Oh, will the combatants ever cease from "international currency war" so we can celebrate the holidays in relative peace? With the US dollar doing another of its habitual swoons due to much-lamented American free money policies, Asian economies not particularly keen on shooting themselves in the foot are having to wade into the open market and buy the godforsaken and hapless greenback to stem the appreciation of their currencies. From the Wall Street Journal comes this snippet:Central banks in South Korea, Malaysia and Thailand are believed to have intervened in foreign-exchange markets Thursday as Asian currencies surged against the dollar on optimism about the region's economic outlook, underscored by strong economic data from China and signals that the yuan will continue to strengthen.Taiwan, meanwhile, unveiled measures to buttress its banking system against rapid movements in foreign capital, the latest Asian economy to introduce stricter regulations to control the risks...
China: Moving from or Clinging to Export Reliance?
We have, dear friends, reached the end of another year. Still, there is interesting news that suggest the Chinese are already thinking about 2011 while we're still celebrating the arrival of a new year (Chinese new year is still on February 3). The changes identified below seemingly indicate contrasting pressures on the PRC leadership.First, the central government is demanding a greater share of dividend payouts from state-owned enterprises. Given the astounding rates of investment in China, I certainly believe this is a welcome development. Aside from reducing the potential for overinvestment, the hope here is that more state funds emanating from these SOEs will be allocated to spending on social safety nets which can encourage the emergence of a Chinese consumer culture:Currently, 99 central government-backed firms are required to pay 5% of their profits as dividends, and 18 companies pay 10%. Another 34 centrally owned companies pay nothing. Under the new rules, 15 companies,...
Indonesia Mounts Its Defence in Int'l Currency War
♠ Posted by Emmanuel in IMF,Southeast Asia
at 12/30/2010 02:14:00 AM
Just a little over a decade ago, Indonesia was the epicentre of the Asian financial crisis. In a matter of months, the local currency, the Indonesian rupiah (IDR), had lost eighty percent of its value as foreign investors fled the country as quickly as they came. After all, they call it "hot money" for a good reason. Amidst all this were food riots, race riots, and various separatist movements trying to take advantage of the seeming loss of control by the central government. By 1998, harsh IMF conditionalities had helped ease out the long-running Suharto regime. But that was then and this is now. The--how should I describe them--flatulent fiscal and monetary policies of the Americans, currency warriors extraordinaire, now threaten to overwhelm Indonesia's financial stability. Like in so many other countries in the region, the nearly unlimited ammunition the Yanks threaten to use causes asset bubbles, inflation, and a diminution of export performance. And so it has come to pass...
Philippines' Economics of Excessive Vacation
♠ Posted by Emmanuel in Southeast Asia,Travel
at 12/26/2010 07:35:00 PM
Is too much vacation bad? Working in academia right now, I must unreservedly state that one of its perks is having more free time once the semester is out. However, for the clock puncher / office slave classes, things are not as straightforward. Take the example of the Philippines. Inheriting a "hectic" holiday schedule from its colonial masters of manana the Spanish, things have gotten out of hand in recent years. In a bid to supposedly increase vacation trips and decrease disruptions due to holidays, it has had a habit of moving holidays that fall midweek to Fridays and Mondays.However, the economic benefits of doing so...
'Indonesian & Filipino Corruption Compared'
♠ Posted by Emmanuel in Governance,Southeast Asia
at 12/24/2010 01:29:00 PM
With Christmas a few hours away, here's more lighthearted fare for you all. A few weeks ago, I attended an LSE event held by our colleagues here at the Asia Research Centre intriguingly titled "Where Have all the Bad Guys Gone? Governance in Indonesia Today." Since Southeast Asia is my area of interest for obvious reasons, governance matters are a matter near and dear to me. Needless to say, it was a very interesting discussion. After the event, Roger Montgomery told me the following joke about the difference between Indonesia and Filipino corruption, with the latter coming out worse and being the punch line.So the Philippines...
Markets Ponder China Bailing Out Europe (Again)
OK, OK, so I am using the term "bailing out" in a very loose sense: For instance, China has not quite said that its continued patronage of US debt in the wake of the financial crisis is specifically to bail out America. Rather, it's always couched in diplomacy-speak such as preserving "stability" in the global financial system as a certain Yankee diplomat-beggar would put it.I almost missed the clip above of LSE IDEAS' very own Niall Ferguson arguing that the Chinese should help bail out China on Fareed Zakaria's GSP programme. (Despite what our school paper says, he does work here.) This theme has been a continuing one: former IMF Chief Economist Simon Johnson even went so far as to suggest its headquarters should be in Beijing if and when the Chinese become the largest shareholders. Somewhat less far-fetched, China has indeed voiced support for the idea of diversifying its holdings by purchasing sovereign debt of troubled eurozone members (which ares still denominated in euros).So...
