Please quote official source for information.TSJones wrote:that gold is being used as a reserve or as collateral for India's leveraged positions on currency swaps and loans. In other words it's being used for India's benefit. go ahead take the gold back, it will be fun to see what happens.
Perspectives on the global economic changes
Re: Perspectives on the global economic changes
Re: Perspectives on the global economic changes
do you seriously think India is leaving the gold there without purpose? It's most likely being used for forex reserve management. why else would they leave it off shore? In the hands of a third party?
Re: Perspectives on the global economic changes
In other words, you have no source for your claim ? Thanks.
Re: Perspectives on the global economic changes
I believe germany had asked gotus for most of its gold reserve in NYC to be flown back. from the howls of pain and foot dragging by gotus thereafter, I could sense it was somehow not so good thing for usa. looks like they got back some 5 tons from 3500 !!
custodianship of a country's gold abroad is like having our balls in a nutcracker.
http://www.mining.com/bubba-explains-wh ... old-73709/
On January 16, 2013 Germany's central bank, the Bundesbank, said it will ship back home all 374 tonnes it had stored with the Banque de France in Paris, as well as 300 tonnes held in Manhattan by the US Federal Reserve, by 2020.
Fast forward a year and Buba, as the Federal Bank of Germany is affectionately (or maybe not) known, has only managed to bring home a paltry 37 tonnes of gold.
And a mere 5 tonnes of that came from the US, the rest from Paris. The US Fed holds 45% of the total 3,396 tonnes German gold.
Needless to say this prompted renewed questions whether Germany's gold still exists in those Manhattan vaults or if it has been melted down, leased or even sold.
At the time of the original Bundesbank announcement, there were rumours that Germany wanted their gold back because the Fed refused German officials a viewing of the bullion a couple of months earlier.
In an extensive interview with German business publication Handelblatt, executive board member Carl-Ludwig Thiele, tries to lay to rest all the rumours about the program which was designed as a "trust-building" measure among the German people:
There are these rumours that either the gold in New York is no longer there or you do not have unrestricted access to it. Why have you not called in auditors or other externals to oversee the transfers in response to such rumours?
The Americans have never stonewalled or hindered us in any way.
It astounds me that Handelsblatt pays any attention to such absurd rumours. I was in New York myself in June 2012 with the colleagues responsible for managing the gold reserves and saw for myself how our money is stored in the vault there. The Americans have never stonewalled or hindered us in any way. On the contrary, their cooperation has been most constructive in every respect. Our internal audit team was present last year during the on-site removal of gold bars and closely monitored everything. The smelting process is also being monitored by independent experts.
Does this also apply to opportunities to inspect the stocks?You said a year ago that discussions on the matter with the Federal Reserve Bank of New York were making good progress.
That is correct. We have enjoyed an excellent relationship of trust with the New York Fed for many decades. As regards the details of the contracts, however, we are bound by confidentiality which we cannot unilaterally break. From my visit to New York, I can tell you that a number of bars selected by us were removed, inspected and reweighed even while I was there. The inspections conducted by our internal audit team, during which an external auditor was also present, were also completed to our utmost satisfaction.
Was an external auditor present during your visit to the New York Fed gold storage facility in June 2012?
No, not during my visit. However, an external auditor was present for part of the time during the internal audit team’s inspection of stocks.
Did the gold from New York have to be melted down immediately?
The gold was removed from the vault in the presence of the internal audit team and transported to Europe. Only once the gold had arrived in Europe was it melted down and brought to the current bar standard. Some of the bars in our stocks in New York were produced before the Second World War. It was confirmed after the melting process, as anticipated, that these bars were absolutely fine.
[...]
If the intention was to build trust, would it not have been better to postpone the smelting process so that you would have been able to present sceptics with the original bars?
Prior to transportation, the original gold bars were handed over to us in New York. Our internal audit team checked the numbers of the bars there and then against its own lists. The very same gold arrived at the European gold smelters that we had commissioned. This ought to demonstrate to everyone that such conspiracy theories are completely unfounded.
German gold is also held at The Bank of England which stores 13% in London, while the Bank of France in Paris has 11% in total and the remainder is held at the Bundesbank's headquarters in Frankfurt.
In November 2011, Venezuela repatriated some 180 tonnes of gold held in vaults in London and elsewhere to store it with the Caracas central bank under orders from late President Hugo Chavez. (good move that)
Click here for the rest of the interview which includes questions on whether Germany plans to use gold as a monetary policy tool and why the US is willing to store and guard all that gold free of charge.
custodianship of a country's gold abroad is like having our balls in a nutcracker.
http://www.mining.com/bubba-explains-wh ... old-73709/
On January 16, 2013 Germany's central bank, the Bundesbank, said it will ship back home all 374 tonnes it had stored with the Banque de France in Paris, as well as 300 tonnes held in Manhattan by the US Federal Reserve, by 2020.
Fast forward a year and Buba, as the Federal Bank of Germany is affectionately (or maybe not) known, has only managed to bring home a paltry 37 tonnes of gold.
And a mere 5 tonnes of that came from the US, the rest from Paris. The US Fed holds 45% of the total 3,396 tonnes German gold.
