BEIJING: Last month, at least three significant Chinese cities lifted restrictions on home purchases as the Asian powerhouse slowly retracted a crackdown on the real estate industry in an effort to boost its economy. Two of the most popular cities in the northern province of Liaoning, Dalian and Shenyang, individuallyContinue Reading
Washington doesn’t follow a meal, according to the Congressional Budget Office. Rather, it predicts that over the next ten years, the fiscal deficit will total at 6.1 percent of the gross domestic product. The government has already spent the highest amount since 1998 — 14 %— on net interest payments.
Treasury bonds may no longer be owned by long-term investors, according to Jefferies capital strategist Christopher Wood.
Purchasing US$ 350,000 value of local government bonds appears to be a safer bet in this world environment. Indonesia also upholds fiscal discipline, possibly in large part as a result of the cash outflows it experienced during the Global Financial Crisis.
These days, Jakarta maintains a 3 % self-imposed cap on its fiscal shortfall, even at the cost of slower growth. The most recent Income forecast for 2024 is 2.29 percent.
This conservative stance is a welcome story in an environment full of purchase. Buyers are concerned about how little debt is excessive and when a full-fledged economic collapse may occur in China, the European Union, and the US.
However, in Indonesia, household debt only makes up 9 % of GDP andnbsp; in fact, less than 60 % of the country’s 274 million young people have bank accounts.
For tech companies who want to be more than quiet investors and experiment with banking and financial participation, this balance-sheet environment offers a great option. People prefer to possess smartphones over televisions and washing machines because portable devices are so common.
Social media sites like TikTok, on the other hand, have a significant impact on Gen Z because they connect Indonesians while also protecting them from the turbulent, debt-fueled world.
And Bali, the sub-tropical riding and yoga haven, should not be overlooked. I observed young digital nomad typing frantically on their laptops in chic cafes last summer while participating in a yoga retreat it.
I felt jealous. I’d like to relocate it. The beautiful visa of Indonesia certainly merits a good look.
shabby graphicsA joint resolution, which includes a statement on the conflict in Ukraine, has been agreed upon at the G20 summit in India.
The G20 leaders condemned the use of force for regional gain on the first day of their two-day meeting, but they refrained from criticizing Russia instantly.
The statement, according to the Polish government, is” nothing to be happy of.”
A number of international issues, such as climate change and the debt burden on developing nations, were also covered at the elevation in Delhi.
But at the G20 summit, it was a time of unexpectedly significant articles.
Given the strong divisions within the team over the conflict in Ukraine, some anticipated a joint resolution, not least on the first day of the mountain.
However, Indian Prime Minister Narendra Modi declared that the resolution had received widespread support.
An earlier review of the charter that was accessed by the BBC on Friday contained a clear indication that last-minute negotiations were ongoing: it stated the paragraph on Ukraine was left vacant.
The Ukraine conflict was the sticking point, as it was at the Bali summit the previous year.
The Delhi Declaration seems to be intended to make it possible for both Russia and the West to get advantages. However, in the process, it has used terminology that is less forceful in its criticism of Moscow than it was in Bali the previous year.
Although it noted that” there were other landscapes and different analyses of the condition and sanctions ,” the people in Bali condemned” in the strongest term” the brutality by the Russian Federation against Ukraine.
Russia is not immediately criticized for the war in the Delhi resolution.
However, it does mention” the human suffering and additional negative effects of the Ukrainian war on the world’s food and energy security.” Additionally, it reiterated the acknowledgment of” different perspectives and evaluations.”
Importantly, rather than” the war against Ukraine ,” the declaration refers to the” war in Ukraine.” The probability that Russia would support the resolution may have increased as a result of this word choice.
Ukraine, which participated in the Bali conference, was never invited this time, and its reaction to the resolution has been negative.
The Russian foreign ministry tweeted,” G20 has nothing to be glad of in terms of Russia’s aggression against Ukraine.”
The African Union( AU) was formally invited to join the G20 as a permanent member by Mr. Modi, which was the other major development.
As the cornerstone of its president, Delhi prioritized elevating the tones of these countries. In the near future, it is prepared to benefit from this strategic decision as it competes with China for influence in Asia and Africa.
The choice is also great news for Africa, which has 1.4 billion inhabitants and will now have a larger voice at international events like the G20.
