GRG55
11-28-07, 12:23 AM
From the FT: Exchange controls? Things are getting desperate. :eek:
Officialdom finds a new, unprincipled bogeyman
By John Dizard
Published: November 27 2007 02:00 | Last updated: November 27 2007 02:00
Within the stream of coded language and doubletalk coming from officialdom these days, you can find louder signals of preparations for exchange control regimes in the developed world. This is bad news for almost everyone, but in particular for the investment community. When exchange controls - no doubt in another name - are imposed in Europe or the US, the official targets will be "speculators" or financial manipulators lurking in the shadows. In reality, speculators and traders will be among the few beneficiaries; there will be a lot of money to be made by working out ways, legal and ethical, to get between the rules.
The most recent, and most serious indication that controls on the international movement of funds are on the agenda came from Joaquín Almunia, the European Commissioner responsible for Economic and Monetary Affairs. In remarks to the European Parliament, he made the customary references to exchange rate "volatility", which is Euro-code for denouncing the effects of the cheap dollar. (After all, if the euro now was set at $1.48, say, with no change over the next year or two, would this "non-volatile" exchange rate be satisfactory for the maintenance of European prosperity?)
More significant was Mr Almunia's comments on sovereign wealth funds. "There are situations that are quite striking when the investor is a sovereign fund, a foreign state. This requires transparency, it requires knowing what the governance criteria for those funds are . . . we need to set out certain principles, European principles, because we can't fulfil [the] internal market . . . if each state has different principles when it comes to its approach to investment by sovereign funds."
Sovereign wealth funds are a convenient bogeyman to call up in imposing political controls on international capital. The image being painted is that of some half-concealed Bond villain slowly stroking a big white cat and plotting world domination. The reality is just another office full of harried people trying to find relatively safe places to stick hundreds of millions or billions of dollars each month.
These bureaucrats, like other investors, don't want to get their money caught behind a barrier of "governance criteria" and "certain principles". Bad for the career. As such criteria and principles get closer to being turned into law, they'll slow and perhaps reverse some of their investments in euro-area assets, but maybe not quickly enough to avoid having their money, or, rather, their country's money, being locked up.
Still, the rise of the SWFs, and China's funds in particular, highlights the single most important cause for the huge increase in international capital flows: China's one child policy. Since Chinese parents could no longer ensure support in their old age by having several dutiful children, they had to accumulate security with physical and financial capital accumulation.
Bernard Connolly, Banque AIG Financial Products' global strategist, says: "These precautionary savings, in part a consequence of the one child policy, are the key to the whole problem. They've been channelled into the reserve accumulation that European politicians blame for the strong euro. No one actually believes the SWFs are the problem. The problem is the dollar is falling because of the [prospective] collapse of the global Ponzi scheme."
However, since officials in the "advanced" countries were complicit in that scheme, it would never do to call it for what it is...
Officialdom finds a new, unprincipled bogeyman
By John Dizard
Published: November 27 2007 02:00 | Last updated: November 27 2007 02:00
Within the stream of coded language and doubletalk coming from officialdom these days, you can find louder signals of preparations for exchange control regimes in the developed world. This is bad news for almost everyone, but in particular for the investment community. When exchange controls - no doubt in another name - are imposed in Europe or the US, the official targets will be "speculators" or financial manipulators lurking in the shadows. In reality, speculators and traders will be among the few beneficiaries; there will be a lot of money to be made by working out ways, legal and ethical, to get between the rules.
The most recent, and most serious indication that controls on the international movement of funds are on the agenda came from Joaquín Almunia, the European Commissioner responsible for Economic and Monetary Affairs. In remarks to the European Parliament, he made the customary references to exchange rate "volatility", which is Euro-code for denouncing the effects of the cheap dollar. (After all, if the euro now was set at $1.48, say, with no change over the next year or two, would this "non-volatile" exchange rate be satisfactory for the maintenance of European prosperity?)
More significant was Mr Almunia's comments on sovereign wealth funds. "There are situations that are quite striking when the investor is a sovereign fund, a foreign state. This requires transparency, it requires knowing what the governance criteria for those funds are . . . we need to set out certain principles, European principles, because we can't fulfil [the] internal market . . . if each state has different principles when it comes to its approach to investment by sovereign funds."
Sovereign wealth funds are a convenient bogeyman to call up in imposing political controls on international capital. The image being painted is that of some half-concealed Bond villain slowly stroking a big white cat and plotting world domination. The reality is just another office full of harried people trying to find relatively safe places to stick hundreds of millions or billions of dollars each month.
These bureaucrats, like other investors, don't want to get their money caught behind a barrier of "governance criteria" and "certain principles". Bad for the career. As such criteria and principles get closer to being turned into law, they'll slow and perhaps reverse some of their investments in euro-area assets, but maybe not quickly enough to avoid having their money, or, rather, their country's money, being locked up.
Still, the rise of the SWFs, and China's funds in particular, highlights the single most important cause for the huge increase in international capital flows: China's one child policy. Since Chinese parents could no longer ensure support in their old age by having several dutiful children, they had to accumulate security with physical and financial capital accumulation.
Bernard Connolly, Banque AIG Financial Products' global strategist, says: "These precautionary savings, in part a consequence of the one child policy, are the key to the whole problem. They've been channelled into the reserve accumulation that European politicians blame for the strong euro. No one actually believes the SWFs are the problem. The problem is the dollar is falling because of the [prospective] collapse of the global Ponzi scheme."
However, since officials in the "advanced" countries were complicit in that scheme, it would never do to call it for what it is...