G-20 Currency Agreement to Agree Collapses Already

So much for the G20's agreement to agree on currencies. South Korea, Indonesia, Columbia, Thailand, Brazil and now Europe and South Africa are all bitching about the strength of their currencies.

Every Man for Himself

Bloomberg says it's ʻEvery Man for Himselfʼ on Currencies After G-20

Wednesday, October 27, 2010 .

Finance chiefs from South Korea to South Africa signaled they may act to slow gains in their currencies, just four days after the Group of 20 vowed to soothe trade tensions in the $4 trillion-a- day foreign-exchange market.

Asian currencies fell to a one-week low after Bank of Korea Governor Kim Choong Soo said today that measures to mitigate capital flows could be “useful.” Hours later, the rand dropped as South African Finance Minister Pravin Gordhan said his government will use part of higher-than-expected tax revenue to build foreign reserves as it attempts to weaken the currency.

The shifts suggest G-20 members will keep trying to defend their economies from the slide of the dollar and capital inflows even after the group promised Oct. 23 to refrain from “competitive devaluation” and to increasingly embrace market- determined currencies.

Bank Indonesia will “guard” the rupiah at its “fundamental” level of 8,900 to 9,300 against the dollar and buy foreign currencies to limit volatility, Governor Darmin Nasution said today. Bank Negara Malaysia Governor Zeti Akhtar Aziz told Bloomberg Television yesterday she favors a gradual strengthening of the ringgit.

More currency measures may be on the way. President Juan Manuel Santos has said Colombia may take additional steps this week to ease the pesoʼs rally and Chilean President Sebastian Pinera said Oct. 25 that his government plans to increase foreign investment limits for institutions.

Having already removed a 15 percent tax exemption for foreigners on income from domestic bonds, Thailand Finance Minister Korn Chatikavanij warned on Oct. 25 that regulators are “keeping an eye” on speculative inflows.

While he didnʼt advocate action by European governments, Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, also said today the dollar is “undervalued” against the euro.

“Europe is the victim” of global currency policies, Juncker said at a conference in Frankfurt.

Everyone a Victim

It would be easy to mock Juncker but truth be known, everyone is a victim of Bernanke's misguided Quantitative Easing strategy and interest rate policies.

It's an international currency war says Brazilʼs finance minister as noted in Pied Piper Politics; Krugman and Candle Makers Complain about the Sun; Global Trade Wars

For more on competitive currency debasement including capital controls, please see Emerging Market Economies Turn to Capital Controls; Forex Market in State of Disarray; Gold's Message; Life Imitates Art.

Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List

China Injury Case: Key to Global Balance? -WSJ-

Concerned about rebalancing of the world economy? Then set aside the G-20 and all the complicated wrangling over exchange rates and ponder instead the story of a one-handed former Chinese factory worker.

Associated Press

Chinese workers: When will they feel safe enough to spend?

Last year, Ruan Libing’s left hand was crushed in a molding machine while he worked the night shift at a factory making household appliances in Zhuhai, southern China. It had to be amputated. Without expensive surgery to create a prosthetic hand, the 21-year-old will likely never get factory work again and so faces a life with little or no income.

As compensation, Ruan initially received 90,000 yuan, or around $13,500 — the equivalent of 170 yuan a month for the rest of his working life, or about a tenth of the salary he was earning for a 60-hour work week. Yet his employer, Elec-Tech International Co. — a Shenzhen-listed manufacturer whose customers include Wal-Mart Stores Inc — was fully compliant with Chinese law, which prescribes different lump-sum compensation payouts based solely on injury type with no adjustment for the age of the victim or for the degree of employer negligence.

Magnified across an 800-million-strong labor force, this system feeds into the problem of global imbalances – or, put another way, the notion that Americans spend too much and Chinese too little. That’s because it encourages China’s workers to save in case they suffer an income-losing injury. Along with China’s woefully limited health insurance and retirement plans, the inadequate workers compensation model is a big factor behind its 30%-plus household savings rate.

Typically, injured Chinese workers accept their measly payout and leave. But Ruan’s case is different, and represents a change that could benefit the entire world.

For two months, Ruan kept his accident quiet to avoid upsetting his parents, who live in a cowshed in a village in Hunan Province and earn around 500 yuan a year. But eventually he broke down and told a cousin, who contacted an expatriate family she knew through her work as a travel agent in Shenzhen. They referred her to China Labor Bulletin, a Hong Kong-based advocacy group, which immediately adopted the case.