Another fiercely debated subject was climate change.
There had been no consensus on the matter at the governmental level meetings in the weeks leading up to the mountain. However, officials now claim to have reached” 100 % consensus.”
There has been a clear give-and-take on the environment in the resolution.
The G20 nations will” pursue and encourage efforts to triple renewable energy capacity globally through existing targets and plans ,” according to the statement. More than 75 % of greenhouse gas emissions come from G20.
In the past, developing countries had resisted raising their goals for renewable energy, cutting back on fossil fuel use, and lowering their emissions of greenhouse gases.
Developing countries have been able to buy day for greenhouse pollution to peak, at which point they will need to decrease.
According to the declaration,” timeframes for rising may be shaped by sustainable development, needs for poverty eradication, equity, and in accordance with various federal circumstances.”
The Green Development Pact, a plan to address the climate crisis through international cooperation over the next ten years, has also been emphasized by specialists.
In order to assist developing nations’ transitions to lower emissions, the G20 nations have also committed to working together to provide low-cost financing.
India had performed” fairly well” on natural finance, according to Pramit Pal Chaudhuri, head of the Eurasia Group’s South Asia practice.
” Green finance presently primarily originates in wealthy nations and travels between rich nations.” Private funding is essential to this funding. Yet emerging markets don’t grasp it. India has made efforts to alter that. Getting multilateral development banks to start de-risking private capital moves in the clean space is at the heart of it, he said.
Then there is the rising worry about debts. According to the World Bank, the world’s poorest countries have to pay bilateral creditors an annual debt service of more than$ 60 billion, which increases the likelihood of defaults. China is owed two-thirds of this bill.
The organization has stated that it wants to aid in the loan management of these nations. The Delhi Declaration has pledged to handle the country’s loan risks.
Navin Singh Khadka provided extra coverage.
9 September 2023 at 16:07 PUBLISHED
A former deputy director of a personal transportation company was detained for allegedly robbing the gold store in order to settle his debt from virtual gambling.
The 44-year-old person, Methee, was detained by Thong Lor officers on Saturday near the Kluai Nam Thai crossing. He was alleged to have stolen a necklace from an area in heist on Rama IV Road that was one-baht in weight( 15. 2 grammes ) and worth about 32, 200 baht at current prices.
The man fit the description of someone who pretended to be a consumer when they entered the store on September 3rd in the evening. While the team was briefly distracted, he immediately grabbed the collar.
The suspect was discovered on Saturday morning, also dressed as he had been on the day of the theft, after being located by police using surveillance footage.
While attempting to enter a hotel, the suspect apparently behaved strangely as police drew near. The officers searched him and found a puppet solution that had been taken as proof.
According to the officers, Mr. Methee admitted to committing the crime and claimed that his addiction to online gambling caused him to take the gold when his debt was too high.
He admitted that he had planned the offense for two weeks before actually doing it. He added that he worked as a famous secret transportation company’s assistant selling manager.
He is currently being held at the Thong Lor authorities station after being charged with daylight theft by the police.
NEW DELHI: At the bloc’s summit in New Delhi on Saturday( Sep 9 ), Indian Prime Minister Narendra Modi announced that the African Union, which includes the richest and most powerful nations in the world, had been made a permanent member of the G20. The African Union, a western entityContinue Reading
P informs Khon Kaen producers that aid is on the way.
According to Prime Minister Srettha Thavisin, the government intends to implement actions to alleviate people’s situation, including a ban on farmers’ debts and lower fuel and electricity pricing, with an annual GDP growth target of at least 5 %.
He was briefed on the northern province’s drought position and water control during a Friday assessment trip to the Ubolratana Dam in Khon Kaen.
After the most recent GDP benefits and prices charge were lower than anticipated, the Bank of Thailand( BoT) reduced its growth forecast for 2023 on Tuesday.
The second quarter’s GDP growth was 1.8 %, which was less than the central bank had anticipated.
According to its government Sethaput Suthiwartnarueput, the BoT plans to evaluate its socioeconomic assessment this month, so this was primarily attributed to outside factors.
The regulator anticipates a 3.6 % increase in this year’s growth, with inflation anticipated to fall within the target range of 1 to 3 %.
