Comments on Bill Gross "Paranormal economic activity", 7/01/2012, http://www.businessspectator.com.au/bs.nsf/Article/global-economy-interest-rates-US-Federal-Reserve-E-pd20120105-Q7W3Q?OpenDocument&src=sph&src=rot
I think the flooding of money by ECB, BOE, and Fed will either be hoarded by those financiers that need deleveraging, or spill over to other more promising and less risky countries/markets by some international hedging operators, or both.
Maybe the Aussie stock markets and bond markets will be one of the destinations for those QE money supplies.
It will be self-fulfilling, if enough money is flowing into a better market, because the amount can be very large.
If I could get money from the US, UK, or EU, I would definitely invest in Australia, selecting a time when the A$ is a bit lower to come in and buy some shares and get out with a decent profit at a time when A$ is higher.
That would be a very excellent strategy.
The question Australians need to ask is why the Australian banks have been arguing that their financing costs from overseas financial markets are higher than the domestic money market where official interest rates are much higher than most of their counterparts overseas.
I was personally wondering that why there is no operators from Australia financiers to set up some bonds to be sold overseas and use the proceeds to provide cheaper loans in Australia.
Indeed, the Australian government perhaps should seize this opportunity to do so to benefit Australians by lowering the cost burdens for many Aussies who have mortgages or loans from the banks.
Showing posts with label $US. Show all posts
Showing posts with label $US. Show all posts
2011-12-31
Morici's failure in intellectual
Comments on Peter Morici “A lifeline
for the US middle class”, 31/12/2011,
http://www.businessspectator.com.au/bs.nsf/Article/US-economy-middle-class-oil-energy-growth-pd20111230-Q25BW?OpenDocument
Peter Morici, while recognising some
roles of the trade, has failed fundamentally and miserably to grasps
some of the most important fundamental implications of trade, that
is, income/wage equalisation.
Until he properly takes that into
account, he will not be able to come up with useful and practical
policy recommendations.
He has always tended to blame the
emerging economies, their governments for Americans' problems.
Unfortunately that only shows his
failures in intellectual, even though he is a professor and was the
chief economist of US trade commission some times ago.
That is also a fundamental problem with
most US elites that has been at the root of the problems US has been
faced, even though the $US and the largest economy status have
afforded it with unparalleled advantages over other countries.
2011-04-21
Time to rethink exchange rate regime
Comments on “Aust dollar clears 107 US cents”, see NEWS – Currencies, http://www.businessspectator.com.au/bs.nsf/Article/Australian-dollar-clears-107-US-cents-record-high-pd20110421-G4SRZ?OpenDocument&src=hp2
Two points: 1. the $A has entered uncharted territory and no one knows how high it will go in the next year or so. It may go as high as $US1.10, 1.20 or even 1.50, though few people would dare to say the last figure. The point is no one is sure about it.
2. Given the pervasive effects of the high $A, is there a case for some RBA intervention to keep it lower? Why does the RBA continue its conventional operations and stay away from intervention while the US Fed has been doing unconventional quantitative easing? Isn't time for the RBA to catch up with the changed international finance and monetary politics?
I think those are legitimate questions to ask and the RBA needs to have a serious review of what is best for Australia, getting out of its comfort zone of conventional thinking and conventional operating.
While free exchange rate has been the norm and dominate economic theory, excessive movements and fluctuations of a currency against others, especially the ones that are having a big effect on the country such as the $US for Australia given that many commodities are priced in $US, may not be optimal or desirable.
If the GFC has promoted a rethink of macroeconomic theories, a thorough review of international exchange rate regimes is also overdue and equally important.
Two points: 1. the $A has entered uncharted territory and no one knows how high it will go in the next year or so. It may go as high as $US1.10, 1.20 or even 1.50, though few people would dare to say the last figure. The point is no one is sure about it.
