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Gopher
Joined: 04 Jun 2005
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 Posted: Thu Oct 16, 2008 7:06 pm Post subject: N. Sarkozy calls to dismantle, restructure Bretton Woods... |
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BRUSSELS, Oct. 16 -- European leaders on Thursday urged that a pending international summit carry out an urgent overhaul of the world's financial architecture and impose new controls on freewheeling bankers and traders. U.S. officials pledged that all good ideas would get an airing but hinted of opposition to giving new authority to international regulators.
French President Nicholas Sarkozy, who holds the European Union's rotating presidency, said here that he will meet President Bush on Saturday in Washington to lay the groundwork for the conference, which the Group of Eight industrialized countries is convening. It should "re-found the capitalist system" that has governed international financial exchanges since World War II, Sarkozy said... |
Western Europeans looking to exploit this to return to the good-old days when they policed the world system.
Washington Post |
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Gopher
Joined: 04 Jun 2005
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| Posted: Thu Oct 16, 2008 7:14 pm Post subject: |
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Also, this part...
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| Jos� Manuel Barroso, head of the European Union's executive body here in Brussels, cautioned that the United States must be brought aboard for the conference to succeed: "There can't be a solution to the international financial crisis without the active participation of the United States." |
does not inspire any confidence in all of those who presently engage in antiAmerican triumphalism, asserting that American power is dead and gone.
In any case, the EU, the leadership, that is, not the smug, elitist press, understands that if we part company, they will suffer badly. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Oct 16, 2008 7:20 pm Post subject: |
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| This is happening much faster than I, or anybody I read assumed. |
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Gopher
Joined: 04 Jun 2005
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| Posted: Thu Oct 16, 2008 8:06 pm Post subject: |
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| That is not true. You were matter-of-factly proclaiming the definitive end of "the American Empire" less than a week ago. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Oct 16, 2008 8:09 pm Post subject: |
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Yes, the American empire is in decline. But the Bretton Woods system or regime I expected to last likely into the next crises, though significantly weakened and more unstable.
This, because China will try and keep the export gravy-train going long past when they should adjust. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Oct 16, 2008 8:11 pm Post subject: |
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http://www.nakedcapitalism.com/2008/10/renminbi-to-fall-next-year.html
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One of the trades that looked like a no-brainer was betting on continued appreciation of the Chinese renminbi. In fact, so strong was the confidence in this outlook that China suffered from large-scale hot currency inflows (as recounted ably by Brad Setser) despite the official obstacles.
A top investment in China is now forecasting a small fall in the renminbi next year. Not only is that bad for US exports, bad for global rebalancing (a higher renminbi would do wonders to slow China's destabilizing growth in foreign exchange reserves), but an exit of the hot money certain of either a revaluation upward or continued appreciation could have nasty knock-on effects for China.
The theory is that China will now try to keep the renminbi weak to preserve its exports. So far this is a lone forecast, but if it were to pan out, it would not be a good development. While not obvious, it would amount to a defacto race to the bottom in currencies.
From ChinaStakes (hat tip reader Michael):
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China International Capital Corporation (CICC), a leading investment bank in China, expects RMB to fall against the USD by 2% next year.
Since the 2005 RMB exchange rate reform, or the even the beginning of RMB appreciation expectations in 2003, thoughts about any depreciation of RMB have never appeared in investment bank reports. But yesterday CICC Chief Economist Ha Jiming expressed just such expectation for the first time in a CICC report. �The RMB exchange rate against USD depends on the USD trend. Next year RMB may be 2% down against the USD.�
Recently, although many international investment banks have expressed pessimistic prediction on the Chinese economy, none has expected the RMB to depreciate.
Expectation for China�s GDP growth in 2009 has dropped to 8.7%, 8%, and 9% by Goldman Sachs, UBS, and Barclays, respectively, in reports issued early in October. Goldman Sachs also predicted China�s financial deficit in 2009 to be 2%, and Barclays 1.5%. But even with such pessimistic economic predictions, they still maintained their expectation for RMB appreciation. Goldman Sachs predicted RMB appreciation in 2009 to be 3%, while UBS expected the RMB/USD rate to rise by nearly 3% to 6.3. Barclays predicted �RMB appreciation will slow down�.
According to the report issued in August by Wang Qing, Greater China Chief Economist for Morgan Stanley, at the end of 2009 the RMB/USD rate will rise to 6.3, meaning RMB will appreciate by 7.7% in less than 14 months. Wang Qing also said there was no market condition for RMB depreciation, and believes RMB can hardly depreciate continuously.
But strong depreciation expectation for RMB occurred in the non-deliverable forward (NDF) market since China�s central bank announced an interest rate cut in September. In late September RMB�s five-year NDF approached 7.0, while one-year and two-year RMB NDF both fell to less than 7.0 in October. Depreciation expectation is strengthening.
