Briexit may not necessarily be as bad as many people think!

Comments on Editors, East Asia Forum "Can Asia shield the world against Europe’s Brexit woes?" 28/06/2016

While there is no question that the Brexit has and will continue to be a source of uncertainty, particularly for financial market, the scenarios presented in this post may appear to be too and overly pessimistic.

While the EU integration in general has been a good thing, the economic woos in some Euro zone economies in the wake of the GFC undoubtedly suggest there is a need for an exit mechanism for a member of an integrated regional organisation, such as the Euro zone or, for that matter EU. Such a mechanism, with good wills and intentions of all involved, would allow the exit of a member with either some difficulties or political determinations.

Such a mechanism should be friendly, as opposed to punitive.

Greece, with its painful economic, political and social problems, would have benefited if a helpful exit mechanism allowed it to use a national currency as an adjustment tool, as opposed to cuts to nominal wages, social securities and pensions.

Married couples may divorce and most countries have laws allow that to happen. Then why not allow a member of an integrated organisation to exit?

We should not just think in only one direction, that is, to integrate with no exist possibility and mechanism. That way of think is problematic itself. And that is one of the key sources of uncertainty in the wake of the Brexit vote outcome.

It is unhelpful and unproductive to blame or complain the Brexit.

I believe that Britain and the EU will negotiate creatively with mutual benefits for a successful Britain exit. They should and will create a workable framework to facilitate the Britain exit.

No need to be arrogant and Europe centric

Comments on Maaike Okano-Heijmans and Daniel Lanting "Europe finds the China connection", 24/07/2015

This post seems completely European centric. It is quite one sided advocate for the European standards and I am not sure that is either the best way for all European countries to work with China or indeed for a better world.

First, are the European standards the best standards with no room to improve? I think those people who hold that view may be too arrogant and out of touch.

Secondly, if it is to work with China in a collaborative way, why should only the European standards need to be followed and why not also consider a compromise between the European standards and the presumably different Chinese or Asian standards?

Given the quite diverse situations among the European countries, the benefits and otherwise of working with China may be quite different. As a result, the member states of Europe are likely to seek more cooperative solutions as opposed to the authors' advocate of a consolidated approach to hold the European standards.

On China's part, it is likely to invest in countries where maximum benefits for both partners can be expected to achieve.

PS, what a title that is quite different from its content.

Time to think urgently and creatively on the Greek issue

Comments on Wesley Widmaier "Eurozone’s shared identity the final tragedy of the Greek crisis", 1/07/2015

There is a need to balance the macro and micro economic policies for the troubled countries and the potential moral hazard issues. The argument for debt forgiveness, while may have some attractiveness, but if not handled with great care, may create a moral hazard issue on the debtor's side.

The Greek tragedy, if it is to become one, reflects a weakness of the single currency of the euro, at least the shortcomings in its design, that is, the lack of consideration of a mechanism for a country or a number of countries to exit from it when the circumstances have become so necessary that such exit actions would be better than for that country or countries to stay inside the euro zone.

That shortcoming in the design of the euro reflects the erroneous approach of those involved in the euro process, that is to say, the simple minded and linear approach to economic/currency integration.

That shortcoming may have also created a moral hazard problem for some countries. In good times, some countries within the euro zone may have spent too much beyond their means, caused by some imperfection in the integration process that have over valued their economies. On the other hand, those countries may experience economic problems so severe that it is difficult to deal with within the single currency framework, because they lack the means to adjust without the need to force severe cuts to their nominal income/wages, as compared to the case where the country had its own currency and can devalue as a means of adjustment to its reduced international competitiveness.

Given the current irreconcilable stance between the debtor, that is Greece, and its major creditors, the so called Troika, there is an urgent need for a rethink of the euro approach. The rethink needs to design an exit strategy for a member country. An orderly exit of a member should be good for both that member and the rest of the euro zone members. There is no point to blame each other on the failure of the negotiations to claim a higher moral ground, whether it is Greece or any other parties. What is needed is cool head, creative thinking and quick actions. Failing to do that may cause unnecessarily greater damages than it needs to be.

An orderly and well designed Grexit may be beneficial

Comments on Barry Eichengreen "Path to Grexit tragedy paved by political incompetence", 29/06/2015

I agree with the author on the point that the current mess reflects the lack of leadership in all the major parties involved, though for quite different reasons. To me, the lack of political leadership lies in the lack of creative thinking in coming to a well considered and coordinated strategy for the Grexit, as opposed to the author's view that a Grexit will be disastrous. An orderly and well designed Grexit is likely to be beneficial to all major parties, because it can have all the advantages of within the euro zone, but have extra advantages of of more flexibility for Greece.

Both Greece and its creditors have had enough of the painful experiences and there should be a quick but orderly end to those pains.