Mr. Srettha also spoke with the local people, who expressed worry about the effects of the rainfall brought on by the El Nino conditions phenomenon.
In addition to falling crop prices and rising debts, grain farmers even lamented a lack of rice strains due to the slow development of new people.
They were reassured by Mr. Srettha that the government was addressing issues with water, such as flooding and dryness, as well as investing in agriculture and expanding irrigated locations.
As part of the short-term measures to combat dryness, he stated that the Interior Ministry will collaborate with the military and other organizations to build reservoirs and drag canals to increase water flow.
In light of the impending drought, the prime minister emphasized the necessity of ensuring adequate water supplies for the agrarian industry.
According to Mr. Srettha, the government will even consider reviving the Kong-Chi-Moon waters diversion project, which may channel water away from the Mekong River and nourish Northeastern farmland.
According to him, the job will be a long-term solution to issues related to water.
In order to store and supply water to hundreds of thousands of ray of land, 14 search rivers may be constructed in the Chi and Moon valley lakes as part of the project.
However, the task was put on hold a number of years ago due to the region’s common ground salination.
The lower incomes of farmers and the declining grain prices, according to Mr. Srettha, are a major concern.
According to him, the government has a plan to increase crop yields per rai( system of harvested place ), lower fertilizer and insecticide expenses, open new business industry, and increase their income while lowering their expenditures.
The primary secretary stated that this would also result in an increase in farmers’ gross income.
Parnpree Bahiddha-Nukara, the deputy prime minister and international secretary, is an authority on international trade, Mr. Srettha continued.
He declared that Mr. Parnpree may look for new markets abroad and figure out how to modify trade agreements with other nations in a way that would be more advantageous to Thailand.
The anticipated embargo on farmers’ debt will also be discussed at the upcoming cabinet meeting, according to the prime minister.
He claimed that this action would improve the situation of producers and increase their team spirit.
He emphasized that the debt ban must be implemented in conjunction with other initiatives like cutting farmers’ costs and raising their money.
The prime minister stated that” This will be a long-term answer.”
He stated that the upcoming cabinet meeting would also look into the feasibility of implementing a potassium mining project to increase fertilizer supplies and lower prices as well as measures to lower fuel and electricity prices.
The mineral calcium is primarily used as an element in the manufacture of calcium fertilizers.
Mr. Srettha insisted that the government’s measures to address the issue of falling wheat prices would not include rice-pledging or wheat price guarantee schemes.
Except in the event of a catastrophe brought on by global price distortions, the government does not do any rice-pledging or rice price guarantee schemes, he said.
The prime minister added with assurance,” We will concentrate on boosting farmers’ online money.”
The British Broadcasting Corporation in the United Kingdom prepared and released information about various countries’ growth projections for 2023 and 2024 from the International Monetary Fund ( IMF ) in January. The BBC predicted some extremely negative media for the UK.
The UK would be the only one of the nine key business economy to experience true economic decline, with a recession in its 2023 Economy( its entire annual, national output of goods and services ). This is due to the Group of Seven( the US, Canada, Japan, Germany, the UK, France, and Canada ), as well as Russia and China. The longer political day of the Conservative Party’s rule was followed by such a dubious difference for the UK.
The darker moments of that night included austerity following the severe global financial crash of 2008 – 2009, blaming Europe for the UK’s economic problems, Brexit occurring at the height of the scapegoating, former British prime minister Boris Johnson enjoying Covid cocktail parties while it forbade them, and endless, transparent, cringeworthy lying to the public when caught and exposed.
However, the BBC’s analysis of the most recent IMF information shocked people about much more than just the UK market.
The IMF predicts that China’s GDP will increase by more than 5 %, or half as much, over the course of the remaining 2023. Another G7 nations’ Earnings may increase more gradually than Japan’s. In 2023, China’s expansion rate will be more than triple that of the US.
Lastly, the IMF’s projected GDP growth for 2024 demonstrates that China and Russia are both expanding much more quickly than any G7 nation.
These relative forecasts represent a reality check that contrasts with the statements made by the majority of politicians, the accounts in the media, and the propaganda swarms coming from the former bourgeois regime of the G7. As a result, the BBC statement was both uncommon and shocking.