CLB found Ruan a lawyer, who filed a lawsuit against Elec-Tech in a Zhuhai District Court in July, alleging gross negligence on the company’s part. It was the first time a Chinese worker had brought such a suit against an employer – a test, as CLB described it, of “the inadequacies in China’s compensation system.”

The judge rejected the claim, but Ruan’s lawyer appealed to a higher court. Then the case got a big publicity boost: Wal-Mart sprung two surprise safety audits on Elec-Tech’s facilities to identify 55 incidents of worker injuries in the preceding 12 months, including other severed hands. The giant U.S. retailer found that numerous machines were inadequately equipped with safety guards and infra-red detectors and asked that half the stamping machines be turned off until they were repaired or replaced.

Elec-Tech moved to repair the machines and entered into negotiations with Ruan, who asked for a settlement of 260,000 yuan above the 90,000 already paid.

“Although we have fulfilled our responsibility according to the law, he was our employee and he was injured during work so we are considering giving him more compensation,” a spokesman for the company told China Real Time when asked about the case earlier this week.

On Wednesday, Ruan accepted a counteroffer from Elec-Tech for an additional 130,000 yuan on condition that he drops the lawsuit.

An extra $20,000 for 44 years of lost income might not seem like much, but what matters is that a deal was reached, with a payout significantly higher than the previous one.

The question is whether such advances will be accompanied by reform of the workers compensation system that provides real security for the future — security that might free working class Chinese to finally spend some of the money they’ve been stashing away.

–Michael Casey with contributions from Yuanni Chen.

G 20 focuses on current accounts -Korea herald2010. 10.22-

GYEONGJU G20 finance ministers were struggling to find a common ground to prevent a currency battle from derailing a fragile recovery from the economic crisis as they launched a two-day meeting in Gyeongju on Friday. 

Their first-day discussion focused on a U.S. and Korean proposal to set caps on current account balances as an option to resolve global imbalances and circumvent foreign exchange disputes.

The proposal which calls for setting numerical targets for current account surpluses and deficits, received mixed reactions initially. But Seoul officials said it could be seen as a feasible alternative to the competitive currency devaluations intensified over the past few weeks.

The two-day meeting of finance ministers and central bank governors is the last high-level talks before the Seoul summit on Nov. 11-12. 

Major exports and developing nations are skeptical to the proposed trade balance cap.

Japan’s Finance Minister Yoshihiko Noda said that a U.S. proposal for setting a current account target is “unrealistic,” despite it being part of the G20’s job to urge countries to help avoid a race for cheaper currencies. “We need to talk about this first, but numerical targets seem unrealistic.” 

A U.S. senior official Wednesday had said the G20 will discuss setting targets for current account deficits or surpluses at four percent of gross domestic product.

U.S. Treasury Secretary Timothy Geithner sent a letter to his G20 counterparts, urging the nations to “commit to undertake policies consistent with reducing external imbalances below a specified share of GDP over the next few years.”

Finance Minister Yoon Jeung-hyun (right) makes the opening speech at the finance ministers and central bank governors’ meeting in Gyeongju, North Jeolla Province on Friday. From left: U.S. Federal Reserve Board Chair Ben Shalom Bernanke, Bank of France Governor Christian Noyer, French Finance Minister Christine Lagarde, and Bank of Korea Governor Kim Choong-soo. (Yonhap News)

The letter was focused in pursuing the in-deficit nations to boost national savings and meet credible targets to reduce their debt levels. Recommendations given to in-surplus nations included fixing fiscal and structural policies to boost domestic demand. 

It also urged G20 to “refrain from exchange rate policies designed to achieve competitive advantage.”

Korea, staying low-key on the issue so far, is speculated to mediate the tension through bilateral meetings. President Lee Myung-bak and Finance Minister Yoon Jeung-hyun said the exchange rate policy should be discussed at the G20 but more weight was given to the discussion over current account in tackling the economic imbalance.

The forum come at a moment when major global economies are pitted against each other to gain higher ground in the currency spat.

A central part of the dispute concerns mounting pressure on China and other Asian members, including Korea, to appreciate their currencies. 

Early in the morning, finance ministers of the Group of Seven richest countries held a closed-door meeting.

The G7 consists of the U.S., Japan, the U.K., Germany, France, Italy and Canada.

Sources speculated that the unscheduled conference was aimed at coordinating foreign exchange strategies among the advanced countries amid the international currency war. 