2. Given the pervasive effects of the high $A, is there a case for some RBA intervention to keep it lower? Why does the RBA continue its conventional operations and stay away from intervention while the US Fed has been doing unconventional quantitative easing? Isn't time for the RBA to catch up with the changed international finance and monetary politics?
I think those are legitimate questions to ask and the RBA needs to have a serious review of what is best for Australia, getting out of its comfort zone of conventional thinking and conventional operating.
While free exchange rate has been the norm and dominate economic theory, excessive movements and fluctuations of a currency against others, especially the ones that are having a big effect on the country such as the $US for Australia given that many commodities are priced in $US, may not be optimal or desirable.
If the GFC has promoted a rethink of macroeconomic theories, a thorough review of international exchange rate regimes is also overdue and equally important.
2011-02-10
Current international monetary gaming
Comments on Karen Maley “Prisoners of global inflation”, 10/02/2011, http://www.businessspectator.com.au/bs.nsf/Article/China-US-global-inflation-Bernanke-pd20110210-DWS4D?OpenDocument&src=sph
A small point in the international monetary gaming.
While China may be regarded as having no monetary independency with its currency fixed to the $US according to the conventional economics textbook, China is not a conventional economic entity that operates as the conventional textbooks assumes.
For example, China tends to use credit control (and sometimes through administrative orders), as compared to interest control as the main tool of monetary policy to control money supply. So it has considerable room of monetary autonomy even with a fixed exchange rate regime. One can buy off the $US to increase money supply and reduce credits to reduce money supply at the same time with little expansionary money policy, should one wish to do so.
The second thing is that when the excessive $US flows to China, the Chinese monetary authority can simply shifts it back to the US by buying more US securities, or other countries securities. That translates the excessive international liquidity back to the US or to other countries.
So Bernanke can’t simply win out of this simple monetary game for two reasons. One is that inflation pressure will build up in the US and force him to act to raise interest rate and to reduce liquidity that is money supply. The other is that international pressure against loose US monetary policy will increase and international politics will come back to bite the US authorities to cease its loose monetary policy.
A small point in the international monetary gaming.
While China may be regarded as having no monetary independency with its currency fixed to the $US according to the conventional economics textbook, China is not a conventional economic entity that operates as the conventional textbooks assumes.
For example, China tends to use credit control (and sometimes through administrative orders), as compared to interest control as the main tool of monetary policy to control money supply. So it has considerable room of monetary autonomy even with a fixed exchange rate regime. One can buy off the $US to increase money supply and reduce credits to reduce money supply at the same time with little expansionary money policy, should one wish to do so.
The second thing is that when the excessive $US flows to China, the Chinese monetary authority can simply shifts it back to the US by buying more US securities, or other countries securities. That translates the excessive international liquidity back to the US or to other countries.
So Bernanke can’t simply win out of this simple monetary game for two reasons. One is that inflation pressure will build up in the US and force him to act to raise interest rate and to reduce liquidity that is money supply. The other is that international pressure against loose US monetary policy will increase and international politics will come back to bite the US authorities to cease its loose monetary policy.
2010-11-18
The US QE2
Comments on Suman Bery “India and global monetary disorder”, 16/11/2010, http://www.eastasiaforum.org/2010/11/16/india-and-global-monetary-disorder/
In terms of QE2, is it because there is not enough cash in the US system? There are reports that there is money hoarding in the US, so what more cash can do to its economy, apart from lowering the $US?
In that case, is the exchange rate market determined or not, or is it market mechanism? Who is manipulating currency? No wonder it has been condemned!
The US complains other countries’ currency policies for its economic problems, but conveniently ignores its own currency policy on exchange rates and the reserves held by others.
PS: the following is an open letter from some economists in the US to Ben Bernanke opposing QE2:
http://blogs.wsj.com/economics/2010/11/15/open-letter-to-ben-bernanke/
In terms of QE2, is it because there is not enough cash in the US system? There are reports that there is money hoarding in the US, so what more cash can do to its economy, apart from lowering the $US?
In that case, is the exchange rate market determined or not, or is it market mechanism? Who is manipulating currency? No wonder it has been condemned!
