Vinny’s Blog

Continued from….

So, what type of changes China is looking for in the currency market and what are they doing to accomplish those changes ? they are doing a number of things.

1. Not support Dollars/US Debt. anymore. (…too late to realize it but none the less they did !).
2. Asking IMF to be a world bank and issue new ( world ) currency and
3. In case both ( 1 & 2) fails convert their own currency as world currency and increase it’s value
– Not much is published about ( increasing value) it…so I can only brush upon this topic.
4. Gather support for everything they are doing - applicable to all 3 of their goals listed on the top.

– Let us look at all 4 of their goals one by one.
– 1. Not support Dollars/US Debt. anymore.  &  4. gather support of it

China and Russia to meet on economic crisis < gathered support >
Wednesday, 28 January 2009
Leaders of China and Russia will hold a private meeting at the World Economic Forum today to explore common ground for tackling the global economic crisis.

“The premiers of Russia and China will discuss the economic situation in the world and ways to move out of the current situation,” a source close to the Russian government said. “A wide range of questions will be discussed, both bilateral and international,” the source said.

Chinese Premier Wen Jiabao is due in a Davos speech later today to explain how his country is tackling the economic crisis and ways to cooperate internationally to overcome the financial problems, Xinhua news agency reported.

Russian Prime Minister Vladimir Putin will later address the roots of the crisis, next steps and modernising Russia’s economy, his spokesman has said.

– What ever they discussed in that meeting on Jan-28th…later actually turned tables…

Wen and Putin lecture western leaders
By Andrew Edgecliffe-Johnson and Gillian Tett in Davos and John Thornhill and Catherine Belton in Moscow
Published: January 28 2009 19:17 | Last updated: January 29 2009 08:39
The leaders of China and Russia on Wednesday turned the tables on their western counterparts who have dictated the world’s economic agenda, lecturing them for policy failures they said had led to the global financial crisis.
Wen Jiabao, the Chinese premier, and Vladimir Putin, Russia’s prime minister, used the World Economic Forum in Davos to argue that the two rising powers must play a bigger role in a new economic order.

–Looks like China has full support from Russia on it.

Russian prime minister Vladimir Putin calls for end of dollar stranglehold
Russian prime minister Vladimir Putin has called for concerted action to break the stranglehold of the US dollar and create a new global structure of regional powers.
By Ambrose Evans-Pritchard in Davos . Last Updated: 11:13AM GMT 29 Jan 2009
“The one reserve currency has become a danger to the world economy: that is now obvious to everybody,” he said in a speech at the World Economic Forum. It is the first time that a Russian leader has set foot in the sanctum sanctorum of global capitalism at Davos.  Mr Putin said: “We are witnessing a truly global crisis. The speed of developments beats every record, and the strategic difference from the Great Depression
is that under globalisation this touches everyone. This has multiplied the destructive force. It looks exactly like the perfect storm.”

–Here is Russia again in March. Does not look like Russia want to let go of it…

Russia adds to calls for currency reform
Peter Garnham and agencies ,Published: March 26 2009 11:42 | Last updated: March 26 2009 13:24
Russia wants to convene an international conference at government envoy level to discuss the creation of a new global currency, RIA news agency on Thursday quoted Andrei Denisov, first deputy foreign minister as saying.

”This proposal is aimed at a practical realisation of the idea about a new global accounting unit or a new global currency. It is a question which should be discussed to create a consensus,” said Mr Denisov, according to the RIA news agency.

–Here are some more sarcastic direct comments..from Russia, though China has more to loose.

“What is discouraging is [Barack] Obama’s statement that he is going to run a $1 trillion deficit for years to come. For us, that means that all the free liquidity in the world will run into American Treasury bills,” said Igor Yurgens, who heads a think tank advising Mr Medvedev.
Mr Yurgens likened the policy to the “beggar thy neighbour” protectionist policies of the 1930s. “Of course, [Mr Obama] expects the Chinese or Russians to buy US Treasury bills. That is pretty selfish and philosophically it is protectionism,” he said.

– Beggar ? US ? is it true ? could be…..US  is asking for support ?

Clinton Urges China to Keep Buying Treasuries (Update3)
By Indira Lakshmanan
Feb. 22 (Bloomberg) — U.S. Secretary of State Hillary Clinton urged China to continue buying Treasury bonds to help finance President Barack Obama’s stimulus plan.

The two nations’ economies are intertwined and it wouldn’t be in China’s interest if the U.S. were unable to sell its government debt, Clinton said in an interview with Shanghai’s Dragon Television today. China knows it needs a healthy American economy as its biggest export market, she said, adding that the U.S. must take “drastic measures” to stimulate growth.

–  China has indicated that it’s not gonna support dollars anymore this has been a long debate through out 2008. If China was or was not going to support  USD in future. Wait no more…writing is on the wall.

U.S. debt is losing its appeal in China
By Keith Bradsher , Published: January 8, 2009
HONG KONG: China has bought more than $1 trillion in American debt, but as the global downturn has intensified, Beijing is starting to keep more of its money at home - a shift that could pose some challenges to the U.S. government in the near future but eventually may even produce salutary effects on the world economy.

China pitches for new financial order
March 04, 2009 15:53 IST
China on Wednesday strongly pitched for reform of global financial institutions and establishment of a new financial order with Beijing and New Delhi playing a greater role in the decision-making process of these bodies.
Chinese Ambassador Zhang Yan said both the countries should work together to press the developed countries to bear their responsibility and prevent them from shifting the burden on to developing countries.
He said India and China should enhance cooperation in the economic field and join hands in ensuring reform of the international financial system to meet challenges posed by the economic downturn.

Dollar’s status under attack from China
World leaders gear up for reform of global system
By Sean O’Grady, Economics Editor , Tuesday, 24 March 2009
His remarks come as the managing director of the International Monetary Fund said that any plans, such as those being pursued by the G20, to stimulate the  world economy would fail unless the banking system is repaired.

