A second best at best

Comments on Yin-Wong Cheung, Guonan Ma and Robert N. McCauley “Why is China attempting to internationalise the renminbi?” 2/12/2011, http://www.eastasiaforum.org/2011/12/02/why-does-china-attempt-to-internationalise-the-renminbi/

Leaving the real motivations of China's push for internationalisation of the RMB aside, there are alternatives to internationalisation of the RMB for avoiding or at least mitigating the potential huge losses for China associated with a rapid currency appreciation.

Beside considerations and argument based on the effects of RMB appreciation on both China's and indeed regional economies in terms of jobs and production of manufacturing, China could and should mount an argument to those parties that argue for a rapid appreciation that those countries must allow any assets China holds in any other currencies against which the RMB would appreciate to be denominated in dual currencies, that is, both their and China's currencies.
If any of them refuses to do that, it would be hypocrite of them by asking China to make a huge loss in terms of its assets holding in those other currencies.

However, one may suspect that internationalisation of the RMB might have other more important effects as the Chinese economy becomes even larger and transaction costs of international trade and FDI become more significant.

How long would it take for the RMB to internationalise?

Comments on Gunter Dufey “The renminbi’s internationalisation: a reality check”, 29/11/2011, http://www.eastasiaforum.org/2011/11/29/the-renminbi-s-internationalisation-a-reality-check/#more-23060

I have no idea about the reality and more Importantly the prospect of the renminbi’s internationalisation, but one may be totally surprised or even shocked if the pace accelerates rapidly to an unprecedented speed.
Just as the rapid rise of the Chinese economy along with its international trade, it is entirely possible that the renminbi’s internationalisation may be even fast once China realise its benefits greatly outweigh its costs.
In theory, internationalise a currency should be easier than rapidly increase a country's share in international trade, given the fact currency similar to monetary adjustment can be instantaneous, while trade or the real economy would move rather slowly, as demonstrated by the famous exchange rate overshooting and the simple IS-LM curve macroeconomic framework.

International institutions should avoid moral hazards

Comments on Wolfgang Münchau “A G20 comedy of irrelevance”, 7/11/2011, http://www.businessspectator.com.au/bs.nsf/Article/G20-summit-eurozone-debt-crisis-Italy-bonds-ECB-EF-pd20111107-NCR2E?OpenDocument&src=mp

No matter what new world and regional institutions are set up, a key principle should be to avoid moral hazard problems.

People or countries with irresponsibility or mistakes must pay a price.

The IMF or ECB cannot be simply bail out countries without those countries required to pay a reasonable price for that bail out.

On the other hand, whoever contribute to bail out should be explicitly rewarded.

Without this kind of quasi market mechanism being introduced and effectively implemented, future failures cannot be minimised.

Italy woes raises the stakes of the euro crisis

Comments on Alan Kohler “Revenge of the golden days”, 7/11/2011, http://www.businessspectator.com.au/bs.nsf/Article/ECB-gold-G20-Cannes-IMF-debt-crisis-inflation-Berl-pd20111107-NCRPR?OpenDocument&src=sph&src=rot

As I have pointed out somewhere else, an orderly exit from the euro of some troubled members and allow them to have their own currencies and set fixed exchange rates to the euro, so they can have effective depreciations instead of deflation and so much painful adjustments.

Fixed exchange rates with the euro are to prevent what the Asia financial crisis from happening in the euro zone.

European leaders should realise that to keep the vanity of existing euro is costly, and more creative thinking is required to minimise the costs of adjustments.

The sooner they let this happen the better off they and the world will.

Any delay just simply exacerbate the problems.

Eurozone sovereign debt crisis: creative thinking badly needed

Comments on Christopher Findlay "European debt crisis: European fragmentation?" 6/11/2011, http://www.eastasiaforum.org/2011/11/06/european-debt-crisis-european-fragmentation/
Most mainstream economists and politicians tend to think in a flexible exchange rate regime as the best and that can sometimes become a barrier to creative thinking.
In the current situation, for example, Greece could exit the euro and start using a new national currency withou destined to dwonward currency spiral if it pegs to the euro with a certain and appropriate own currency real depreciation.
I don’t see it would be inevitable for what occurred in the Asian financial crisis in 1997 to repeat if Greece, or any small number of existing eurozone countries exit the euro.
A dual and pegged currency in the current eurozone would present a sensible adjustment from the current effectively fixed exchange rate equivalent from 1 to 1 to a x to 1. Essentially it would create a much more flexible adjustment mechanism without necessarily introducing increased risks.
Even from the mainstream economics point of view, it is not a retreat from its current state of euro to a worse regime!
Why don’t economists think in this way?