Needless to say this prompted renewed questions whether Germany's gold still exists in those Manhattan vaults or if it has been melted down, leased or even sold.
At the time of the original Bundesbank announcement, there were rumours that Germany wanted their gold back because the Fed refused German officials a viewing of the bullion a couple of months earlier.
In an extensive interview with German business publication Handelblatt, executive board member Carl-Ludwig Thiele, tries to lay to rest all the rumours about the program which was designed as a "trust-building" measure among the German people:
There are these rumours that either the gold in New York is no longer there or you do not have unrestricted access to it. Why have you not called in auditors or other externals to oversee the transfers in response to such rumours?
The Americans have never stonewalled or hindered us in any way.
It astounds me that Handelsblatt pays any attention to such absurd rumours. I was in New York myself in June 2012 with the colleagues responsible for managing the gold reserves and saw for myself how our money is stored in the vault there. The Americans have never stonewalled or hindered us in any way. On the contrary, their cooperation has been most constructive in every respect. Our internal audit team was present last year during the on-site removal of gold bars and closely monitored everything. The smelting process is also being monitored by independent experts.
Does this also apply to opportunities to inspect the stocks?You said a year ago that discussions on the matter with the Federal Reserve Bank of New York were making good progress.
That is correct. We have enjoyed an excellent relationship of trust with the New York Fed for many decades. As regards the details of the contracts, however, we are bound by confidentiality which we cannot unilaterally break. From my visit to New York, I can tell you that a number of bars selected by us were removed, inspected and reweighed even while I was there. The inspections conducted by our internal audit team, during which an external auditor was also present, were also completed to our utmost satisfaction.
Was an external auditor present during your visit to the New York Fed gold storage facility in June 2012?
No, not during my visit. However, an external auditor was present for part of the time during the internal audit team’s inspection of stocks.
Did the gold from New York have to be melted down immediately?
The gold was removed from the vault in the presence of the internal audit team and transported to Europe. Only once the gold had arrived in Europe was it melted down and brought to the current bar standard. Some of the bars in our stocks in New York were produced before the Second World War. It was confirmed after the melting process, as anticipated, that these bars were absolutely fine.
[...]
If the intention was to build trust, would it not have been better to postpone the smelting process so that you would have been able to present sceptics with the original bars?
Prior to transportation, the original gold bars were handed over to us in New York. Our internal audit team checked the numbers of the bars there and then against its own lists. The very same gold arrived at the European gold smelters that we had commissioned. This ought to demonstrate to everyone that such conspiracy theories are completely unfounded.
German gold is also held at The Bank of England which stores 13% in London, while the Bank of France in Paris has 11% in total and the remainder is held at the Bundesbank's headquarters in Frankfurt.
In November 2011, Venezuela repatriated some 180 tonnes of gold held in vaults in London and elsewhere to store it with the Caracas central bank under orders from late President Hugo Chavez. (good move that)
Click here for the rest of the interview which includes questions on whether Germany plans to use gold as a monetary policy tool and why the US is willing to store and guard all that gold free of charge.
Re: Perspectives on the global economic changes
if India is letting its gold sit there at the BOE and not doing anything with it, then by all means start shipping it back. India must not need the gold very much. 
Re: Perspectives on the global economic changes
German will never get it gold back thats for sure 
It can keep crying and asking for it though hard luck
According to World Bank if you measure economy on PPP basis then Chinese Economy is as big as the US one and we are third , I think PPP is a good way to measure economic strength unlike the nominal one.
Check the figures from World Bank
http://data.worldbank.org/indicator/NY. ... ay=default
It can keep crying and asking for it though hard luck
According to World Bank if you measure economy on PPP basis then Chinese Economy is as big as the US one and we are third , I think PPP is a good way to measure economic strength unlike the nominal one.
Check the figures from World Bank
http://data.worldbank.org/indicator/NY. ... ay=default
Re: Perspectives on the global economic changes
RBI Governor Warns of Global Market 'Crash'
Reserve Bank of India (RBI) governor Dr Raghuram Rajan says global markets are at risk of a "crash" should investors start bailing out of risky assets created by the loose monetary policies of developed economies.
The comments, carried in an interview with Central Banking Journal, reiterate Dr Rajan's previous warnings that emerging markets were especially vulnerable to big shifts in capital flows brought on by the unprecedented monetary accommodation in rich nations.
The former chief economist at the International Monetary Fund compared the current global markets to the 1930s - a period marked by the Great Depression.
Dr Rajan said back then countries were engaged in a period of competitive devaluation, in a similar way to central banks now being engaged in ever more accommodative policies.
"We are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost," Dr Rajan said in an interview on the journal's website dated Wednesday.
Dr Rajan said he worried about the impact of investors exiting markets all at once after buying heavily into assets inflated by these loose central bank policies.
"There will be major market volatility if that occurs. True, it may not happen if we can find a way to unwind everything steadily. But it is a big hope and a prayer," Dr Rajan said.
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panduranghari
- BRF Oldie
- Posts: 3781
- Joined: 11 Aug 2016 06:14
Re: Perspectives on the global economic changes
After some digging there is still some doubt IF there is any gold held in London for RBI.
On page 134 of this document, the Venn Diagram indicates BOE stores gold for 72 of the world central banks as a custodian. Not specified which countries do that however.