A dual Euro currency is likely to work to save the Euro in the long run

Comments on Michael Pettis "Breaking up (the euro) is hard to do", 21/07/2012, http://www.businessspectator.com.au/bs.nsf/Article/European-debt-crisis-market-reaction-policymakers--pd20120718-WB9E7?OpenDocument&src=sph&src=rot
I personally believe in neither the conviction of a single currency Europe nor the complete break up of the Euro - something in the between is likely to emerge sometime in the next couple of years and to last.
Some problematic and weak Euro members may exit the Euro, but the majority may stay.
It is possible that instead of a single euro currency in the euro zone there might be 2 currencies, that is, a dual currency system to provide some flexibility.
At the same time, they may establish some mechanism that allows a common euro bond, but allow limited internal risk sharing and fiscal transfer, but each country will still be responsible for their own actions.

A plan to save euro and Europe

Comments on Philip Stephens “Wanted: one plan to save Europe”, 23/09/2011, http://www.businessspectator.com.au/bs.nsf/Article/Eurozone-debt-crisis-euro-currency-monetary-union--pd20110923-LY4T2?OpenDocument&src=rot

There is a need for both shorter and longer term plans. A short term plan could be a euro bond that has differential costs to different countries when they use it. The costs should be lower than a higher risk country's own bond implies but higher or lower than the costs of the euro bond. How much higher or lower should be determined by the member countries collectively.

A differential design imposes a real cost to those countries that have taken too much risks or ill disciplined fiscally that contributed to their current fiscal predicaments.

It will provide a solution to those countries risking of default with lower cost of financing.

It will also lower the costs of those other countries that bail out those high risk countries.

Politically it would be beneficial for both debt and credit countries within the euro zone.

A longer term plan could be further strengthening the original requirement by the euro constitution/agreement.

A really long term or permanent plan is fiscal integration. But it will take time for the conditions to be right.

Will the Libya intervention benefit Sarkozy?

Comments on Charles McPhedran “Sarkozy play a bid for survival”, 21/03/2011, http://www.theaustralian.com.au/news/world/sarkozy-play-a-bid-for-survival/story-e6frg6ux-1226025633235

The international intervention in Libya, especially large scale bombings of Libya whether it is current Libya government troops or civilian casualties, will complicate the Middle East and the Arab world.

While the Libya situation has some elements of Kaddafi's dictatorship against oppositions to his rule, there are also the unease characteristics of internal tribal and regional conflicts.

Further, although there were international backings from the African Union and the Arab League, those supports may reflect internal politics among those regional organisations. The tide can turn very quickly once the situation in Libya changes one way or another.

France's adventure might have short term benefits, but is likely to incur longer term losses in the Middle East and Arab world.

Sarkozy's calculation and attempt to use external conflicts for his personal gains in domestic political affairs may prove to be a serious mistake and an error in judgement with the rush of blood.

History will be the judge and the judgement day may not be too far away for Sarkozy.

Those IOUs don't work

Comments on John Abernethy “A way Europe can survive”, 28/05/2010, http://www.businessspectator.com.au/bs.nsf/Article/European-debt-crisis-pd20100527-5U5E8?OpenDocument&src=sph

Do any of the proposed inter-government and Central Bank IOUs which will be forgiven at a future date make the moral hazard issue between different European member countries more or less a problem?

It does not sound quite right from that point of view.

My solution to the current European economic and financial problems would be to allow intra-euro trade measures to have effective "devaluation" of some euro members.

How should Europe be represented at international bodies?

Comments on Gideon Rachman “Europe’s plot to take over the world”, 6/10/2009, http://www.businessspectator.com.au/bs.nsf/Article/Europes-plot-to-take-over-the-world-pd20091006-WK2CN?OpenDocument&src=sph

While the current structure and membership of the G20 can be regarded as a transitional arrangement to bridge the G8 and a new permanent G20, it is a bit unfair to have so many European representatives from both its individual member countries and from its unity bodies.

Europe should be represented either as a group or as individual countries, but not by both. It is up to them to decide how they would like to be represented.

While others are polite enough not to raise this issue openly and directly with the Europeans, they should have self awareness and be wise enough not to be unreasonable in their representation at the G20.

They should act without the urge of others. The earlier they do that, the better for both them and the rest.

Questions for Harry Clarke on his "India & China to get tough on emissions?"

comments on Harry Clarke "India & China to get tough on emissions?" 22/09/2009, http://www.harryrclarke.com/2009/09/22/india-china-to-get-tough-on-emissions/#comments

hc, your guess seems to be wrong. I am afraid to say.You argue that "India and China will suffer far more serious costs as a consequence of global heating than will the US or Europe."

What is your basis of that argument? Why will they suffer more? Do you assume that a life in India and China is more precious than that in the US and Europe?

Do you really believe that they are terrified by the possible defeat of the US bill? Can you believe yourself, honoestly?

Do you think they are after charity or compensations? It is now that developing countries have been giving charity and free compensations to the developed countries, because the latter emit more than their rightful "permits" to do so on the per capita basis.

Why do you call it charity or compensations for developing countries? Is that the best logic you can come up?

You argue that their voluntary cuts not convincing. What do you expect them to do? Have the developed countries reduced their emissions to the levels in either India or China on the per capita basis?

I simply fail to understand your logic.