Ha Jiming says that with the global financial crisis, the Chinese economy is declining, and more obvious decline will appear in exports next year. Since the decrease of export orders has lagged behind the economic decline, it seems exports are now dropping drastically, but this may accelerate next year. Besides, hot money inflows won�t be so active in future as they have been, and overseas companies will withdraw funds and profits from China due to the global credit crunch. With these factors, RMB will depreciate against the USD. |
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The global dollar standard will survive this crises, I believe. But this crises has planted the seeds of change. But you can't change the system in the middle of a crises. |
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Gopher
Joined: 04 Jun 2005
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| Posted: Thu Oct 16, 2008 8:13 pm Post subject: |
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Neither China nor any combination of Western European powers are positioned to dismantle and/or rewrite Bretton Woods as they like. The system has only changed through massive world wars -- Napoleonic Wars and the First and Second World Wars, to be precise. Where is such a conflict today, Mises?
Further, this entire "decline" discourse is little more than mere wishful thinking on the part of those pining for it to happen, hoping that should they repeat it a magic number of times in the press, on the internet, etc., then enough people will believe it is real that it will all come true. Call it a psych-warfare campaign.
Finally, this is not a disinterested discourse and proposal. N. Sarkozy and co., I presume, want to propose a system where they will establish regulatory authority over the American economy. They apparently want the American govt to voluntarily submit to this. Unlikely to succeed, to say the least. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Oct 16, 2008 8:20 pm Post subject: |
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Well, the wishful thinking is somewhere. And anyways, weren't you a few days back arguing that the US wasn't that powerful and it was American-centric to argue it is?
There are a wide variety of regimes that could replace the dollar as a means of global exchange. And whatever regime is born will have to reflect the new economic reality of our globe. |
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Gopher
Joined: 04 Jun 2005
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| Posted: Thu Oct 16, 2008 8:46 pm Post subject: |
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| mises wrote: |
| ...weren't you a few days back arguing that the US wasn't that powerful and it was American-centric to argue it is? |
Yes, this remains my position. I do not see any conflict with my position on this thread, either. The American govt presides over the capitalist system, and has done so, since the Second World War.
Do you take this to mean that the United States dominates the planet?
In any case, please remember: nearly all of those in Western Europe took the reverse position in the interwar years, when they repeatedly offered the American govt this position and the American govt declined. They bitterly complained about American isolationism, etc.
| mises wrote: |
| There are a wide variety of regimes that could replace the dollar as a means of global exchange. And whatever regime is born will have to reflect the new economic reality of our globe. |
This suggests that you believe that, as opposed to the American-led capitalist system, which is apparently selfish and irresponsible, the regime that replaces it will benevolently take "the people of the world's" interests at heart and reflect "our globe," as if "we" represented a monolithic or at least united population, and its concerns, etc.?
We, we Americans, Mises, are not the villain, impeding progress, etc. And there is no disinterested hero waiting to take over and lead us all, that is, "the people of the world," especially "the rest of the world," into Star Trek.
Should the American-led system decline or collapse, and should another power replace the United States, you can be sure of this: we will all be right back here within a century or two. Only then the Americans will get to be smug and allegedly sophisticated like the Western Europeans are today and some other poor nation will get to be the scapegoat and the villain...
Last edited by Gopher on Thu Oct 16, 2008 8:52 pm; edited 1 time in total |
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Adventurer
Joined: 28 Jan 2006
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| Posted: Thu Oct 16, 2008 8:51 pm Post subject: |
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| mises wrote: |
Well, the wishful thinking is somewhere. And anyways, weren't you a few days back arguing that the US wasn't that powerful and it was American-centric to argue it is?
There are a wide variety of regimes that could replace the dollar as a means of global exchange. And whatever regime is born will have to reflect the new economic reality of our globe. |
Frankly, we all know that the United States should not simply be treated as some God not to be criticized by its own people when it comes to economics, foreign policy, and the polity should be more educated when it comes to government, more engaged and the like. If all that was in place, things would be better. Do you think the Greeks don't slam their governments? What about the Italians?
As far as the United States, with what has happened in the past 8 years of so, though it is easy to blame George Bush, has seen America hit a serious bubble, and much of the global crisis has been blamed on the U.S., though that's unfair. The economy has been mismanaged horribly. Let us face it, that the economy has to be direct and managed and regulated, and that has not been done, because those on right and some people who claim to be on the left stopped that.
The U.S. has looked weak with the way it engaged itself in Iraq, the economic crisis, how it responded to Hurricane Katrina under George W, and the list goes on and on. Again, it's not Bush's fault. He was just there, and his administration made things worse. America is weak, Gopher, let's face it, and something must be done about that. America in some decades ago doubted itself when the Soviets someone to space and worked hard to make progress in many areas. How about making some progress and major changes? I am not sure if you realized it, but many people are scared in America, and they should be. My father, who is an economist, is nervous, but you act like this is all no big deal.