China’s statements about its economic development faced suspicion and criticism for 30 years. The intensity of these efforts increased even after Beijing’s astounding track record of better economic growth later disproved these claims.
Even though in-person trips to China confirmed higher levels of industrialization, inner migration, and urbanization as well as rapidly rising mass consumption amounts, doubt in China’s economic accomplishments grew.
We are reminded of the Cold War-driven lack of recognition of Russian economic accomplishments after 1945 by the need to ignore China’s economic transition from severe poverty to financial powerhouse status rivaling the US. In the G7 restrictions approach against Russia over the Ukraine conflict, a horizontal non-recognition appears once more.
One problem looms for anyone who is seriously interested in comprehending the significant changes currently sweeping the global market. How can we explain the discrepancy between what the previous bourgeois establishment claims( and may even consider ) and what is actually true?
The concomitant reduction of US socialism and its world empire( or hegemony ) presents us with a confluence of denials and notions, which is the correct response. Sometimes, observers within the old bourgeois establishment have been able to see these declines clearly enough, if only momentarily.
The US government’s ability to” win” local war even against developing nations like Afghanistan and Iraq, for instance, is one of these crucial moments. Another illustration is the US medical-industrial complex’s poor achievement in controlling the higher rate of Covid illnesses and deaths.
Not exactly a brilliant financial history, US mankind’s crash in 2020 and into 2021 was serious, followed immediately by bad inflation and then an abrupt, weakening tightening of credit. The US government, businesses, and families all have debts levels that are at or close to record levels. Now severe wealth and income disparities continue to widen.
A public viewing for details might logically wonder if there is more going on than just these events being observed separately. Could a structural issue exist?
However, denial sets in before such a line of thought may erupt into an intentional query, much less any major pursuit of an answer. Denial of systematicity is made because the idea of a widespread break seems intolerable.
Details are carefully crafted claims to avoid tying them to their environment of a deteriorating capitalist system. The widespread dimension’s expansion causes people to underestimate the risks that each specific issue or turmoil poses.
Anti-systemic cups make economic problems appear less harmful, narrower, and more constrained in their effects than they really are, much like rose-colored glasses. Anti-systemic discrimination is a type of defence.
Think about Treasury Secretary Janet Yellen or other leaders who lament the rise in economic disparity in the US. They do not reject or even appear to be able to think that the richest and most powerful people did use their jobs to pass on the costs of a declining socialism to others.
For instance, raising interest rates today to combat inflation is an anti-inflation coverage option rather than enacting wage-price freezes like later President Richard Nixon did in 1971 or a system of goods rationing like President Franklin D. Roosevelt implemented in the 1940s. Mid – and lower-income consumers bear the brunt of this option more than the wealthy.
A plan of massive federal budget deficits, which are financed by borrowing excessively from( and therefore paying more attention to) the richest parts of society, entails similar cost-shifting. However, the decline of US socialism and its international hegemony are often linked to those policy decisions and deficits in mainstream G7 discussions.
In contrast to problems abroad, the G7 economies’ compliant neglect of structural issues is accompanied by audible pretenses about their great health. similar to how the US economy’s repeated claims of being” great” stood in stark contrast to the severe problems plaguing the economies of China and Russia.
Ironically, because of the” natures” of an” authoritarian” or socialist economic system, these problems are frequently portrayed as systemic.
For instance, the major US media has recently reported that China’s building boom is collapsing, its economy is being destroyed by anti-Covid plans, and that Russia will soon” collapse.”
In reference to Russia’s economy, the late US senator John McCain referred to it as” a gas station masquerading as a country.” The argument that financial system shift in China was unavoidably a goal on the horizon was frequently made in relation to former presidents Donald Trump and Joe Biden. This argument also applied to tariffs, industry, sanctions, Hong Kong, and Taiwan.
These protestations and notions are undermined by fact. One of the reasons they work so hard to hide truth is because of this. For instance, China’s financial performance over the past 25 years, as measured by its world-leading GDP growth, supports its faith in and loyalty to its specific monetary system. That assurance is further supported by the BBC’s design.
By the same reasoning, that graphic puts the old G7 bourgeois establishment’s widespread self-confidence in jeopardy. In response to the growing disparities between G7 efficiency and the emerging( and presently larger in Economy terms ) option gathered around the BRICS( Brazil, Russia, India, China, and South Africa ), protestations and notions are unlikely to be long-lasting solutions.