Dominique Strauss-Kahn said: “You can put in as much stimulus as you want. It will just melt in the sun as snow if, at the same time, you are not able to have a generally smaller financial sector than before but a healthy financial sector at work.”

Zhou Xiaochuan, the governor of the Chinese central bank, implicitly criticised the status of the dollar as the world’s sole reserve currency. “The price is becoming increasingly high, not only for the users, but also for the issuers of the reserve currencies,” Mr Zhou said.

He added: “The role of the SDR has not been put into full play due to limitations on its allocation and the scope of its uses. However, it serves as the light in the tunnel for the reform of the international monetary system.

– More direct blame and asking to get rid of dollar from being reserve currency.

US ‘has to clean up dollar mess’
By Wang Xu (China Daily) , Updated: 2009-03-26 07:28
US President Barack Obama may have dismissed the need to replace the greenback with a global currency, but economists said yesterday that he should take more steps to restore confidence in the dollar, especially in the near term.

Obama said at a White House press conference on Tuesday evening (Wednesday morning, Beijing time) that confidence in the US economy and the dollar was “extraordinarily strong”, and that he did not believe there was a need for a global currency.

Obama’s comments came after China’s central bank governor Zhou Xiaochuan wrote in an article that it was necessary to create a “super-sovereign reserve currency” to overhaul the existing international monetary system of using the currency of one nation as the global reserve currency.

– Does this sounded like support for dollar ? Diplomatically they still might give press statements here and there that they are still supporting dollars  but in my mind it’s only superficial and not much truth behind it.

– 2. Asking IMF to be a world bank and issue new currency & 4. Gather support for it.

China eyes SDR as global currency
Updated: 2009-03-23 19:45
China’s central bank chief on Monday proposed a sweeping overhaul of the global monetary system, outlining how the dollar could eventually be replaced as the world’s main reserve currency by the Special Drawing Right (SDR). Fewer risks A super-sovereign reserve currency not only eliminates the risks inherent in a credit-based currency such as the dollar — in contrast to one backed by gold  — but also makes it possible to manage global liquidity, Zhou argued.

“And when a country’s currency is no longer used as the yardstick for global trade and as the benchmark for other currencies, the exchange rate policy of the country would be far more effective in adjusting economic imbalances. This will significantly reduce the risks of a future crisis and enhance crisis management capability.” he said.

Reform of the international monetary system is likely to take a back seat to the more pressing task of economic and financial stabilization when leaders of the Group of 20 developed and emerging economies meet in London on April 2.

But Zhou’s speech shows that the issue is a pressing one for China, whose top officials regularly bemoan the volatility of the dollar and what they see as mismanagement of the world’s leading economy.

Zhou acknowledged that establishing a new reserve currency that commands wide acceptance may take a long time. It would be a “bold initiative that requires extraordinary political vision and courage”.

China ‘Super Currency’ Call Shows Dollar Concern (Update1)
By Li Yanping
March 24 (Bloomberg) — China’s call for a new international reserve currency may signal its concern at the dollar’s weakness and ambitions for a leadership role at next week’s Group of 20 summit, economists said.
Central bank Governor Zhou Xiaochuan yesterday urged the International Monetary Fund to create a “super-sovereign reserve currency.” The dollar weakened after the Federal Reserve said it would buy Treasuries and the U.S. government outlined plans to buy illiquid bank assets

“China is concerned about the potential for a slide in the dollar as the U.S. attempts to stimulate its economy,” said Mark Williams, a London-based economist at Capital Economics Ltd. The “rare” sight of a Chinese official attempting to reframe an international debate may be “a sign of China becoming more engaged,” he said.

Zhou’s comments may also signal ambitions for the yuan to play a bigger global role. The central bank this week signed a currency swap with Indonesia, adding to agreements since December with South Korea, Hong Kong, Malaysia and Belarus. It’s also preparing for trade settlement in the Chinese currency with Hong
Kong, Macau and the Association of Southeast Asian Nations.

China is promoting use of the yuan to smooth currency volatility and to serve “a long-standing interest” to raise its status to that of a global reserve currency, said Ben Simpfendorfer, an economist at Royal Bank of Scotland Group Plc in Hong Kong. Such moves are not “a knee-jerk response” to the economic crisis, he said.
“If turning the Chinese yuan into a global reserve currency sounds ambitious, then encouraging its adoption as a regional reserve currency is more straightforward,” said Simpfendorfer.

–Some countries have decided to remove dollar from settlements all together. This is clear indication that trade can be done without any currency. And this is direct blow to dollar.

Nations turn to barter deals to secure food
By Javier Blas in London , Published: January 26 2009 23:32 | Last updated: January 26 2009 23:32
Countries struggling to secure credit have resorted to barter and secretive government-to-government deals to buy food, with some contracts worth hundreds of millions of dollars.
In a striking example of how the global financial crisis and high food prices have strained the finances of poor and middle-income nations, countries including Russia, Malaysia, Vietnam and Morocco say they have signed or are discussing inter-government and barter deals to import commodities from rice to vegetable oil.

– But who else besides China is supporting creation of world currency ?  you’ll be surprised.

At G20, Kremlin to Pitch New Currency
17 March 2009By Ira Iosebashvili / The Moscow TimesThe Kremlin published its priorities Monday for an upcoming meeting of the G20, calling for the creation of a supranational reserve currency to be issued by international institutions as part of a reform of the global financial system.
The International Monetary Fund should investigate the possible creation of a new reserve currency, widening the list of reserve currencies or using its already existing Special Drawing Rights, or SDRs, as a “superreserve currency accepted by the whole of the international community,” the Kremlin said in a statement issued on its web site.
The SDR is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries.

Indonesia, Malaysia, Thailand Support Call for Global Currency
By Lilian Karunungan and Aloysius Unditu
March 27 (Bloomberg) — China’s call for a global reserve currency to take the place of the dollar has won the support of central bank chiefs in Indonesia, Malaysia and Thailand, who argue it would help curb volatility and foster trade.

