Archive for March, 2009
« Previous EntriesThe march of the renminbi
Posted by robin in Financial Articles Tuesday March 31, 2009 12:08 pm
“China and Argentina in currency swap”, reads the FT headline.
Tucked away at the bottom of an inside page it doesn’t exactly leap out at you.
But a few lines into the peice it starts to get interesting. China has agreed a deal with Argentina to receive renminbi rather than dollars for its exports.
China’s calling time on the world’s global reserve currency. It’s had its fill of US Treasuries. What has it got? $740bn worth reports Bloomberg. A gigantic pile of government debt from recycled manufacturing export profits. Their buying of US IOUs kept interest rates low, pumped up asset prices and kept consumers buying. Such was the merry-go-round that led to ’imbalances’ in econospeak.
Well, now the world has turned. China has had its fill of dollars and now looks on anxiously as the US government ramps up spending and the printing press - aka ‘quantative easing’. Their gigantic pile of hard-earned dollars is at the mercy of policymakers eyeing inflation as the rainmaker to wash away vast debts. Bloomberg called its investment in the US a “Faustian bargain” and “a sucker’s bet”.
Little wonder China wants a new global reserve currency: “A super-sovereign reserve currency” replacement based on special drawing rights (SDR) first established by the IMF in 1969. Little wonder too, the US is opposing the idea. What debter, given the choice, wants to add potentially ruinous currency risk?
So China will trim its dollars this year, says Deutsche Bank and here we see one way of doing it. The dollar has long been the currency of worth for Argentines who have been tormented by chronic economic disaster and money reduced to dust. But now the Chinese are calling the shots with this trading partner. Dollars no, renminbi yes. And it’s not only Argentina, since December it has signed $95bn of such deals with others too - Malaysia, South Korea, Hong Kong, Belarus and Indonesia.
These deals are “pieces in the jigsaw designed to promote wider international use of the renminbi”, reports the FT, with the aim of making it the reserve currency for Asia.
The days of dollar are numbered.
Killer stat of the day
Posted by robin in Financial Articles Market Commentary Monday March 23, 2009 1:54 pm
Killer stat of the day from David Smith in The Sunday Times…
“Half a century ago a liquidity ratio of 30% was the norm for UK banks. More recently 5% was considered acceptable.”
The comment was attributed to Peter Cooke, a former head of banking supervision at the Bank of England.
And talking of banks, the editor of the FT’s financial blog expresses a fear that Barclays might “unravel” after the story, initially denied, that it is looking to sell Barclays Global Investors for £5bn - a business considered “a jewel in the bank’s crown”.
Selling the family silver, to mangle ones metaphors, smacks of desperation. If a sale fails to materialise will Barclays join the sad collection of bust British banks bailed out by the already overburdened taxpayer? If so, I’m with those who mutter darkly of civil unrest in the wings.
- On a separate note, that prescient beacon of bearishness at SocGen, strategist Albert Edwards who forecast the FTSE 100 would fall into 3,000 when it was over 6,000 and was preaching doom long before it became fashionable, says of the recent stock market rally:
“Is this rally the real thing? Have we really reached bottom? It would be wrong to say I do not agonise that I might not be missing a turn. I’m riddled with self-doubt.”
Humility… admirable. It appears in some of the savviest investors too. They can readily admit their mistakes and limitations. Buffett is a prime example. He advises investing within your circle of competence and even he doesn’t gets it right every time, as he recently acknowledged on the purchase of ConocoPhillips at the height of the oil price spike.
Though somehow it’s hard to picture him riddled with self-doubt…
« Previous Entries
Latest Comments