Apart from the G7 meeting, ministers of the U.S., France and Canada held a bilateral meeting with Korea’s Minister of Finance and Strategy Yoon Jeung-hyun, respectively, on Friday.

Noda told reporters in an emergency press conference that the G7 discussion would involve “the overall economy,” trying to emphasize that the meeting would not center on currency issues.

Japan notified Japanese reporters of the meeting Thursday night to talk about the sudden G7 meeting, sources said. 

European Union Economic and Monetary Affairs Commissioner Olli Rehn on Friday morning said the G20 must avoid the downward spiral of competitive devaluations of their currencies. He also said, however, there is a possibility of nations failing to cooperate on economic policy. 

Belgium finance minister Didier Reynders told reporters that G20 needs a balanced solution to exchange rates before the meeting began. He said exchange rates must be aligned with a nation’s economic strength.

A draft position paper from a G20 nation Thursday said G20 will pledge to “refrain from competitive undervaluation.”

It suggests G20 policy chiefs take a clear stance against a global currency war that seemed to be approaching after over a dozen nations stepped into foreign exchange markets to increase their trade surpluses.

The G20 will “move towards (a) more market-determined exchange-rate system,” it said.

Finance officials will discuss IMF reforms, global financial safety net, framework for strong, sustainable and balanced growth and bank reforms Saturday.


source - http://www.koreaherald.com/business/Detail.jsp?newsMLId=20101022000835

Asia stocks rise as G20 vows to avoid currency war - The Washington Post-

The Associated Press
Monday, October 25, 2010; 4:39 AM 

BANGKOK -- Asian stock markets rose Monday after a weekend meeting of global finance chiefs vowed to avoid a currency war that could derail the global economic recovery. European markets gained.
Shares in Australia got an added boost from news the Singapore Exchange is making a takeover offer for the Australian stock market operator, sending the ASX's stock price up more than 20 percent.
Oil prices, meanwhile, jumped to near $83 a barrel as the dollar weakened against the euro and fell to a fresh 15-year low against the yen, making the commodity cheaper for investors holding those currencies.
The two-day meeting of finance mandarins from the Group of 20 major advanced and emerging nations resolved to avoid weakening currencies to boost exports - a scenario that could cause a trade war. The group's statement, however, fell short of imposing any measurable targets
Nations in Asia and other regions have been trying to stem strength in their currencies amid sustained weakness in the U.S. dollar out of fear their exports will become less competitive. At the same time, China's currency, the yuan, has been effectively pegged to the greenback, provoking criticism it is being kept artificially low and giving the country's exporters an unfair advantage.
"The agreement the finance ministers reached is being interpreted by the market as a go-ahead to the U.S. to further devalue the dollar, that the developing countries won't partake in a competitive currency devaluation," said Victor Shum, an energy analyst with Pervin & Gertz in Singapore. "It's a signal to the market that some more weakening of the U.S. dollar will probably be tolerated by everybody else."
Asia relying less on exports for growth is seen as one of the adjustments that nations should make to ensure more stability in the global economy and markets in the aftermath of the global recession. Asian currencies rising against the U.S. dollar would help reduce so called "global imbalances" - a reference to the region's vast trade and current account surpluses and America's overreliance on debt-fueled consumption.
In early European trading, France's CAC-40 gained 0.6 percent to 3,891.07, Germany's DAX added 0.8 percent to 6,656.25 and Britain's FTSE 100 climbed 0.8 percent to 5,788.48.
Wall Street was set to gain with Dow futures ahead by 59 points, or 0.5 percent, to 11,149.00. Broader S&P futures rose 7.5, or 0.6 percent, to 1,188.20.
Japan's benchmark Nikkei 225 stock index bucked the gains in Asia, falling 25.55, or 0.3 percent, to 9,401.16 as the yen strengthened and the country's exports grew at their slowest pace this year in September, hit by cooling foreign demand and the yen's rise.
Australia's S&P/ASX 200 added 1.3 percent to 4,710.00 amid news the Singapore Exchange is making a $8.3 billion takeover offer for ASX, the operator of the Australian stock market.
The combined exchange company would be the world's fifth-largest by market value and rank as the second-largest stock market in Asia by number of listed companies, the two exchanges said in a joint statement. ASX shares surged more than 20 percent.
South Korea's Kospi added 1 percent to 1,915.71 and Hong Kong's Hang Seng climbed 0.9 percent to 23,732.05.
The Shanghai Composite Index vaulted 2.6 percent to 3,051.42 as investors recovered confidence following last week's interest rate hike. Elsewhere, markets in Singapore, Taiwan and India also rose.
In New York on Friday, the Dow Jones industrial average fell 14.01 points, or 0.1 percent, to 11,132.56.
In currencies, the euro rose to $1.4030 from $1.3952 in New York late Friday. The dollar fell to 80.52 yen from 81.50 yen.
Benchmark crude for December delivery rose $1.21 to $82.90 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.13 to settle at $81.69 on Friday.
----
Associated Press researcher Ji Chen in Shanghai and AP writers Alex Kennedy in Singapore and Shino Yuasa in Tokyo contributed to this story.