“We need a currency that is stable by volume and value so that world trade and investment can be more stable,” Bank Indonesia Governor Boediono told reporters in Jakarta today. “Trade transactions using one currency that’s dependent on the condition of a single country’s economy is dangerous.”

U.N. panel says world should ditch dollar
Wed Mar 18, 2009 11:16am ED
By Jeremy Gaunt, European Investment Correspondent
LUXEMBOURG (Reuters) - A U.N. panel will next week recommend that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar.

Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket. Persaud has long argued that the dollar would give way to the Chinese yuan as a global reserve currency within decades.
A shared reserve currency might negate this move, he said, but he believed that China would still like to take on the role.

– US too ? told ya ! you could be surprised.

A world currency moves nearer after Tim Geithner’s slip
US Treasury Secretary Tim Geithner confessed on Wednesday that he had not read the plans by China’s central bank governor for a “super-sovereign reserve  currency” run by the International Monetary Fund, but nevertheless let slip that Washington was “open” to the idea. Whoops.
By Ambrose Evans-Pritchard
Last Updated: 8:58AM GMT 27 Mar 2009

This is how matters quickly escalate in geo-finance. China’s suggestion – backed by Russia, Brazil, and India, and clearly aimed at breaking US dollar hegemony – is making its way onto the agenda of the G20 Summit next week. ‘Dollar-dämmerung’ no longer looks so far-fetched.

Last Updated: 3:56PM GMT 25 Mar 2009
Mr Geithner said he was “quite open” to China’s suggestion of moving towards a currency system linked to the International Monetary Fund’s Strategic Drawing Rights (SDRs).
Analysts said these comments hit dollar sentiment, as such a move would result in countries selling large portion of their dollar reserves. Spot gold hit a session high of $940 an ounce.

US backing for world currency stuns markets
US Treasury Secretary Tim Geithner shocked global markets by revealing that Washington is “quite open” to Chinese proposals for the gradual development of a global reserve currency run by the International Monetary Fund.
By Ambrose Evans-Pritchard , Last Updated: 8:18AM GMT 26 Mar 2009
Beijing has the backing of Russia and a clutch of emerging powers in Asia and Latin America. Economists have toyed with such schemes before but the issue has vaulted to the top of the political agenda as creditor states around the world takes fright at the extreme measures now being adopted by the Federal Reserve, especially the decision to buy US government debt directly with printed money.

Mr Bloom said the US is discovering that the sensitivities of creditors cannot be ignored. “China holds almost 30pc of the world’s entire reserves. What they say matters,” he said.

–Damn right, creditors can’t be ignored.

China is right to have doubts about who will buy all America’s debt
Chinese doubts about the value of US Treasury bonds highlight a crucial question: who will buy the estimated $2.7 trillion (£1.9 trillion) to $4.2 trillion of debt expected to be issued over the next two years?
By Martin Hutchinson , Last Updated: 12:14PM GMT 13 Feb 2009

–Remember how Geithner back in Jan. called China manipulator of the currency and then later said it will investigate IF that was true not only that he also told Europe to back off from criticizing China. Well, here is another glory moment for him.

U.S. Vows To Sustain Dollar’s Dominance
Geithner Defends Currency’s Role
NEW YORK, March 25 — Treasury Secretary Timothy F. Geithner said Wednesday that the United States would do whatever it takes to make sure the dollar would remain the world’s dominant reserve currency, clarifying comments he had made earlier in the day that had caused the greenback to fall against major
currencies.

“I think the dollar remains the world’s dominant reserve currency,” Geithner said during a question-and-answer session at the Council on Foreign Relations here. “I think that’s likely to continue for a long period of time. And as a country, we will do what’s necessary to make sure we’re sustaining confidence in our financial markets, and in the productive capacity of this economy and in our long-term fundamentals.”

3. In case both ( 1 & 2) fails convert their own currency as world currency and increase it’s value
– Not much is published about ( increasing value) it…so I can only brush upon this topic. Now, just in case IMF does not listen and does not act upon China’s proposal, Chinese have decided to help themselves. They are trying to find another way to get out of the dollar mess by turning their own currency into international currency. Announcement was made last year in December on Christmas but I am sure talks for such must have been taking place from long before, 8 countries have already signed up for accepting Yuan in trade settlements.

– The thing with Chinese is they don’t just talk, they do stuff….they believe in action…

Milan (AsiaNews) - While the comments of economic observers have focused on what is happening to U.S. public debt and to financial markets overseas, the news media rarely mention what is happening in Asia, almost as if there were not a strong correlation between the two phenomena. But it is logical that a substantial accumulation of foreign exchange reserves in China, Japan and throughout Asia corresponds to an unprecedented supply of dollars, the global reserve currency.

But Asia now understands that the increase of money supply decreases the intrinsic value of a currency. That is why China is seeking a possible and rational attempt to decouple Asian currencies from the dollar, as recent news stories report [1].

In practice, China is trying to make its currency convertible and give it a role as a reserve currency. The first experiment is limited to transactions between Hong Kong and the neighboring provinces. It is also proposed that the yuan renminbi be used in 8 neighboring countries, including Russia. With these countries, agreements have already been signed for the settlement of contracts in the Chinese currency. Perhaps it is no coincidence that the news was  released on Christmas Day, when Western markets are closed, reducing the impact on the dollar. In addition, the first weeks of January are usually fairly  quiet. This means that although for now the trial is limited, China is preparing to establish full convertibility of its currency to all other currencies.

Many in China have spoken out directly or indirectly in this regard: for example, Wu Xiaoling, former vice governor of the central bank, and Zhao Xijun, a professor of finance at Renmin University of China. The current governor of China’s central bank, Zhou Xiaochuan, in early December in Hong Kong had indicated that if the value of the dollar fluctuated drastically, its use as a settlement currency (for commercial transactions) would cause problems. It is clear that Chinese exporters, behind the scenes, are asking the government for permission to charge in yuan instead of dollars, which are losing value.

– Following article was published right on Christmas - A Christmas gift ( blow ) from China to Western world.

