World Economics Thread


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China backs talks on dollar as reserve -Russian source
Thu Mar 19, 2009 11:24am EDT
By Gleb Bryanski
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MOSCOW, March 19 (Reuters) - China and other emerging nations back Russia's call for a discussion on how to replace the dollar as the world's primary reserve currency, a senior Russian government source said on Thursday. Russia has proposed the creation of a new reserve currency, to be issued by international financial institutions, among other measures in the text of its proposals to the April G20 summit published last Monday.

Calls for a rethink of the dollar's status as world's sole benchmark currency come amid concerns about its long-term value as the U.S. Federal Reserve moved to pump more than a trillion dollars of new cash into the ailing economy late Wednesday.

Russia met representatives of China, India and Brazil ahead of the G20 finance ministers meeting last week, as the big emerging powers seek to up their influence on decisionmaking globally. Their first ever joint communique did not mention a new currency but the source said the issue was discussed.

"They (China) did not formally put forward their position for the G20 summit but unofficially they had distributed their paper regarding the same ideas (the need for the new currency)," the source told Reuters, speaking on condition of anonymity.

The source said the Chinese paper envisaged the International Monetary Fund's Special Drawing Rights (SDRs) being first assigned a role of a clearing currency on some transactions and then gradually becoming the main global reserve currency. "They said that the role of reserve currency should be given to SDR," the source said.

A U.N. panel of experts is also looking at using expanded SDRs, originally created by the International Monetary Fund in 1969, but now used mainly as an accounting unit within similar organisations as a new reserve currency instead of the dollar.

Currency specialist Avinash Persaud, a member of the U.N. panel, told a Reuters Funds Summit on Wednesday that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.

The SDR and the old Ecu are essentially combinations of currencies, weighted to a constituent's economic clout, which can be valued against other currencies and against those inside the basket.

The Russian source said Moscow was aware that the emergence of the new global currency would not happen overnight and said its goal was to initiate a discussion about it at the G20 summit in London on April 2.

The source said that India did not object to the discussion but was not prepared to take the lead. The source said South Korea and South Africa backed the idea, while developed nations were not "allergic" to it.

"We are not waiting for everyone to say: 'How beautifully it has all been formulated, let's subscribe to it'," the source said. "The main idea is to start a discussion about it."

Russia holds about half of its reserves, the world's third-largest, in dollars, with the rest in euros and pounds. Prime Minister Vladimir Putin has called on reserve currency issuers to show more financial discipline.

Finance Minister Alexei Kudrin told reporters on the sidelines of the G20 finance ministers meeting that it would take up to 30 years to create a new super-currency, suggesting there was no unity in Russia on the issue.

President Dmitry Medvedev's top economic aide and G20 sherpa Arkady Dvorkovich is behind the Kremlin's G20 proposals, made public one day after Kudrin returned from England. (Reporting by Gleb Bryanski; editing by Mike Dolan/Patrick Graham)

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With the crises percieved to carry own, there's at least the perspective of cheap oil / energy. So inflation will (hopefully) remain low. One gleam of hope for the private consumer.

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Oil falls amid turmoil for auto sector, stimulus push

EW YORK (MarketWatch) -- Crude futures fell more than 5% Monday to below $50 a barrel on rekindled concerns that a slow recovery in global growth will continue to weigh on energy demand.

Analysts said energy prices also were coming under pressure over investor worries about the auto industry, with fresh turmoil buffeting General Motors Corp. and Chrysler LLC.

On the New York Mercantile Exchange, crude for May delivery dropped $2.83, or 5.4%, to $49.55 a barrel. Earlier, the contract hit an intraday low of $49.36 a barrel.
On Wall Street, U.S. stocks fell sharply, retreating after the White House said bankruptcy was a possibility for GM and Chrysler, while hopes for a new round of stimulus spending appear thwarted.
"Oil is trading lower today due to the shocking news out of the auto industry and the implications for demand if GM and/or Chrysler fall within the next 60 days," said Zachary Oxman of TrendMax Futures. "I think the market sees that this recession is nowhere near over."



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Japan PM unveils $150bn stimulus

Japan has formally unveiled its record $150bn (£105bn) stimulus package as it seeks to revive its flagging economy.

Prime Minister Taro Aso said the plan - worth about 3% of its gross domestic product - aimed to protect livelihoods and to foster future growth.

The 15.4 trillion yen package includes measures to boost fuel-efficient vehicles and consumer electronics.

Japan's economy has been battered by a collapse in exports and is facing its deepest recession since World War II.

Japan's ruling coalition plans to put the stimulus package before parliament by the end of the month.


This is the government's third stimulus plan in the past year. It comes on top of 12tn yen of spending in earlier packages, as well as tax breaks and cash handouts.

It also creates a financial safety net for temporary workers, boost struggling firms and support regional economies.

