first official comment by a senior Chinese official on the subject. "If you look at the global economy, there are many issues that merit more attention -- for example, the question of quantitative easing."
China's opposition to the proposal, which had made some progress at a G20 finance ministers' meeting last month, came amid a continuing rumble of protest from around the world at the U.S. Federal Reserve's plan to pump an extra $600bn into financial markets.
Officials from China, Germany and South Africa on Friday added their voices to a chorus of complaint that the Fed's return to so-called quantitative easing would create instability and worsen imbalances by triggering surges of capital into other currencies.
Tim Geithner, the U.S. Treasury secretary, has proposed using what the U.S. refers to as current account "guidelines" to accelerate global rebalancing, partly as a way of changing the debate away from simply pressing China to allow faster appreciation in the renminbi.
But on Thursday and Friday, governments focused instead on the global impact of the Fed's action. "With all due respect, U.S. policy is clueless," Wolfgang Schäuble, German finance minister, told reporters. "It's not that the Americans haven't pumped enough liquidity into the market," he said. "Now to say let's pump more into the market is not going to solve their problems."
Pravin Gordhan, finance minister of South Africa, a key member of the emerging market bloc, said the decision "undermines the spirit of multilateral co-operation that G20 leaders have fought so hard to maintain during the current crisis", and ran counter to the pledge made by G20 finance ministers to refrain from uncoordinated responses.
The U.S. Treasury declined to comment on Friday.
Experts say the mood has soured since the G20 Toronto summit in June and worry that unless the summit can patch up differences on trade imbalances and exchange rates, the outlook for international economic agreement is poor.
Ousmène Mandeng of Ashmore Investment Management and a former senior International Monetary Fund official, said: "The G20 will also have to show [in Seoul] it can work on the issue or its very existence will be in question."
In recent weeks, there had been some hints that China was favourable to the idea of current account targets. Yi Gang, a deputy central bank governor, said China aimed to reduce its surplus to 4 per cent of GDP in the medium-term
But Mr Cui's comments suggest that China's senior leaders have decided to reject Mr Geithner's proposal. "We believe it would not be a good approach to single out this issue and focus all attention on it," he said.
Separately, the deputy foreign minister also had a stern message for European leaders, warning them not to attend next month's Nobel Peace Prize ceremony for Liu Xiaobo, an imprisoned Chinese democracy activist.
Source:CNN
www.cnn.com
(FT) -- China has curtly dismissed a U.S. proposal to address global economic imbalances, setting the stage for a potential showdown at next week's G20 meeting in Seoul.
Cui Tiankai, a deputy foreign minister and one of China's lead negotiators at the G20, said on Friday that the U.S. plan for limiting current account surpluses and deficits to 4 per cent of gross domestic product harked back "to the days of planned economies".
"We believe a discussion about a current account target misses the whole point," he added, in the first official comment by a senior Chinese official on the subject. "If you look at the global economy, there are many issues that merit more attention -- for example, the question of quantitative easing."
China's opposition to the proposal, which had made some progress at a G20 finance ministers' meeting last month, came amid a continuing rumble of protest from around the world at the U.S. Federal Reserve's plan to pump an extra $600bn into financial markets.
Officials from China, Germany and South Africa on Friday added their voices to a chorus of complaint that the Fed's return to so-called quantitative easing would create instability and worsen imbalances by triggering surges of capital into other currencies.
Tim Geithner, the U.S. Treasury secretary, has proposed using what the U.S. refers to as current account "guidelines" to accelerate global rebalancing, partly as a way of changing the debate away from simply pressing China to allow faster appreciation in the renminbi.
But on Thursday and Friday, governments focused instead on the global impact of the Fed's action. "With all due respect, U.S. policy is clueless," Wolfgang Schäuble, German finance minister, told reporters. "It's not that the Americans haven't pumped enough liquidity into the market," he said. "Now to say let's pump more into the market is not going to solve their problems."
Pravin Gordhan, finance minister of South Africa, a key member of the emerging market bloc, said the decision "undermines the spirit of multilateral co-operation that G20 leaders have fought so hard to maintain during the current crisis", and ran counter to the pledge made by G20 finance ministers to refrain from uncoordinated responses.
The U.S. Treasury declined to comment on Friday.
Experts say the mood has soured since the G20 Toronto summit in June and worry that unless the summit can patch up differences on trade imbalances and exchange rates, the outlook for international economic agreement is poor.
Ousmène Mandeng of Ashmore Investment Management and a former senior International Monetary Fund official, said: "The G20 will also have to show [in Seoul] it can work on the issue or its very existence will be in question."
In recent weeks, there had been some hints that China was favourable to the idea of current account targets. Yi Gang, a deputy central bank governor, said China aimed to reduce its surplus to 4 per cent of GDP in the medium-term
But Mr Cui's comments suggest that China's senior leaders have decided to reject Mr Geithner's proposal. "We believe it would not be a good approach to single out this issue and focus all attention on it," he said.
Separately, the deputy foreign minister also had a stern message for European leaders, warning them not to attend next month's Nobel Peace Prize ceremony for Liu Xiaobo, an imprisoned Chinese democracy activist.
Source:CNN
www.cnn.com
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