China to begin yuan-settlement trials
By Wang Xu (China Daily) , Updated: 2008-12-25 07:31
The yuan will be used in transactions with neighboring trade partners as part of a pilot project - in what could be the first step on the road to making it an international currency.
The yuan will be allowed to be used for settlement between the Pearl and Yangtze river delta regions and the special administrative regions of Hong Kong and  Macao, the State Council, or the Cabinet, said in a statement yesterday.

– Do you think anyone can stop them in that region ( in Asia) from doing this ? specially when they have support from others in the region. It may not become world currency over night but it might become a regional currency within Asia soon.

S.Korea studied yuan as FX reserve currency -media
Mon Jan 5, 2009 11:40am IST
SEOUL, Jan 5 (Reuters) - South Korea’s central bank had studied expanding its foreign exchange reserves into yuan <CNY=CFXS> assets, a local online media outlet quoted an official at the Bank of Korea as saying on Monday.

– Has India, china’s neighbor 3rd largest Asian economy changed it’s outlook towards USD ? and this following article on it is very old. I am sure criteria has changed in India even more since that time. Next Article below this will indicate the direction….clearly.

RBI takes a liking to yuan, Australian dollar
4 Aug 2008, 0115 hrs IST, Gayatri Nayak , ET Bureau
MUMBAI: Reserve Bank of India is gradually shifting away from hard currencies such as the dollar, the yen, the euro and the pound within its portfolio of foreign exchange reserves to other currencies. While the central bank does not disclose the currency break-up in reserves, it is understood that it has begun investing in assets denominated in Chinese yuan and Australian and Canadian dollars.

–Who else ?

In China’s neighboring countries, there were calls for the yuan to be used to settle bilateral trade payments, she said. China has signed settlement agreements with eight neighboring countries, including Russia, Mongolia, Vietnam and Myanmar, assuming a voluntarily choice of settlement currency, she added.

Yuan-based settlements for some China trade likely by March: central bank
BEIJING, March 6 (Xinhua) — Four commercial banks could begin offering yuan-denominated settlement of some of China’s international trade deals as soon as March, the central bank said Friday.
Zhou Xiaochuan, head of the People’s Bank of China (PBOC), said that a policy for settlement of Hong Kong-mainland trade denominated in the yuan would be released soon. He made the comment at a press conference on the sidelines of the annual session of the National People’s Congress, or the parliament.
“It won’t be long before the policy can be made public,” Zhou said.

BEIJING, March 6 (Xinhua) — China is expected to soon issue a policy facilitating settlement in yuan for trade between Hong Kong and the mainland, the country’s central bank governor Zhou Xiaochuan said here Friday.
“It won’t be long before the policy can be made public,” Zhou, head of the People’s Bank of China, told a press conference here on the sideline of the parliament’s annual session.
Zhou said there are no major technical difficulties in realizing the settlement of HK-mainland trade in yuan because banks are already operating with multiple currencies, while payment systems accommodating mainland tourists using yuan had been operating on a tentative base since 2003.

Cross-Strait financial cooperation to be deepened: central bank governor
BEIJING, March 6 (Xinhua) — Financial cooperation between the Chinese mainland and Taiwan will go through similar development and practice in the future as that between Hong Kong and the mainland, the country’s central bank governor Zhou Xiaochuan said here Friday.

“The cross-Strait financial cooperation has already been deepened,” Zhou told a press conference here on the sideline of the parliament’s annual session.

Zhou, governor the People’s Bank of China, said that the financial industry has kept with the pace of cross-strait tourism and personnel exchange development.

China is promoting use of the yuan to smooth currency volatility and to serve “a long-standing interest” to raise its status to that of a global reserve currency, said Ben Simpfendorfer, an economist at Royal Bank of Scotland Group Plc in Hong Kong.

– The thing with Chinese is they don’t just talk but they actually go ahead and do and they did..here is the latest ( check the date on this )…

China, Argentina to settle trade in yuan: Xinhua
By MarketWatch , Last update: 5:08 a.m. EDT March 30, 2009
HONG KONG (MarketWatch) — China and Argentina have agreed to set up a 70 billion yuan ($10.24 billion) currency swap system that will enable trade between the two nations to be settled in the Chinese currency, the state-run Xinhua News Agency reported Monday.

– Remember IMF and it’s role. In Asia,  with China leading,  it has decided to establish their own Mini-IMF like Asian-Monitory fund.

Asian Ministers Said to Plan February Meeting on Currency Pool
By Keiko Ujikane and Kyoko Shimodoi
Jan. 30 (Bloomberg) — Finance ministers from Japan, China, South Korea and 10 Southeast Asian nations plan an unscheduled meeting next month to forge a pact to pool $120 billion of foreign exchange reserves to help defend their currencies.

Asia Agrees on Expanded $120 Billion Currency Pool (Update1)
By Shamim Adam and Seyoon Kim
Feb. 22 (Bloomberg) — Japan, China, South Korea and 10 Southeast Asian nations agreed to form a $120 billion pool of foreign-exchange reserves that can be used by countries to defend their currencies amid the deepening global recession.

The amount is 50 percent more than the $80 billion proposed last May, and an expansion of the current arrangement called the Chiang Mai Initiative that allows only bilateral currency swaps. The nations’ finance ministers and government officials jointly announced the decision at a meeting in Phuket, Thailand, today.

Asia Needs Own Monetary Fund to Stem Crisis, ADB’s Kawai Says
By Keiko Ujikane and Tatsuo Ito
Feb. 25 (Bloomberg) — Asia needs its own monetary fund to protect the region’s economies from capital flight as the global financial crisis deepens, according to the head of the Asian Development Bank’s research arm.

The Feb. 22 decision of 13 Asian countries to pool $120 billion of foreign-exchange reserves to defend their currencies was an important step toward the creation of a fund, Masahiro Kawai, 61, dean of the Asian Development Bank Institute, said in an interview on Feb. 23.

— Here is another indication that China wants to play at par with others in financial market.

