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Senior Vice-President for Research and Innovation, Professor of Theoretical Physics, Michigan State University

Thursday, January 27, 2005

FX roundup

Comments of Fan Gang, director of the National Economic Research Institute at the China Reform Foundation, at Davos:

"The U.S. dollar is no longer -- in our opinion -- is no longer a stable currency, and is devaluating all the time, and that's putting [sic] troubles all the time.”

"So the real issue is how to change the regime from a U.S. dollar pegging ... to a more manageable ... reference ... say Euros, yen, dollars -- those kind of more diversified systems.”

"If you do this, in the beginning you have some kind of initial shock," Fan went on. "You have to deal with some devaluation pressures."

Keep in mind Fan is not an official spokesperson of the PBOC or the Ministry of Finance. Nevertheless, he represents at least one thread of the internal debate that must be ongoing among Chinese policymakers. The "shock" he refers to will be felt here as a dollar and interest rate crash.

Further analysis and commentary:
Setser blog
Sage Capital Zurich


Anonymous said...

Grumble, grumble. The currency problem is real for China and us, though more so for us I feel, for China's dollar reserves are a claim against American assets and I do not expect we will choose to inflate our way free of the claim. What we must do is lessen the federal deficit that is contributing so much to the trade deficit, but that would take a Robert Rubin at Treasury and there is no chance. So, we grumble at China and China grumbles back and all stays about the same for the while. Hmmm.


Anonymous said...


Central Park, you ask. Central Park, I say.

Anne :)

Anonymous said...

I have not forgotten the conversation on individuality and am thinking thinking.


Anonymous said...


The Market Shall Set You Free

Princeton, N.J.

LAST week President Bush again laid out a faith-based view of the world and again took heat for it. Human history, the president said in his inaugural address, 'has a visible direction, set by liberty and the author of liberty.' Accordingly, America will pursue 'the ultimate goal of ending tyranny in our world' - and Mr. Bush has 'complete confidence' of success. Critics on the left and right warned against grounding foreign policy in such naïve optimism (a world without tyrants?) and such unbounded faith.

But the problem with the speech is actually the opposite. Mr. Bush has too little hope, and too little faith. He underestimates the impetus behind freedom and so doesn't see how powerfully it imparts a 'visible direction' to history. This lack of faith helps explain some of his biggest foreign policy failures and suggests that there are more to come....


Anonymous said...


America's Promises

Three years ago, President Bush created the Millennium Challenge Account to give more money to poor countries that are committed to policies promoting development. Mr. Bush said his government would donate billions in incremental stages until the program got to a high of $5 billion a year starting in 2006. While $5 billion is just 0.04 percent of America's national income, President Bush touted the proposal as proof that he cares about poverty in Africa and elsewhere. 'I carry this commitment in my soul,' the president said.

For the third straight year, Mr. Bush has committed a lot less than he promised. Michael Phillips of The Wall Street Journal reports that the White House has quietly informed the managers of the Millennium Challenge Account to expect about $3 billion in the next budget. This follows a sad pattern. Mr. Bush said he would ask Congress for $1.7 billion in 2004; he asked for $1.3 billion and got $1 billion. He said he would ask for $3.3 billion in 2005; he asked for $2.5 billion and got $1.5 billion....


Anonymous said...

Aside: Oh my...


Humanity With Flaws Forgiven


THE woman, hand to chest, leans a little forward, head turned and tilted, lips slightly parted, liquid eyes gazing into the ether. She is dressed in a dark, fur-lined cloak that reveals a peek-a-boo white chemise; a robe sewn with gold is draped over her right shoulder and it glints, like the gold fillet in her hair. Her round, pretty face is a little puffy and sad, and she seems oblivious of us. But she is no doubt alert to the painter, her lover, whose gifts are so surpassing that simply by virtue of being the object of his devotion she looks divine.

This is a portrait of Hendrickje Stoffels, Rembrandt's companion. In the little Rembrandt show opening Sunday here at the National Gallery, the picture is tentatively identified (with a question mark after the title) as "The Sorrowing Virgin."

Had he been a poet instead of a painter, Rembrandt would have seduced countless women with his love sonnets. Every lover would have believed him when he wrote yet another poem that swore undying devotion to her unrivaled feet and peerless earlobes.


Anonymous said...

Rembrandt and dark matter, imagine :)


Anonymous said...


