I2CREDIT Nº 4
Handle with care
China suggests an end to the dollar era
IN FUTURE, changes to the international financial system are likely to be shaped by Beijing as well as Washington. That is the message of an article by Zhou Xiaochuan, the governor of the People’s Bank of China. Mr Zhou calls for a radical reform of the international monetary system in which the dollar would be replaced as the main reserve currency by a global currency. It is a delicate issue, however. When Tim Geithner, America’s treasury secretary, discussed the proposal in New York on March 25th, his remarks sent the dollar tumbling before he made clear that, naturally, he thought the greenback should remain the dominant reserve currency.
Por: The Economist print edition
He suggests that the international financial system, which is based on a single currency (he does not actually cite the dollar), has two main flaws. First, the reserve-currency status of the dollar helped to create global imbalances. Surplus countries have little choice but to place most of their spare funds in the reserve currency since it is used to settle trade and has the most liquid bond market. But this allowed America’s borrowing binge and housing bubble to persist for longer than it otherwise would have. Second, the country that issues the reserve currency faces a trade-off between domestic and international stability. Massive money-printing by the Fed to support the economy makes sense from a national perspective, but it may harm the dollar’s value.
Mr Zhou suggests that the dollar’s reserve status should be transferred to the SDR (Special Drawing Rights), a synthetic currency created by the IMF, whose value is determined as a weighted average of the dollar, euro, yen and pound. The SDR was created in 1969, during the Bretton Woods fixed exchange-rate system, because of concerns that there was insufficient liquidity to support global economic activity. It was originally intended as a reserve currency, but is now mainly used in the accounts for the IMF’s transactions with member countries. SDRs are allocated to IMF members on the basis of their contribution to the fund.
Mr Zhou’s plan could win support from other emerging economies with large reserves. However, it is unlikely to get off the ground in the near future. It would take years for the SDR to be widely accepted as a means of exchange and a store of value. The total amount of SDRs outstanding is equivalent to only $32 billion, or less than 2% of China’s foreign-exchange reserves, compared with $11 trillion of American Treasury bonds.
There are also big political hurdles. America would resist, because losing its reserve-currency status would raise the cost of financing its budget and current-account deficits. Even Beijing might want to rethink the idea. Mr Zhou praised John Maynard Keynes’s proposal in the 1940s for an international currency, the “Bancor”, based on commodities. But as Mark Williams of Capital Economics says, central to Keynes’s idea was that a tax be imposed on countries running large current-account surpluses, to encourage them to boost domestic demand.
Ultimas Notas
I2CREDIT Nº 4
Senators Examine Credit Card Rule Changes
Sen. Sheldon Whitehouse, D-RI, during a hearing yesterday to explore whether the bankruptcy code should be changed to give borrowers leverage in negotiations with creditors, said banks are more often mistreating credit cardholders.
Por: www.creditcollectionsworld.com
Banks Intensify Credit Card Debt Collection Efforts
Yes, it's more "good news" for consumers... with the credit crunch in full swing and the U.S. economy teetering madly, the banks are stepping up efforts to collect debt from you! Not that they aren't owed, and I know they are all bleeding profusely over writeoffs concerning all things mortgage lately, but aren't we ALL struggling to make ends meet these days?
Por: www.creditinfocenter.com
Why Small Companies Will Win in This Economy
Peter Bregman is CEO of Bregman Partners, Inc., a global leadership development and change management firm.
Por: Washingtonpost | http://voices.washingtonpost.com
The nuts and bolts come apart
The nuts and bolts come apart
As global demand contracts, trade is slumping and protectionism rising
COMPARISONS to the Depression feature in almost every discussion of the global economic crisis. In world trade, such parallels are especially chilling. Trade declined alarmingly in the early 1930s as global demand imploded, prices collapsed and governments embarked on a destructive, protectionist spiral of higher tariffs and retaliation.
Por: The Economist print edition
Sharing the pain
EVEN as America’s politicians harangue the bankers, the bankers are sniping back. On March 13th the chairman of Wells Fargo, America’s fourth-biggest bank, called the Treasury’s ongoing stress test for banks, with its glacial timetable, “asinine”. Amid the ranting, the rot from bad debts is creeping up banks’ capital structures, imperilling any recovery. Initially common shareholders, who bear the “first loss” on assets, were crushed, along with preferred shareholders, who get supposedly safer dividends. Now owners of bank debt, which bears losses once equity is wiped out, live in fear. Junior subordinated debt, which ranks next in the queue, trades at 15-45 cents on the dollar and senior subordinated debt at 65-70 cents. Even senior debt, holders of which rank second only to depositors in America and typically alongside them in Europe, is at 85-90 cents.
Por: The Economist print edition
The Federal Reserve acts boldly to ease credit conditions
The Federal Reserve's trillion dollar move to expand money available for lending is a known technique, but the scale is historic.
Por: The Seattle Times | http://seattletimes.nwsource.com
Notas Destacadas
- 2012
- CREDIT PERFORMANCE Nº 36
- CREDIT PERFORMANCE Nº 35
- CREDIT PERFORMANCE Nº 34
- CREDIT PERFORMANCE Nº 33
- 2011
- CREDIT PERFORMANCE Nº 32
- CREDIT PERFORMANCE Nº 31
- CREDIT PERFORMANCE Nº 30
- CREDIT PERFORMANCE Nº 29
- CREDIT PERFORMANCE Nº 28
- CREDIT PERFORMANCE Nº 27
- CREDIT PERFORMANCE Nº 26
- CREDIT PERFORMANCE Nº 25
- CREDIT PERFORMANCE Nº 24