More digging indicates, the plan for NaMo govt. is to eliminate the 80-20 rule. The rule for those unaware is out of 100% gold imported, 80 can be kept within India while 20 has to be compulsorily exported.
It explains why the government is doing this loco swap.
To understand a loco swap, here is an example from the Perth Mint website;
I am substituting perth mint for RBI
The RBI records loco swap trades as linked buy and sell trades. For example, a mining companying swapping its RBI gold for London gold would be entered as (assuming a gold price of $1000 and a loco RBI discount of $1.00):
Trade Number 1 2
RBI is Buying Selling
Metal Gold Gold
Currency USD USD
Price $1000.00 $1001.00
Ounces 100.000 100.000
Loco Mumbai London
Trade Value $100,000.00 100,100.00
While there are two separate trades, on settlement the USD trade values are netted against each other and the mining company pays the RBI $100.00. The metal values however are settled independently as they are for different locos - the RBI would deposit 100oz into the mining company's London metal account and withdraw 100oz from its metal account with the RBI.
Now the question arises, who is going to do the refining to make the LBMA good delivery bars. Claims are being made by the economic times reporter Sugata Ghose are without any research.
The plan is to sell non loco gold in India and buy London good delivery bar??? I dont know.
However, the refiner is MKS. They are in the list of approved refiners to make London good delivery bars. However, they have a joint undertaking with GOI - PAMP-MMTC
MMTC PAMP
No gold is going overseas. And they will swap the impure gold and make it into good delivery bars. Later they will import gold by eliminating the 80-20 rule.
Austin's article on Rajan saying the possibility of economic turmoil, makes be believe there is no chance of any of Indian gold other than the 100 tons bought from IMF 3 years back is in London. I think they will get that back too as soon as the current gold is converted into GDB.
MKS will give RBI good delivery bars worth 100 tons over the refined bit and perhaps take the 100 tons from Indias account in BOE. Thus Indias balance with BOE will be ZERO. MKS is big enough to afford this.
On page 134 of this document, the Venn Diagram indicates BOE stores gold for 72 of the world central banks as a custodian. Not specified which countries do that however.
More digging indicates, the plan for NaMo govt. is to eliminate the 80-20 rule. The rule for those unaware is out of 100% gold imported, 80 can be kept within India while 20 has to be compulsorily exported.
It explains why the government is doing this loco swap.
To understand a loco swap, here is an example from the Perth Mint website;
I am substituting perth mint for RBI
The RBI records loco swap trades as linked buy and sell trades. For example, a mining companying swapping its RBI gold for London gold would be entered as (assuming a gold price of $1000 and a loco RBI discount of $1.00):
Trade Number 1 2
RBI is Buying Selling
Metal Gold Gold
Currency USD USD
Price $1000.00 $1001.00
Ounces 100.000 100.000
Loco Mumbai London
Trade Value $100,000.00 100,100.00
While there are two separate trades, on settlement the USD trade values are netted against each other and the mining company pays the RBI $100.00. The metal values however are settled independently as they are for different locos - the RBI would deposit 100oz into the mining company's London metal account and withdraw 100oz from its metal account with the RBI.
Now the question arises, who is going to do the refining to make the LBMA good delivery bars. Claims are being made by the economic times reporter Sugata Ghose are without any research.
As stated the loco swap is happening here without moving gold. So ET is wrong.Economic Times wrote:Better known as loco swaps in the global bullion market, it's a mechanism whereby gold in one location is 'swapped', or exchanged, for gold in another location without physically shipping the yellow metal.
Here's how the proposed swap scheme between RBI and banks would work: RBI will give delivery of gold from its Nagpur vault to banks in India while taking delivery of gold from banks in London.
But the gold that RBI would give to banks in India could be of a slightly inferior quality compared with the 'London deliverable' purer gold that it would receive from banks in London. The banks will deposit the gold in London in RBI's account with Bank of England.
The plan is to sell non loco gold in India and buy London good delivery bar??? I dont know.
However, the refiner is MKS. They are in the list of approved refiners to make London good delivery bars. However, they have a joint undertaking with GOI - PAMP-MMTC
MMTC PAMP
From their website a screen shot.MMTC-PAMP India – a joint venture between PAMP SA Switzerland and MMTC Ltd, a Government of India Undertaking – operates the world’s most advanced precious metals processing facility, under the direct technical supervision of PAMP. As India's first and only LBMA Good Delivery refinery accredited for Gold and Silver, MMTC-PAMP India is setting new global standards for product excellence, customer service, environmental management and safety.........
............
Located at a short distance from New Delhi airport, MMTC-PAMP India has an unparalleled national distribution network servicing all of India’s key precious metals markets. Powered by PAMP’s global expertise, we provide efficient and responsive service 24-hours a day and customers have access to our full product and service range.
No gold is going overseas. And they will swap the impure gold and make it into good delivery bars. Later they will import gold by eliminating the 80-20 rule.
Austin's article on Rajan saying the possibility of economic turmoil, makes be believe there is no chance of any of Indian gold other than the 100 tons bought from IMF 3 years back is in London. I think they will get that back too as soon as the current gold is converted into GDB.
