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Archive for the tag “Foreign Exchange Reserves”

Pakistan’s Debt Dynamic

An oft-overlooked aspect of Pakistan’s debt situation is the political economy. There is an inherent asymmetry between the ‘benefits’ derived from new debt undertaken, and the burden of its repayment. There are two facets worth considering. First, those segments who tend to ‘benefit’ from the debt contracted (the elite) are usually different from those who bear the incidence of the debt burden (the less affluent).

Read Here – Dawn

Who Is The Bigger U.S. Creditor?

Differing views have been expressed in the debate on who is going to be the biggest US creditor. However, it is certain that China and Japan will remain as the top 2 creditors for the foreseeable future.

Read Here – Global Times

The Dollar Sinkhole

China’s $3.8 trillion of currency reserves are the largest stockpile ever amassed. Economists have long seen that money as a strength — the ultimate rainy-day fund should China’s shadow-banking system blow up. Trouble is, the value of those holdings depends on China’s $1.3 trillion of U.S. Treasuries. If they plunge in value, all hell breaks loose and officials from Beijing to Brasilia will scramble to exit the American bird cage, writes William Pesak.

Read Here – Bloomberg

In Dollar We Believe

Since 1976, the US dollar’s role as an international currency has been slowly waning. International use of the dollar to hold foreign-exchange reserves, denominate financial transactions, invoice trade, and as a vehicle in currency markets is below its level during the heyday of the Bretton Woods era, from 1945 to 1971. But most people would be surprised by what the most recent numbers show.

Read Here – Project Syndicate

Cheap China

As hundreds of thousands of Filipinos struggled to find food, water, shelter and the bodies of loved ones in the wake of Typhoon Haiyan, China quickly dipped into its world-leading $3.7 trillion of currency reserves and came up with … all of $100,000, William Pesak writes.

Read Here – Bloomberg

Can the BRICS Have Their Own World Bank?

The five countries known as the BRICS have 43 percent of the world’s population, $4.4 trillion in currency reserves, and generally healthier economic growth than Europe and the U.S. Yet to their frustration, Americans and Europeans still dominate policymaking at the World Bank and the International Monetary Fund.

Should the five—Brazil, Russia, India, China, and South Africa—create their own development bank and crisis fund?

Read Here –  Businessweek

China Has Its Own Debt Bomb: WSJ

Six years ago, Chinese Premier Wen Jiabao cautioned that China’s economy is “unstable, unbalanced, uncoordinated and unsustainable.” China has since doubled down on the economic model that prompted his concern. Mr. Wen spoke out in an attempt to change the course of an economy dangerously dependent on one lever to generate growth: heavy investment in the roads, factories and other infrastructure that have helped make China a manufacturing superpower. Then along came the 2008 global financial crisis. To keep China’s economy growing, panicked officials launched a half-trillion-dollar stimulus and ordered banks to fund a new wave of investment. Investment has risen as a share of gross domestic product to 48%—a record for any large country—from 43%.

Read Here -Wall Street Journal

The Unloved Dollar Standard

Since World War II’s end, the dollar has been used to invoice most global trade, serving as the intermediary currency for clearing international payments among banks and dominating official foreign-exchange reserves. This arrangement has often been criticized, but is there any viable alternative?

The problem for postwar Europe, mired in depression and inflation, was that it lacked foreign reserves, which meant that trade carried a high opportunity cost. To facilitate trade without requiring payment after each transaction, the Organization for European Economic Cooperation created the European Payments Union in 1950.

Read Here – Japan Times

Japan’s Currency Dance: Weaken the Yen—But Not Too Weak

Weaken the yen: That has been a desperate plea by the captains of Japanese industry for years as the strong currency has hurt such exporters as Sony and Toyota. Reversing the yen’s rise was a major goal of Liberal Democratic Party leader Shinzo Abe during his successful campaign against incumbent Prime Minister Yoshihiko Noda last month.

Sure enough, now that Abe is prime minister, the yen has weakened. A lot. With the government promising a big new spending program and the central bank expanding its quantitative easing policy, Japan’s currency on Jan. 18 hit a two-and-a-half-year low of ¥90.10 to the dollar. Since mid-November, when the election season got underway and an LDP victory became a near certainty, the yen has weakened by 10 percent.

Read Here – Businessweek

The Dollar Trap: China’s Misunderstood Foreign Exchange Reserves

China’s foreign exchange (‘forex’) reserves and its holdings of U.S. government debt are two of the most frequently misunderstood issues in relations between the two countries. Recent events have underscored this problem. On September 18th, a car carrying Gary Locke, the U.S. Ambassador to China, was surrounded and partially attacked in a sideshow to an outbreak of Beijing anti-Japanese protests over the Senkaku/ Diaoyu islands. The attackers allegedly shouted anti-American slogans, including the cry “Pay us back our money” – a reference to Chinese investments in U.S. government debt. Then, a poll by the Pew Institute again demonstrated worried opinions in the U.S. about China’s large holdings of U.S. debt. The poll showed that 78% of the general public surveyed thought that Chinese holdings of U.S. debt are a “very serious problem”.

Read Here – The Diplomat

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