Of course, there are many major differences between the members of the G7 and BRICS because they are both varied formations. Furthermore, there is no assurance that either alliance will maintain its socialist or neoliberal elements or switch between them. Relationships between the G7 and BRICS are currently important societal issues and problems, just like any potential shift between different types of capitalism and socialism.
These concerns and those conflicts will be shaped by social activities within both blocs. Social activities will need to put off notions and denials in order to accomplish that, particularly if war are to be avoided.
Economy for All, a initiative of the Independent Media Institute, created this article and gave it to Asia Times.
shabby graphicsIndia has transformed the G20 into a brand-new political scene.
The plan to turn India’s G20 president into a world victory has reached fever ball in the run-up to the leaders’ summit this trip after 200 discussions held in 60 Indian cities throughout the year.
Huge billboards and banners that show Prime Minister Narendra Modi and a message welcoming members, demonstrating India’s willingness to embrace the world, have been placed all over Delhi.
And the crest of the officials and their capacity to issue a joint resolution that signals broader agreement on issues of global concern will ultimately determine the outcome of all of this work.
India has been working hard to make a resolution; if there isn’t one at the summit, it will be the first. But with a G20 that is divided on some problems, the biggest of which is the Ukraine conflict, that’s not going to be simple.
However, things have changed since then; Russia and China might not agree to make such concessions, and the West, led by the US, won’t accept anything less than a categorical criticism of the battle.
The absence of Chinese President Xi Jinping and Russian President Vladimir Putin may produce decision-making a little more difficult. Instead, Sergey Lavrov of Russia and Premier Li Qiang of China will speak for their respective nations, but they might lack the political clout to create last-minute concessions without first consulting their leaders.
Early this year, the meetings of the G20 unusual and finance officials also came to an end without a joint declaration.
However, India will continue to hold out hope that the Ukraine problem won’t undermine the issues it wants to talk about with the developing nations of the Global South.
75 % of global trade and 85 % of the country’s economic output come from the G20 nations. Two-thirds of the world’s people lives there. India has positioned itself as the tone of the Global South by repeatedly asserting its duty to nations not included in the G20.
The presence of the African Union at the G20 has strengthened India’s location on the needs of developing nations.
The conflict and the pandemic have made problems like arrears, rising food and energy prices worse. According to Tanvi Madan, older brother at the Brookings Institution, India and other developing nations in the G20 do like industrialized economy to add money to these problems.
However, it is also uncertain whether these issues will be resolved. Consider debt refinancing. For instance, India and other developing nations have argued that wealthy nations and organizations like the International Monetary Fund ( IMF) should assist struggling borrower countries.
However, there can be no dialogue on this without bringing up China. The country’s poorest nations owed$ 62 billion in annual debt services to creditors, with China owing two-thirds of this, according to David Malpass, chairman of the World Bank until recently.
This has increased poverty, put some nations at risk of default, and skyrocketed food and energy prices.
American officials have frequently accused China’s lending practices of being aggressive, but Beijing disputes this claim.
According to Ms. Madan, developing nations” need their creditors to help them rebuild their timeframes” and, in some cases,” support them with more funding.”
She continues,” We don’t know what will come of this meeting yet, but the idea has been to come to some sort of compromise.”
A Common Framework ( CF) for the debt restructuring of poor countries was agreed upon by the G20 governments in 2020, but progress has been sluggish. China denies the accusation made by the West that it dragged its foot.
However, India, which has ongoing boundary disputes with China, will need more support from wealthy nations. It has advocated expanding the CF to more Global South nations( including middle-income countries ), a walk the EU has previously supported.
However, China could become a hindrance if the West continues to hold it responsible for the debt problems.
India also wants the World Bank and the IMF to be overhauled, as well as international cryptocurrency rules; these issues will probably be less contentious.
Another topic Delhi has brought up time and time again is weather change, claiming that some of the poorest nations are most prone to extreme weather events.
In an article published on Thursday, Mr. Modi stated that” actions on climate financing and technology transfer must be matched with ambitions for weather activity.”