US Sues China at WTO on Wind Power Subsidies
This case has been anticipated for some time but is very interesting nonetheless. It is yet another entry in a series of steel-related actions by the US against China on the import front. Previous actions include those over tires and steel pipe. While China took the US to the WTO and recently lost its appeal over tariffs applied to its tires, this new action involves the US taking China to the WTO instead of unilaterally applying tariffs against Chinese steel products. On the export front, the US did take China to the WTO as well but that was over the PRC applying duties to American flat-rolled electrical steel.From the USTR press blurb:------------------------------U.S. Trade Representative Ron Kirk announced today that the United States has requested consultations with the People’s Republic of China under the dispute settlement provisions of the World Trade Organization (WTO) concerning a program known as the Special Fund for Wind Power Manufacturing. Under this program, China...
Maybe LDCs Aren't Being Inundated w/ Capital (Yet)
♠ Posted by Emmanuel in Bretton Woods Twins,Credit Crisis
at 12/21/2010 02:51:00 PM
The general impression you get from certain developing countries is that easy money policies emanating from reserve currency-issuing ones like the unbelievably profligate United States are driving up their exchange rates and threatening to inflate various bubbles. It may be some surprise that, in 2009 at least, this scenario did not really happen as capital flows to the developing world fell from 2008 according to a just-released World Bank report:Net global capital flows to developing countries fell 20 percent in 2009 to $598 billion (3.7 percent of gross national income [GNI]), from $744 billion in 2008 (4.5 percent of GNI) and were a little over half the 2007 peak of $1.11 trillion. This according to a new comprehensive dataset launched by the World Bank today on international capital flows titled “Global Development Finance 2011: External Debt of Developing Countries,” which reveals the impact of the financial crisis on 128 developing countries.Global private flows (debt...
Architect of the Euro, Padoa-Schioppa, Dies
♠ Posted by Emmanuel in Europe
at 12/19/2010 05:23:00 PM
The eurozone's current woes notwithstanding, one of the indicators of the worth of an idea is the number of persons who are attributed to helping create a single currency. For its conceptual underpinnings, American Nobel laureate Robert Mundell is widely regarded as the (Intellectual) "Father of the Euro." Meanwhile, the late Dutchman Wim Duisenberg who died in a swimming pool accident also has an argument for being the "Father of the Euro" after being the first ECB president and seeing its introduction in 13 countries.It is thus with sadness and more than a little confusion that we must observe the passing of another notable...
Can Count Dracula Save Romania's Economy?
The title is more apropos than you would think. When we last talked about Romania, it was in the clutches of an IMF standby agreement as one of the Soviet satellite countries that ran into a bad balance-of-payments situation in June of 2009. The recently Economist featured a downcast article on Romania's economic prospects going forward. In some respects, it's a matter of "political risk" being an unsettled matter in the country:Nor are foreign investors queuing up to take advantage of Romania’s fertile soil and beautiful scenery or its flexible, cheap and multilingual workforce. Services are particularly underdeveloped. “This...
'Key to Happiness is Work, Not Necessarily Growth'
♠ Posted by Emmanuel in Labor,Welfare Economics
at 12/16/2010 07:59:00 AM
Well here's another report that should put growth fetishists on the defensive. Before you start talking about endogeneity biases and how employment is related to economic growth, do note that the assertion above ain't mine. Rather, it's that of the International Institute of Labor Studies in Geneva--a research body of the International Labor Organization which, of course, is under the United Nations. International organizations, what'd we do without them?Anyway, the notable assertion the IILS makes in the 2010 edition of the World of Work report is that life satisfaction is driven primarily by employment outcomes and not economic growth. This being a UN publication, you will not be surprised to note that the policy recommendation is thus to reduce unemployment and to reduce income inequalities stemming from unemployment. The summary concerning this finding is reproduced below, though the section of the report is well worth reading for those with an interest in labor or well-being:Social...
Round 2: China Bashing Bill Heads to US Senate
A few months ago, I commented on a China-bashing bill, H.R. 2378 ("The Currency for Fair Trade Reform Act"), finally getting through the US House of Representatives. That done, its equivalent is now coursing its way through the Senate. Something that strikes me is the timing: instead of waiting for the newly-elected senators to take their place next year, the China-bashing bills proponents think it at least has a chance during the current lame-duck session. Why? I can think of two reasons: First, gains the Republicans made during the November elections may appear negative to the bill's proponents insofar as Republicans are, on the balance, less protectionist by perception. Second, anti-China sentiment may be so great at present that it's the right time to strike.In any event, what's transpiring is that the bill's co-sponsors in the Senate are trying to tie this China-bashing legislation to the pending and rather odious spending bill Obama has penned as a compromise between--what--American...
