Publicado: 11-24-2010 01:52 PM
CHINA, RUSSIA QUIT DOLLAR RESPONDING OBAMA'S POLICIES
By Su Qiang and Li Xiaokun (China Daily)
Premier Wen Jiabao shakes hands with his Russian counterpart Vladimir Putin on a visit to St. Petersburg on Tuesday.ALEXEY DRUZHININ / AFP
St. Petersburg, Russia - China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.
Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.
“About trade settlement, we have decided to use our own currencies,” Putin said at a joint news conference with Wen in St. Petersburg.
The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities.
The yuan has now started trading against the Russian rouble in the Chinese interbank market, while the renminbi will soon be allowed to trade against the rouble in Russia, Putin said.
“That has forged an important step in bilateral trade and it is a result of the consolidated financial systems of world countries,” he said.
Putin made his remarks after a meeting with Wen. They also officiated at a signing ceremony for 12 documents, including energy cooperation.
The documents covered cooperation on aviation, railroad construction, customs, protecting intellectual property, culture and a joint communiqu. Details of the documents have yet to be released.
Putin said one of the pacts between the two countries is about the purchase of two nuclear reactors from Russia by China’s Tianwan nuclear power plant, the most advanced nuclear power complex in China.
Putin has called for boosting sales of natural resources - Russia’s main export - to China, but price has proven to be a sticking point.
Russian Deputy Prime Minister Igor Sechin, who holds sway over Russia’s energy sector, said following a meeting with Chinese representatives that Moscow and Beijing are unlikely to agree on the price of Russian gas supplies to China before the middle of next year.
Russia is looking for China to pay prices similar to those Russian gas giant Gazprom charges its European customers, but Beijing wants a discount. The two sides were about $100 per 1,000 cubic meters apart, according to Chinese officials last week.
Wen’s trip follows Russian President Dmitry Medvedev’s three-day visit to China in September, during which he and President Hu Jintao launched a cross-border pipeline linking the world’s biggest energy producer with the largest energy consumer.
Wen said at the press conference that the partnership between Beijing and Moscow has “reached an unprecedented level” and pledged the two countries will “never become each other’s enemy”.
Over the past year, “our strategic cooperative partnership endured strenuous tests and reached an unprecedented level,” Wen said, adding the two nations are now more confident and determined to defend their mutual interests.
“China will firmly follow the path of peaceful development and support the renaissance of Russia as a great power,” he said.
“The modernization of China will not affect other countries’ interests, while a solid and strong Sino-Russian relationship is in line with the fundamental interests of both countries.”
Wen said Beijing is willing to boost cooperation with Moscow in Northeast Asia, Central Asia and the Asia-Pacific region, as well as in major international organizations and on mechanisms in pursuit of a “fair and reasonable new order” in international politics and the economy.
Sun Zhuangzhi, a senior researcher in Central Asian studies at the Chinese Academy of Social Sciences, said the new mode of trade settlement between China and Russia follows a global trend after the financial crisis exposed the faults of a dollar-dominated world financial system.
Pang Zhongying, who specializes in international politics at Renmin University of China, said the proposal is not challenging the dollar, but aimed at avoiding the risks the dollar represents.
Wen arrived in the northern Russian city on Monday evening for a regular meeting between Chinese and Russian heads of government.
He left St. Petersburg for Moscow late on Tuesday and is set to meet with Russian President Dmitry Medvedev on Wednesday.
Agencies and Zhou Wa contributed to this story.
BRAZIL Y VENEZUELA TAMBIEN APOYAN LA DESDOLARIZACION DE LAS TRANSACIONES COMERCIALES INTERNACIONALES. SI AÑADIMOS LA DEBACLE SUFRIDA POR OBAMA EN LA REUNION DE LOS G20 EN SEUL, ¿PUEDEN MENCIONAR UN SOLO PAIS EN QUE LA GENUFLEXIONES Y APOLOGIAS DE OBAMA SE HAYA TRADUCIDO EN APOYO INTERNACIONAL HACIA ÉL O HACIA LOS ESTADOS UNIDOS?
Germany: Called Obama's Financial Policy “Clueless”
Germany Was Right When It Called Our Financial Policy “Clueless”
Larry M. Elkin, Palisades Hudson | Nov. 13, 2010
Larry M. Elkin is the president of Palisades Hudson Financial Group LLC.
“With all due respect, U.S. policy is clueless,” German Finance Minister Wolfgang Schaeuble said recently, referring to the Federal Reserve’s decision to throw $600 billion at our sluggish economy.
