Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (16316)	11/19/2004 7:43:26 PM
From: mishedlo	Respond to of 116555

Jim Willie on the US$ [Yiwu (and anyone else too!) I would appreciate thouughts and commenst on this line of discussion - thanks] JW Message 20785038 Tons of questions and comments from Mish on the above Message 20785209 Mish

To: RealMuLan who wrote (16316)	11/19/2004 8:03:42 PM
From: mishedlo	Respond to of 116555

China, Asia Currency Policies Unnerve Europe: William Pesek Jr. Nov. 19 (Bloomberg) -- ``Too fast.'' Spanish Economy Minister Pedro Solbes seemed to speak for Europe when he used those words to characterize the euro's gains. It's hard to disagree with the description, and Asia gets much of the blame. Just ask folks here in Madrid. And not just fellow travelers you meet staring in disbelief at the small stack of euros they'd just been handed at currency-exchange kiosks. The euro's surge to a record high versus the dollar also has businesses worried about the export outlook and a decline in tourist arrivals. The dollar's 4.3 percent drop against the euro this month is front-page news as investors finally realize a U.S. current account deficit approaching 6 percent of gross domestic product is a problem. Yet the trend has been afoot for some time, thanks to Asia. European economies and companies have been bearing the brunt of Asia's massive currency sales. By holding down the Chinese yuan, Japanese yen, South Korean won and other currencies, Asians indirectly boost the euro. Another Spaniard, Joaquin Almunia, monetary affairs commissioner, said as much this week: ``We have to remind some Asian countries that they need to create more flexible exchange rates.'' He's right, of course. Asia's penchant for devaluing currencies hurts Europe and delays a necessary adjustment in global markets. Unless the dollar weakens the U.S. trade gap will continue widening, and what's arguably the world's biggest and most dangerous financial bubble will swell even more. European Anger Yet with the euro's rise increasingly unnerving European officials, the days of Asia's beggar-the-other-guy policies may be numbered. Europe seems less likely to sit back silently and suffer the side effects. Rising European anger at Group of Seven meetings or in public comments could shame Asia into facing the inevitable. Let's hope so. Aside from giving Europe's stagnant economies a boost, Asia would benefit from all this. The region's weak- currency fixation is distracting it from restructuring and diversifying its economies. It's a crutch big economies like China, Japan and South Korea use to avoid painful structural change, like fortifying financial and corporate sectors. Weak currencies also make it more likely Asia will import inflation amid record oil prices. And holding down exchange rates limits the amount of foreign capital economies attract. More capital would support stock markets, reduce interest rates and help companies raise money by selling bonds instead of borrowing from banks. Two to Tango Greek Finance Minister George Alogoskoufis suggested as much this week when he said Europe alone can't halt the euro's rise. Noting that ``it takes two to tango,'' he said the U.S. and Japan would have to pitch in to end the decline of the dollar. It's telling that he mentioned Japan, not China. Anyone with a passing interest in U.S. political debate, in which China's currency peg with the dollar is routinely cast as evil incarnate, might get the impression Beijing is the prime culprit. It's Japan that's by far Asia's biggest economy. Only when Tokyo lets markets set the yen's value will China and others follow suit. If global policy makers want to fix things, ``they need to deal with Japan,'' says Ken Courtis, vice chairman in Asia at Goldman Sachs Group Inc. Asian Ally Europeans might be wise to do just that. Just about every major policy maker the world over agrees flexible exchange rates are best, but Asia's mercantilist tendencies largely get a pass. A likely reason is that the Bush administration is covering for Japan, its key ally in the region. Japan has been a steadfast supporter of the U.S.-led war on global terrorism and the White House seems loath to upset Tokyo on the currency issue. It may take pressure from Europe to shake things up. The good news is that officials in Spain and elsewhere in Europe seem livid enough to launch such a campaign. ``The one legitimate complaint from Europe is burden sharing,'' says David Gilmore, a partner at Foreign Exchange Analytics in Essex, Connecticut. ``Asia simply is not carrying its fair share of the adjustment burden.'' Is Japan ready to let the yen rise? Some will no doubt argue the world's No. 2 economy has done just that. Japan has indeed watched the yen rise lately without stepping in to manipulate its value. The dollar is down 5 percent versus the yen this month. All the while, though, subtle hints from the government -- reminding traders Japan would sell the yen if it rose too much -- limited its gains. More recently, Japanese officials have more forthrightly warned they'll step in to cap the yen's rise. Same old, same old. If Europe works together, it may be able to force change in Asian currency policies. If so, the global economy might be better off. quote.bloomberg.com