MKS will give RBI good delivery bars worth 100 tons over the refined bit and perhaps take the 100 tons from Indias account in BOE. Thus Indias balance with BOE will be ZERO. MKS is big enough to afford this.
Re: Perspectives on the global economic changes
I'm glad you know what the RBI's plans for the future are.panduranghari wrote:After some digging there is still some doubt IF there is any gold held in London for RBI.
On page 134 of this document, the Venn Diagram indicates BOE stores gold for 72 of the world central banks as a custodian. Not specified which countries do that however.
More digging indicates, the plan for NaMo govt. is to eliminate the 80-20 rule. The rule for those unaware is out of 100% gold imported, 80 can be kept within India while 20 has to be compulsorily exported.
It explains why the government is doing this loco swap.
To understand a loco swap, here is an example from the Perth Mint website;
I am substituting perth mint for RBI
The RBI records loco swap trades as linked buy and sell trades. For example, a mining companying swapping its RBI gold for London gold would be entered as (assuming a gold price of $1000 and a loco RBI discount of $1.00):
Trade Number 1 2
RBI is Buying Selling
Metal Gold Gold
Currency USD USD
Price $1000.00 $1001.00
Ounces 100.000 100.000
Loco Mumbai London
Trade Value $100,000.00 100,100.00
While there are two separate trades, on settlement the USD trade values are netted against each other and the mining company pays the RBI $100.00. The metal values however are settled independently as they are for different locos - the RBI would deposit 100oz into the mining company's London metal account and withdraw 100oz from its metal account with the RBI.
Now the question arises, who is going to do the refining to make the LBMA good delivery bars. Claims are being made by the economic times reporter Sugata Ghose are without any research.
As stated the loco swap is happening here without moving gold. So ET is wrong.Economic Times wrote:Better known as loco swaps in the global bullion market, it's a mechanism whereby gold in one location is 'swapped', or exchanged, for gold in another location without physically shipping the yellow metal.
Here's how the proposed swap scheme between RBI and banks would work: RBI will give delivery of gold from its Nagpur vault to banks in India while taking delivery of gold from banks in London.
But the gold that RBI would give to banks in India could be of a slightly inferior quality compared with the 'London deliverable' purer gold that it would receive from banks in London. The banks will deposit the gold in London in RBI's account with Bank of England.
The plan is to sell non loco gold in India and buy London good delivery bar??? I dont know.
However, the refiner is MKS. They are in the list of approved refiners to make London good delivery bars. However, they have a joint undertaking with GOI - PAMP-MMTC
MMTC PAMP
From their website a screen shot.MMTC-PAMP India – a joint venture between PAMP SA Switzerland and MMTC Ltd, a Government of India Undertaking – operates the world’s most advanced precious metals processing facility, under the direct technical supervision of PAMP. As India's first and only LBMA Good Delivery refinery accredited for Gold and Silver, MMTC-PAMP India is setting new global standards for product excellence, customer service, environmental management and safety.........
............
Located at a short distance from New Delhi airport, MMTC-PAMP India has an unparalleled national distribution network servicing all of India’s key precious metals markets. Powered by PAMP’s global expertise, we provide efficient and responsive service 24-hours a day and customers have access to our full product and service range.
No gold is going overseas. And they will swap the impure gold and make it into good delivery bars. Later they will import gold by eliminating the 80-20 rule.
Austin's article on Rajan saying the possibility of economic turmoil, makes be believe there is no chance of any of Indian gold other than the 100 tons bought from IMF 3 years back is in London. I think they will get that back too as soon as the current gold is converted into GDB.
MKS will give RBI good delivery bars worth 100 tons over the refined bit and perhaps take the 100 tons from Indias account in BOE. Thus Indias balance with BOE will be ZERO. MKS is big enough to afford this.
Re: Perspectives on the global economic changes
Jones, please consider this an informal warning: stop trolling. Someone who shamelessly passes off conjecture as fact, has no business mocking others who post detailed, well researched posts on the basis of which they make reasonable claims.
Re: Perspectives on the global economic changes
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Last edited by Austin on 07 Aug 2014 23:04, edited 1 time in total.
Re: Perspectives on the global economic changes
"central banks... repair damage".world’s financial system may soon face fresh turbulence at a time when central banks have yet to repair the damage that the 2008 financial crisis caused
More like central bank is the cause of the damage. There is nothing a central banker does other than sit in an ivory tower, print money & fiddle around with interest rates to benefit private bank cronies and offload their gambling losses onto the backs of suckers (wage earners, savers, pensioners...basically anyone doing productive work in society).
Until this is recognized, the productive economy will continue to be cheated and decimated by central banking charlatans who's career legitimacy as economic fortune tellers rivals medieval sorcerers.
Re: Perspectives on the global economic changes
Interestingly, the US govt has directed all media to not report on the never-ending raising of the debt ceiling.
Yet another raising of the debt ceiling just happened recently with the 2 party system agreeing not to debate the issue.
Yet another raising of the debt ceiling just happened recently with the 2 party system agreeing not to debate the issue.
Re: Perspectives on the global economic changes
They shut down Washington twice over ceiling issue and brought government to stand still , so they made this deal to automatically raise debt ceiling and come back to it later. Rep were getting bad press due to it and corporate were not happy either.Neshant wrote:Interestingly, the US govt has directed all media to not report on the never-ending raising of the debt ceiling.
