Monthly Archives: June 2014

more on China RMB

I wanted to post this as a response to Andrew’s recent post on this topic, but the way the post is published does not allow for comments.

In a separate message I will post the instructions again. please take note so we can generate discussions on the blog.

Here is another take on the likely future of China RMB as a world currency. as you will notice, this one is more in the spirit of the discussion we had in class of this issue. whatever view you take, it is an excellent take of the issue.

http://www.economist.com/news/finance-and-economics/21604579-buzz-about-rise-chinas-currency-has-run-far-ahead-sedate-reality-yuawn

Ukraine Faces Hurdles in Restoring Its Farming Legacy

Ukraine Faces Hurdles in Restoring Its Farming Legacy

In this article I was very fascinated by Maria Onysko’s preference of the barter system to obtain funding for her goods. Her system involves exchanging the land that she rents for grain. During the interview, Ms. Onysko said: “I have two cows and four pigs, many chickens”. Therefore, getting grain to feed her cattle is the most inexpensive way for her to run the farm.
The way the system in Ukraine works is the following:
First, if you borrow in euros you have to pay 12%. Second, if you borrow from the bank you will pay 20%.
Therefore the solution to this dilemma for Ms. Onysko is to use the barter system to avoid the need for borrowing money from anyone.

Sincerely,
Sidi Salmi

Argentina Keeps Hedge Funds in a Sweat After Supreme Court Ruling

Firstly, this article is just an  another reminder that when you make your investment choices – you have to diversify. Numerous retirees in Argentina, Germany and Italy lost their investments in Argentina’s default in 2001. Most of them lived very comfortably for a while but the default had wiped out everything.

The second important point is the danger and uncertainty of investment in countries like Argentina. The economy in Argentina moves rather erratically going from boom to bust and article gives the clear picture on how hard it is to deal with the mess after the bust. Here is the problem in a nutshell:

“Argentina is the world’s leading exemplar of how a sovereign should not treat its creditors,” Brodsky said in an emailed statement last year. “The global financial system is placed at risk by rewarding such behavior, not by enforcing contracts.”

http://www.newsweek.com/retirees-set-lose-big-argentinas-bond-fight-255553

http://www.newsweek.com/argentina-keeps-hedge-funds-sweat-after-supreme-court-ruling-255268

Rada

Unemployment initiative for the youth

http://www.weforum.org/content/global-agenda-council-youth-unemployment-2012-2014

Here you will find an article that talks about the global crisis for unemployment with the global youths. 

As we become more global as a community it is vital that all of us pay attention to employment around the world and the opportunities for the youth. As we become more interconnected in the future this will effect all of us.

Charlotte

Global Backyard – A world with no borders

I watched this video that shows how our countries computer waste is handled. This was from our CIS class. I was so stunned at how we just send our trash to other countries and not even care. It made me realize how we have evolved into a global community. What happens in one country effects the others within the world. We are all responsible for all of our neighbors. Amazing to see we may have man made borders but our actions effect everyone.

Charlotte

Globalized RMB to stabilize world economy: Bank of China head

Getting ready for our globalization debate.  Check out this article, below are the facts.

The globalization of the yuan or renminbi will not only benefit the Chinese economy but generate global economic stability, a senior banker has said.

China’s economy ranks second in the world and its trade ranks first, so it is thought that use of the currency in cross-border trade will be a mutually beneficial move for China and its trade partners.

Investors are also optimistic about RMB globalization. Bank of China’s global customer survey shows that over half of the respondents expect RMB cross-border transactions to rise by 20%-30% in five years. And 61% of overseas customers say they plan to use or increase use of RMB as a settlement currency.

Andrew Bonacci

 

 

Ukraine signs EU Trade Pact, how does this impact the rest of the world?

Ukraine’s new president, Petro O. Poroshenko signed a new trade agreement with the European Union on Friday in Brussels.   I can’t help but think how this new agreement would impact  the rest of the world.  The article describes Mr. Poroshenko’s excitement on the new opportunity however the article also states that the new pact has escalated what was already a volatile atmosphere in the region.  The former USSR state has had their sovereignty tested by Russia recently with the latter’s annexation of the Crimean Peninsula.  Russia has slowly impose a manifest-destiny-type will on Ukraine despite the rest of the world’s objections.  The signing of this pact not only escalates their tension to the next level, Ukraine has also clearly drawn the line and their intentions on where and which side they are planning on taking in the foreseeable future.

I believe this trade agreement will affect the rest of the world positively because of a couple of reasons.  First of all, trade agreements are design to boost the economy (at least between the parties concerned).  Secondly, looking at the eco-political aspect of it, this sets precedent in the modern international community that diplomacy wins over might.  This is a significant change to the old mentality that was prevalent in the 20th century.  With this agreement, Russia’s attempt to recapture the former USSR states by coercion has absolutely and utterly failed, further severing its tie with Ukraine and ironically pushing them to the hands of the western community.   Once Ukraine stabilizes the remainder of the their eastern territory, the country should fulfill the positive expectations set by themselves and the EU.  What do you guys think?

http://www.nytimes.com/2014/06/28/world/europe/ukraine-signs-trade-agreement-with-european-union.html?_r=0

What is your IMF story?