21일 남은 G-20 Summit Seoul을 기다리며....

처음 G20 정상회담의 개최지로 Seoul이 결정되었을 때, 필자 역시도 그 놀라움을 감출 수 없었던 기억이 난다.  앞으로 21일후, 11월 11일부터 12일까지 양일간 전세계인들의 시선이 한국으로 집중된다. 이는 단순한 "서울에서 국제적 정상회의가 열린다."라는 의미가 아니라 한국의 위상이 국제적으로 얼마나 성숙되었는지를 확인하며 또 다른 도약을 준비하는 단계로의 변화를 부르는 신호탄이라는 의미를 가지고 있다.  

현재 전 국민들은 G20 정상회의가 성공리에 개최되기를 간절히 바라고 있으며 회의에서 다루어질 안건에 대한 많은 관심을 가지고 있다. 이를 반증하듯 정상회의를 주제로한 모의회의들이 여러 대학, 언론사에서 개최되었거나 개최되고 있으며 많은 이들이 참여하고 있다. 모의회의를 통해 우리가 개최할 정상회의의 의미와 회의에서 다루어질 안건들의 중요성을 이해 할 수 있는 기회를 만들어주고 있으며 심지어 시장에서 만나는 사람들도 G20가 무엇인지는 몰라도 국제적인 행사라는 것에 대해서는 정도는 인지하고있을 정도로 국민들의 관심이 높다.

운 좋게도 필자는 이번 정상회의를 참관할 수 있는 자격을 얻어서 세계 정상들이 회의하는 모습을 직접 볼 수 있게 되었다. 그러나 국제회의 참관이라는 설레임과 함께 정상회의를 맞이하는 한 국민으로 몇 가지 염려스러운 것들이 있다.

그 첫번째로 국민들이 지속적으로 관심을 가질 수 있는 기반의 부재이다. 

2002년 한국-일본 월드컵이 성공리에 개최되고 4위라는 엄청난 쾌거를 올렸을 때 국민들의 관심과 성원은 대단하였다. 매 게임이 있을 때마다 서울시청앞은 인산인해를 이루었고 전국의 모든 외식업소뿐만 아니라 해외에 있는 교포들이나 유학생들의시선은 TV앞으로 고정되었으며 한골, 한골 넣을 때마다 모두들 하나되어 기쁨을 나누었던 것은 당시에 한국인이면 모두들 기억할 것이다. 그러나 월드컵이 끝나고 한국리그의 관중석과 경기중개를 되돌아 보았을 때, 월드컴에 열광하던 국민들의 관심은 자취를 감추어버렸다.

G-20 정상회의를 월드컵에 비교하는 것은 조금은 억지스럽다고 하는 사람도 있을 것이다. 그러나 G-20 정상회의는 국제경제, 정치의 세계중심에 있는 회의이다. 이를 서울에서 개최한다는 것은 한국인으로서 굉장한 자부심을 느낄만한 일이다. 그러나 국민들의 정치에 대한 부정적인 시각, 현 정부에 대한 비관적 태도 등은 G20 정상회의를 단발적 행사라는 하나의 이벤트로 전락시킬 수 있는 위험요소를 가지고 있다. 

현재 진행된 G20준비과정에서 대학생들이 참여하였던 모의회의는 어디에서도 "제 1회 모의회의"라는 수식어를 찾아볼 수 없다. 이는 수많은 모의회의가 단발성으로 끝나는 이색이벤트로서의 역할만을 하게될 수 있다는 것이다.