Little Black Lies

Social Security privatization really is like tax cuts, or the Iraq war: the administration keeps on coming up with new rationales, but the plan remains the same. President Bush's claim that we must privatize Social Security to avert an imminent crisis has evidently fallen flat. So now he's playing the race card.

This week, in a closed meeting with African-Americans, Mr. Bush asserted that Social Security was a bad deal for their race, repeating his earlier claim that "African-American males die sooner than other males do, which means the system is inherently unfair to a certain group of people." In other words, blacks don't live long enough to collect their fair share of benefits.

This isn't a new argument; privatizers have been making it for years. But the claim that blacks get a bad deal from Social Security is false. And Mr. Bush's use of that false argument is doubly shameful, because he's exploiting the tragedy of high black mortality for political gain instead of treating it as a problem we should solve.

Let's start with the facts. Mr. Bush's argument goes back at least seven years, to a report issued by the Heritage Foundation - a report so badly misleading that the deputy chief actuary (now the chief actuary) of the Social Security Administration wrote a memo pointing out "major errors in the methodology." That's actuary-speak for "damned lies."

In fact, the actuary said, "careful research reflecting actual work histories for workers by race indicate that the nonwhite population actually enjoys the same or better expected rates of return from Social Security" as whites....


Anonymous said...


Big Apple by the Pound

Sheila Riley came for Macy's, evidenced by the pile of telltale red bags piled around her feet. Russell Whitehead and Robert Archibald made the trip for 'Wicked.' Jeff Taylor wanted to propose.

Seb Sims's goals were admittedly more prosaic and yet they pleased him. 'I came to New York to go shopping and get drunk,' said Mr. Sims as he headed for a southbound No. 1 to 'Greenwich.' (No, not Connecticut, but why embarrass him?)

Tourists from overseas - the most coveted of visitors thanks to their long stays and habit of shopping with abandon - are returning to New York for the first time since 2001, and no place is exporting more of them to the city than Britain, whose citizens are lured by the combination of a falling dollar, low air fares and an apparently insatiable lust for sneakers on the cheap.


Anonymous said...


Amazing long-eared owl in Central Park. Owls really are amazing.


Anonymous said...


At Forum, Leaders Confront Annual Enigma of China

DAVOS, Switzerland - In almost every panel discussion at the annual meeting of the World Economic Forum here, there comes a moment when somebody mentions China.

A hush typically ensues, as panelists draw their breath, gather their thoughts and struggle to put the bewildering vastness of the topic into a few words.

'China is going to be the change agent for the next 20 years,' said Bill Gates, the chairman of Microsoft, when asked about the country's future by the television interview host Charlie Rose.

China's staggering potential, coupled with the steep language barrier and cultural discomfort of many Chinese who come to this conference, has made it Davos's annual enigma.

After three days of outsiders' dissecting its motives and prospects, China finally took the stage on Saturday, with a speech by its executive vice prime minister, Huang Ju.

'China's development will by no means pose a threat to other countries,' Mr. Huang declared cheerfully, as if to soothe people here who spent the week fretting about China's lengthening shadow.

Mr. Huang, however, said little on the two issues of overriding importance to the investors and business people here: whether China would allow its currency to rise against the dollar, and whether the Chinese would crack down on the rampant theft of intellectual property....


Anonymous said...


China's Fear of Ghosts: Balancing Stability and Dissent

BEIJING - Deng Xiaoping, China's late paramount leader, famously declared after he consolidated power in the early 1980's that his predecessor, Mao Zedong, was 70 percent good and 30 percent bad. With that numerical coda, the Communist Party closed a historical debate that had threatened to tear it apart.

Hu Jintao, general secretary of the Communist Party and China's top leader, assigned no precise ratio to assess his late predecessor, Zhao Ziyang. But Mr. Hu clearly struggled to find the right balance in managing the politically explosive death of Mr. Zhao, who was officially memorialized and cremated on Saturday.

The test of whether Mr. Hu succeeded may be less the event itself, conducted with martial discipline, than whether society and the Communist Party ultimately accept the verdict on Mr. Zhao, political analysts said.

Mr. Zhao, an architect of China's economic reforms in the 1980's, openly defied the party he once led when he opposed the use of force against democracy protesters in 1989. Although he was never charged with a crime, Mr. Zhao was purged and spent his remaining years under house arrest, becoming an unlikely hero for China's scattered opposition.


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