IMF's Strauss-Kahn on Progress in Saving Greece
♠ Posted by Emmanuel in Credit Crisis,Europe
at 12/14/2010 01:57:00 PM
There's an interesting interview of IMF Managing-Director Dominique Strauss-Kahn (DSK) that recently appeared in the Greek newspaper Kathimereni. Protestations that this is a kinder, gentler, less Washington Consensus-style lender aside, the emphasis is still very much on the old triad of liberalization, privatization, and deregulation. Elsewhere, DSK is quite diplomatic and in the process avoids questions about Portugal and Spain, preferring to point out that neither has approached the IMF for help. (He usefully points out as well that the problems facing Greece and Ireland differ significantly.) Moreover, Strauss-Kahn avers that the current episode is not an existential threat to the euro, two-speed economies and everything else. Yet the usually smooth DSK stumbles a bit when asked which industries he sees growth coming from. It kind of beats me, too...---------------------------------------Q: What specific moves are needed in the next couple of months in order for the fourth...
WikiLeaks: Shell 'Infiltrates' Nigeria, Hugo Bossed
I can hardly believe that this is my third post on WikiLeaks. After cataloguing typical American double-speak on "Internet freedom" (whatever that is) and suggesting that WikiLeaks move to Montenegro if survival is its goal, we now have two interesting entries.First, I have in the past featured the highly controversial activities of Royal Dutch Shell in Nigeria. To say that its activities in the Niger Delta and relationship with the Ogoni tribe are controversial is to put things mildly. Now we have these cables in which American officials claim that a Shell executive boasted of infiltrating the Nigerian government. From WikiLeaks' media partner The Guardian:The oil giant Shell claimed it had inserted staff into all the main ministries of the Nigerian government, giving it access to politicians' every move in the oil-rich Niger Delta, according to a leaked US diplomatic cable.The company's top executive in Nigeria told US diplomats that Shell had seconded employees to every relevant...
Philippines, Not India is World's Call Centre Capital
Now this article kind of took me by surprise. While India is renowned as a global hub for business process outsourcing (BPO)--we even have popular entertainment glamorizing its services-led economic renaissance in Slumdog Millionaire--it seems another country has been away from the BPO limelight that has just stolen India's thunder. Alike India, the Philippines has been subject to the (English-speaking) white man's burden of enlightening us coloured people about the benefits of markets and democracy (well sort of). Also like India, then, the Philippines has a large English-speaking population which happens to be tertiary educated....
OECD on Education: Chinese Bury US Students
About the capitalist states, it doesn't depend on you whether or not we exist. If you don't like us, don't accept our invitations, and don't invite us to come to see you. Whether you like it or not, history is on our side. We will bury you!One of the signature statements of the Cold War was Nikita Khrushchev saying the above phrase to Western diplomats in 1956. While it was certainly enjoyable bluster alike his alleged shoe-banging incident at the UN General Assembly four years later, let's say that history was not on his side. However, let's now turn to an altogether different sort of command economy of the "market authoritarian"...
World Bank's Lin on Post-Crisis Industrial Policy
A few months back I featured Robert Wade's article in Global Policy concerning the prospects of industrial policy post-crisis. Yes, it was a bit of triumphalism about the follies of blind obeisance to American neoliberal diktat circa 1997. However, time moves on. World Bank Chief Economist Justin Yifu Lin has a new response in the same journal to Wade that takes (surprise!) issue with some of the latter's assertions, especially scepticism about the worth of neoclassical economics as well as the role of the market vis-a-vis that of the state. Let's just say Lin is more sanguine on neoclassical economics and the market as an...
Hey Assange, Take WikiLeaks.ch to Montenegro
♠ Posted by Emmanuel in Internet Governance
at 12/06/2010 12:09:00 AM
Whatever you may think of Julian Assange's now world-famous leaks, you have to wonder about his follow-through. Having plied a cache of cables from the world's most formidable foreign service, he's had a more challenging time keeping his leaks online. As we keep reading nowadays, Amazon decided to discontinue hosting WikiLeaks (allegedly under duress). Meanwhile, the cash flow to Julian Assange & Co. has also been severed as PayPal has similarly cut off handling donations to this "illegal" operation.So having done the hard work of acquiring American secrets, it is thus puzzling to me why he's not thought of keeping his...