이번 정상회의는 지속적인 성과에 따라 현 체제를 유지하며 매년 열릴 예정이다. G20정상회의는 그 성과에 따라 그 체제가 변할 수 있다. 처음 시작할 당시 G7으로 시작하였다가 미국의 경제위기로 인해 국제사회에서 정상회의 필요성을 충족시킬 수 있는 G20체제로 변모하였다. 즉, 현재 G20체제는 G7체제보다 좋은 성과를 이루어낼 때만 지속성이 가능하다. 정부가 G-20체제안에 계속 남아있기 위해서는 정책을 시행함에 있어 국민의 지지가 필요하며 이를 위한 정부의 지속적인 지원도 병행될 때만 정상회의에서 좋은 결과를 만들어낼 수 있는 기반이 생기는 것이다.

정상회의의 성공적 개최도 중요하지만 한국의 국제적 지위를 유지하기위해서는 국민들이 지속적 관심과 지지를 이끌어 낼 수있는 방안들이 계속해서 모색되어야할 필요성이 있다.

두 번째는 국제화시대의 국민들의 인지도이다.

국제화라는 것은 여러나라들이 서로 경제적, 정치적, 그리고 문화적으로 서로 거미줄처럼 연결되어 세계각국에서 일어난 일들이 다른 나라들에 직, 간접적인 영향을 끼칠 수 있게된 하나의 연결고리와 같은 것이다. 

정치적인 예를들면, 천안함 사건때 미국을 포함한 여러나라들이 한국을 지지한 반면 중국을 포함한 몇몇 나라들은 북한을 보호하는 입장에서 국제정세를 대변하였다. 천안함사태는 국내적 문제임에도 불구하고 국제사회에 영향을 미쳤으며 한미 연합 훈련시에도 중국과 외교적 마찰이 있었다. 

경제적인 면에서는 미국에서 발생한 경제위기가 한국의 주식시장뿐아니라 주택, 은행금리등의 변화에 영향을 주었던 것은 단적인 예이다.

문화적으로는 한국의 대중 문화가 일본이나 중국, 인도, 베트남등으로 빠르게 퍼져나가고 ‘한류’를 형성함으로 한국의 유행문화가 다른 국가에서도 유행되는 현상들을 볼 수 있다.

이는 한국은 이미 국제화 속에 들어와있다는 것을 보여준다. 그렇다면 한국인의 문화의식은 국제화가 되었냐?라는 질문을 이쯤에서 던져보려한다. 이 질문은 정상회의가 열리는 기간동안 한국을 방문할 많은 외국인에 비칠 한국인의 모습이 향후 한국의 이미지가 될 수 있기 때문이다.

필자 역시도 평범한 한국인이다. 도심에 급하게 지나가는 행렬, 엘리베이터나 에스컬레이터를 탑승시 바짝붙어있는 모습, 보행자보다는 차량이 우선인 운전습관등은 필자에게 있어 여느 한국인처럼 익숙한 모습들이다. 

그러다 가끔 TV에서 나오는 한 정유사의 광고, 국가브랜드위원회의 공익광고를 볼때면 내 자신의 부끄러운 모습을 느낄 때가 종종 있다. 광고를 보며 한 명의 한국인으로도 부끄럽다고 느끼는 행동들이 외국인의 눈에는 잘 보이지 않을까? 그들 눈에서는 당연하지 않은 모습이어서 놀라기도 할 것이다. 

민망하면서 기억에 남는 일을 하나 예로 들어보면, 보스톤 유학시절 뉴욕으로 운전을 해서 갈 일이 있었다. 뉴욕하면 미국 내에서도 운전하기 쉽지 않은 도시로 유명하다. 몇명의 현지 친구들과 뉴욕시내를 차로 돌아다니는데 뜬금없이 한 친구가 입을열었다. “운전을 굉장히 잘하는 구나.” 그에 대한 대답은 “서울에서 운전해보면 알꺼야.”였다. 서울 도심에서 운전하는 것보다 수월한 뉴욕시내 운전에 대한 나의 생각이었다. 지금은 그 당시보다 훨씬 많은 사람들이 운전중 양보하는 모습을 볼 수 있지만 아직도 외국인의 눈에는 ‘무섭게 운전하는 한국인’이라는 인상을 주고있다는 것을 외국인 친구들과의 대화에서 종종 발견한다.

이렇게 글을 적는 것은 외국인에게 잘보이기 위해서 문화적 의식을 바꿔야한다는 것이 아니다. 그들에게 좋은 인상을 주기위해 영어를 배워야한다는 것 역시 아니다.