The US complains other countries’ currency policies for its economic problems, but conveniently ignores its own currency policy on exchange rates and the reserves held by others.
PS: the following is an open letter from some economists in the US to Ben Bernanke opposing QE2:
http://blogs.wsj.com/economics/2010/11/15/open-letter-to-ben-bernanke/
2010-10-19
The US and currency war
Comments on Shiro Armstrong “Using the G20 to avoid currency war”, 18/10/2010, http://www.eastasiaforum.org/2010/10/18/using-the-g20-to-avoid-currency-war
For the US to justify its use of currency manipulation by China, the word manipulation must have a special meaning, given that China has largely pegged its currency to the $US and the rmb moved up and down with the $US as it moved up or down against other currencies in the past.
The argument by US politicians and some economists like Krugman that China steal US jobs especially in the wake of the GFC sounds very hollow, given that it was the US that was the epicentre of the GFC and together with the reduction in imports from those GFC severe countries that threatened the whole world.
The argument for a flexible exchange rate regime as adjusting to trade imbalance has both merits and fallacy.
It is not different from using deliberate depreciation to export one's own problems with the disguise of a market determination of exchange rate. That is no different from the "beggar thy neighbor" policy, albeit with the name of flexibility, or market mechanism.
But we all know markets can generate serious problems like bubbles. Who can say that trouble does not occur in the exchange rate markets?
The US has been in this situation for a while.
For the US to justify its use of currency manipulation by China, the word manipulation must have a special meaning, given that China has largely pegged its currency to the $US and the rmb moved up and down with the $US as it moved up or down against other currencies in the past.
The argument by US politicians and some economists like Krugman that China steal US jobs especially in the wake of the GFC sounds very hollow, given that it was the US that was the epicentre of the GFC and together with the reduction in imports from those GFC severe countries that threatened the whole world.
The argument for a flexible exchange rate regime as adjusting to trade imbalance has both merits and fallacy.
It is not different from using deliberate depreciation to export one's own problems with the disguise of a market determination of exchange rate. That is no different from the "beggar thy neighbor" policy, albeit with the name of flexibility, or market mechanism.
But we all know markets can generate serious problems like bubbles. Who can say that trouble does not occur in the exchange rate markets?
The US has been in this situation for a while.
2010-02-04
China's GDP and international exchange rates - which is worse?
Comments on “The holes in China's accounts”, see Business Spectator's Isabelle Oderberg interview with Hong Kong General Chamber of Commerce chief economist David O'Rear, 4/02/2010, http://www.businessspectator.com.au/bs.nsf/Article/CHina-economy-data-David-ORear-pd20100203-2AVVZ?OpenDocument&src=sph
It is shocking that China's GDP data has a 20% margin of errors.
However, there are differences between the National Bureau of Statistics and Provincial Bureau of Statistics. The former is supposed to have better data and a smaller margin of errors.
Further, 20% margin of errors, though large itself, is not too bad as one might think, given the wild swings in exchange rates.
How much the $US has depreciated against the $A, and especially against the Euro over the last few years? Some may be more than 50%, I'd say.
What does that mean for income comparison internationally?
20% margin of errors is bad. The unwarranted wild swings in key international exchange rates seen in recent years are even worse! The former pales to insignificant in front of the latter!
It is shocking that China's GDP data has a 20% margin of errors.
However, there are differences between the National Bureau of Statistics and Provincial Bureau of Statistics. The former is supposed to have better data and a smaller margin of errors.
Further, 20% margin of errors, though large itself, is not too bad as one might think, given the wild swings in exchange rates.
How much the $US has depreciated against the $A, and especially against the Euro over the last few years? Some may be more than 50%, I'd say.
What does that mean for income comparison internationally?
20% margin of errors is bad. The unwarranted wild swings in key international exchange rates seen in recent years are even worse! The former pales to insignificant in front of the latter!
Subscribe to:
Posts (Atom)
Posts
