Daily Archives: February 25, 2010

Venezuela is an unlikely taker for the IMF’s planned bullion sale.

The country plans to invest about $300m importing equipment to mine 36 tonnes per year. Tailings at a number of old mines show reserves of around 170 tonnes in the southern state of Bolivar. Read more

Delivering the prestigiou Mais lecture is a feather in the cap of George Osborne, the shadow chancellor. So it is a shame that the speech, while strong on the process a Conservative government would adopt to sort out the public finances, was weak on the Tories’ ambitions for running the budget and disastrous in its use of definitions and figures.

Process of budgetary control

The FT outlined the process the Conservatives are proposing to control the public finances in the paper this morning. The Conservatives’ big idea is to create an Office of Budget Responsibility to produce independent fiscal forecasts and judge how much taxes or public spending need to be changed to allow the government a better than evens chance of meeting its fiscal ambitions. As I argued in a column in 2008, I think this is sound. It is another attempt to provide an external constraint on politicians’ desires to borrow too much or to fiddle the figures. Read more

Calling a turning point is tricky, and offers ample room to make oneself look silly.

But I reckon a good indicator is surprise. If pundits expect the continuation of a trend, and are surprised, that suggests either a temporary blip or a reversal. And if there are many such related surprises, evidence strengthens for the reversal.

Well, there is a lot of surprise in this office at the moment. Every day there seems to be a new (negative) data release for the UK or US – and every day I see colleagues raising eyebrows at the size of that surprise. An eyebrow raise, in Britain, is a powerful indicator.

So I’m keeping a list, below, of the latest data releases. Read more

Krishna Guha, the FT’s US economics editor, will be leaving the FT to join the Federal Reserve Bank of New York.

Sadly he will no longer post on Money Supply. His Fed-watching replacement will be announced in due course. Read more

Simone Baribeau

Day two of Ben Bernanke’s semiannual monetary policy report to the Congress is proving a bit more eventful than the relatively news-free day one.

The day started with the revelation that the Fed is looking into whether Goldman Sachs helped Greece cover up the extent of its budgetary problems by using derivatives. “We are looking into a number of questions related to Goldman Sachs and other companies in their derivatives arrangements with Greece,” Mr Bernanke told the Senate banking committee. At the end of the hearing, the Fed chairman said that any arrangements may have been made a decade ago.

After starting the second and final day with a bang, Mr Bernanke faced another generally civil, but occassionally less friendly set of questions than he had before the the House financial services committee yesterday. The Senate recently confirmed the Fed chairman for a second term, albeit not without difficulty, and some of the Senators are looking to make clear that they are still sceptical of his chairmanship.

Here are some highlights: Read more

The Sri Lankan central bank has dismissed the idea that the delay of an IMF payment will have any effect on investor confidence.

Following the IMF’s announcement, governor Ajith Nivard Cabraal declared: “There is absolutely no impact at all.” Of course, countries receiving IMF loans are generally in need of them. But a) the governor couldn’t really say much else; and b) post-conflict growth in the country has helped to build up forex reserves, possibly making the loan less of an issue than it was. Read more

China is one of 32 central banks in a group that released a statement last week, saying there would be further restrictions on Iranian banks if no action is taken on nuclear proliferation and terrorist financing.

The Financial Action Task Force had been asked to identify ‘unco-operative’ jurisdictions by the G20. On Tuesday, the US Treasury reiterated its interest in sanctions against Iran’s central bank. Read more

Faith in the lira has slipped as the political power struggle continues, with accusations of an attempted coup, which some say dates back to 2003 and others say never existed. No clarity is needed for traders to want to exit the currency, however. Uncertainty is sufficient incentive.

The lira has fallen about 2 per cent against the euro and dollar this week (see chart). It is likely to continue falling. Bloomberg is reporting a surge in demand for put options on the currency. Put options give the holder the right, but not the obligation, to sell the currency for a specified amount on a set date in the future. Read more

Topically, it was Zhu Min who raised this troubling issue at Davos recently. “The big risk this year is the dollar carry trade,” he said. “Estimates are that the dollar carry trade is $1,500bn – which is much bigger than Japan’s carry trade was.”

A carry trade is where investors borrow in a low-interest currency to invest in a high-interest currency. Historically, the borrowing currency of choice was the yen. Recently the dollar, with record low interest rates, has apparently become popular. Read more

The central bank of Brazil has announced a rise in reserve requirements for larger banks, reversing the lower levels permitted during the crisis.

Two moves are intended to soak up 71bn reais ($39bn) from the Brazilian financial system: (1) reserve requirements for time deposits will be raised to 15 per cent from 13.5 per cent; (2) additional requirements for demand and time deposits will be raised to 8 per cent from 5 and 4, respectively. The moves will take place on March 22 and April 9. Read more

Zhu Min is to become a special advisor to IMF head Dominique Strauss-Kahn. Mr Zhu has been a deputy governor of the Chinese central bank since October last year. Highly respected in international financial circles, Mr Zhu will start his new role in May. His appointment follows the selection in 2008 of Justin Yifu Lin, the Chinese academic, as chief economist of the World Bank. One sticky topic might be the renminbi, which Mr Strauss-Kahn has repeatedly said should appreciate (more from Geoff Dyer).