Live From New York: ECB's Trichet & Bob Rubin

♠ Posted by Emmanuel in at 4/30/2010 12:03:00 AM
I almost missed this speaking engagement that the ECB's chief had at the Council for Foreign Relations in New York. Welcoming him is none other than the rather famous Goldman Sachs alum and former Treasury Secretary Robert Rubin. Needless to say, it's important stuff touching on the goings-on in the European Monetary Union (EMU). If the length deters you, there's a highlight clip as well at the link abo...
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So, What Happens if Greece Can't Pay Up?

♠ Posted by Emmanuel in at 4/30/2010 12:01:00 AM
Here are three disaster scenarios I found from Reuters if Europeans cannot figure out how to stave off Greek capitulation. These are arranged in terms of increasing anarchy and improbability:-----------------------------------------------(I) NEGOTIATED DEBT RESTRUCTURINGPROBABILITY: most likely in the medium to long termGreece would negotiate a restructuring of its debt before missing a payment. This would require investors to take a significant discount on their debt holdings and could include extending maturities or possibly investors switching to longer maturities. Bondholders could, however, see haircuts of anything from 20 to 40 percent of the net asset value of their debt positions, according to some analysts' calculations.According to Brown Brothers Harriman's calculations, the current two-year Greek/German bond yield spread is consistent with about a 25 percent chance of a 50 percent haircut or about a 33 percent chance of a 40 percent haircut. The two-year Greek/German...
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EU, Look to Hong Kong '98 for Staunching Panic

♠ Posted by Emmanuel in ,,, at 4/29/2010 12:08:00 AM
So it has come to this point. Regardless of what you think about alleged EU indecision and infighting, the barbarians are definitely at the gate. The stakes are high; indeed, some even believe that the fate of European monetary union hangs in the balance. Like in so many times past, it is certainly easy to blame faceless speculators in the hullabaloo. There are also those rating agencies who appear hellbent on downgrading Greece, Portugal, and Spain at a most inopportune time as the EU and IMF crews try to assemble a definitive rescue package for Hellas. Long after this episode is over, I suspect there will again be much debate...
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'Actually, the IMF Isn't Mandated to Help Greece'

♠ Posted by Emmanuel in ,, at 4/29/2010 12:04:00 AM
This point has been gnawing at me for quite some time and I do believe it should be aired even if I'm not entirely certain about its validity. The basic point made here is that Greece is suffering from a fiscal crisis, whereas the IMF was meant to confront balance-of-payments troubles. That is, not being able to finance one's budget at reasonable terms is different from not having sufficient foreign exchange to facilitate international transactions. While the whitebread commentariat has seemingly neglected this crucial question, it's certainly one which should bother IPE scholars in general and those who make finer distinctions in particular.Indeed, us folks from the third world can rightfully question if poor countries who've contributed to the IMF are funding crisis-fighting efforts in rich countries when the IMF's mandate doesn't extend past balance-of-payments woes. In what follows, Swaminathan Aiyar makes precisely these points. Aiyar contributes to the Economic Times, a...
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Deja Vu Time: G-20 as Bretton Woods Rehash

♠ Posted by Emmanuel in ,, at 4/27/2010 11:35:00 PM
To its credit, the G-20 process seems to be making meaningful progress on fronts I thought would be sacrosanct only a few months ago: cracking down on tax havens; increasing transparency of hedge fund positions; regulating "systemically important" banks; and even a then-unheard one of charging these banks for the public service of bailouts going forward. We now know that the current IMF head has proclaimed the death of the Washington Consensus, while its quest for ever-freer capital flows has been abandoned (for now).Now, Eric Helleiner should be a very familiar name to IPE readers. As his edited volume The Future of the Dollar...
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Pay Us In Yuan, Not Dollars (Pretty Please)

♠ Posted by Emmanuel in , at 4/27/2010 10:18:00 PM
An interesting piece in the FT by StanChart's chief economist Gerard Lyons makes the case that, in spite of its continued willingness to buy dollar-denominated reserve assets, China is nonetheless undermining the dollar by facilitating the use of renminbi swaps with its trading partners for invoicing and settling transactions. For sure, there is still some way to go before the yuan becomes more freely traded, but this is a step in the right direction.I cannot possibly hide my antipathy towards the wretched greenback, so I wish these small-scale experiments China is conducting with various LDCs--especially those in Southeast Asia--pick up speed. What impresses me with Lyons is that, unlike many other commentators who've been living in their whitebread world (as Billy Joel once sang), he understands that these efforts are currently being coursed through the Hong Kong Monetary Authority (HKMA) and not the People's Bank of China (PBoC). The reason is simple: the former simply has...
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Minor German Party: Remove Greece from EMU

♠ Posted by Emmanuel in , at 4/27/2010 04:33:00 PM
There has been much commentary about this Reuters article reporting that the junior partner in the ruling coalition of the Christian Democratic Party (CDP) and Free Democratic Party (FDP) alliance suggests Greece should take a time out on the euro:Greece might have to quit the euro zone for a time if the country failed to tighten its belt sufficiently to qualify for emergency aid, a budget expert with Germany's junior coalition party said on Tuesday. A temporary exit from the single currency might benefit Athens if accompanied by a devaluation, the Free Democrats' (FDP) Juergen Koppelin told Deutschlandfunk radio.The EU treaty makes no provision for a euro zone member to quit the single currency, and top regional policymakers including ECB president Jean-Claude Trichet and Eurogroup chairman Jean-Claude Juncker have dismissed the possibility of Greece doing so..."One may have to say no (to aid) if Greece does not meet conditions and the country just comes along to get money under...
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0.7% of GDP Aid Target: Where Did It Come From?