약간은 여유로운 모습을 가져볼 필요가 있다는 것이다. 운전중 양보, 에스컬레이터에 오를때는 한칸정도 거리를 두고 타고, 영어를 못 하더라도 웃어줄 수 있는 여유가 한국인에게 필요한 몇 가지 국제화된 문화의식 중 한가지 일 것이다.


G-20 정상회의의 성공적 개최를 준비도 중요하지만 이를 맞이하는 국민들의 정부에 대한 지지 그리고 국제화 속의 문화의식의 변화는 앞으로 한국이 나아갈 길에 좋은 토양의 역할을 할 것이며 이를 위한 정부의 지속적인 지원이 될 때 서울 정상회의의 개최가 성공적이라고 할 수 있을 것이다.

Africa: Commonwealth Countries Have Much to Offer to G20 Discussions, Says Leading Economist

press release18 October 2010

"The Commonwealth has much to offer the G20," according to the economist Stephen Pickford, who wrote an article in a reference report presented to Commonwealth Finance Ministers at their meeting in Washington, DC on 7-8 October 2010.

"Its members include a broad range of countries at very different levels of development, in particular small and vulnerable states," he wrote. "And the Commonwealth has developed considerable expertise on the issues facing its members."

The economist noted that the Commonwealth's relationship with the G20 is not starting from scratch as its members countries make up one-quarter of the total membership of the G20 (a grouping Finance Ministers and Central Bank Governors).

According to Mr Pickford, while the G20 may be an effective mechanism, it should become more representative - especially for developing countries - if it is to play a greater role in the system of global governance.

Stronger and deeper

Mr Pickford, a former UK board member at the IMF and World Bank, acknowledged that the Commonwealth-G20 relationship could be stronger and deeper, and that increased co-operation would be beneficial for both groupings.

The G20, he noted, would benefit from the Commonwealth's analysis and also derive greater legitimacy and representativeness, while the Commonwealth can benefit by ensuring all its members' interests have a fair hearing in the discussions and decisions of the G20.

However, he cautioned that closer Commonwealth-G20 co-operation will need stronger processes and will require a commitment by the Commonwealth to deepen its analysis of issues under consideration by the G20.

Mr Pickford, the former International Monetary Fund and World Bank board member, highlighted trade, development and climate change as three priority issues on the G20 agenda where the Commonwealth can make a significant contribution.

Source:http://allafrica.com/stories/201010190848.html

Africa and the financial crisis, is it really going to be a war ?

Mohamed Ghannouchi, Tunisia PM

The African Development Bank (ADB) took the initiative to gather the African ministers and bank governors to debate the world financial crisis which has been raging for some time, and about which the world experts say that the poorest among the African countries will be the most affected.

At a date between the seism and the G20 Summit, where Africa was represented by the Republic of South Africa alone, invited as an emerging country just like China and Brazil, the leaders coming from other African countries, decided to take action and discuss their own destiny.

The Tunisian Prime Minister, Mohammed Ghannouchi, was the only guest among African high officials who, in turn, took the floor to express their need for a positive approach for the continent, some of them even qualified this Summit as a war council, in which the best decisions should be made to minimise the impact on Africa.

Africa saw the tornado in the far !

The African decision-makers were nearly unanimous on the cat that this crisis will progress from Wall street to Main street, that is to say from the virtual finance to the tangible real economy.

The international banks operating in Africa are withdrawing partially or totally, fearing the collapse of their home market.

However, in exchange, even though the crisis will,  undoubtedly, oblige us to adopt a more cautious attitude, some private national and international investors are now bringing to the market a record volume of new funds dedicated to Africa.

The financial institutions  of the continent must find ridiculous the fact that Africa and most of the African countries have always been considered to be delayed and third world.

The initial evaluation of the African banks shows that the majority of these banks as well as the African financial institutions witnessed the crisis from very close. These banks, these financial institutions including the insurance companies are doing relatively well compared to their international counterparts.

However, if these banks and institutions benefited of their lack of integration into world economy, we are still concerned about the possible unforecast losses in the local markets of shares or due to the risk of change with the high devaluation of currencies in emerging markets.
If others were not able to avoid impact, Africa also will not also succeed to do so !

But we are sound and healthy on the financial plan, other sectors will certainly be affected. The global aspect of the crisis as well as the vulnerability of most African economies, do not leave room for imagining other scenarios, other than seeing the black continent affected, in turn by the financial tsunami.

