Currency

Ethical economy: The touchstones of Yap

11 Jul 2012

The Pacific island of Yap used two-tonne stones as currency. The odd system worked because people believed in it. The modern monetary system is also faith-based, and that faith has been shaken by the financial crisis. Purification is needed to strengthen the value of money.

Scots aim to break Europe’s working currency union

9 Jul 2012

Europe does have a successful currency, fiscal and banking union - in the United Kingdom. Scottish nationalists want to go backwards, towards the weaknesses of the euro zone. In Edinburgh as in Brussels, it’s dangerous to let politics get the better of financial reality.

Anti-euro prize strengthens case for euro

5 Jul 2012

The offer of 250,000 pounds for the best way to untangle the single currency was supposed to make a breakup more plausible. The winning Wolfson Prize entry shows how it might be done. But the proposal is so messy that it supports the opposite case: a breakup shouldn’t happen.

Hong Kong, enjoy your peg while it lasts

27 Jun 2012

Hitching the Hong Kong Dollar to the U.S. greenback brought 30 years of something like stability. Now it brings inflation and high property prices. Yet the alternatives are messy, and the peg has a symbolic value. The status quo is best, until China offers a good replacement.

India’s finance minister goes out with a flop

25 Jun 2012

Talk about over promising and under-delivering. Pranab Mukherjee inflated the market’s hopes that he’d take bold measures to boost investor confidence, but came up with a few small tweaks - on his last day as finance minister. Hopefully his successor will talk less and act more.

Denmark is another costly refuge

21 Jun 2012

In search of a safe haven? Denmark ticks the boxes. The economy is strong and the krone isn’t the euro, but shadows it. Tempted investors should think hard. The central bank is against them and two-year yields are negative. Investors only win if Germany exits the euro.

Eurogeddon would drive Swiss to capital controls

13 Jun 2012

The Swiss decision to peg the franc is working. GDP is increasing and deflation persists despite the central bank’s liberal money-printing. The SNB will go further, to emergency capital controls, if the euro crisis worsens. The worry is there’s no end to currency poker in sight.

Perhaps the Swiss should just join the euro?

28 May 2012

The Swiss National Bank is engaged in an expensive battle against savers who want to flee the euro for Swiss franc safety. Instead of fighting, perhaps the country should join the single currency. Exports would do well, German-style. But there might be nasty consequences.

"Geuro" could be least bad Greek solution

21 May 2012

Greece would run out of euros if it reneged on its bailout. But it could keep the euro as the official currency and issue IOUs that became alternative tender, or “geuros”, argues Deutsche Bank. Such dual currency regimes are unstable. But the geuro might just help Greece recover.

The rupee looks vulnerable

30 Apr 2012

India’s ballooning trade deficit means it has to run just to stand still. Without steady capital inflows, the currency will collapse. The rupee’s 19 percent fall against the dollar over the past year is worrying. Predictions of further decline could become self-fulfilling.

Japan’s yen yearning takes dismal corporate turn

24 Feb 2012

Toshiba and Sony are tapping $2.4 billion in loans from a government fund designed to promote M&A abroad and weaken the yen. But companies are spending the money on the kind of foreign forays Japanese firms use to avoid reform at home. Japan can’t afford such misadventures.

Shanghai needs bigger ideas to be a global hub

1 Feb 2012

The Chinese city has outlined ambitious plans to build a global yuan trading centre by 2015. But key reforms are missing. Without freer capital flows, exchange rate flexibility, and a more open financial regime, Shanghai’s markets can be huge, but not really international.

New currency unions could yet see the light of day

20 Dec 2011

The euro is in deep trouble. But if leaders successfully realign political and fiscal policies with monetary facts on the ground, it could set a precedent. Single currencies have big economic and geopolitical advantages. Gulf states and South America might yet embrace the idea.

No happy euro Christmas for U.S. markets

14 Dec 2011

Last week’s European summit in the end did little to address the region’s immediate problems. That’s dragging down the euro, commodities - oil and gold by 5 pct on Wednesday - and U.S. stocks. It could all make for skittish trading as investors aim to avoid year-end surprises.

How a 1990s sterling currency area might now look

14 Dec 2011

In 1992, the UK abandoned plans to adopt the euro. Martin Hutchinson imagines what would have happened if Britain had used its economic strength in the mid-1990s to form its own alternative currency bloc. The sterling zone would at least be insulated from troubles elsewhere.

Euro crisis worsens the currency wars

10 Nov 2011

Once there was just one big controlled currency, China’s. Now there are three, as Switzerland and Japan try to counteract euro fear and safe haven flows. But these interventions could enlarge global imbalances. China is best placed to help, by letting the yuan rise.

Currency crossfire to hit emerging economies hard

29 Sep 2011

Money is flowing out of emerging economies. Countries that had complained about currency appreciation have had to prop up forex rates. Turkey and South Korea are vulnerable to hot money retreat. Poland and Hungary are caught in currency traps.

China’s pursuit of stability risks greater stress

20 Sep 2011

Some claim China’s economy is a bubble set to burst while others think slowing growth and inflation warrant looser policy. Ethan Devine of Indus Capital argues that in fact China’s economy is both too hot and too cold, with structural reforms needed to bring it back into balance.

Pseudo-devaluation could help euro periphery

20 Sep 2011

Greece and its ilk would have to quit the euro to devalue their currencies. But the IMF is offering a tip to mimic the effect: rejigging taxes to benefit exports and hurt imports, especially by hiking VAT. Portugal is trialing the idea. It has drawbacks, but options are scarce.

Only Drachmaization can save Greece and euro

8 Sep 2011

Regional comparisons suggest Greek living standards rose far beyond productivity, making austerity inadequate to rebalance the economy. Drachmaization would allow the market to set wage levels, induce other weak countries to reform without EU prodding and thus solidify the euro.