Yet another raising of the debt ceiling just happened recently with the 2 party system agreeing not to debate the issue.
I think Rep will make it a big deal before the next election to gain political mileage , so the next impass it expected sometime around 2016.
Re: Perspectives on the global economic changes
"The Train Wreck Is Coming," David Stockman Warns, "All Hell Will Break Loose"
Are we looking at two key events here one is related to stock market crash and the other related to Bond Market collapse ?
The stock market is expected soon and bond market in few years ?
Are we looking at two key events here one is related to stock market crash and the other related to Bond Market collapse ?
The stock market is expected soon and bond market in few years ?
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panduranghari
- BRF Oldie
- Posts: 3781
- Joined: 11 Aug 2016 06:14
Re: Perspectives on the global economic changes
When the EU decides to MAKE the EU bond holders undertake restructuring of the bonds at better terms - thats when I think the game will be truly up.
This is how I see it.
Bond holders take a pay cut. This will buy ECB some time. I feel they will then devalue Euro v/s Dollar. 1 euro is 0.75 Dollars. The ECB could devalue it to say 0.50 per dollar.
The deflation is avoided and it puts the ball into US F reserves court. I doubt if US can match this devaluation as quite a lot of money will flow into USD making USD even stronger.
This is how I see it.
Bond holders take a pay cut. This will buy ECB some time. I feel they will then devalue Euro v/s Dollar. 1 euro is 0.75 Dollars. The ECB could devalue it to say 0.50 per dollar.
The deflation is avoided and it puts the ball into US F reserves court. I doubt if US can match this devaluation as quite a lot of money will flow into USD making USD even stronger.
Re: Perspectives on the global economic changes
Richard Duncan : Way too late to go back onto a gold standard
http://traffic.libsyn.com/powertradingr ... 061314.mp3
Economist and author of several books, Richard Duncan joins John O’Donnell and Merlin Rothfeld for a look at what he feels is the New Depression. A cycle of debt expansion that is leading to a nearly inevitable collapse, that not even a gold standard can safe. The trio discuss this and several other topics while Mr. Duncan offers a radical solution to it all. A solution that would put America back on top, and get us out from all this debt.
http://traffic.libsyn.com/powertradingr ... 061314.mp3
Economist and author of several books, Richard Duncan joins John O’Donnell and Merlin Rothfeld for a look at what he feels is the New Depression. A cycle of debt expansion that is leading to a nearly inevitable collapse, that not even a gold standard can safe. The trio discuss this and several other topics while Mr. Duncan offers a radical solution to it all. A solution that would put America back on top, and get us out from all this debt.
Re: Perspectives on the global economic changes
Putin says Russia should aim to sell energy in roubles
http://uk.reuters.com/article/2014/08/1 ... BP20140814
(
http://uk.reuters.com/article/2014/08/1 ... BP20140814
(
Reuters) - President Vladimir Putin said on Thursday Russia should aim to sell its oil and gas for roubles globally because the dollar monopoly in energy trade was damaging Russia's economy.
"We should act carefully. At the moment we are trying to agree with some countries to trade in national currencies," Putin said during a visit to the Crimea region, which Moscow annexed from Ukraine earlier this year. (Reporting by Alexei Anishchuk; Writing by Dmitry Zhdannikov; Editing by Christian Lowe)
Re: Perspectives on the global economic changes
How does the rouble transaction work , Importing countries buy Rouble from Central Bank but what do the Central Bank get in return for selling rouble ?
Re: Perspectives on the global economic changes
Exporters would have to accumulate rubles which the nation would buy from them and use to purchase oil in rubles.
Easy enough for China since they run trade surplus see with everyone in sight.
Not so for India.
Russia would need to let in a ton of Indians into their country to work and send back roubles. Labor (half of it being manual labor) is the only thing India has to export to Russia. But what Indian would be working in sub zero temperatures. Also Russians not being used to immigration from developing countries would respond with xenophobia.
The only other way is to have them take rupees for roubles which is to say pay for oil in rupees - and ask them to find ways of investing those rupees in India.
Easy enough for China since they run trade surplus see with everyone in sight.
Not so for India.
Russia would need to let in a ton of Indians into their country to work and send back roubles. Labor (half of it being manual labor) is the only thing India has to export to Russia. But what Indian would be working in sub zero temperatures. Also Russians not being used to immigration from developing countries would respond with xenophobia.
The only other way is to have them take rupees for roubles which is to say pay for oil in rupees - and ask them to find ways of investing those rupees in India.
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panduranghari
- BRF Oldie
- Posts: 3781
- Joined: 11 Aug 2016 06:14
Re: Perspectives on the global economic changes
Very impressive. He is positioning himself as the leader of the Emerging economies CB's.
http://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=886
The key question is what happens when these policies are prolonged long beyond repairing markets – and there the benefits are much less clear. Let me list 4 concerns:
1.Is unconventional monetary policy the right tool once the immediate crisis is over? Does it distort behavior and activity so as to stand in the way of recovery? Is accommodative monetary policy the way to fix a crisis that was partly caused by excessively lax policy?