First, the donations promised by the rich countries to Africa, according to Jean Ping, President of the Commission for the African Union «the financial crisis could reduce once again the ADP (which represents 70% of 2007 budget of the United Nations Fund for Childhood) with the possible consequences this would have on all the engagements made towards Africa».

Qualifying the African ministers Summit «a war council», J. Ping warned against a second wave of repercussions of the crisis as well as their impacts on the continent, which is translated in «a decrease in export receipts due to the decreasing world orders in terms of raw material, as well as a recession in the traditional partner markets of Africa which mainly affect tourism».

Later, the continent will also have to expect another wave of the crisis drawbacks. There will mainly be an avalanche effect because the fall in export receipts will be followed by a decrease in national revenues, a decrease in the investment capacity, a fall in national demand in public as well as private consumption, a rise in joblessness, an inability to cope with  servicing the external debt, and many other aches to be added to a neglected Africa and only considered as a reserve of raw materials by the industrialized countries.

A hard job is awaiting the whole world !

Awaiting a final declaration to finish the activities of this Summit, many issues, solutions, suggestions may be drawn for the African continent in order to cope with the various repercussions of the crisis.

First, a climate of confidence must reign, not only in the choices and decisions made by the African political and economic decision-makers, but also and most importantly in the resources of this continent.

Before this crisis all the African countries have been able to maintain a growth rate of 6.5%, of course « the economic repercussions are henceforward dark, specifies Donald Kaberuka, President of the Group of the ADB, and that growth rate would decrease now to 5% », but Africa is emerging now after a period of ten years of sustained growth, mainly thanks to international demand in African export products, that is raw materials.

There are still so many raw materials in Africa, but also as underlined by the Tunisian prime minister, there is an important amount of human resources.

2008 did not only bring a financial crisis putting everyone in front of difficult choices, but it was also marked by a sharp food and energy crisis, Africa should learn from these crises not to let itself be dragged by overseas forces and expect the worse.

A huge work awaits the leaders of the different African countries in order to make more reforms, a work which consists in mainly adopting a strategy which puts the human being at the core.

A coordinated action should be undertaken to guarantee a good destiny to Africa, an action which should take into consideration the infrastructure improvement in the different African countries; these were the steps of a long and hard day.

A day with as a result a result a small hope for this Africa in war with itself and a victory is too much asking
! source: African Manager

China Plays The Game

By: John M. Mason   Tuesday, October 19, 2010 11:38 AM


The Chinese central bank has announced that it will raise the one year lending and deposit rates by 25 basis points. This has been a major surprise to international financial markets.

One can assume that this move was done very deliberately and very intentionally. The Chinese do not make policy decisions unless they are well thought-out. 

The immediate reason for the move at this time: later this week there will be a meeting of the G-20 finance ministers. Next month in Seoul, South Korea there will be a meeting of the G-20 leaders.

The move is not an accident!

The International Monetary Fund just completed meetings earlier this month in Washington, D. C. Before that meeting, the United Statestook a strong stand on the value of the Chinese currency and the behavior of the Chinese government with respect to this value. The United States made an effort to get other nations to criticize the Chinese position.

The result of the IMF meeting? Little to no pressure was put on the Chinese giving indication that the United States was having no luck in its campaign to bring the Chinese "into line" on the value of their currency. The United States looked weak. 

If China's action on interest rates is followed up by China allowing for a faster climb in its currency, the yuan, the Chinese will strengthen the position of their government within the G-20. It would also strengthen the role of other Asian nations as well as other BRIC nations in negotiations concerning the future of the dollar as a reserve currency. 

Thus, the Chinese would build on the exhibited weakness of the United States at the meetings of the IMF in Washington and help to consolidate other nations around its leadership in world economic affairs. 

Is the United States and China at war? 

In one sense they are. Martin Wolf at the Financial Times of London has written, "In effect, the US is seeking to inflate China, and China to deflate the US. Both sides are convinced they are right…" 

How has this situation developed? Well, in a real sense, the world has bifurcated. Part of the world, generally the developed countries, are struggling to restart their economies from the Great Recession, while many of the emerging countries are doing just fine, thank you. 

The Federal Reserve System in the United States and the European Central Bank seem intent upon buying massive amounts of bonds to carry out a "Quantitative Easing" in an attempt to "jump-start" their economies. The prospect of this has resulted in a weakening of the dollar.
This has not been looked on favorably by the emerging nations who are experiencing economic growth and even a potential threat of inflation.

