Daily Archives: April 19, 2010

Alan Beattie

Consider the evidence: it’s the IMF/World Bank spring meetings this coming weekend in Washington. Big emerging market countries, mainly in Asia, have been pushing for a higher voting weight on the executive boards of the Fund and Bank. Standing in their way are the Europeans, who would have to give up some of their influence. And the week of the meetings, it just so happens that a volcanic ash cloud threatens to keep the Europeans away altogether and let Asia grab a lot more of the attention.

I’m not necessarily saying I have cast-iron proof from two sources that the Asians got the volcano to erupt somehow. I’m saying it’s mightily convenient, that’s all.

Simone Baribeau

The Fed didn’t know about ‘repo 105′ and if it had, it wouldn’t have cared.

That pretty much sums up Ben Bernanke’s planned testimony to the house financial services committee tomorrow.

Knowledge of Lehman’s accounting for these transactions would not have materially altered the Federal Reserve’s view of the condition of the firm; the information we obtained suggested that the capital and liquidity of the firm were seriously deficient, a view that we conveyed to the company and that I believe was shared by the SEC and the Treasury Department.

Mr Bernanke also, of course, says that the Fed was not Lehman’s regulator, and that it only began monitoring the financial condition of Lehman as the financial stress built in March 2008.

As it turns out, former Lehman chief executive Dick Fuld also doesn’t remember the now infamous “Repo 105″ – a technique used by Lehman which critics say allowed it to make its balance sheet look healthier. Read more

James Politi

Overly-generous unemployment benefits are not by any stretch a major factor behind the surge in long-term US joblessness. Or at least this is what economists at the Federal Reserve Bank of San Francisco argue in a research report released on Monday.

In examining the topic, Rob Valletta and Katherine Kuang of the SF Fed are wading into an area that is of great concern to policymakers and also been a source of tension between Democrats and Republicans on Capitol Hill. Read more

Ralph Atkins

The European Central Bank website is offering a sneak preview of some of the speeches to be delivered at a Frankfurt conference later this week on statistics and the global financial crisis. It is perhaps not something to set everyone’s pulse racing. But I was interested to see a contribution from George Provopoulos, Greece’s central bank governor. After all, it was Greece’s failure until late last year to reveal the true scale of its public sector deficit that led to all the trouble it faces today.

As Mr Provopoulos notes sagely: “Timely and accurate information is indispensable for sound policy choices, whereas insufficient information and/or inaccurate information undermine the implementation of sound policies.” He even quotes a line from Plato: “For it is experience that enables our span of life to proceed according to art, whereas lack of experience leaves us at the mercy of chance.” Read more

“Chinese revaluation is not in the US interest.” This is one of the major conclusions from a collection of short essays on the Sino-US currency dispute (eBook). Other conclusions are that a revaluation is in China’s interest, and that the size of the RMB undervaluation is between 2.5 and 27.5 per cent.

The conclusions back up research performed by PwC for Money Supply on Friday. They found that while a renminbi appreciation would reduce the US trade deficit, the effects would not flow through to GDP and would, at any rate, be short-lived.

The zloty is too high, even though recent intervention by the central bank has helped to weaken the currency to levels last seen a month ago. So says Polish deputy finance minister Ludwik Kotecki.

“At this stage of the recovery, the zloty is probably too strong and for sure further appreciation of the zloty should be avoided,” Mr Kotecki told Bloomberg in an interview on April 17 in Madrid. “The recovery is not well grounded and risks still exist. Too strong a zloty would be negative.” He declined to speculate on what the optimal exchange rate would be for Poland’s economy. Read more