Asia and the United States - allies or enemies

среда, 6 мая 2009 г.

Asia and the United States - allies or enemies

Economy of Asia playing a game that can change the face of the global financial system, affecting the interests of influential central banks like the Federal Reserve, on the other end of the world.

They are called "Asian Bellagio group", Borrowing the name from "European Bellagio group", gathering academics from the 1960's. Asian group includes officials from Japan, China, South Korea and South-east Asian countries, who met in Bangkok last week to discuss the decline in the dollar.

The group represents a formidable force, given that its members hold more than 1.1 trillion. $ U.S. treasury obligations. In fact, if Federal Reserve Chairman Alan Greenspan ask why his recent rate increases do not work as planned, it should be to look to the East.

Greenspan recently uttered the "enigma" that the yield of U.S. bonds fell, with increasing official rates. The trend is explained very simply - the purchase of large Asian American "kaznacheek" that reduce their profitability, making the powerful Federal Reserve impotent in its efforts to cool the economy. These days, markets react more to rumors about Asian central banks selling U.S. debt securities, rather than on what Greenspan says about the economy. One could argue that the main point of his comments about the low yield was the "irrational exuberance market bonds." In December of 1996., Greenspan's concern about the re-actions caused the blast. What did not happen when he mention about low-yield debt securities.

Rotate Korea
However, when Korea, the fourth country in the world's largest dollar reserves, a week ago announced its intention to diversify its reserves to other currencies, the markets react with lightning speed. When the Bank of Korea later announced that he would retain their dollar assets, the markets returned to normal, satisfied that the mighty United States once again prevailed over conceding Asian economies.

Nothing could be further from the truth.
Rotate Korea just shows how connected Asian officials. They are at risk of causing a large impact on their finances, openly selling the currency, which has already lost 34% against the euro over the past three years. Their economies also become less competitive, as the strengthening of their currencies against the dollar and Chinese yuan, which is pegged to the dollar. Undermining the dollar is not in the interests of Asia in the short term. In the future, however, is in their interest to keep their savings at home. Capital may be needed to re-economy or to improve education, infrastructure and health. It should also be on hand to help the economy with the crisis.

Full circle
This was the impetus for the establishment of "Asian Monetary Fund" proposed in 1997. The idea was quickly discredited the United States, which feared that this would reduce the influence of the IMF. Because it would mean less U.S. influence in Asia, the then Minister of Finance USA Robert Rubin did not want to hear about it.

So, the idea was a complete circle. Asia is becoming confident about the dollar. In addition, the economy is becoming increasingly vulnerable to the impact of Chinese demand and less dependent on American consumers. The leaders here also feel the lack of influence in Western circles. Thus, Asia now seems ready to create such an institution to serve their interests.

What does this mean for the United States? So far, Asian central banks are complicating the lives of the Federal Reserve, because it slows the growth of the U.S.. Still, there are two scenarios in which the efforts of Asian monetary cooperation may complicate the life of the Federal Reserve even stronger. One of them is that the massive sales of dollar assets by Asian authorities could plunge the U.S. economy into chaos, because the dollar will decline, and yield of Treasury securities to rise. The second relates to the fact that Asian cooperation could keep the current global system in place, hampering the efforts of the Federal Reserve cut U.S. inflation.

Asian confrontation
In Asian consumers are stronger and mightier than the question about what their governments are funding the American way of life. Capital flow from East to West reduces incentives for the United States to address its deteriorating fiscal deficit and current account.

First of symbolic relations between the United States and Asia is now increasingly like the unhealthy and unsustainable mutual dependence. Asia maintains its propensity for growth through exports, fueling the U.S. propensity to import capital to finance its economy, and vice versa. Now, Asian leaders are concerned that they receive less of these relationships than could be expected.

While meeting last week, "Asian Bellagio group" not shown a coordinated effort to keep the dollar, it could become a landmark event for the region, aiming to stand alone. If the question of joint efforts to cause to fall the dollar, it could be done by this group. Asia has never been good at collaboration. In the past, have been established notable Association of Southeast Asian Nations (ASEAN) members, or from 10 Asia-Pacific Economic Cooperation (APEC), which includes 21 countries? Political and technical problems related to collective monetary policy means that it could not be more soon. Still, some efforts begin. This may accelerate, as the leaders of Asian central banks realize that they are fighting at a losing position in an attempt to halt the decline in the dollar.

Defined benefit, of course, may be to avoid large-scale dollar crisis in Asia than the United States is interested not less.