Tag Archives: economics

This is Backwards

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The IMF is likely to announce Monday (tomorrow as I wrote this, yesterday as you read it) that it will add the PRC’s renminbi to its basket of reserve currencies alongside the US dollar, the British pound, the Japanese yen, and the eurozone euro. As a result of this, the renminbi will be more tightly scrutinized, and the IMF’s hope expectation is that the PRC will become much more open in its handling of the renminbi. As The Wall Street Journal put it Saturday,

Inclusion would also put pressure on the central bank to offer the same degree of clarity and transparency that the US Federal Reserve, the European Central Bank, and other vital institutions strive for.

Here, too, is Sheng Songcheng, Director of the Statistics Division of the People’s Bank of China:

We will have to build up confidence in renminbi assets from investors both at home and abroad and at the same time, prevent the financial risks associated with a more global currency. That calls for carrying out various financial reforms in a coordinated way.

A couple things: Sheng is not the top official of the PRC’s central bank; he’s just the guy in charge of one of the bank’s departments.

More importantly, though, is that this order of events is backwards. The central banks of the US, Great Britain, the EU, and Japan were open, transparent, and generally free of government manipulation before they became global reserve currencies.

So should it (have been) a requirement for the PRC, the PBOC, and the renminbi. The promises and predictions of a lower level functionary of the PRC government have little value.

An aside and a short lesson, courtesy of a friend of mine: the terms “renminbi” and “yuan” very often are used interchangeably; this is incorrect. “Renminbi” refers to the national currency, just as “dollar” and “pound” (or “British pound” where the distinction matters) refer to national currencies. However, unlike in the US and Great Britain, where “dollar” and “pound” refer also to units of the national currency, the unit of the PRC’s national currency is “yuan:” that thing in the window costs five dollars, or it costs five pounds, or it costs five yuan—not five renminbi.

Another Democrat Blockage

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Pennsylvania has a budget impasse. Democratic Governor Tom Wolf wants more taxes and more spending. The Republican legislature (both houses) want smaller government. One aspect of the dispute is this:

The sides are focused now on the Democratic priority of increasing education spending and the Republican goals of reining in public employee pension costs and privatizing a state-run liquor agency.

How typical is that? Big Government Democrats are holding up a budget deal because they can’t stand private enterprise, but they demand to have the folks in private enterprise–the private economy—continue to pay for fat public union pensions.

These Big Government Democrats need to get out of the way of economic progress. But they are loathe to give up the political power of which their “welfare” programs are so redolent.

Hopefully, It’s a Start

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The Libre Initiative is a conservative organization funded by a donor network organized by the Koch brothers, that pair of Left-wing bêtes noire.

This organization is

[a]ctive in nine states, including Colorado, Nevada and Virginia, Libre, which means free in Spanish, is an effort to organize Latinos around free-market political ideas.

It’s also helping Hispanic immigrants learn English and

offering recent immigrants practical services such as English-language courses, tax-preparation seminars and driver’s license classes….

It’s helping these folks fit into their new nation.

They’ve been doing this sort of thing since 2011, and they represent an excellent start. But. This sort of thing needs to be greatly expanded, with lots of other Conservative organizations taking part, and it needs to be an ongoing effort, not just an election year ploy. The Libre Initiative clearly is more than a ploy. Where are the others?

Economics and Secession

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Spain’s economy may be beginning to recover, even to boom, from the global Panic of 2008.

In its second estimate of gross domestic product for the quarter, statistics bureau INE said the eurozone’s fourth-largest economy grew 3.4% in the July-to-September period compared with the year earlier period, up from a rate of 3.2% in the second quarter.

To be sure, these are only two quarters’ worth of data. It’s also unclear how much of this growth is spread throughout Spain, and how much is concentrated in the secessionist province of Catalonia.

This will be interesting to watch, both for the improvement’s impact on the secession movement and for any later impact from a continued movement toward secession.

Economic Contest

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It’s not yet an economic war. Russia is beginning the contest with Turkey after that nation was so impertinent as to shoot down a Russian fighter-bomber that was the latest Russian aircraft to violate Turkish airspace, this time refusing to leave despite multiple requests and warnings.

…Moscow took aim at Turkey’s economy, ordering tougher checks on its food imports.

This isn’t a contest that Russia can win, though. The Turkish economy is in sounder shape than Russia’s, and Turkey isn’t particularly dependent on exports to Russia. Russia, though, already has banned food imports from the rest of Europe over the latter’s sanctions that responded to Russia’s invasion and occupation of significant parts of Ukraine. This latest move, delicate though it is, simply makes Russia more dependent on domestic food production.

To be sure, this isn’t all the posturing Russian President Vladimir Putin is doing. He’s also shipped a number of near state-of-the-art S-400s, long-range anti-aircraft missiles, to his base in Syria, and he’s moved his guided missile cruiser, Moskva, which also is equipped with SAMs, closer to Syria. Both deployments put Turkish aircraft operating over a significant portion of Turkey in Putin’s gunsights.

This is a contest that Russia needn’t be allowed to win, either. If Putin continues to violate other nations’ airspace in his efforts to prop up his client Bashar al-Assad, those two isolated deployments can become targets themselves.