His remarks are a reflection of the group’s disagreements over funding for climate shift. Developing nations are reluctant to commit to ambitious goals to reduce greenhouse gases out of concern that doing so would impede their progress. Instead, they attribute the issue to industrialized nations and demand that they shoulder a greater portion of the responsibility and invest in infrastructure, technology, and money to help them reduce emissions.
Professor of international coverage at Jawaharlal Nehru University in Delhi, Happymon Jacob, says he doesn’t anticipate making a significant contribution to the fight against climate change.
However, it is obvious that it will be a key G20 agenda item, and Delhi do encourage wealthy nations to contribute more solutions to the cause, he continues.
It is likely that agreements on crops, pandemic preparedness, care, and the global supply chain may be reached, but it is unclear whether these agreements will form part of the joint declaration.
However, a subject that is unlikely to be brought up is India’s deteriorating record on human rights under Mr. Modi, which detractors and opponent figures have frequently questioned.
Experts claim that despite pressure from campaigners and rights organizations, European leaders may not bring up this subject at the speaks in India, which is regarded as a crucial friend in efforts to halt China’s rise.
The presence of a pronouncement, according to some experts, including Michael Kugelman of the Wilson Center think-tank, had hurt Mr. Modi, India, and the G20.
He does, however, add that India has a history of collaborating with nations that don’t get along, demonstrating how it has” safely managed its connections with both Russia and the US.”
Delhi might therefore get the nation that can resolve its differences. It wants to take advantage of its popularity as a balance, but it will be very challenging.
According to Ms. Madan, the presence of a joint declaration won’t actually result in failure because Delhi will be able to present summing up the meeting( which the host countries may do ), which can demonstrate agreement on 90 % of the problems.
However, a tumultuous G20 may also cause some to doubt the forum’s usefulness in the face of rapid change.
One of the few nations that participates in the SCO, Brics, and West-dominated communities like the Quad, G7( as an invited member ), and G20 is India.
In light of this, it is crucial for Delhi to carry out a summit that is effective and produces results that will strengthen both Mr. Modi’s reputation as an influential international leader and its position as such.
It will demonstrate Delhi’s capacity to not only comprehend but also strike a balance between the competing demands of various international forums. Additionally, it will help to improve the reputation of the American PM at house, where a general election is scheduled for next year.
The stakes are high for Mr. Modi both at home and in the international political purchase because he is implementing G20 activities to expand his foreign policy to smaller American towns and cities.
Fevered speculation of the dollar’s demise has gained intense currency throughout 2023. Yet the world’s reserve currency and the market bulls driving it ever higher haven’t gotten the memo.
This disconnect is sure to dominate discussions at this weekend’s Group of 20 summit in New Delhi, Indian.
Officially, the host, Indian Prime Minister Narendra Modi, wants the September 9-10 confab to focus on cooperation and showcasing India’s rising clout in global trade and finance.
Yet the sideline of these events is where the real action happens. And a major source of discord is why the dollar is climbing for an eighth straight week, the longest such streak since 2005.
The plot thickens when you consider that the US Federal Reserve is wrapping up its tightening cycle, Washington’s dangerous fiscal trajectory continues apace and many G20 members are determined to sideline the dollar in global market circles.
“Many of the dollar-supportive factors of 2022 have abated,” says strategist Dwyfor Evans at State Street Global Markets.
He notes that other top central banks “are playing catch-up on rates.” And if China’s Covid re-opening trade reasserts itself, giving global demand a lift, “then cautious safe haven buying is on the back foot.”
Others argue that the surprising stability of the US service sector, despite still-high inflation and global headwinds, continues to offset trade weakness and support dollar buying.
“This resilience, whether looking at jobs growth, sticky inflation or consumer spending, is predominantly driven by services,” says strategist Adarsh Sinha at Bank of America. While the bank remains bullish, Sinha says, “In our view, a meaningful slowdown in the service sector is necessary if not sufficient for sustained US dollar depreciation.”
The more capital the dollar lures out of the developing world, the less there is to finance growth, keep bond yields stable and help private sector companies innovate, disrupt and create new wealth.
Past periods of extreme dollar strength – including the 1997-98 Asian financial crisis – posed existential financial risks to emerging markets. Yet the writing is seemingly on the proverbial wall, notes Natasha Kaneva, head of global commodities strategy at JPMorgan.
