Distress – Sure A Not

In case a future Fed withholds needed bailout: a dollar coalition – Asia Times

On: May 12, 2025

In the event of dysfunction in dollar funding markets, the Federal Reserve can supply liquidity through standing central bank swaps. This column considers a scenario in which the Fed declines to extend such credit. It argues that 14 major central banks hold roughly $1.9 trillion in US safe assets. They could form a dollar coalition of the willing by pooling their dollar holdings and swapping them when needed. An inferior international lender of last resort beats no international lender of last resort.

On 16 April 2025, Federal Reserve Chair Jay Powell (2025) assured Professor Raghu Rajan that the Fed stands ready to supply dollar liquidity through standing central bank swaps.¹ When needed, the Fed can lead international last resort lending of dollars by extending hundreds of billions of its credit to partner central banks that in turn lend to their banks against collateral. Powell stressed that in doing so, the Fed ensures the transmission of its own policy when global dollar funding markets dry up. He cited the example of a foreign bank funding a security backed by US household debts (Reis and Bahaj 2018).

In 2008 and 2020, the amounts that the Fed swapped were not small, but offshore dollar funding – both on- and off-balance-sheet – is measured in the tens of trillions of dollars. Thus, with pennies on the dollar lent and repaid with interest, the Fed and co-operating central banks calmed dollar panics.

In the light of events in early 2025, this column considers the unlikely possibility that the Fed does not take the lead in international dollar lending of last resort in the event of dysfunction in dollar funding markets. What if some future Fed leadership were to decline to extend its credit through central bank swaps, taking the view that they “just hate bailing out Europe again,” in the unguarded phrase of the US Vice President (Goldberg 2025)? Or to condition swaps on bilateral political considerations?

US Vice President JD Vance (center), discussing Trump administration plans to bomb Houthi rebels, said he disliked “bailing Europe out again.” Defense Secretary Pete Hegseth (left) responded, “I fully share your loathing of European free-loading. It’s pathetic.” They assumed the world wasn’t listening but they were on a Signal chat and a magazine editor had been invited by mistake. (This picture shows an earlier public ceremony, in which Vance swore in Hegseth.) Photo: Wikipedia

This scenario is worth exploring even if one deems it very unlikely. A new Fed Board leadership would have to persuade the Federal Open Market Committee (FOMC) to reverse the policy just affirmed by Chair Powell. By law, the FOMC controls Fed open market operations, including the central bank swaps.²

A glance at the recent additions to the current FOMC lineup suggests that it would not readily agree to withhold standing central bank swaps for political reasons. On 21 April, the New York Fed appointed European Central Bank (ECB) operations veteran Anna Nordstrom to head its markets group, managing the FOMC’s $6.3 trillion System Open Market Account. Her crisis-tested predecessor, Lorie Logan, has headed the Dallas Fed since 2022.³Last year, another New York Fed veteran, Alberto Musalem, and a former Goldman Sachs global treasurer, Beth Hammack, became the heads of the St Louis and Cleveland Feds, respectively. By the wisdom of the Congressional framers of the Federal Reserve Act, none is a presidential appointee.⁴

That said, after trans-Atlantic differences surfaced over NATO, Ukraine and trade in March 2025⁵but even before the so-called reciprocal tariff announcement in early April, the reliability of the Fed as a source of dollar swaps came into question (Smart 2025). On March 20, a think tank report to the European Parliament considered a scenario of politicized “recourse to the dollar swap lines” (Tudoir et al. 2025). More telling was a Reuters story on the same day, widely sourced by a large team of writers, that reported that European central bankers were discussing how to make do without the Fed swaps.⁶Citing the Reuters story, Deutsche Bank’s foreign exchange strategist George Saravelos (2025) called this a “nuclear button.”⁷

This scenario takes us to the Kindleberger Trap, the risk that a fading world power lacks the ability, but the ascendant power lacks the will, to provide the world with vital public goods — such as stable international money. In 1931, the Bank of England (BoE) was not able, but the Fed was not willing, to serve as lender of last resort to Austria. As a result, the crisis rolled on to Germany, Britain and ultimately the US. The Kindleberger Trap caught the “world in depression,” as Charles Kindleberger (1973) titled his seminal work.⁸Nowadays, it is not, as Joseph Nye (2017) imagined, that the Fed is unable to play lender of last resort and the People’s Bank of China is unwilling.

