RMB as reserve: Rebalancing the global financial system

By Peter Wong via Caixin | It is unlikely that the RMB or yuan, China’s “people’s currency,” will replace the dollar outright as the world’s only investment and reserve currency any time in the foreseeable future. But there is every indication that the dollar will have to make room for a second global reserve currency within the next 15 years. A revolution allowing investors to diversify risk – and creating a system with more choice and better ability to resist shocks – should be welcomed.

Catalonia exit: a financially doomed move

MADRID | By J. P. Marín Arrese | Water and power supply would be secured should Catalonia become an independent nation. That’s the only reassuring conclusion the economic think tank set up by the regional government has recently reached. On handling monetary and financial issues, it points to severe problems ahead. 

Why hasn’t the Euro fallen more?

MADRID | The Corner | The EUR/USD dropped nearly 4 cents from its maximum area in 2014 (very close to 1.40) with a movement that began on 8 may, when Mario Draghi announced that a package of monetary stimulus / liquidity would be used at the June 5 meeting (refi rates drop in 10bp, negative deposit type, completion sterilization SMP and quarterly TLTRO). Why hasn’t the Euro fallen more?


Why All Currencies Are National

By Jean Pisani-Ferry via CaixinActions by America’s Justice Department launching a probe against BNP Paribas are a reminder that the major international currency – the U.S. dollar – brings with it legal, judicial and political dimensions. 

No Picture

German Ifo business climate falls to 6-month low

MADRID | The Corner | The  much-awaited German Ifo Business Climate Index for industry and trade fell to a seasonally adjusted 109.7 points this month, below forecasts for 110.2 and down from 110.4 in May. Although the country’s firms still make positive assessments of the current business situation, the Munich-based institution explained in a press release on Tuesday, they feel less optimistic about the future. And fear the potential impact of the crises in the Ukraine and Iraq.

No Picture

The euro goes negative

NEW YORK | By Dickson Buchanan Jr. via Truman Factor | The European Central Bank’s (ECB) decision to charge a negative interest on overnight deposits is not going to lead to a higher targeted inflation rate, despite ECB President Mario Draghi’s insistence that it will. Like all cases of central planning, this decision will have unintended and costly consequences – some of which are already starting to play out. 

No Picture

Easy money, stronger currency?

LONDON | By Chris Walker and Marvin Barth at Barclays | Despite the ECB delivering more easing than expected, the EUR remains close to the levels heading into Thursday’s meeting. Did the ECB then fail? In a word, no. The ECB’s objective is to raise inflation from unacceptably low levels well below its mandate of “less than but close to 2%” and a crucial element of doing so is to keep inflation expectations anchored near the Bank’s target.

“Spain has been trying to be a good citizen by keeping the German bankers happy”

MADRID | By Ana Fuentes | Well-known U.S. economic theorist and financial strategist Michael Pettis believes the European project has a blatant, simple economic problem: Germany benefits from a weak euro while Spain suffers from a strong currency. As for the IMF’s recommendation of cutting wages in countries like Spain, Mr Pettis thinks it’s an absurd tip that can only make the global demand imbalance worse. He answered our questions via email from Beijing, where he is currently based.

EU’s problem is not in Germany but in France

MADRID | The Corner | The rise of the far-right Front National will harm more the European project than any economic recipe imposed from Berlin. In the end, Germany is indeed setting hard conditions for the EU integration, but at least is favoring it, whereas France’s Marine Le Pen has a clearly anti European speech and intends to bring power back to the countries.