As a consequence, several of the emerging nations have already taken actions to protect the value of their currency from the weaknesses seen in the American position. These nations have already considered control techniques to protect themselves from the fall in the dollar exchange rate. They are considering the possibility having dual exchange rates, one for trade payments and one for non-trade payments.

The threat here is that world will break into two currency areas, one that is dollar/euro dominated and one that is dominated by China and the other emerging nations. And, certainly, the possibility of some kind of financial controls on foreign exchange is not a settling thought.

The reigning problem to me is the failure of leaders, especially leaders in the United Statesand in other developed countries, to appreciate the changes that have taken place in the world. The continued focus of the leadership in the United States on stimulating internal demand so as to achieve something, full employment of resources, that they really can't achieve, is leading them down the path of isolation. By continuing to follow an economic philosophy that has proven itself to be ineffective (if it ever was effective) is only creating a fissure within the world.

In effect, the United States, by pursuing the same type of policy it has followed for the last 50 years, is not only weakening itself but is providing the stage for the Chinese to exert its own leadership to those the United States policy is hurting.

The Chinese are moving to achieve a position of prominence in the world of the 21st century. What they are doing is very intentional and when they do things, they do them in their own time and for their own reasons. They are not always right, but that is not the point.

The point is that the Chinese are very deliberate in promoting themselves and their country. The United States, however, seems to be helping them achieve what they want to achieve. This cannot continue.


Source :http://www.istockanalyst.com/article/viewarticle/articleid/4593820

U.S. and Korean lawmakers call for big changes to trade agreement Posted By Josh Rogin

Tuesday, October 19, 2010 

When world leaders convene on Seoul next month for the G-20 Summit, trade policy experts are hoping that the United States and the South Korean government will be able to show that they've made progress in finalizing the terms of the long-suffering South Korea-U.S Free Trade Agreement.

The Office of the U.S. Trade Representative (USTR) argues that the agreement, which was signed in 2007 but has not been approved by the United States, "would be the United States' most commercially significant free trade agreement in more than 16 years" and would add $10 billion to $12 billion to annual U.S. GDP, and around $10 billion to annual merchandise exports to Korea. But the deal faces opposition from Congress, and especially from Democrats on Capitol Hill, who complain that it fails to address issues of Korean automotive surpluses and restrictions on Korean imports of American beef.

The U.S. Chamber of Commerce has been pushing hard for the Obama administration to iron out the differences in advance of the G-20 meeting in November, which the president pledged to do when he met with South Korean President Lee Myung-bak in June. But as the U.S. midterm elections approach, both Democratic and Republican candidates have staked out their opposition to the deal amid fears that it could send precious American jobs overseas.

On Monday, 21 U.S. lawmakers joined with 35 South Korea lawmakers to write to both presidents demanding significant changes in the agreement. "An FTA that prioritizes corporate interests over those of our constituents is not an agreement but a compromise of our countries' ideals, and it is one we foresee working to defeat," the lawmakers wrote.

Congressman Mike Michaud (D-ME), chairman of the House Trade Working Group, said in a statement publicizing the letter, "Even beyond the market access issues for textiles, autos and beef, the current free trade agreement is based on the same failed NAFTA model and promises to ship U.S. jobs overseas."

The letter also calls on the agreement to better address issues of alleviating poverty, advocating social justice, advancing human rights, and protecting the environment.

On October 9, USTR put out a statement that the U.S. and the ROK had ""exchanged views relative to the US-Korea trade agreement," but neither side had offered a "formal" proposal. For some Korea observers, the United States' reticence to announce progress in the ongoing discussions over the agreement sends a signal that the administration may not be able to show any concrete progress at the November Seoul Summit.

"Anodyne blather like this helps explain rising concern, if not cynicism, in some business and media circles that USTR is under such tight political constraints from the White House that even having a 'framework' ready for Obama and Lee to initial at the G-20 seems a long shot," Samuels International Vice President Chris Nelson wrote in his newsletter The Nelson Report.

"Certainly the Obama political pros are terrified of angering Labor activists who must turn out in large numbers if Nov. 2 is not to be a total disaster," continued Nelson, "and who can blame them?"

Source:http://thecable.foreignpolicy.com/posts/2010/10/19/us_and_korean_lawmakers_call_for_big_changes_to_trade_agreement