China is building world financial center like London and New York.
In a working report to the Shanghai local people’s congress last month, Mayor Han Zheng said the city will “enhance the construction of Lujiazui financial city” as part of its plan to build itself into a world financial center like New York and London.
The plan says that by 2010, Lujiazui will become a key cluster of financial institutions, funds and talents, and will serve as China’s pilot area for financial innovation and standard-setting.

– What is China doing to enhance the value of it’s own currency ?

China PBOC Mulls Raising Gold Reserve By 4,000 Tons - Report

…What else is in it’s favor ?

Mr Wen said that the renminbi had appreciated by 21 per cent against the US dollar since China reformed its exchange rate policy in 2005, and in recent months it had strengthened against the Euro and other Asian currencies.

“Our goal is to have a reasonable and balanced level and to maintain the basic stability of the renminbi,” he said. “No other country can put pressure on our country to depreciate or appreciate the renminbi.”

Yuan settlement plan waiting for final approval
By Zhang Ran (chinadaily.com.cn) , Updated: 2009-03-13 11:17
The plan for yuan settlement in foreign trade is waiting for the State Council’s approval and will be implemented soon, Premier Wen Jiabao said on a media conference after the closing of the second session of the 11th National People’s Congress today.

–Do you think it’s only China’s problem if USD is going to loose it’s value. If you live in the US or get paid in USD you should be equally concerned about it. Specially if you’re a saver..what happens to your dollar deposits ? as such they are earning interest close to zero percent or best case anything between 0 - to 3%. On top of that they are going to loose value ( purchase power ) where does that put you ?

– Anyway, we looked enough of it from China’s point of view…what about US. What is US doing to sort out the mess…….answer is simple ‘Money Printing’  what else ?

– In US all that money printing is also called ’stimulus’. That is they way to solve crisis. Let us see how much support US has for that.

EU presidency: US stimulus is ‘the road to hell’
By AOIFE WHITE, The Associated Press , 11:58 a.m. March 25, 2009
BRUSSELS — The head of the European Union slammed President Barack Obama’s plan to spend nearly $2 trillion to push the U.S. economy out of recession as “the road to hell” that EU governments must avoid.
The blunt comments by Czech Prime Minister Mirek Topolanek to the European Parliament on Wednesday highlighted simmering European differences with Washington ahead of a key summit next week on fixing the world economy.

– Really, this is fun….One of them got to be wrong….US thinks stimulus is the way to go..Europe thinks it way to go to hell. This is the biggest contrast US has with Europe that, I have ever seen in terms of economic policies agreements. Let us see who else is supporting US plan. China and Russia definitely not supporting it.

IMF criticises US stability plan
By Edward Luce in Washington ,Published: March 19 2009 15:21 | Last updated: March 19 2009 19:20
The Obama administration’s plans to stabilise the financial system lack “essential details” and have left the markets uncertain about how it intends to recapitalise the teetering US banking sector, says the International Monetary Fund.
The IMF report, which comes out days before the administration plans to unveil the mechanism of its public-private funding vehicle for removing toxic assets from bank balance sheets, adds to the pressure on Tim Geithner, US Treasury secretary, to provide greater clarity on the bail-out plan.

-What about France ?

France’s president argues that the current global economic crisis was created by a system that has drifted away from the basic values of capitalism. At the G-20 summit, he wants a reform of international financial systems, additional economic aid and speedier crisis management.

– Here comes someone from US itself and a very credible person…after all that money is printed and slated to be spent…check the date out on this article.

The U.S. Financial System Is Effectively Insolvent
Nouriel Roubini, 03.05.09, 12:01 AM EST
There is a grave risk of a global L-shaped depression. For those who argue that the rate of growth of economic activity is turning positive–that economies are contracting but at a slower rate than in the fourth
quarter of 2008 the latest data don’t confirm this relative optimism. In 2008’s fourth quarter, gross domestic product fell by about 6% in the U.S., 6% in the euro zone, 8% in Germany, 12% in Japan, 16% in Singapore and 20% in South Korea. So things are even more awful in Europe and Asia than in the U.S.

– And if Roubini wasn’t enough for you…here is Puru Saxena….

US is already bankrupt -

–And then , here you go again….from China…

China calls for full-scale financial system overhaul(Xinhua)
Updated: 2009-03-26 16:55
China’s Finance Minister Xie Xuren urged Wednesday for a full-scale reform of the global financial system to diversify international currencies, improve regulation and give developing countries a bigger say in economic decisions.
–US stimulus does not seem to be very popular now does it ?

–Fact is nothing dramatic is going to happen overnight. Neither, USD is going to disappear from the system overnight nor Yuan is going to become world  currency overnight.

Beijing Faces Big Barriers in Effort to Supplant Dollar
MARCH 23, 2009, 10:41 P.M. ET
China’s call to shift to a new global reserve currency marks the latest attempt to wean the international financial system away from the U.S. dollar. There’s a good reason why such efforts haven’t worked in the past: The economic and political hurdles to such a transition are enormous.
–Enough already ! so, next obvious question is can any other currency become world currency ?

– Only other currency that comes to mind right away is Euro, can Euro replace Dollar and become next world currency ?

Euro Currency of Choice as Fed Easing Devalues Dollar (Update2)
By Oliver Biggadike
March 23 (Bloomberg) — Less than a month after lambasting European Central Bank President Jean-Claude Trichet for failing to keep up with Ben S. Bernanke’s efforts to stem the recession, foreign-exchange traders are glad he’s behind the curve.
The 16-nation currency strengthened 7.7 percent versus the dollar since February, after tumbling 9.3 percent in the first two months of the year. JPMorgan Chase & Co., Morgan Stanley and Citigroup Inc. are advising investors to buy euros.
– Among all blinds one eyed man is a king. So Euro might….but here is a rundown on Europe’s problems.