♠ Posted by Emmanuel in , at 4/27/2010 12:09:00 AM
I serendipitously came across this fascinating paper by Michael Clemens and Todd Moss of the Center for Global Development (CGD) while looking for the history of the much-vaunted aid target. As someone interested in all matters dealing with development, I've been curious about the somewhat obscure origins of the target that official development aid (ODA) constitute, at a minimum, 0.7% of the GDPs of developed nations' respective outputs. Even today, the UN Millennium Project harps on the 0.7% target:The UN Millennium Project's analysis indicates that 0.7% of rich world GNI can provide enough resources to meet Millennium Development Goals, but developed countries must follow through on commitments and begin increasing ODA volumes today. If every developed country set and followed through on a timetable to reach 0.7% by 2015, the world could make dramatic progress in the fight against poverty and start on a path to achieve the Millennium Development Goals and end extreme poverty...
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Deutschland uber alles: EU's Surveillance Dilemma

♠ Posted by Emmanuel in at 4/26/2010 12:07:00 AM
I'm a little lamb who's lost in the woodI know I could always be goodTo one who'll watch over me...As we know, the somewhat harrowing experience Germany is now experiencing of imposing discipline on wayward EMU members has compelled it to create additional surveillance mechanisms to (hopefully) prevent future repeats. However, doing so is easier said than done. While some left-of-centre commentators welcome the establishment of a European Monetary Fund (EMF) as a way to ward off globalization's pantomime villains--"the speculators"--the reality is more complex and involves some rather unpalatable considerations. As Pogo said, we've met the enemy and it is us [Europeans].First, the Bundesbank is already the template for ECB; establishment of an EMF would further emphasize Deutschland uber alles (Germany above all) in the European project's economic sphere. That is, Germany would be acting as "the big affair I cannot forget" to get its long-desired wish for tighter watch over...
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Who'll Kick Greece Harder, EU or IMF?

♠ Posted by Emmanuel in , at 4/24/2010 08:07:00 PM
I just wanted to put this up quickly. As we all know by now, the Greeks have finally cried uncle over their massive fiscal hole. Not wanting to say "I told you so," please visit my previous post on how the above countries have availed of or are in the process of availing of EU/IMF bailout packages. Greece now shares this fate as predicted. Included in that previous post are links back to the relevant EU/IMF pages which detail their rescue operations.What will be of note here is how much conditionality and monitoring will be handled by the EU and IMF. This distribution of labour will be interesting since the IMF is already...
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China, Japan, and US Contest the Heart of Asia

♠ Posted by Emmanuel in ,, at 4/23/2010 12:36:00 AM
If the current century is indeed "The Pacific Century" as many commentators make it out to be, then we need to understand how major powers are jockeying for leadership in the region. Geography is often subject to political contestation, and nowhere is this truer than in defining what exactly the "Asia Pacific" is. As China, Japan, and the US jockey for position, they all define the region differently--including some, neglecting others--as suits their interests. I have prepared the following situation analysis as part of a package introducing our sister programme here at LSE IDEAS. I work in the Southeast Asia programme, but...
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Will Murdoch's News Corp Pay for Backing Tories?

♠ Posted by Emmanuel in at 4/23/2010 12:12:00 AM
As British viewers will know, one of the believed sources of New Labour's resilience has been its odd alliance with Rupert Murdoch's News Corporation. Aside from the obvious past benefit of backing a winner, New Labour has also put some distance between itself and the European project. Rupert Murdoch has always feared Brussels' encroachment on his media empire's expanse here in Britain on the grounds of competition law. Perhaps sniffing that New Labour's time was up, Murdoch famously shifted allegiances to David Cameron prior to the upcoming election.In perceived retaliation for shifting allegiances, Labour revoked the Murdoch-invested Sky Sports' rights to air the Ashes--an important event for cricket watchers--late last year:Labour will exact revenge over the Sun's criticism of Gordon Brown by axing Sky Sports' exclusive rights to live TV coverage of The Ashes, it emerged today. In a major blow to the Rupert Murdoch-owned channel, a government review of so-called “crown jewels”...
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Mighty Money: Russian Ruble & Indonesian Rupiah

♠ Posted by Emmanuel in , at 4/22/2010 11:05:00 AM
We tend to think the dollar is strong when the euro is weak since it is usually the anti-dollar. However, the unique woes being heaped on the common currency by Greece obscure the observation that there are many other currencies that are quite strong against the US dollar at the moment. Commodity currencies like the Canadian (CDN) and Australian (AUD) dollars are naming names and taking no prisoners, with the former above parity against the greenback once again. (That is, it will take more than one US dollar to buy a Canadian dollar.) The Aussie is no slouch, either. Once more, this is being attributed to a "growing risk...
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Tory Scare Story: Vote for Us or UK is IMF-Bound

♠ Posted by Emmanuel in ,, at 4/22/2010 12:01:00 AM
As things stand, the upcoming British general elections scheduled for the sixth of May are going to result in a hung parliament or having no party with a clear majority. In that event, a coalition government will need to be formed, with the Liberal Democrats and Labour being more natural allies than the Lib Dems and the Conservatives or even a grand coalition of Labour and the Conservaties. Matters are complicated by the Liberal Democrats stating they would rather play for an outright majority than signal which other party they'd rather go into a coalition with. Now, I've expressed my strong support for the Liberal Democrats (obviously), but the chain of arguments that the Conservatives or "Tories" are putting forward now goes something like this:A hung parliament causes political uncertainty that unnerves markets;The last time Britain had a hung parliament, a Lib-Lab (Liberal Democrat/Labour coalition) government resulted;This Lib-Lab coalition was in place when Britain had...
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