After reading so much about IMF, I decided to write my own IMF blog.

The International Monetary Fund (IMF) is an organization of 188 countries, for some it’s the devil for others the savior. By our book’s definition: “working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world”.

Recently IMF called for countries to work harder together on tax policies, as it finds increasingly pervasive cases of nations’ tax rules affecting each other. In a new paper, the IMF discusses tax issues like profit shifting – which has sparked outrage in Congress with cases involving Apple Inc. and Caterpillar Inc.

As we hear, read, and in my case experience, most multinational organizations use various ways to get around paying taxes, by maneuvering profits around the world for higher margins. As an example, PepsiCo has about 600 legal entities designed to move money around, establish transactions through entities that are established in countries like Ireland, Bermuda and Luxemburg to minimize taxes, fees associated with doing business in various countries, and foreign exchange rate impacts.

These multinational organizations serves as foreign direct investors, bring development and much needed jobs to these countries. E.g. One of Google’s major business hub is located in Cork, Ireland. IMF doesn’t mention any company by name in its report, but acknowledges that these efforts can create what the fund calls “a collective inefficiency” in the global economy. Congress is moving on its own to stop such deals to close tax loopholes for companies that take U.S. jobs overseas.

Result? In my opinion, this is all legal, and I admire multinational companies that can learn and implement business practices like this. Government seems to be slow at taking steps to prevent these approaches. As Marketwatch calls it: “Major U.S. tax legislation is virtually certain to go nowhere as lawmakers gear up for November’s midterm elections.”

Erol Menda

US to lose a great deal if TPP pact isn’t ratified

According to Prime Minister Lee Hsien Loong, the Trans-Pacific Partnership (TPP) trade pact is necessary to demonstrate US’ commitment  to engage with the Asia-Pacific region.   Furthermore,  the TPP involves the US and 11 other countries including Japan and Australia, when combined results in 40% of the world’s GDP.  “The TPP is a key part of the US’ rebalancing towards Asia and an instrument to deepen this relationship”. So why the hesitation? Read more in the article below.

US to lose a great deal if TPP pact isn’t ratified: PM (PUBLISHED: JUNE 28, 2014)

NEW YORK — The United States would stand to lose a great deal if ratification of the Trans-Pacific Partnership (TPP) trade pact became a problem, said Prime Minister Lee Hsien Loong as he wrapped up a six-day working visit to Washington DC and New York.

In an interview with Singapore media, Mr Lee said failing to ratify the trade pact would be very damaging and call into question the US’ commitment to and engagement with the Asia-Pacific region.

Negotiations for the TPP — which involves the US and 11 other countries including Japan and Australia, which combined make up about 40 per cent of the world’s gross domestic product — could conclude by November. US’ ratification of the trade pact requires the support of its Congress.

Mr Lee, who met Congressmen and other key officials during his trip, said he made the TPP pitch to everyone he met and received a range of reactions.

“I think many understood the imperative, but there are some political considerations, of course. You’ve got the elections coming and even beyond the elections, you want to have something which is saleable to the voters,” he said. “And while a good number said yes … there were also a few who listened to me and reserved their positions. So I don’t know how they will decide, but I hope I have left them something to think about.”

Mr Lee has pitched strongly for the TPP in recent days, such as during a dialogue held at a think tank in Washington DC. He also called on business leaders to lend their support at such events as a reception to commemorate the 10th anniversary of Singapore’s free trade agreement with the US.

The TPP is a key part of the US’ rebalancing towards Asia and an instrument to deepen this relationship, he said. The region is moving, such as through the Regional Comprehensive Economic Partnership involving the Association of South-east Asian Nations, China, Japan, South Korea, Australia, New Zealand and India. “So if America is not moving, you may be part of the game, but you’re not in play.”

Asked about the receptiveness of US Vice-President Joe Biden and National Security Adviser Susan Rice during meetings with them, Mr Lee said they are completely convinced of the TPP. It was foremost on US President Barack Obama’s mind when he joined the meeting with Ms Rice for a few minutes, Mr Lee added.

“So I’m convinced that the Administration wants it; what we need to be able to know is that between the Administration and Congress, and the American people, they can work together to deliver the ratification.”

Mr Obama was reported last week saying he hoped for a document to present to the public and stakeholders by the time he travels to Asia in November. The meeting of the Group of Twenty leaders will take place in Australia and the Asia-Pacific Economic Cooperation (APEC) leaders meet in Beijing that month.

On how the South China Sea disputes between China and four Southeast Asian countries affect the US’ rebalancing towards Asia, Mr Lee said the Americans’ strategic move is happening regardless of specific issues, such as the territorial rows in the South and East China Seas.

The US has a legitimate interest in the South China Sea issue because of freedom of navigation and international law, but stable US-China relations are important, he said. “I told them, it depends on what you say, it depends on how you act, also it depends on how you interact with China and with the other participants in the region.”

Marisol R.