US faces worse recession than euro zone, warns IMF
The United States could be heading for a significant recession as the financial crisis bites, but the euro area may suffer no worse than an economic slowdown, according to an authoritative new report.
By Edmund Conway, Economics Editor , Last Updated: 9:45PM BST 02 Oct 2008
The study from the International Monetary Fund also warned that a banking crisis tends to double or triple the severity of the economic downturn that follows. This underlines the scale of the slump facing the broader economy both in the UK and elsewhere.

–Look closely..and you will find that there are more challenges.

Europe’s banks face a $2 trillion dollar shortage
European banks face a US dollar “funding gap” of almost $2 trillion as a result of aggressive expansion around the world and may have difficulties rolling over debts, according to a report by the Bank for International Settlements.
By Ambrose Evans-Pritchard , Last Updated: 11:41AM GMT 05 Mar 2009

Overvalued euro set to plunge ‘within months’
Spread betting companies have reported a huge wave of short euro trades in the last two weeks, leading to speculation that a significant correction in the currency will come in the next few months.
By Garry White , Last Updated: 7:05AM GMT 09 Mar 2009

European bank bail-out could push EU into crisis
A bail-out of the toxic assets held by European banks’ could plunge the European Union into crisis, according to a confidential Brussels document.
By Bruno Waterfield in Brussels, Last Updated: 3:50PM GMT 11 Feb 2009

– What next ? Can British Pound become world currency ?
— In a country where for centuries best way to determine wind direction has been by smelling either king’s or Queen’s fart in that direction and while waiting for that fart is to have Tea has been the passion. In other words you gotta be kidding me.

–I mean look at the history ( I did..) I am still scrambling to find out one ( just one) such country that prospered while under British rule. If you know of one please let me know fill out the comment section..that is why it’s there. US no matter how much we blame for the current crisis has definitely been better. It has supported and help grow economies world wide. Canada, Mexico, South America, India, China..these economies have grown because of US.

Anyway since we are on the topic of UK..let us see where it stands…logically….

– This will tell you right away..what’s going on in UK and the extent of crisis there…

Bank of England cuts interest rates to their lowest in 315 years
The Bank of England cut interest rates to the lowest level in its 315-year history yesterday as it attempts to prevent the UK recession deepening into a depression.

ECB deems Britain unworthy of euro
The European Central Bank has deemed Britain unfit for monetary union even if it wants to join following the dramatic slide in sterling and the explosion in the UK budget deficit.
“Great Britain does not meet the entry criteria for the euro,” said Lorenzo Bini Smaghi, the ECB’s board member in charge of international affairs.
“The public deficit will rise to around 6pc (of GDP) in 2009 and even higher in 2010. Sterling’s exchange rate is not yet sufficiently stable,” he told Italy’s La Repubblica newspaper.

UK national debt set to surpass £2 trillion
The national debt is likely to be catapulted through the £2 trillion mark following the Treasury’s decision to stand behind Britain’s troubled banks’ debts.
By Edmund Conway and Angela Monaghan , Last Updated: 5:47AM GMT 20 Feb 2009
In the latest Government figures, which underline fears about the impact of the crisis on the taxpayer and may spark further jitters over Britain’s creditworthiness, the Office for National Statistics confirmed that it now considers both Lloyds Banking Group and Royal Bank of Scotland to be public sector companies.

The ONS expects to have to add between £1 trillion and £1.5 trillion to the UK’s public sector net debt, taking the total national debt to an unprecedented £2.2 trillion – just under 150pc of gross domestic product. This would be the worst debt total since the 1950s, when Britain was in the process of paying
back its war debts.

The figures were the latest in a blizzard of bad news on the public finances, which have been badly hit by the financial and economic crisis.

Britain on the brink of an economic depression, say experts
Britain is heading for economic depression for the first time since the 1930s, economists have warned.
Families must brace themselves for a slump of far greater severity and longevity than the recessions of the 1980s and 1990s, they warned. They said the  current crisis will be of a scale to rival the biggest peace-time crisis in modern history — the Great Depression.

UK national debt will not return to pre-crisis levels for 20 years
The Government needs to introduce £20bn of tax increases or spending cuts to stand any chance of meeting its public finances targets, an independent think-tank has warned.
By Angela Monaghan , Last Updated: 1:48PM GMT 28 Jan 2009
Even if it does act, the national debt level is unlikely to return to pre-crisis levels for more than 20 years, according to the Institute for Fiscal Studies.

The IFS, which has published its alternative ‘Green Budget’ in conjunction with Morgan Stanley, said that it does not expect tax revenues over the next few years to grow as strongly as the Chancellor Alistair Darling suggested in the Pre-Budget Report in November.

– UK debt is nearly 50% of the GDP.
Britain’s debt reached £697.5bn at the end of December, equivalent to 47.5pc of gross domestic product. That is the biggest proportion since 1978, when net  debt was 49.1pc of GDP, according to figures from the Office for National Statistics

– Only 50%…??? here comes the correction.

Fitch Ratings has warned that Britain’s public debt will explode to almost 70pc of GDP by the end of next year, vaulting past Germany to become one of the  most heavily-indebted states in the industrial world.

–This article describes it Even better…

Britain has foreign reserves of under $61bn dollars (£43.7bn), less than Malaysia or Thailand. The foreign liabilities of the UK banks are $4.4 trillion – or  twice annual GDP – according to the Bank of England. The mismatch is perilous.

Credit default swaps (CDS) measuring risk on British debt have reached an all-time high of 125 basis points, just below Portugal. The yield spread on 10-year Gilts over German Bunds has doubled to 53 basis points since last week.

The UK’s net debt reached £697.5bn at the end of December, equivalent to 47.5pc of gross domestic product. That is the biggest proportion since 1978, when net debt was 49.1pc of GDP, according to figures from the Office for National Statistics.

Standard & Poor’s has quashed rumours that it will soon strip Britain of its AAA credit rating – an indignity averted even after the International Monetary Fund bail-out in 1976.

Indeed, if Britain walked away from UK banks’ $4.4 trillion of foreign liabilities – worth eight times Lehman Brothers – it would destroy the credibility of the City and take the whole world into deeper depression.