Instead, the hazard to the world economy now is that:

1. The Fed is able to lead a dollar lender of last resort operation, but
2. A future Fed may not be willing to do so, and
3. No one else is able to do so.

This column proposes a work-around:

4. A coalition of central banks can pool dollars to lend as a last resort.

Central banks without access to the Fed could form a dollar coalition of the willing.⁹The 14 central banks that had standing and temporary Fed swap lines in 2008 and 2020 span dollar funding markets to a remarkable extent, which is not generally recognized (Ito et al. 2021). Among them they cover about three-fourths of offshore dollar liabilities of non-US headquartered banks and about five-sixths of global turnover against the dollar in the foreign exchange swap market (Figures 1 and 2 from McCauley 2024).

Figure 1 Dollar liabilities of banks headquartered outside the US

Note: 1 Cross-border and local liabilities in all instruments vis-à-vis all counterparty countries. Excludes intragroup positions but includes liabilities to other (unaffiliated) banks. From end-2015, includes positions reported by China and Russia (the latter up to end-2021).
Sources: BIS consolidated banking statistics; BIS locational banking statistics; author’s calculations.

Figure 2 Coverage of dollar foreign exchange swap turnover by Fed central bank swaps in 2007-2022

Note: Big 5: European Central Bank, Bank of Japan, Bank of England, Bank of Canada, and Swiss National Bank, advanced economy (AE) 5: Reserve Bank of Australia, Riksbank, Norges Bank, Danmarks Nationalbank, Reserve Bank of New Zealand; emerging market (EM) 4: Monetary Authority of Singapore, Banco de Mexico, Bank of Korea, and Central Bank of Brazil.
Source: BIS Triennial Central Bank Survey of foreign exchange of 2007, 2010, 2013, 2016, 2019, 2022, author’s estimates for Danish krone, author’s calculations.

A key fact is their collective firepower: The 14 central banks hold lots of dollars. Their collective holdings of US safe assets amounted to an estimated $1.9 trillion at the end of 2021.¹⁰The 14 central banks cannot, like the Fed, create dollars without limit, but they could pool their holdings and swap them when needed.

There is ample precedent for central banks to lend each other international money that is not of their own creation. In the 19th century, precious metal loans did not lack a geopolitical dimension but could not be unlimited.

A legendary story tells how the Silver Train (Silberzug) chugged from Vienna to Hamburg in 1857. Agreeing to a call for help on 8 December, the Bank of Austria loaded a train with almost ten million ounces of silver.¹¹ It arrived on 12 December “in highly visible fashion” (Deutsche Boerse 2025, Roberds and Velde 2014, p 45) in time to prevent the impending failure of most of Hamburg’s banks and to allow ship captains to unload their cargoes with some hope of getting paid (Aliber et al. 2023, pp 294-295). The Bank of Prussia evidently regretted having joined London and Paris in turning Hamburg down, before Vienna said yes – and having thus “missed an opportunity.”¹²

During the 1890 Baring Crisis, it took the Banque de France about a day to send 707,547 ounces of gold, worth £3 million, from Paris to London by wagon, train, and ship.¹³The crates of gold “supposedly” recrossed the channel unopened (Flandreau 1997)¹⁴but, in any case, signaled that sterling was as good as gold. The BoE Governor “and the City were uneasy about asking the French and the Russians for help…. Suppose for some political-financial reason they had been unwilling to oblige?”¹⁵These metallic last resort loans calmed panics even though neither drew on alchemy to extend unlimited support.

In the modern era, central bank mutual support has mixed money creation and dollar reserve use in varying proportions. In the record-breaking $3 billion support for the Bank of England in November 1964, the US, German, French and Swiss central banks pledged 59% in their own currencies and the other G-10 members and the Bank for International Settlements (BIS) pledged 41% in dollars (Schenk 2010, p 276). The June 1976 record-breaking $5.3 billion credit to the Bank of England reversed the proportions, as apparently only the Fed pledged its own currency for 38% and the other G10 members and the BIS stumped up dollars for their 62% share.¹⁶

Thus, in an historical perspective, the 2008 pattern of the Fed, the ECB and the Swiss National Bank (SNB), each swapping its own currency, stands out as an exception. Much of last resort lending by central banks to each other has involved lending their own reserves rather than freshly created money.

