Tuesday, February 22, 2005

First FX domino?

Just as predicted by game theory critics of Bretton Woods II, Korea may be the first to defect from the currency regime, seeking to protect the value of its reserves by diversifying into a basket of currencies. Note, however, that BoK has merely floated this as a proposal to parliament. Korean companies may have something to say about whether the won should be allowed to rise against the dollar. Not long ago at the ASEAN meeting Korean President Roh expressed concern about the rising won and declared pan-Asian currency solidarity. Can the Koreans take the pain necessary to move to a basket?

Bloomberg: "The dollar fell the most in more than four months against the yen and dropped versus the euro, Korean won and at least 30 other currencies after the Bank of Korea said it plans to increase its non-dollar reserves.

South Korea's central bank, which has a total of $200 billion in reserves, said in a Feb. 18 report to a parliamentary committee it will increase investments in assets denominated in currencies such as the Australian and Canadian dollars. The country's reserves are the world's fourth biggest, behind Japan, China and Taiwan, according to data compiled by Bloomberg."

Brad Setser caught this as well.

UPDATE: From Bloomberg this evening, South Korea's central bank, which holds the world's fourth-largest foreign currency reserves, said it has no plan to sell dollars from those holdings and no plan to change the current portfolio of currencies in its reserves.

"The Bank of Korea will not change the portfolio of currencies in its reserves due to short-term market factors," the central bank's said in a press release e-mailed to all media this morning after the Korean won rose past 1,000 against the dollar for the first time since November 1997.

But not before the dollar plunged and US equity markets tanked...


Anonymous said...


A Deadly Fever, Once Defeated, Lurks in a Chinese Lake

XINMIN VILLAGE, China - Had she been younger, Liao Cuiying might have been mistaken for pregnant, standing beside a watery ditch with a hard, distended belly that spoke not of imminent life but approaching death.

Her village is surrounded by Dongting Lake, an immense inkblot of brown water that sustains villages of fishermen and farmers. Mrs. Liao, 55, had regularly washed her vegetables in a nearby stream and cut wood in the damp soil beside the lake.

They were mundane, daily tasks that would cost Mrs. Liao her life, because Dongting Lake carries a complicated burden for those who depend on it: people cannot touch the water. It is infested with a water borne parasite called schistosomiasis, also known as snail fever, which can penetrate a person's skin after only 10 seconds of contact and cause serious illness, even death....


Anonymous said...


Latin America Fails to Deliver on Basic Needs

EL ALTO, Bolivia - Piped water, like the runoff from the glaciers above this city, runs tantalizingly close to Remedios Cuyuña's home. But with no way to pay the $450 hookup fee charged by the French-run waterworks, she washes her clothes and bathes her three children in frigid well water beside a fetid creek.

So in January, when legions of angry residents rose up against the company, she eagerly joined in. The fragile government of President Carlos Mesa, hoping to avert the same kind of uprising that toppled his predecessor in 2003, then took a step that proved popular but shook foreign investors to their core. It canceled the contract of Aguas del Illimani, a subsidiary of the $53 billion French giant Suez, effectively tossing it out of the country and leaving the state responsible.

'For us, this is good,' Ms. Cuyuña said, voicing the sentiment in much of El Alto. 'Maybe now, they will charge us less.'

That is far from certain. Even less certain is how she and 130 million other Latin Americans will get clean water anytime soon in a region where providing basic services remains among the most pressing public health and political issues.

Governments like Bolivia's tried the task themselves before, abandoned it as too costly, and turned to private companies in the 1990's. Today as privatization is rejected, foreign investment is plummeting across the region and the challenge is being returned to states perhaps less equipped than a decade ago.


Anonymous said...

A remarkable article:


More Africans Enter U.S. Than in Days of Slavery

For the first time, more blacks are coming to the United States from Africa than during the slave trade.

Since 1990, according to immigration figures, more have arrived voluntarily than the total who disembarked in chains before the United States outlawed international slave trafficking in 1807. More have been coming here annually - about 50,000 legal immigrants - than in any of the peak years of the middle passage across the Atlantic, and more have migrated here from Africa since 1990 than in nearly the entire preceding two centuries.

New York State draws the most; Nigeria and Ghana are among the top 20 sources of immigrants to New York City. But many have moved to metropolitan Washington, Atlanta, Chicago, Los Angeles, Boston and Houston. Pockets of refugees, especially Somalis, have found havens in Minnesota, Maine and Oregon.