( Fixed income investors with minimum nominal return needs then migrate to riskier instruments such as junk bonds, emerging market bonds, or commodity ETFs, with some of the capital outflow coming back into government securities via foreign central banks accumulating reserves. Other investors migrate to stocks....There are two ways these calculations can go wrong. First, financial risk taking may stay just that, without translating into real investment...second,accommodative policies may reduce the cost of capital for firms so much that they prefer labor-saving capital investment to hiring labor )
2.Do such policies buy time or does the belief that the central bank is taking responsibility prevent other, more appropriate, policies from being implemented? Put differently, when central bankers say, however reluctantly, that they are the only game in town, do they become the only game in town?
(The spillovers from easy global liquidity conditions to cross-border gross banking flows, exchange rate appreciation, stock market appreciation, and asset price and credit booms in capital receiving countries - and eventual overextension, current account deficits, and asset price busts has been documented elsewhere, both for pre-crisis Europe and post-crisis emerging markets.....Prudential measures, including capital controls, to contain credit expansion is the new received wisdom, but their effectiveness against the "wall of capital inflows" has yet to be established)
3.Will exit from unconventional policies be easy?
(ultra accommodative monetary policy creates enormously powerful incentive distortions whose consequences are typically understood only after the fact. The consequences of exit, however, are not just felt domestically, they could be experienced internationally)
4.What are the spillovers from such policies to other countries?
(Perhaps most vulnerable to the increased risk-taking in this integrated world are countries across the border. When monetary policy in large countries is extremely and unconventionally accommodative, capital flows into recipient countries tend to increase local leverage; this is not just due to the direct effect of cross-border banking flows but also the indirect effect, as the appreciating exchange rate and rising asset prices, especially of real estate, make it seem that borrowers have more equity than they really have...Recipient countries are not being irrational when they protest both the initiation of unconventional policy as well as an exit whose pace is driven solely by conditions in the source country.)
Hence, my call is for more coordination in monetary policy because I think it would be an immense improvement over the current international non-system. International monetary policy coordination, of course, is unpopular among central bankers, and I therefore have to say why I reiterate the call and what I mean by it.
I do not mean that central bankers sit around a table and make policy collectively, nor do I mean that they call each other regularly and coordinate actions. In its strong form, I propose that large country central banks, both in advanced countries and emerging markets, internalize more of the spillovers from their policies in their mandate, and are forced by new conventions on the “rules of the game” to avoid unconventional policies with large adverse spillovers and questionable domestic benefits.16 Given the difficulties of operationalizing the strong form, I suggest that, at the very least, central banks reinterpret their domestic mandate to take into account other country reactions over time (and not just the immediate feedback effects), and thus become more sensitive to spillovers. This weak “coordination” could be supplemented with a re-examination of global safety nets
First, domestic constraints including political imperatives of bringing unemployment down and the economic constraint of the zero lower bound may lead monetary policy to be set at levels different from the unconstrained domestic optimal. Dysfunctional domestic politics could also contribute in moving monetary policy further from the unconstrained optimal. In other words, the central bank, responding to a variety of political pressures and weaknesses, may stray away from even the constrained optimal – towards third best policies rather than second best policies. Second, cross-border capital flows can lead to a more dramatic transmission of policies, driven by agency (and other) considerations that do not necessarily relate to economic conditions in the recipient countries.
One argument along these lines is that if some large country adopts unconventional and highly accommodative sub optimal policies, other countries may follow suit to avoid exchange rate appreciation in a world with weak demand. As a result, the policy equilibrium may establish at rates that are too low compared to that warranted by the global optimal.(Rate rise is on cards)
Despite these arguments, official statements by multilateral institutions such as the IMF continue to endorse unconventional monetary policies while downplaying the adverse spillover effects to other countries
I see two dangers here. One is that any remaining rules of the game are breaking down. Our collective endorsement of unconventional monetary policies essentially says it is ok to distort asset prices if there are other domestic constraints to reviving growth, such as the zero-lower bound. But net spillovers, rather than fancy acronyms, should determine internationally acceptable policy.
Otherwise, countries could legitimately practice what they might call quantitative external easing or QEE, whereby they intervene to keep their exchange rate down and build huge reserves. The reason we frowned on QEE in the past is because we believed the adverse spillover effects for the rest of the world were significant. If we are unwilling, however, to evaluate all policies based on their spillover effects, there is no legitimate way multilateral institutions can declare that QEE contravenes the rules of the game. Indeed, some advanced economy central bankers have privately expressed their worry to me that QE “works” primarily by altering exchange rates, which makes it different from QEE only in degree rather than in kind.
The second danger is a mismanaged exit will prompt fresh distortionary behaviour. Even as source country central banks go to great pains to communicate how their removal of accommodation will be contingent on domestic activity, they have been silent on how they will respond to foreign turmoil. Market participants conclude that recipient countries, especially those that do not belong to large reserve currency blocks, are on their own, and crowd devastatingly through the exit.
Indeed, the lesson some emerging markets will take away from the recent episode of turmoil is (i) don’t expand domestic demand and run large deficits (ii) maintain a competitive exchange rate (iii) build large reserves, because when trouble comes, you are on your own. In a world with deficient aggregate demand, is this the message the international community wants to send?