“The UK cannot go down that route because it would set off an asset price death spiral,” said Marc Ostwald, a bond expert at Monument Securities. “The Western banking system is already on life support. That would turn it off altogether.”

S&P’s lead UK analyst, Trevor Cullinan, said the Government faces a “severe test” and will be judged by its actions, but he doubts whether matters will reach such a dangerous pass.

“The challenges to UK banks are significant amid a correction in property prices and a contraction of GDP. Nevertheless, the situation is very different from Iceland. The UK benefits from sterling, which is a major global funding currency. UK access to external funding is far more secure.

–You would imagine that S&P’s lead UK analyst will know a thing or two he is talking about…so let us see demand for British Pound lately. Remember he said Pound is major global funding currency. UK itself likes to believe that it’s currency is a major source of funding…just like USD…so why not simply go ahead and print it.

Bank of England gambles on printing extra money
The Bank of England took a historic “step into the unknown” yesterday by pledging to create £150 billion of cash to pour into Britain’s stricken financial system.
By Edmund Conway, Economics Editor , Last Updated: 12:11PM GMT 06 Mar 2009

–What happened when they decided to print extra…? Major currency !!

U.K. Bond Auction Fails for First Time in 14 Years
MARCH 26, 2009
LONDON — The U.K. government failed to find enough buyers in a bond auction for the first time in 14 years, underscoring the market distortions caused by the Bank of England’s latest efforts to revive the U.K. economy.

Prices of benchmark U.K. government bonds, or gilts, fell Wednesday after the Debt Management Office failed to collect enough bids from investors at an auction of £1.75 billion ($2.57 billion) in 40-year government bonds. The failure will force the government to try again at a later date, or to raise the money by issuing bonds with shorter maturities, which tend to be easier to sell.

Investors and analysts attributed the failure to uncertainty over how the Bank of England will implement its policy of “quantitative easing,” in which the bank buys bonds with freshly created money. That money is supposed to make its way into the banking system, increasing banks’ ability to make new loans.
– Ooops !! Seems no body wants to put up with MAJOR SOURCE OF FUNDING CURRENCY, I wonder why !! Let us see, I have fully furnished house I guess so do you..now what exactly do you have in your house that is made in UK ? humm ….!! Tea may be…?? This major source of funding currency has a lot of strength behind it, or does it ?

UK will have the worst deficit in Western world, warns IMF
Britain is now tumbling towards the biggest budget deficit in the Western world, the International Monetary Fund has warned.
By Edmund Conway, Economics Editor , Last Updated: 6:41AM GMT 20 Mar 2009

–Europe is so lucky that UK is not part of it’s currency else they would have taken down Euro single hand. Europe is still not lucky enough because it’s still part of how Europe’s GDP gets calculated.

–So do you still think Pound can become next world currency ? or are you convinced otherwise ?

– Then, last but not the least….

Britain showing signs of heading towards 1930s-style depression, says Bank

Britain is showing signs of sliding towards a 1930s-style depression, the Bank of England says today for the first time.

The country is displaying early symptoms of being trapped in a so-called “debt deflation trap” where families find themselves pushed further and further into the red every month, according to a Bank report published today.

The stark warning will cause serious concerns, since it was this combination of falling prices and soaring debt burdens that plagued the US in the 1930s.

The Bank is using its Quarterly Bulletin to highlight the threat posed to the economy by deflation – where prices fall each year rather than rise.

Although inflation is currently in positive territory, it is expected to become negative in the coming months.

The Bank is worried that this may combine with high levels of indebtedness to squeeze families further.

–Is there any other currency left that could take the crown of world currency ? oh, ya ! Swiss francs !! I almost forgot about it. Let us see what’s going on with them.

PRECIOUS-Gold jumps as SNB currency sale spooks market
03.12.09, 09:55 AM EDT
MARKETS-PRECIOUS (UPDATE 5):PRECIOUS-Gold jumps as SNB currency sale spooks market
LONDON, March 12 (Reuters) - Gold jumped more than 2 percent on Thursday, boosted after the Swiss National Bank sold francs against the euro and raised the spectre of a race to devalue major currencies.

Analysts said the SNB intervention means one of the world’s safest currencies is being deliberately undermined to help boost growth and that other countries  could follow.

“If all currencies are being devalued against each other then gold is a currency which is going to profit from it,” Commerzbank analyst Eugen Weinberg said.

Swiss Kick Off ‘Currency War’
Vidya Ram , 03.13.09, 09:10 AM EDT
Thursday’s forex intervention by Switzerland could see Japan follow suit.
Switzerland’s latest move to weaken the Swiss franc marks the first time in the current financial crisis that a G10 nation has intervened in forex markets to support a flagging economy. It is probably only a matter of time before others–notably Japan–follow suit.

–Oh ya ! Gulf states ( oil producing countries ) what about them…will the continue to support dollars ?
– For now may be…but pretty soon within a couple of years they are going their own way…originally their plan was to launch a single Gulf Currency by 2010 which is delayed for now.

Gulf single currency delayed beyond 2010 -officials
Tue Mar 24, 2009 4:08am EDT

MANAMA, March 24 (Reuters) - The 2010 deadline for Gulf Arab single currency will be extended and a new timetable set, senior Gulf officials said on Tuesday, in the first official recognition that monetary union plans would be delayed.

Naser al-Kaud, deputy assistant secretary-general of the six-member Gulf Cooperation Council, told a conference of bankers on Tuesday that a new timetable should be set by the group’s monetary council.

Another GCC official, speaking on condition of anonymity, also told reporters that the deadline would be extended.

–There go Gulf states !!  in just a couple of years !!

–Rupee….I guess a lot of people wanted to know what is going on with Rupee Vs Dollar. Short term outlook for India is not good.

RBI: total deficit may reach 10 pct of GDP-India
Wed Feb 18, 2009 6:12pm IST
TOKYO (Reuters) - India may see a further downturn in investment demand before it turns up and growth may moderate more than expected, while this year’s  total fiscal deficit could reach 10 percent, the Reserve Bank of India (RBI) governor said on Wednesday.