The movement is still a trickle compared with the number of newcomers from Latin America and Asia, but it is already redefining what it means to be African-American. The steady decline in the percentage of African-Americans with ancestors who suffered directly through the middle passage and Jim Crow is also shaping the debate over affirmative action, diversity programs and other initiatives intended to redress the legacy of slavery.

In Africa, the flow is contributing to a brain drain. But at the same time, African-born residents of the United States are sharing their relative prosperity here by sending more than $1 billion annually back to their families and friends.

'Basically, people are coming to reclaim the wealth that's been taken from their countries,' said Howard Dodson, director of the Schomburg Center for Research in Black Culture, in Harlem, which has just inaugurated an exhibition, Web site and book, titled 'In Motion,' to commemorate the African diaspora....


Anonymous said...

The epidemic in China is important in depicting what may be a sharp deterioration of health conditions in rural China, as communal health care provision falters and limits are of course realized in private health care extension. We should attend to this development problem.


Anonymous said...

And yes, yes, yes. I think Setser and Roubini may well be right. At least, I can not argue beyond them. There is reason for concern; a game theorist's game?


Anonymous said...


In a Corner of India, They Have the Vote, but Little Else

PATNA, India - On the next-to-last day of the toughest election race of his career, Laloo Prasad Yadav, one of India's canniest and most caricatured politicians, is wrapped up in a rambunctious campaign caravan known here as a "road show."

Laloo-ji, as he is universally called, sits in the cab of his forest-green campaign bus, eats sugar-cane candy out of a plastic bag and promises factories and bridges to the roaring crowds outside. Marigold garlands are tossed at him in adoration; campaign fliers are tossed out to the crowds; his fans practically stampede for a chance to touch his outstretched hand.

Mr. Yadav, scion of lower-caste farmers, self-fashioned champion of the downtrodden, now a federal cabinet minister who rules India's third most populous state, Bihar, worships them in return. "I salute you, I pay my respect to you," he bellows. "The government of India is yours."

As dusk turns to dark, on the edges of the road, Laloo loyalists display his party symbol in a show of support: they hold up lanterns to light up the road.

Actually, they do not have much of a choice. Only 5 percent of households in Bihar have electricity, compared with 40 percent nationwide, according to the World Bank. On virtually every other development indicator, from infant mortality to literacy to its share of people below the poverty line, Bihar and its 82 million people sit at or near the bottom....


Anonymous said...


Mexico's Migrants Profit From Dollars Sent Home

VALPARAÍSO, Mexico - Less than two months after he was elected, Mayor Alberto Ruiz Flores climbed in his truck and set out on a 26-hour road trip across the border to Southern California, carrying a wish list of public works projects to a backyard barbecue in Oxnard.

The reason? To solicit money from some of the 400,000 Mexicans who abandon their country each year for work in the United States, including half his town in Central Mexico. Those who have left Valparaíso send home an estimated $100,000 a day, as much money in one month as the municipality will spend all year.

A week later, Mr. Ruiz was at a restaurant in Aurora, Ill., for a meeting with a Mexican factory worker and billboard painter who has raised hundreds of thousands of dollars for Valparaíso. The week after that, he invited migrant leaders from Dallas and Las Vegas to join him at home for the annual crowning of the municipal beauty queen.

"I consider myself the mayor of Valparaíso, and the mayor to those, like you, who had to leave Valparaíso in search of a decent life," Mr. Ruiz said at the start of each encounter. "You have shown with your generosity that you are still a part of Mexico. Without you, who knows where we would be."

For Mr. Ruiz, politics does not stop at the United States border. The same is true across Mexico, the Caribbean and Latin America, where more and more officials like him answer to cross-border constituencies made up of the people at home who cast ballots and the ones abroad who pull the purse strings.

Today more than ever, the remittances sent home by immigrant workers, both legal and illegal, are translating into political clout, and their communities in the United States, better organized and more vocal than before, have become social and political forces too important to ignore.


Anonymous said...

Notice that long term Treasury interest rates are at 4.24% on news of a tame inflation report. The bond market did not move significantly as the dollar lost value again. A sharp short term move may be too much to expect in matching interest rates and dollar moves.


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