Central banks should assess spillover effects from their own actions, not just in terms of immediate feedback, but also in terms of medium term feedback as other countries alter their policies. In other words, the source country should not just worry about the immediate flows of capital to other countries from its policies, but the longer run reaction such as sustained exchange intervention that this would bring about. This would allow central banks to pay more attention to spillovers even while staying within their domestic mandate
My take away;A first step to prescribing the right medicine is to recognize the cause of the sickness. Extreme monetary easing, in my view, is more cause than medicine. The sooner we recognize that, the more sustainable world growth we will have.
1.Rajan (and Modi) want to restart NAM but of forsaken Central Banks
2.Domestic Interest rates are going to rise
3.Reserve accumulation by RBI will continue- it could also mean easing of import tariffs on gold.
4. If we tie the Modi speech point of bank accounts for all Indians, it may be associated with things like LTRO that ECB have done. Basically RBI will provide nationalised banks with capital in time of crisis.
5. Following up from point 4, it will perhaps mean capital controls are coming in India.
Of course who can understand Central Bankers more than themselves. I am speculating onlee.
Re: Perspectives on the global economic changes
he's already on the wrong track.panduranghari wrote:A first step to prescribing the right medicine is to recognize the cause of the sickness. Extreme monetary easing, in my view, is more cause than medicine. The sooner we recognize that, the more sustainable world growth we will have.
the market should be determining interest rates, not a guy sitting in an ivory tower (i.e. central banker) pretending he knows what ails the economy and how to fix it.
the moment he starts talking about "prescribing medicine" as if he's some kind of doctor, you know he's clueless.
Re: Perspectives on the global economic changes
I think what Russian Central Bank can do is sell Roubles and they can sell it for USD/Euro/Gold or any thing else they wish and then any country that wants to buy Oil/Gas can buy it off roubles.Neshant wrote:The only other way is to have them take rupees for roubles which is to say pay for oil in rupees - and ask them to find ways of investing those rupees in India.
Oil is after all black gold , Instead of supporting other currency it would make sense to support their own.
Well they have the 2nd largest migrant after USAlso Russians not being used to immigration from developing countries would respond with xenophobia.
Russia: The World's Second-Largest Immigration Haven
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panduranghari
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Re: Perspectives on the global economic changes
I don't disagree. But he is powerless in the current scheme of things. If you look at his Brookings institute speech and also the speech given at BIS at a Andrew Crockett memorial lecture, he is pleading to the US federal reserve to not do QE. We are all assuming US will keep tapering the QE. The deflation in many developed economies is getting worse. While inflation in emerging markets, is worsening. Emerging markets want QE to stop. Developed economies have but one choice - devalue their currency against US dollar. That's how I see it.Neshant wrote:he's already on the wrong track.
the market should be determining interest rates, not a guy sitting in an ivory tower (i.e. central banker) pretending he knows what ails the economy and how to fix it.
the moment he starts talking about "prescribing medicine" as if he's some kind of doctor, you know he's clueless.
Re: Perspectives on the global economic changes
We do make pharmaceuticals, cars, steel, and diamonds you know. This isn't Soviet times. There is an intersection between the export basket of items we make and the import basket of what Russia imports. There is considerable overlap here. They don't have to invest rupees anywhere, they can buy goods, same as Russia does with China.Neshant wrote: The only other way is to have them take rupees for roubles which is to say pay for oil in rupees - and ask them to find ways of investing those rupees in India.
We can replace Germany/France, who have levied EU sanctions on Russia, in pharmaceuticals. Don't write us off as a nation of textile weavers and shoe makers. We can replace the products that the EU nations were exporting, particularly agricultural and many other items. This is a huge opportunity to establish ourselves in a big market, and such gifts don't come very often.
Re: Perspectives on the global economic changes
We needs lots from them - metals & minerals, oil, timber, nuclear energy, military goods, space technology, gold and numerous other things.
They need next to nothing from us.
What they get from Germany and western Europe are either high tech goods or branded consumer goods. The rest they get from China, South Korea and Japan.
As to what India can ship to them that's from either of those categories is questionable.
I wish we could do some ship building for them as contractors. Or export cheap labor to them. But really there are few opportunities for trade since they are not interested in either.
The only thing they can practically do with rupees is invest it in business ventures in India. Perhaps setup an R&D base here in various industries to harvest the vast hoards of brains & hoofs that are one of the (few) resources India has.
They need next to nothing from us.
What they get from Germany and western Europe are either high tech goods or branded consumer goods. The rest they get from China, South Korea and Japan.
As to what India can ship to them that's from either of those categories is questionable.
I wish we could do some ship building for them as contractors. Or export cheap labor to them. But really there are few opportunities for trade since they are not interested in either.
The only thing they can practically do with rupees is invest it in business ventures in India. Perhaps setup an R&D base here in various industries to harvest the vast hoards of brains & hoofs that are one of the (few) resources India has.
Re: Perspectives on the global economic changes
Russian central bank moves closer to free float by widening rouble corridor
(Reuters) - Russia's central bank on Monday moved a step closer to its goal of a freely floating rouble exchange rate by widening its trading corridor for the rouble and reducing the interventions it carries out to move the corridor.