It’s never a good thing when another country calls your financial policy clueless. It’s particularly bad if that other country is one of the world’s leading economies, and if it also happens to be right.
The Fed can create as much money as it likes, but the U.S. economy is presently unable to productively put that money to work. By setting near-zero interest rates, the Fed has established that money in this country has no real value. We give it to the banks for nothing, and the banks lend it back to the deficit-ridden U.S. Treasury for almost nothing. The result is a guaranteed profit for the banks, but no incentive to lend cash to creative entrepreneurs or expanding businesses.
The Fed’s $600 billion intervention will make this foolishness more efficient by cutting out the middleman. There will be no need for banks to buy Treasury securities for the next eight months. The Fed plans to buy, for itself, just about as much debt as the Treasury plans to sell in that period.
The banks will just sit there uselessly, unable to attract deposits with near-zero rates (or negative rates for many depositors, when fees are considered), and unwilling to risk making loans to businesses in a weak economy while regulators are worried about the banks’ financial strength.
The whole idea behind banking is to have solid, well-capitalized institutions that can attract deposits with a fair rate of interest, and still make a profit by lending depositors’ money at higher, yet reasonable, rates to creditworthy borrowers. It’s a great system. We ought to try it.
Instead, we are going to flood developing nations, which offer better potential investment returns, with cheap dollars. South African finance minister Pravin Gordhan warned that “Developing countries, including South Africa, would bear the brunt of the U.S. decision to open its flood gates without due consideration of the consequences for other nations.” Those consequences will include asset bubbles, inflation and painful currency gyrations.
Brazil’s Central Bank Governor, Henrique Meirelles, told reporters that already “excess liquidity in the U.S. is creating problems in other countries.” Brazil’s currency, the real, has risen 39 percent against the dollar since the start of 2009, interfering with the country’s export market.
The Group of 20 summit in South Korea this week gave President Obama an opportunity to defend U.S. policy, but it’s not an easy policy to defend. The only truly convincing argument he could offer is that in 2012 this country might elect more responsible officials and get itself back on track.
Not surprisingly, that was not the message the president wanted to deliver. Instead, he planned to focus on drumming up support for another bad policy move: capping current account surpluses and deficits at 4 percent of gross domestic product.
This proposal, first floated last month by Treasury Secretary Timothy Geithner, has allowed the Chinese to cast themselves as wise and responsible players while blatantly manipulating their currency in order to keep it pegged to the U.S. dollar. Chinese Vice-Foreign Minister Cui Tiankai said in a news briefing, “Of course, we hope to see more balanced current accounts. But we believe it would not be a good approach to single out this issue and focus all attention on it. The artificial setting of a numerical target cannot but remind us of the days of planned economies.”
The proposal to cap account imbalances simply highlights the fact that the United States has failed to bring what it buys from abroad into any sort of reasonable relationship to what it is able to sell overseas. Rather than actually working to accomplish this balance through domestic policy, we want to impose on the rest of the world the financial discipline we lack.
The United States is the lynchpin of the global economy. We buy more stuff than anyone else, we make more stuff than anyone else, and we produce the currency that everyone else uses as either a direct or indirect reference point. If the United States fails to adopt responsible financial policies, the rest of the world will have to sever ties or risk being pulled down as the American economy sinks.
The world is losing confidence in our financial common sense. Just this week, China’s Dagong credit rating agency reduced its rating on U.S. government debt from AA to A+. If Obama cannot address this country’s problems at forums like the G-20 summit, foreigners will have little choice but to do what they can to mitigate the effects that our mismanagement could have on their countries.
The first thing other countries will need to do to insulate themselves from failing U.S. economic policy is to stop lending money to a country that thinks it can whip up prosperity by creating gobs of cash out of thin air. As our bonds mature, we will be unable to refinance them by issuing new paper to foreign buyers.
The Federal Reserve has sworn not to “monetize” the debt by buying bonds the Treasury cannot sell elsewhere, but it will end up having to do exactly that to avoid default. The dollar will plunge. Commodity prices and U.S. inflation will very likely soar. Other countries will begin to demand that we pay for their products using currencies that still have value. We’ll still be able to get Middle Eastern oil and Italian leather shoes, but only when we can scrape together the euros, yuan or Swiss francs that the market will demand as payment.
The eventual result will be a recession far worse than the one we just experienced. And, in this future downturn, the government will not be able to borrow money to provide extended unemployment benefits or other relief programs.
Schaeuble was exactly right when he called American financial policy “clueless.” The fact that the rest of the world is beginning to see this is, in fact, a clue to what is ahead for America. Here’s another clue: It isn’t going to be pretty.
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