“The US dollar, one of the key drivers of global oil prices, appears to be losing its once powerful influence,” Kaneva says.
The bank’s research corroborates views that dollar strength and oil prices are steadily weakening. This, of course, is partly by design, with oil increasingly being transacted in non-dollar currencies.
Case in point: G20 member Saudi Arabia, which along with China has ambitious designs for a post-dollar financial system.
Between 2005 and 2013, JPMorgan says, a 1% increase in the trade-weighted dollar would lower the price of international benchmark Brent crude oil by roughly 3%.
Between 2014 and 2022, an equivalent dollar gain only resulted in a 0.2% change in Brent crude prices.
Kaneva’s JPMorgan colleague, Jahangir Aziz, head of emerging market research, notes that “overall, we find that the importance of the dollar has declined significantly from 2014 to 2022.” It’s “hard to ignore” this downshift, Aziz says.
China’s pivot to using the yuan in almost all of its Russian oil purchases is a major factor. Asia’s biggest economy is a huge energy buyer with great sway over smaller nations keen to tap its markets.
Despite international trade sanctions, Russian oil is finding ready demand from Asian trading partners using local currencies rather than the dollar.
It’s complicated, certainly. Both China and the US are keeping score of countries ignoring Washington’s sanctions and curbs imposed in punitive response to Russia’s invasion of Ukraine.
The trajectory is toward less dollar use. For now, the dollar is still at the center of the global financial system and US Treasury securities remain a safe haven of choice.
Within the SWIFT payments system, the dollar share of transactions is north of 40%, affording it the dominant position. The euro’s share is about 25%, while the yuan’s is roughly 3%.
But the dollar’s share in foreign reserves volume was a record low 58% at the start of 2023, down from 73% in 2001.
Old habits die hard, though. In a recent report, economists at JPMorgan conclude that while “marginal de-dollarization” is afoot, it won’t unfold rapidly. The dollar, for all its flaws, is simply too ingrained in global transactions to shift to another monetary unit in short order.
“Instead,” JPMorgan economists write, “partial de-dollarization – in which the renminbi assumes some of the current functions of the dollar among non-aligned countries and China’s trading partners – is more plausible, especially against a backdrop of strategic competition.”
Some are far less convinced that the dollar’s days are numbered. As economist Steve Hanke at Johns Hopkins University notes, “only 14 dominant international currencies have existed since the 7th century BC. This suggests that dethroning King Dollar will be easier said than done.”
Barry Eichengreen at the University of California, Berkeley, notes that the reasons why most economies favor the dollar “all reinforce each other.” He adds “there just isn’t a mechanism for getting banks and firms and governments all to change their behaviors at the same time.”
Yet US fiscal and political strains are colliding with global efforts to knock the dollar down a peg or two or more.
In August, Fitch Ratings yanked away Washington’s AAA credit rating. The rating agency said its downgrade “reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to AA and AAA rated peers over the last two decades that has manifested in repeated debt-limit standoffs and last-minute resolutions.”
Washington’s debt topping US$32 trillion was one problem. “Continued fiscal expansion/deficits could result in additional downgrades from rating agencies,” notes strategist Lawrence Gillum at LPL Financial. “So, until the US government gets its fiscal house in order, we’re likely going to see additional downgrades.”
Another big concern: Republican Party members toying around with the nation’s debt ceiling. “In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” the rating agency said.
A number of G20 members may find this weekend’s summit in New Delhi fertile ground to try and accelerate the dollar’s demise. It presents a timely opportunity for China, Russia, Brazil, Saudi Arabia, Turkey and others to compare notes on devising a new reserve currency.
Earlier this year, Brazil began doing trade in other currencies like the Chinese yuan and Russian ruble. Brazilian President Luiz Inacio Lula da Silva threw his support behind creating a BRICS monetary unit to be used by members Brazil, Russia, India, China and South Africa.
Meanwhile, Malaysian Prime Minister Anwar Ibrahim said China is open to resurrecting the formation of an Asian Monetary Fund, a move that would reduce the International Monetary Fund’s influence and revive a decades-old proposal to marginalize Washington’s power in Asia.
Chinese leader Xi Jinping’s efforts to internationalize the yuan are bearing some fruit. France, for example, is beginning to conduct some transactions in yuan. China and Brazil have agreed to settle their trade in yuan and reals.
