Nepal – the country of the Buddha and the Mt. Everest

Peace comes from within. Do not seek it without – Buddha

Posts Tagged ‘World Finance’

Does the World Believe America Will Pay Its Debts?

Posted by Ram Kumar Shrestha on April 7, 2012

GETTY IMAGES

If you spend any time reading about economics on the internet, you’re aware of the many virtual pamphleteers who loudly portend the impending downfall of the American government and global financial system in general. It’s become somewhat fashionable to proclaim America a banana republic, arguing that she is financing her debt with central bank purchases of government bonds, a strategy that is unsustainable and often ends in a blaze of hyperinflation and economic collapse.

No serious observer really believes that the U.S. faces this fate in the near term. Perhaps much of this hyperbolic rhetoric is merely an effort to get the U.S. to reign in its debt – something, long term, it certainly needs to do. But a strand of this thinking has made its way into the mainstream and is distorting the debate about the federal government’s attempts to steer the economy out of a recession.

(SPECIAL: Turning Point for the Global Recession?)

Lawrence Goodman opined in the Wall Street Journal last week that, “Demand for U.S. Debt Is Not Limitless.”  In the piece, Goodman takes aim at those who have argued that demand for U.S. debt is strong, and that regardless of what the rating agencies say, the marketplace believes the U.S. will pay its bills. In particular, he highlights the “stunning” fact that in 2011 the Fed purchased 61% of the debt issued by the Treasury, up from negligible amounts prior to the 2008 financial crisis. This, he added, “not only creates the false appearance of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.” Read the rest of this entry »

Posted in Article, Global | Tagged: , , , , , , , , , | Leave a Comment »

The Fall of Bo Xilai and the Future of Chinese Growth

Posted by Ram Kumar Shrestha on March 29, 2012

MARK RALSTON / AFP / Getty Images

MARK RALSTON / AFP / GETTY IMAGES
Bo Xilai, the charismatic but controversial Communist Party leader of China’s Chongqing municipality, was removed from his post.

The fall of Bo Xilai, the former head of the Chinese Communist Party in the sprawling mid-Western city of Chongqing, is the stuff of movies.  A member of the party elite and supposed corruption fighter who was seen to have brought order to a Blade Runner-esque sprawl with a population the size of Belgium, Bo was not only poised to enter the top rungs of the Politburo this year, he was the first Chinese celebrity politician since Deng and Mao. In a country where the Party likes to speak with one voice, and tall poppies are often cut down, he stood out. He dressed well; he cultivated the media; he had his own one page Comment and Analysis piece in the Financial Times.

But in March, he was abruptly dismissed as the Party head of Chongqing, after his police chief, Wang Lijun, sought asylum in the U.S. consulate in Chengdu, a city several hours northwest of Chongqing. Wang had provided evidence of crimes allegedly involving Bo, according to reports in the Financial Times and the Wall Street Journal, including murders carried out on his order. Wang also claimed that a dead British businessman, Neil Heywood, who was said to be close to Bo’s wife Gu Kailai, had been in a business dispute with her, and had been poisoned. Rather than being a tough-but-honest politician fighting corruption in China’s Wild West, a very different picture of Bo began to emerge — one of a man who his critics say was an entitled “princeling” (his father was Bo Yibo, a revolutionary general who had fought alongside Chairman Mao), and who was corrupt himself; someone willing to torture, frame, and even murder anyone who got in his way. Read the rest of this entry »

Posted in Article | Tagged: , , , , , , | Leave a Comment »

Why Portugal May Be the Next Greece

Posted by Ram Kumar Shrestha on March 28, 2012

The worst is over for the euro zone, the experts say. But Greece isn’t really fixed and Portugal could become a second big problem before year-end
Getty Images

GETTY IMAGES

When Greece celebrated its Independence Day on Sunday, there were scattered protests over the harsh austerity program aimed at stabilizing the country’s finances. The government reportedly removed low-hanging fruit from bitter-orange trees along the parade route, so it couldn’t be thrown by protesters. But, basically, the most recent bailout appears to be successful. As a result, worries about the European financial crisis have diminished somewhat. Indeed, European Central Bank president Mario Draghi has said that the worst is over for the euro-currency zone.

Such optimism may be premature, however. Not only does Greece remain a long-term financial concern, but in addition Portugal is on track to become a second big problem.

The dangers Greece still poses are clear. Higher taxes and government-spending cuts may reduce new borrowing, but such austerity policies also undermine a country’s ability to pay the interest on its existing debt. Unless accompanied by progrowth policies, austerity can become the financial equivalent of a medieval doctor trying to cure patients by bleeding them. In addition, the bailout plan for Greece consisted of marking down the value of much of the country’s debt held by banks and other private lenders. That means entities such as the European Central Bank now hold most of Greece’s remaining debt. And so, in the event of a default, important international institutions would suffer the greatest damage.

(MORE: Is Germany’s Euro-Crisis Strategy Actually Working?)

The net result has been to postpone the Greek financial crisis for months or even a couple of years, while raising the stakes if things go wrong. That could be seen as a considerable achievement, if you believe Greece is a unique case and that the problem has been successfully contained. The trouble is that other countries — and especially Portugal — seem to be heading down the same path. Here’s why forecasters are worried: Read the rest of this entry »

Posted in Article | Tagged: , , , , , , , , , , , | Leave a Comment »

Can Asian-Style Capitalism Save the West?

Posted by Ram Kumar Shrestha on March 26, 2012

Getty Images

GETTY IMAGES

As you can imagine, the people out in Asia are feeling pretty good about themselves these days. And why shouldn’t they? While the U.S. and Europe struggle with debt, unemployment and sagging competitiveness, most of Asia seems to jump from strength to strength, its economies powering through the downturn with apparent ease, its companies becoming more and more prominent on the world stage. So it’s no wonder that many Asians have come to believe that their economic systems are superior to those of the U.S. and Europe — and that policymakers in Washington, London and Berlin should finally sit up and pay attention. For decades, Asia had been schooled in the wonders of free capitalism by the West, and benefited tremendously. Now, many out there believe, the time has come for the West to learn from Asia.

Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, made this argument outright in a recent blog post on the Financial Times website, in which he argued that Asian-style capitalism is the solution to the West’s woes:

The time may have come for Asians to reciprocate the generosity of the west in sharing capitalism with Asia. Western policymakers and thought leaders should be invited to visit the industrial complexes and service industries of Japan and Korea, Taiwan and China, Hong Kong and Singapore. There may be a few valuable lessons to be learnt.

What are those lessons? Can they really turn around the economic fortunes of the West? Despite Mahbubani’s confidence, those questions are not so easy to answer.

(MORE: Are China’s Big State Companies a Big Problem for the Global Economy?) Read the rest of this entry »

Posted in Article | Tagged: , , , , , , , , , , , | Leave a Comment »

 
%d bloggers like this: