StarLord
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Money, Banking and the Fed
Waits for Dancho and Uni to Ante in.
Waits for Dancho and Uni to Ante in.
Asian FX reserves: a $2.46 trillion question ? ? ? ?Fri Mar 11, 2005 03:29 AM ET ? ?
?SINGAPORE, March 11 (Reuters) - One of the hottest topics in world markets is whether Asian central banks will diversify their huge currency reserves, a move that could hit the dollar hard. ?The head of India's central bank, which has the sixth biggest reserve stockpile in the world, on Friday said the central bank was discussing the issue of reserve diversification.
?This came a day after Japan stoked speculation it could sell dollars when its prime minister spoke of diversification as being necessary. Last month, South Korea made similar remarks.
?Following are some of the positions from Asian financial ?authorities and key facts about Asian reserves.
?ASIAN RESERVE TOTALS
?- Asia has more than $2.46 trillion in foreign reserves.
?- That has risen 23 percent in a little over a year after ?reserves first topped $2 trillion in February 2004.
?- Japan and China have nearly $1.5 trillion between them.
?- Taiwan, South Korea, India, Hong Kong and Singapore have ?reserves ranging from nearly $115 billion to nearly $250 ?billion.
?WHY THEY'VE GROWN
?Asian central banks have intervened heavily in the past year and a half to restrain their currencies, fearing that currency strength could choke off the exports that power their growth.
?Some track the dollar informally to ensure competitiveness. Others, notably China, have a fixed peg that obliges them to accumulate dollars when their balance of payments is in surplus.
?HAS DIVERSIFICATION TAKEN PLACE?
?- Asian central banks do not give currency breakdowns of ?reserves.
?- U.S. data suggest Asian countries have diversified to some extent. Their combined holdings of U.S. Treasury securities rose more slowly in 2004 than the rise in total reserves.
?- Latest IMF data gives central bank breakdowns through ?2003 and shows little change from 2002.
?- The share of dollars held by all central banks was 63.8 percent versus 63.5 percent in 2002. For developing countries it was 59.3 percent versus 59.8 percent.
?- The dollar's share has declined a few percentage points ?from 2000 but is broadly higher from a decade earlier.
?- The Bank for International Settlements said this month Asian banks have cut the proportion of dollar bank deposits in those countries that report currency breakdowns to the BIS.
?- Dollar deposits were 67 percent of the total in Q3 2004 versus 81 percent three years earlier. Some of these deposits may be central bank cash, though the BIS does not have data on this.
?JAPAN, $841 BILLION, END FEB
?\"I believe diversification is necessary,\" said Japanese Prime Minister Junichiro Koizumi on Thursday, when asked in a parliamentary committee about the risks of having reserves too concentrated in one currency.
?A Ministry of Finance official told Reuters: \"We have no plan to change the composition of currency holdings in the foreign reserves and we are not thinking about switching dollar reserves to euro holdings.\"
?CHINA, $610 BILLION, END DEC
?The State Administration of Foreign Exchange, China's foreign exchange regulator, in December denied China was cutting U.S. dollar assets held in its foreign exchange reserves, saying it would not make changes based on short-term market moves.
?SOUTH KOREA, $247 BILLION, END FEB
?\"As foreign exchange reserves increase, (the Bank of Korea) will expand its investment into non-government papers, which carry relatively high yields, and diversify the currencies in which it invests,\" a spokesman for the central bank was quoted as saying last month in a report to parliament.
?- The Bank of Korea later said this did not mean the central bank would sell dollars, and other central banks also weighed in. Taiwan's central bank said it had not been selling dollars.
?INDIA, $136 BILLION, LATE FEB
?\"Yes it is being discussed,\" Reserve Bank of India governor Yaga Venugopal Reddy told reporters on Friday, after being asked whether the central bank was talking about diversification. \"We are always discussing. It's a continuous process.\"
?Reddy added: \"It is an ongoing debate with all central banks and you cannot expect a central bank governor to say anything further on this.\"
?THAILAND, $50 BILLION, LATE FEB
?\"We have been reducing our investments in dollar bonds but investing more in euro and Asian bonds. And we will keep doing so,\" Olarn Chaiprawat, adviser to Finance Minister Somkid Jatusripitak, told Reuters in mid January.