To: RealMuLan who wrote (16316)	11/19/2004 8:04:24 PM
From: mishedlo	Respond to of 116555

China, Asia Currency Policies Unnerve Europe: William Pesek Jr. Nov. 19 (Bloomberg) -- ``Too fast.'' Spanish Economy Minister Pedro Solbes seemed to speak for Europe when he used those words to characterize the euro's gains. It's hard to disagree with the description, and Asia gets much of the blame. Just ask folks here in Madrid. And not just fellow travelers you meet staring in disbelief at the small stack of euros they'd just been handed at currency-exchange kiosks. The euro's surge to a record high versus the dollar also has businesses worried about the export outlook and a decline in tourist arrivals. The dollar's 4.3 percent drop against the euro this month is front-page news as investors finally realize a U.S. current account deficit approaching 6 percent of gross domestic product is a problem. Yet the trend has been afoot for some time, thanks to Asia. European economies and companies have been bearing the brunt of Asia's massive currency sales. By holding down the Chinese yuan, Japanese yen, South Korean won and other currencies, Asians indirectly boost the euro. Another Spaniard, Joaquin Almunia, monetary affairs commissioner, said as much this week: ``We have to remind some Asian countries that they need to create more flexible exchange rates.'' He's right, of course. Asia's penchant for devaluing currencies hurts Europe and delays a necessary adjustment in global markets. Unless the dollar weakens the U.S. trade gap will continue widening, and what's arguably the world's biggest and most dangerous financial bubble will swell even more. European Anger Yet with the euro's rise increasingly unnerving European officials, the days of Asia's beggar-the-other-guy policies may be numbered. Europe seems less likely to sit back silently and suffer the side effects. Rising European anger at Group of Seven meetings or in public comments could shame Asia into facing the inevitable. Let's hope so. Aside from giving Europe's stagnant economies a boost, Asia would benefit from all this. The region's weak- currency fixation is distracting it from restructuring and diversifying its economies. It's a crutch big economies like China, Japan and South Korea use to avoid painful structural change, like fortifying financial and corporate sectors. Weak currencies also make it more likely Asia will import inflation amid record oil prices. And holding down exchange rates limits the amount of foreign capital economies attract. More capital would support stock markets, reduce interest rates and help companies raise money by selling bonds instead of borrowing from banks. Two to Tango Greek Finance Minister George Alogoskoufis suggested as much this week when he said Europe alone can't halt the euro's rise. Noting that ``it takes two to tango,'' he said the U.S. and Japan would have to pitch in to end the decline of the dollar. It's telling that he mentioned Japan, not China. Anyone with a passing interest in U.S. political debate, in which China's currency peg with the dollar is routinely cast as evil incarnate, might get the impression Beijing is the prime culprit. It's Japan that's by far Asia's biggest economy. Only when Tokyo lets markets set the yen's value will China and others follow suit. If global policy makers want to fix things, ``they need to deal with Japan,'' says Ken Courtis, vice chairman in Asia at Goldman Sachs Group Inc. Asian Ally Europeans might be wise to do just that. Just about every major policy maker the world over agrees flexible exchange rates are best, but Asia's mercantilist tendencies largely get a pass. A likely reason is that the Bush administration is covering for Japan, its key ally in the region. Japan has been a steadfast supporter of the U.S.-led war on global terrorism and the White House seems loath to upset Tokyo on the currency issue. It may take pressure from Europe to shake things up. The good news is that officials in Spain and elsewhere in Europe seem livid enough to launch such a campaign. ``The one legitimate complaint from Europe is burden sharing,'' says David Gilmore, a partner at Foreign Exchange Analytics in Essex, Connecticut. ``Asia simply is not carrying its fair share of the adjustment burden.'' Is Japan ready to let the yen rise? Some will no doubt argue the world's No. 2 economy has done just that. Japan has indeed watched the yen rise lately without stepping in to manipulate its value. The dollar is down 5 percent versus the yen this month. All the while, though, subtle hints from the government -- reminding traders Japan would sell the yen if it rose too much -- limited its gains. More recently, Japanese officials have more forthrightly warned they'll step in to cap the yen's rise. Same old, same old. If Europe works together, it may be able to force change in Asian currency policies. If so, the global economy might be better off. quote.bloomberg.com