We need to have a G8 meeting, have more uniform global standards when it comes to financial dealings, currency, lending etc... We should at least have discussions on these matters. I can't say what should be done, but this business as usual is not working. The S&L crisis was a warning sign. With increased global trade, comes more responsibilities. |
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Gopher
Joined: 04 Jun 2005
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| Posted: Thu Oct 16, 2008 8:57 pm Post subject: |
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If America is so weak, why does NATO still stand? It is a voluntary alliance, Adventurer. Any member could walk away from it at any time. Or why does H. Chavez not have Latin America united against us, if not attacking us, then at least slapping us around with embargoes or other sanctions? Or why are our enemies not raiding our territory? Why is the Chinese govt asking how we feel about their still-under-construction navy's possibly policing the Western Pacific, rather than throwing us out, as we did the British Navy in the Caribbean after 1895? Etc., etc., etc.
"Weak" is like the Ottomans following the First World War -- or like the British in the Eastern Med following the Second World War, or in South Asia, for that matter.
Where is this weakness, Adventurer? We took down Saddam in a month. Are we mothballing aircraft carriers or retreating from the Middle East -- or more to the point: is Tehran throwing us out -- and I missed it or something? |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Oct 16, 2008 9:11 pm Post subject: |
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| This suggests that you believe that, as opposed to the American-led capitalist system, which is apparently selfish and irresponsible, the regime that replaces it will benevolently take "the people of the world's" interests at heart and reflect "our globe," as if "we" represented a monolithic or at least united population, and its concerns, etc.? |
Jesus Christ. You're getting really paranoid and conspiratorial. Like a Right Wing Truther that sees nefarious forces and hostile intent behind even the most mundane statements. Like the 9/11 truthers and the way they hang on to GHWB's "new world order" statement and then see that statement growling under their bed at bedtime.
No. The current global financial order is representative of a world overwhelmingly dominated by the West. Things are changing.
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We, we Americans, Mises, are not the villain, impeding progress, etc. And there is no disinterested hero waiting to take over and lead us into Star Trek. |
Seriously.
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| Should the American-led system decline or collapse, and should another power replace the United States, you can be sure of this: we will all be right back here within a century or two. Only then the Americans will get to be smug and allegedly sophisticated like the Western Europeans are today... |
Nothing really left to this topic, given the direction you will force it to take. |
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Gopher
Joined: 04 Jun 2005
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| Posted: Thu Oct 16, 2008 9:29 pm Post subject: |
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But we can wait and see where it goes. And one of us gets to tell the other how wrong he was after this weekend.
For if America is truly declining and truly this weak, then N. Sarkozy and whoever is with him ought to be able to secure whatever changes they want, no?
And that is not paranoid at all, Mises. Stop, for the thousandth time, attributing mental illness to those who hold views you disagree with. If you believe that only the American-led system represents self-interest and that a successor system will reflect disinterest, you will find yourself completely in the wrong and as disappointed as B. Obama's supporters are about to become when he fails, in the next year or so, to do all of the things they are chanting that he is going to do.
Last edited by Gopher on Thu Oct 16, 2008 9:32 pm; edited 1 time in total |
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BS.Dos.
Joined: 29 Mar 2007
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| Posted: Thu Oct 16, 2008 9:30 pm Post subject: |
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| Apparently, Sarkozy's just been on the phone to the white house to outline his plans, but there was no one in so he had to leave a message. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Oct 16, 2008 9:58 pm Post subject: |
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| Quote: |
| If you believe that only the American-led system represents self-interest and that a successor system will reflect disinterest, you will find yourself completely in the wrong and as disappointed as B. Obama's supporters are about to become when he fails, in the next year or so, to do all of the things they are chanting that he is going to do. |
1) That the system represents the post-war political economy is clear. The benefits and deficiencies of the system are varied and spread among both major and minor actors. But the Bretton Woods 2 system can only be stable as long as foreigners are willing to fund the American current account deficit. This is a "Nash equilibrium" which is unstable in the long run, given our world as it is.
http://www.safehaven.ca/showarticle.cfm?id=4399&pv=1
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Bretton Woods Two is actually a Nash equilibrium. In game theory, the Nash equilibrium (named after John Nash) is a kind of optimal strategy for games involving two or more players, whereby the players reach an outcome to mutual advantage (or often as not mutual disadvantage). If there is a set of strategies for a game with the property that no player can benefit by changing his strategy while (if) the other players keep their strategies unchanged, then that set of strategies and the corresponding payoffs constitute a Nash equilibrium.
Foreign nations, but primarily Asian nations, take our electronic dollars and send us "stuff." On our side of the equilibrium, American consumers agree to not save very much and borrow against our rising housing values to hold up our end of the bargain. We have been very good at holding up our part of the bargain.
They agree to keep prices down. If they tried to get rid of their dollars, their currencies would rise in value against the dollar, and thus the cost of their stuff to us. This would make them less competitive against each other. So, to keep their factories going, they keep their currencies low in a competitive devaluation. |
I see no way in which this can be sustained in the medium term. Any new system needs to raise American savings rates and increase Asian consumption for it to be stable.
2) Obama has, as far as I know, not even mentioned this subject. |
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