The moves are part of a long-term policy shift to make inflation a more important benchmark than the exchange rate after several months earlier in the year when the bank was forced to defend the rouble, which came under pressure due to the crisis in neighboring Ukraine.
As part of the plan, the ruble's trading corridor will be abolished altogether from January next year and regular daily interventions will cease, although the bank will reserve the right to make discretionary interventions in the interests of financial stability.
The bank said in a statement that starting from Monday it had widened its exchange-rate corridor by 2 rubles to 9 rubles and reduced the intervention threshold for moving the corridor against a dollar-euro basket to $350 million from $1 billion.
It also said it would stop carrying out interventions within the corridor to reduce exchange rate volatility.
"The stated changes have been made within the framework of moving to an inflation-targeting regime, one of the essential conditions for the successful realization of which is stopping managing the exchange rate," the bank said, reiterating that it aims to move to a free float by next year.
The central bank moves would normally be bearish for the rouble, as the bank will be less active in currency markets to guide the ruble's exchange rate, but the Russian currency temporarily ignored the move in early trading, supported by the approaching end-of-month tax period.
The rouble was 0.36 percent stronger against the dollar RUBUTSTN=MCX and 0.37 percent firmer versus the euro at 0400 EST. EURRUBTN=MCX
Alexander Morozov, chief economist for Russia and CIS at HSBC, said Monday's policy move would likely be followed by a cancellation of interventions to move the corridor, effectively completing the shift to a freely floating rouble.
"Given that the central bank has inflation at the top of its list of priorities, this requires a tighter monetary policy so as not to lose the trust of market participants," he said.
In March, Russia's central bank dramatically raised the size of its intervention threshold, to $1.5 billion from $350 million, after the escalating Ukraine crisis caused a massive rouble sell-off, heightening concerns about Russia's overall financial stability.
The higher threshold paved the way for the central bank to spend some $25 billion to defend the rouble, but in June it signaled its policy shift was back on track by reducing the size of interventions to curb currency market fluctuations.
Re: Perspectives on the global economic changes
Shanghai Gold Exchange Launching International Bullion Exchange In Yuan Next Month
It is worth noting that the People’s Bank of China’s official gold reserves are very small when compared to those of the U.S. and indebted European nations. They are miniscule when compared with China’s massive foreign exchange reserves of more than $3 trillion.
The People’s Bank of China is continuing to quietly accumulate gold bullion reserves. As was the case previously, they will not announce their gold bullion purchases to the market in order to ensure they accumulate sizeable reserves at more competitive prices. They also do not wish to create a flight from the dollar – thereby devaluing their sizeable dollar reserves.
Expect an announcement from the PBOC, sometime later this year or in 2015, that they have trebled or even quadrupled their reserves to over 3,000 or 4,000 tonnes.
Re: Perspectives on the global economic changes
Boom Bust: Christopher Whalen on the BofA settlement & Dan Ariely on psychology and finance
http://rt.com/shows/boom-bust/182292-eb ... economics/
http://rt.com/shows/boom-bust/182292-eb ... economics/
Re: Perspectives on the global economic changes
interestingly, he was dismissed from his party after giving this speech.
Re: Perspectives on the global economic changes
Elizabeth Warren is one of the FEW politicians in the US with enough brains to dissect the utter scam that is central banking (aka private bank monopoly over the monetary system)
Notice how her simple question on JP Morgon's liquidation plan in the event of bankruptcy evokes a totally nonsensical reply. Basically its just a cover to keep their status as "too-big-to-fail" to keep taxpayers on the hook for any and all of their market gambling losses while they pocket the profits.
Its one more reason why this type of central banking foolishness should not be allowed to fester and grow in India. It only breeds corruption and collusion not to mention clueless politicians who vote on issues they know nothing about.
Notice how her simple question on JP Morgon's liquidation plan in the event of bankruptcy evokes a totally nonsensical reply. Basically its just a cover to keep their status as "too-big-to-fail" to keep taxpayers on the hook for any and all of their market gambling losses while they pocket the profits.
Its one more reason why this type of central banking foolishness should not be allowed to fester and grow in India. It only breeds corruption and collusion not to mention clueless politicians who vote on issues they know nothing about.
Re: Perspectives on the global economic changes
France: Amid internal feud, President Hollande dissolves govt
All these stimulus is resulting growth on books only.aris: French President Francois Hollande dissolved the government on Monday after an open feud in his Cabinet over the country's stagnant economy.
Prime Minister Manuel Valls offered up his Socialist government's resignation after accusing the economy minister of crossing a line with his blunt criticism of the government's policies. Hollande accepted the resignation and ordered Valls to form a new government by Tuesday.
Re: Perspectives on the global economic changes
soon they will call for the firing up of the printing press
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panduranghari
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Re: Perspectives on the global economic changes
You would hope that they would and any government would. But remember France cannot print Euro. The authority is solely with ECB. And ECB does not listen to any government.
Re: Perspectives on the global economic changes
ECB is essentially under the control of Germany and France by and large. If those 2 countries want the printing press to start up, some gobblygoop explanation will be put fort by the ECB to justify printing in the name of "stimulus" (or whatever) ... and the presses will start rolling.