Daily Archives: January 25, 2010

Rising gold prices and recovering financial markets have caused a 10bn CHF profit for the Swiss central bank.

Switzerland has exceptionally large gold reserves for the size of its economy, at about 1,040 tonnes, or $35bn. Indeed, the country ranked second in the world in our gold security ranking. The rising value of gold contributed about 7.3bn CHF to the profits. Foreign exchange positions made up much of the rest, at about 2bn CHF. Read more

Lending levels may be too high in aggregate, but farmers aren’t getting enough of the pie. So says the Chinese central bank, which has called for financial innovation and increased levels of rural lending.

Banks should issue more microloans to farmers to foster rural industries and urbanization, said Liu Shiyu, deputy governor of the People’s Bank of China. Rural credit co-operatives, village banks, microcredit companies and new types of financial institution should all be used to help rural development. Read more

Debate on the nationalisation of the South African central bank has been reignited after the head of the ANC submitted a document questioning the bank’s current ownership, raising fears of higher inflation.

ANC Secretary-General Gwede Mantashe asked: “Why have we been reluctant to even open the discussion on the role of the state in the banking industry? [We should also ask] why the South African Reserve Bank is one of less than five central banks in private hands in the world.”

A change to state ownership of the shareholder-owned bank could mean higher inflation. The left has complained that the bank focuses too narrowly on maintaining low inflation. They want policymakers to consider employment and growth when setting interest rates. Read more

Robin Harding

The Bank of Japan’s first monetary policy meeting of the year starts today and concludes tomorrow, Tuesday 26th, when we’ll hear about any change in policy.

With ample evidence that deflation is taking hold again, a majority of economists are looking for further ‘broadly defined quantitative easing’ from the BoJ, although not necessarily at the current meeting. Political pressure for some kind of action is also mounting.

Officials at the BoJ, however, appear to be: (a) skeptical about how much quantitative easing can do to halt deflation; and (b) reluctant to be seen to finance the fiscal deficit through the obvious step of buying more government bonds. Read more