Beijing and Moscow are ramping up trading in yuan and rubles. Pakistan is working to pay Russia for oil imports in yuan. Argentina recently doubled its currency swap line with China to $10 billion.
This month, Bank of China, one of China’s big four state-owned commercial institutions, opened its first branch in the Saudi Arabian capital of Riyadh with big plans to expand the use of the yuan in finance and trade there.
At the opening ceremony, BOC president Liu Jin said its new foothold in the Saudi capital will broaden trade and investment exchanges. Those include new “high-quality” construction projects via Beijing’s Belt and Road Initiative.
It’s but one example of efforts amongst BRICS members to rely more on local currency settlements in cross-border trade while reducing dollar-denominated transactions.
At the same time, India and Malaysia are increasing use of the rupee in bilateral trade. The United Arab Emirates is also talking with India about doing more non-oil trade in rupees.
The 10-member Association of Southeast Asian Nations is doing more regional trade and investment in local currencies. Indonesia, ASEAN’s biggest economy, is working with South Korea to ramp up transactions in rupiah and won.
Yet, despite all of these de-dollarization efforts, the greenback continues to defy gravity.
One explanation, says strategist Elsa Lignos at RBC Capital Markets, is that the dollar is currently the highest yielder in the Group of 10, offering even higher returns than many perceived as riskier emerging markets. RBC’s base case, Lignos says, is for the dollar to remain on an upswing until year-end.
The odds of additional Federal Reserve rate hikes are another wildcard.
“The recent upward trajectory in oil prices has laid the groundwork for potentially elevated consumer price index figures for August,” says Stephen Innes, managing partner at SPI Asset Management.
“These impending increases in oil prices present a fresh challenge for central banks as they continue their diligent efforts to bring inflation levels back in line with their desired targets.”
The dollar’s stubborn advance is ringing alarm bells in Asia as currencies hit multi-month lows. The worry is that capital outflows will accelerate, slamming equity markets and increasing risks of importing inflation.
Such concerns have done the near impossible: put China and Japan on the same side of an international debate.
Officials in Tokyo are particularly worried that the yen’s drop to near 30-year lows will accelerate. “If these moves continue, the government will deal with them appropriately without ruling out any options,” says Masato Kanda, vice finance minister for international affairs.
In Beijing, People’s Bank of China officials are using daily yuan reference rates to warn against speculators pushing the exchange rate much lower. China’s waning growth prospects have economists at Morgan Stanley taking a bearish view on emerging market currencies in general.
Still, arguments for why the dollar’s best days are behind it will be the talk of the town in New Delhi, whether that’s actually the case or not.
Follow William Pesek on X, formerly known as Twitter, at @WilliamPesek
shabby PicturesAs the” country’s factory” struggles with sluggish requirement at home and abroad, China has seen a third consecutive month of declining exports.
According to official statistics, imports decreased by 7.3 % and exports by 8.8 % in August compared to the same period last year.
However, compared to the previous quarter, those drops were not as awful as anticipated.
A home crises and low consumer spending are just two of China’s post-pandemic challenges.
A significant effect on a crucial source of growth for the nation’s economy is being had by sluggish global demand for Chinese-made products.
According to a recent US Census Bureau report released on Wednesday, China’s exports of US products reached their lowest point since 2006 through the end of July.
Over the course of the time, the share of imported goods from China was 14.6 %. This is down from a maximum of 21.8 % in the year to the end of March 2018, when President Donald Trump intensified the trade dispute between the US and China.
Beijing has so far refrained from implementing a sizable stimulation program to stimulate the economy.
Alternatively, it has chosen to implement a number of policies in recent months to support individuals and organizations.
Additionally on Thursday, the Commercial Bank of China and the Agricultural Bank for China, two of the nation’s largest state institutions, announced plans to lower interest rates on current mortgages starting on September 25 for first-home money.
Foreign state-run magazine The Global Times ran a story on its English-language website criticizing negative remarks made by American politicians and media about the nation’s economy prior to the publication of the industry figures.
It stated that despite some difficulties and challenges brought on by the effects of the global economic slowdown, the Chinese economy is actually recovering also thanks to growing development and green development momentum.
