US triggered global currency tensions
“BEIJING – AN ADVISER to China’s central bank on Monday issued a thinly veiled warning to the United States not to print more money to stimulate growth, as IMF and top central bank officials met in Shanghai.
Xia Bin, a member of the monetary policy committee of the People’s Bank of China (PBOC), also said a key task to strengthen the global economic recovery was to ‘improve the flaws in the dollar-denominated international monetary mechanism’. “
“Earlier on Monday, state media accused the United States of ‘double standards’ and blamed the loose monetary policies of the world’s top economy for triggering global currency tensions. — AFP ”
“US policies of “printing money” and holding interest rates near zero were the main cause of the currency dispute, said a commentary by the Xinhua news agency, carried Monday in the central bank-backed Financial News.
“In the eyes of some American politicians it is entirely reasonable to print money and keep the dollar exchange rate low, but it is illegal for other countries to protect their economic and financial security by pushing down exchange rates,” it said.
“This is clearly a double standard.””
FEDERAL Reserve Bank of Chicago president Charles Evans said on Saturday the US is in a â€œbona fide liquidity trapâ€ and needs â€œmuch moreâ€ monetary accommodation in the face of high unemployment and inflation that is too low.
“â€œIf you reach the conclusion that we are in a liquidity trap, or even near a perilous liquidity trap, more accommodation is not data- dependent or a close call,â€ the regional bank chief said in Boston on Saturday. He advocated targeting a path for the price level as a way to stop the inflation rate from falling.
Central bankers, seeking ways to boost flagging growth after lowering interest rates almost to zero and buying 1,7-trillion of securities, are weighing strategies for raising inflation expectations as well as expanding the balance sheet by purchasing Treasuries, according to minutes of the Fedâ€™s September 21 meeting released last week.”
- 3)Â South Korean central bank looks to gold (See also the first DD news story above)
“South Korea, holder of the worldâ€™s fifth-biggest foreign exchange reserves, is considering expanding its small holdings of gold to diversify its dollar-heavy portfolio.
â€œWe need to give careful consideration to the matter of increasing gold volumes in the foreign reserves,â€ Kim Choong-soo, governor of South Koreaâ€™s central bank, told a parliamentary committee on Monday.
Such a move would have a powerfully bullish effect on the gold market. With just 14 tonnes of gold â€“ or 0.2 per cent of $290bn reserves â€“ Seoul is one of the smallest holders of gold among large economies. The world average is about 10 per cent, according to the World Gold Council, while countries such as the US, Germany and France hold well over 50 per cent of their reserves in gold.
South Korea would join other Asian countries including China, India, Thailand and Bangladesh in adding gold to its reserves. With emerging market countries buying gold and central banks in Europe halting their programmes of sales, central banks are set to become net buyers of gold this year for the first time since 1988, according to GFMS, the precious metals consultancy.”
- 4) Gov. Sanford Decries Unsustainable State Retirement Fund (South Carolina)
“Gov. Sanford Friday renewed his call to state citizens to urge government officials to formulate creative means of addressing one of the most serious problems faced by South Carolina in the coming years – the State Retirement Systemâ€™s $12 billion unfunded liability, which makes up more than half of the stateâ€™s $21 billion debt owed by future generations.
â€œJust this week 54 million Americans on Social Security were told that the federal government would not be giving them a cost-of-living increase for the second-straight year, marking the first time this has happened in a generation,â€ Gov. Sanford said. â€œThis comes on the heels of news that Social Security is already paying out more money than itâ€™s taking in, and may be completely insolvent in 25 years. Yet this fiscal nightmare is not confined to the federal government, as states and cities now harbor more than $3.5 trillion in unfunded pension liabilities – promises made but not paid for in capitals across this nation.
â€œSouth Carolina is facing the same nightmare scenario. In 1999, our stateâ€™s Retirement System (SCRS) was underfunded by just $177 million, meaning that state employeesâ€™ pensions were basically assured and the system was almost fully funded. Since then, SCRSâ€™s unfunded liability has grown on average by more than a billion dollars every year – totaling $12 billion today. More so, the SCRS is now funded at less than 70 percent, which would violate federal law were it in the private sector. Add to this the roughly $10 billion in health care related liabilities, and South Carolina taxpayers and their children are on the hook for more than $21 billion.”
- Other news, headlines and opinion:
Underfunding to worsen with further easing (Pensions)