India Rating May Be Cut to Junk by Standard & Poor’s (Update1)
By Cherian Thomas

Feb. 24 (Bloomberg) — India’s credit rating may be cut to junk by Standard & Poor’s, which said government spending plans to help shield the economy from the global recession and win voter support in elections were “not sustainable.”

The rating company reduced the nation’s rating outlook to negative from stable, according to an e-mailed statement today. S&P affirmed India’s BBB- long term credit rating, the lowest level in the investment grade.

The downgrade came after Foreign Minister Pranab Mukherjee on Feb. 16 unveiled a budget deficit this year at 6 percent of gross domestic product, more than double the government’s target. Less than an hour after S&P’s announcement, Mukherjee unveiled further tax cuts.

India Rupee Falls to Record on Junk Rating Risk, Slowing Growth
By Anil Varma

Feb. 27 (Bloomberg) — India’s rupee plunged to a record low on concern global funds will step up sales of local assets after Standard & Poor’s said it may cut the nation’s credit rating to junk and economic growth slumped to a five-year low.

The currency tumbled 22 percent versus the dollar in the past 12 months, the third-worst performance among Asia’s 10 most-used currencies. S&P said Feb. 24 the government’s spending plans to shield the country from a global recession were “not sustainable.” The economy expanded 5.3 percent in the fourth quarter,  the slowest since 2003, the government reported today.

– Now check this out, both these articles came out on March 3rd.

Rupee may hit 56 a dollar in 3 months: Barclays
3 Mar 2009, 2012 hrs IST, PTI
NEW DELHI: The rupee, which weakened to sub-52 level for the first time ever against the dollar during the day today, may depreciate further to Rupee hit 56-level in three months as slowdown would arrest dollar flow, says British financial firm Barclays Capital.
However, another global financial services firm Goldman Sachs said the rupee will bounce from its record low level today to gain about 10 per cent in 12 months once overseas borrowings resume.
Barclays Capital Economist Sailesh Jha said, “We have revised our 3-month Dollar/Indian rupee forecast to 56 from 52 …our February and March 2009 Dollar/Indian rupee forecasts of 50.5 and 52, respectively, have materialised.”
In percentage terms, the rupee would depreciate about 7.8 per cent in three months from today’s close of 51.94. Jha said the bearish view on Indian rupee is based on the assessment that India’s Real Effective Exchange Rate (REER) will respond to the slowdown in GDP growth, fall in the REER of Brazil and Russia, resilient USD, and BoP deficits.

Goldman Sachs sees rupee appreciating 10% in 12 months
3 Mar 2009, 1611 hrs IST, PTI
NEW DELHI: The Indian rupee will bounce from its record low level of close to Rs 52 against the greenback and will gain about 10 per cent in 12 months once overseas borrowings resume, Goldman Sachs has said.
“Over a 3-12 month horizon, we expect the rupee to strengthen as deleveraging pressures ease. Our 3-6 and 12-month USD/rupee forecasts are at 50.5, 48.0 and 46.9 respectively,” the global financial services firm said in a research note today.

– what does this tell me…well, first of all if and this is a big  IF. If these guys are right Barclays and Goldman then it’s perfect opportunity to invest in rupee when it touches 56 to a dollar it’s easy to get 8% interest ( very common in India) which will be appericiated by another 10% within 12 months as Rupee gains………but only IF these 2 Barclays and Goldman are right !! you get 18% return on your investment.

–Following article indicates that Rupee very well may be on it’s way to 56.

India’s Exports Decline the Most in at Least 13 Years (Update1)
By Kartik Goyal

April 1 (Bloomberg) — India’s exports fell the most in at least 13 years in February as recessions in the U.S. and Europe damped demand for the nation’s products.

Merchandise shipments dropped 21.7 percent from a year earlier to $11.9 billion, the government said in New Delhi today. That was the biggest decline since1995, according to Bloomberg data. Imports fell 23.3 percent to $16.8 billion, narrowing the trade deficit to $4.9 billion.

– And this indicates that people may be taking opportunity all the way…..

NRIs shifting funds from dollar to rupee accounts Rising return
NRIs are deploying their money with Indian banks, given the sub-one per cent interest rate regime prevailing in most advanced economies.  NRIs stand to earn as high as 6.8 per cent yield in the case of one-year NRO deposits.
K. Ram Kumar, Priya Nair

Mumbai, March 18 Non-resident Indians (NRIs) appear to be making the most of the rupee’s depreciating trend against the dollar. By liquidating their foreign currency non-resident (banks) deposits denominated in dollars and parking the proceeds in non-resident ordinary rupee (NRO) and non-resident (external) rupee (NRE) accounts, they are laughing all the way to the bank.

The upshot of this arbitrage is that even as there was an outflow of funds aggregating $1.194 billion from FCNR(B) deposits in the April 2008-January 2009  period (as against an outflow of $670 million in the corresponding period last year), the NRO and NRE deposits saw a robust accretion of $2.201 billion ($637
million inflow) and $1.138 billion ($373 outflow) respectively.

Again let me remind you that what you have read so far is News, for that matter anything you read on this website is news..only news..and nothing else but news. These are not trading tips and should you use this information for it, be prepare to loose money.

As for my final comment about currencies. I would say that in G20 meeting which is about to take place financial system reform is going to be THE agenda.

Something will come out of it. Whatever comes out will decide which currency wins and which one looses. Rest of the currencies ( followers ) will simply align value of their currencies accordingly.  In two or more years currency market is going to be a very different place, with what China is doing and what Gulf states will do market would look a lot different.

I think it would be very innocent to believe that USD still remains the ONLY WORLD’S RESERVE CURRENCY after all the trouble USD has caused to this whole world.

Disclaimer¹

[views and opinions expressed here are mine and you need not agree with them. You should not make any financial decisions or any other decision based upon material you read on this website. For that you must contact an expert in the relevant area of your need.]

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