?Thailand now had half its foreign reserves in U.S. dollar ?bonds, with the rest in European and Asian bonds, he said.
?Previously, about 80 percent of the foreign reserves were kept in dollar-denominated bonds and the rest in European and Asian bonds, Olarn added.
?
The Debt-Peonage Society
? ? By <a href=\'http://www.nytimes.com/top/opinion/editorialsandoped/oped/columnists/paulkrugman/index.html?inline=nyt-per\' target=\'_blank\'>PAUL KRUGMAN</a> ?
? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?
Published: March 8, 2005
Today, the Senate is expected to vote to limit debate on a bill that toughens the existing bankruptcy law, probably ensuring the bill's passage. A solid bloc of Republican senators, assisted by some Democrats, has already voted down a series of amendments that would either have closed loopholes for the rich or provided protection for some poor and middle-class families.
The bankruptcy bill was written by and for credit card companies, and the industry's political muscle is the reason it seems unstoppable. But the bill also fits into the broader context of what Jacob Hacker, a political scientist at Yale, calls \"risk privatization\": a steady erosion of the protection the government provides against personal misfortune, even as ordinary families face ever-growing economic insecurity.
The bill would make it much harder for families in distress to write off their debts and make a fresh start. Instead, many debtors would find themselves on an endless treadmill of payments.
The credit card companies say this is needed because people have been abusing the bankruptcy law, borrowing irresponsibly and walking away from debts. The facts say otherwise.
A vast majority of personal bankruptcies in the United States are the result of severe misfortune. One recent study found that more than half of bankruptcies are the result of medical emergencies. The rest are overwhelmingly the result either of job loss or of divorce.
To the extent that there is significant abuse of the system, it's concentrated among the wealthy - including corporate executives found guilty of misleading investors - who can exploit loopholes in the law to protect their wealth, no matter how ill-gotten.
One increasingly popular loophole is the creation of an \"asset protection trust,\" which is worth doing only for the wealthy. Senator Charles Schumer introduced an amendment that would have limited the exemption on such trusts, but apparently it's O.K. to game the system if you're rich: 54 Republicans and 2 Democrats voted against the Schumer amendment.
Other amendments were aimed at protecting families and individuals who have clearly been forced into bankruptcy by events, or who would face extreme hardship in repaying debts. Ted Kennedy introduced an exemption for cases of medical bankruptcy. Russ Feingold introduced an amendment protecting the homes of the elderly. Dick Durbin asked for protection for armed services members and veterans. All were rejected.
None of this should come as a surprise: it's all part of the pattern.
As Mr. Hacker and others have documented, over the past three decades the lives of ordinary Americans have become steadily less secure, and their chances of plunging from the middle class into acute poverty ever larger. Job stability has declined; spells of unemployment, when they happen, last longer; fewer workers receive health insurance from their employers; fewer workers have guaranteed pensions.
Some of these changes are the result of a changing economy. But the underlying economic trends have been reinforced by an ideologically driven effort to strip away the protections the government used to provide. For example, long-term unemployment has become much more common, but unemployment benefits expire sooner. Health insurance coverage is declining, but new initiatives like health savings accounts (introduced in the 2003 Medicare bill), rather than discouraging that trend, further undermine the incentives of employers to provide coverage.
Above all, of course, at a time when ever-fewer workers can count on pensions from their employers, the current administration wants to phase out Social Security.
The bankruptcy bill fits right into this picture. When everything else goes wrong, Americans can still get a measure of relief by filing for bankruptcy - and rising insecurity means that they are forced to do this more often than in the past. But Congress is now poised to make bankruptcy law harsher, too.
Warren Buffett recently made headlines by saying America is more likely to turn into a \"sharecroppers' society\" than an \"ownership society.\" But I think the right term is a \"debt peonage\" society - after the system, prevalent in the post-Civil War South, in which debtors were forced to work for their creditors. The bankruptcy bill won't get us back to those bad old days all by itself, but it's a significant step in that direction.
And any senator who votes for the bill should be ashamed. ?
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