Player 1
Geithner Tells China Its Dollar Assets Are Safe
By Glenn Somerville - Reuters
Monday, June 1, 2009
reuters.com
BEIJING -- U.S. Treasury Secretary Timothy Geithner on Monday reassured the Chinese government that its huge holdings of dollar assets are safe and reaffirmed his faith in a strong U.S. currency.
A major goal of Geithner's maiden visit to China as Treasury chief is to allay concerns that Washington's bulging budget deficit and ultra-loose monetary policy will fan inflation, undermining both the dollar and U.S. bonds.
China is the biggest foreign owner of U.S. Treasury bonds. U.S. data shows that it held $768 billion in Treasuries as of March, but some analysts believe China's total U.S. dollar-denominated investments could be twice as high.
"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.
His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.
The Beijing-based Global Times greeted Geithner by publishing a survey of Chinese economists who called big holdings of U.S. debt "risky."
Geithner renewed pledges that the Obama administration would cut its huge fiscal deficits and promised "very disciplined" future spending, possibly including reintroduction of pay-as-you-go budget rules instead of nonstop borrowing.
"We have the deepest and most liquid markets for risk-free assets in the world. We're committed to bring our fiscal deficits down over time to a sustainable level.
"We believe in a strong dollar ... and we're going to make sure that we repair and reform the financial system so that we sustain confidence," he said.
Player 2
I hate to be cynical, but did anyone really expect Geithner to say, "our country is in the tank, your bonds are in danger of being worthless, and you should sell them all now!" ??
Hardly enlightening....
Not to be mean, just completely cynical.....
Of course, the students seem to think the same:
"His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home."
I think the more important point is that the students (and the public at large) are cynical...I suspect that the Govt. is under increasing pressure to diversify, as the middle class now trashes them every time they make a stupid investment (e.g. Blackstone).
Player 1
no, I suppose not...but
I add for comic effect that Peking U. (I suppose it is Beijing U now) was Tim's alma mater-to some extent-and imagine that if he had addressed Harvard or other... he would likely be greeted by a standing ovation.
Frankly, I hope he was pelted with taro root ball pea-shooters (and dim sum)
Player 3
In case you missed this:
bloomberg.com
Northwestern Mutual Makes First Gold Buy in 152 Years (Update1)
By Andrew Frye
June 1 (Bloomberg) -- Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time in 152 years to hedge against further asset declines.
“Gold just seems to make sense; it’s a store of value,” Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn. “In the Depression, gold did very, very well.”
Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken. Gold gained 10 percent last month, the most since November. The commodity has more than tripled since 2000, rising for eight straight years. Gold futures for August delivery slipped 30 cents to $980 at 11:47 a.m. in New York.
“The downside risk is limited, but the upside is large,” Zore said. “We have stocks in our portfolio that lost 95 percent.” Gold “is not going down to $90.”
Policyholder owned Northwestern Mutual, based in Milwaukee, ranks thirds by 2008 life insurance premiums according to data from the National Association of Insurance Commissioners. The data excludes annuities.
To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net
Unrelated to above but still in in-tray
Ireland set to go bust, claims economic historian
29 May 2009
independent.co.uk
A dire warning that the Republic is a prime candidate to go bust has come from one of the world's leading economic historians.
"The idea that countries don't go bust is a joke," said Niall Ferguson, Harvard professor and author of The Ascent of Money.
"The debt trap may be about to spring" he said, "for countries that have created large stimulus packages in order to stimulate their economies."
His chosen prime candidate to go bust is "Ireland, followed by Italy and Belgium, and UK is not too far behind".
Argentina is top of his list of shaky countries but "the argument that it can't happen in major western economies is nonsense".
Professor Ferguson believes the economists are ill qualified to analyse the current economic situation since they lack the overview of historians such as himself.
"There are economic professors in American universities who think they are masters of the universe, but they don't have any historical knowledge. I have never believed that markets are self correcting. No historian could."
The historian does not subscribe to the theory of the "Great Depression" repeating and says this scenario is unlikely because the Federal Reserve has "massively expanded the monetary base which is the opposite of what happened in the 1930s".
The problem now is what happens when current monetary policy collides with a policy of "vast government borrowing" on a scale unknown since the 1940s.
"We have the fiscal policy of a world war without a war."
Referring to the clash between inflation and deflation he added: "I don't know who is going to win but we know that while the struggle goes on ordinary people will get trampled. There will be more economic volatility and ordinary people will pay."
He has also warned that in Britain he expects "more riots in major cities this year" because of the economic situation and says the recent "drip feed" of the peccadilloes of British MPs and their expenses is "just the beginning of a crisis of political legitimacy that will be played out over the next 18 months".
Ferguson, a native of Glasgow, specialises in financial and economic history as well as the history of the British empire.
* This article is from The Belfast Telegraph. |