Mr Aso said the new steps would be partially funded by issuing new government bonds.

Japan has been worst-hit among advanced nations by the global economic downturn.

Its exports have halved amid an unprecedented collapse in worldwide demand for the cars and electronic gadgets the country produces.

The government has a long-term goal to shift the economy's focus from exports to domestic sectors poised for major growth.

It wants to be a world leader in energy efficient technology and to bolster care for its huge and growing elderly population.

The aim is to create as many as two million jobs in the next three years.


Again, a lot of more money from a government for the economy, this time in the far east.
Hopefully, all those depts won't bite back too hard in the future.


More, this time from central europe:

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German March Inflation Rate Falls to Lowest in Almost 10 Years

Germany’s inflation rate fell to the lowest level in almost ten years in March after oil prices dropped and the deepening recession eroded demand.

Inflation, calculated using a harmonized European Union method, slowed to 0.4 percent from 1 percent in February, the Federal Statistics Office in Wiesbaden said today, confirming a March 27 estimate. The March rate is the lowest since June 1999. From a month earlier, prices fell 0.2 percent.
With the ECB not lowering the interest rate too much and a low oil demand, at least the prices remain stable and keep the domestic demand somewhat alive.
Then again there's still a lot of money put into stimulus packages financed by dept. So infaltion later on or higher taxes are probably still a possibility.

But production is being hit really hard:

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German Industrial Output Fell for a Sixth Month in February

April 9 (Bloomberg) -- Industrial production in Germany, Europe’s largest economy, dropped for a sixth month in February as the global recession sapped demand for goods at home and abroad.

Output fell a seasonally adjusted 2.9 percent from January, when it slumped 6.1 percent, the most since data for a reunified Germany began in 1991, the Economy Ministry in Berlin said today. Economists expected a decline of 3 percent, the median of 30 forecasts in a Bloomberg survey showed. From a year earlier, output collapsed 20.6 percent.

A global slump in demand has forced German companies to scale back production and cut jobs, pushing the economy into its worst recession since World War II. The government has pledged 82 billion euros ($109 billion) to stimulate growth, while the European Central Bank has signaled it will cut interest rates to a fresh record low.

“Industrial production is still suffering from the poor order situation, in particular from abroad” said Simon Junker, an economist at Commerzbank AG in Frankfurt. “We don’t expect a recovery before the second half of the year, when the economic stimulus packages and the decline in interest rates should kick in.”

The ministry revised last month’s decline in output from an initially-reported 7.5 percent. This month’s drop was led by a 4.5 percent slump in production of investment goods, the Economy Ministry said. Construction output rose 1.9 percent from January.

Order Slump

Manufacturing orders plunged 38 percent in February from a year earlier, exports dropped for a fifth month, and German business confidence fell to the lowest level in more than 26 years in March. The economy may shrink as much as 5.3 percent this year before a “slow” recovery in 2010, according to the Organization for Economic Cooperation and Development.

Latest indicators suggest “that the decline in gross domestic product in the first quarter of 2009 could be even stronger than in the last quarter of 2008,” when the economy contracted 2.1 percent, Bundesbank President Axel Weber said last week. “That’s why we have to expect a considerable decline in GDP in 2009 overall.”

Bayerische Motoren Werke AG, the world’s biggest maker of luxury vehicles, yesterday said March deliveries fell 17 percent. German auto-parts company ElringKlinger AG expects the first decline in sales in at least a decade. Chief Executive Officer Stefan Wolf said last week he had “never seen anything like this.”

The ECB expects the euro-region economy, which takes just over 40 percent of German exports, to contract about 2.7 percent in 2009. The central bank has cut its benchmark lending rate to a record low of 1.25 percent and signaled another reduction is likely in May.


Junior Member
USA's economic glory has ended, soon will its military power.

Why did I conclude like this? Because their very foundation of their financial institutions are all shattered. Many industries are falling down. This is an alarming situation considering they are the one championing capitalism and these are vital sectors of their economy in sustaining their wealth.


Banned Idiot
USA's economic glory has ended, soon will its military power.

Why did I conclude like this? Because their very foundation of their financial institutions are all shattered. Many industries are falling down. This is an alarming situation considering they are the one championing capitalism and these are vital sectors of their economy in sustaining their wealth.
I doubt it and you are making one very big generalisation and if you are prepared to look , there are just as many economists that are confident in Americas future. Its taken some serious pounding, but its economy is still three times plus larger than any other country, andthe resilence of its people with its proven ability to innovate, it will still lead the world for most of this century.

I dont know what you mean by military power diminishing, but the technological superiority will be maintained in the decades to come, but how they apply their military, needs some re thinking, as wars of the ww2 scenario are unlikely. They are more likely to resemble what we have now, and in that they are gaining experience.