With this perspective, the $1.9 trillion possible pool is big money. It’s triple the previous maximum drawing on the Fed swap lines in 2008 ($598 billion) and quadruple the peak 2020 usage ($449 billion) (Choi et al. 2022). The coalition would signal an independent judgement of the nature of the crisis, backed by money, like a Fed swap, as opposed to each central bank in need drawing only on its own resources. And if the Fed could trust the 14 central banks, how could they not trust each other?

Where the pool could fall short would be in signaling that there is plenty more where this came from. If the $1.9 trillion were deemed too small, coalition members could ex ante raise the dollar share of their reserves, reversing diversification into Canadian and Australian dollars, renminbi, and other currencies (Arslanalp et al. 2022). Or highly rated countries could borrow dollars ex ante to add to reserves at low cost.¹⁷

Leadership could arise among the Fed’s standing swap partners – the ECB, Bank of Japan (BoJ), SNB, BoE, and Bank of Canada. The ECB and BoJ were the largest users of the Fed swap lines in 2008 and 2020, respectively. During the 2023 run on Credit Suisse, the SNB acquired unique experience in tapping the New York Fed for $60 billion against US Treasury collateral under the FIMA (foreign and international monetary authorities) repo facility (Martin 2024).

The coalition could enlist the BIS for technical support as an agent as European central banks did in 1973-95 (ECB 2025). Or the BIS could serve as intermediary, as it did when the New York Fed lent dollars through the BIS to offshore banks in the 1960s to prevent funding crunches (McCauley and Schenk 2020).

Using reserves rather than money creation to fund swaps has a snag: the $1.9 trillion is invested, and a crisis calls for electronic cash. If the Fed were to deny swaps, would it continue to provide same-day FIMA funding against Treasuries held in custody?

If it did, the coalition could arrange to access hundreds of billions of dollars in same-day funds to meet a panic. If the Fed did not, then it would end up providing ad hoc funding. Here is why.

Without the FIMA backstop, heavy central bank sales of US Treasuries would rock the US bond market. Such selling could prod the Fed into the market as buyer of last resort — as in March 2020, before the FIMA repo was introduced.

Without the FIMA backstop, central banks might seek to repo hundreds of billions in Treasuries for cash in the market. Such funding could well prod the Fed to cap market repo rates. After all, the recent benchmark rate shift from dollar LIBOR to repo-based SOFR means that the Fed’s own domestic monetary transmission requires well-behaved repo rates.

One way or another, the coalition would need to work with the Fed to manage any “dash for cash” (Barone et al. 2022).

Limits excite. It may well be, as Eurosystem sources grimly noted to Reuters, that “there is no good substitute to the Fed” (Martinuzzi et al. 2025). Even a large pool of dollar reserves would not stack up to “whatever it takes” Fed swaps, as demonstrated neatly in Korea during the 2008 Global Crisis (Baba and Shim 2014).

Nonetheless, a dollar coalition of the willing could pool trillions of dollars to backstop global dollar funding with no more than self-interested Fed help. An inferior lender of last resort beats no lender of last resort.

Robert N McCauley is a nonresident senior fellow of the Global Development Policy Center, Boston University, and an associate member of the Faculty of History, University Of Oxford.

This article was originally published by VoxEU, portal of the Center for European Policy Research. It is republished with permission.

References

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Footnotes

Powell (2025), https://www.youtube.com/watch?v=1o_9kO0zZQg, at minute 35:50. Rajan’s question was poignant, since he had called attention to the Fed’s not extending a swap to the Reserve Bank of India when he was the Governor in 2013.
The Fed claims the authority of Section 14 of the Federal Reserve Act to do swaps as open market operations. Perry (2000) and Menand (2021, 2022) have questioned this use of the Section 14 authority. To a non-lawyer, that the Congress has received 60 years of reports on the Fed’s foreign exchange operations, including the swaps, implies something like consent. But Menand (2021, p 108) quotes the Supreme Court in a different context: “[u]nlawful acts, performed long enough and with sufficient vigor, are never enough to amend the law.” Perry (2020) predicted in early 2020: “If another crisis were to occur, public outrage might center on certain, legally dubious Fed activities, such as these swap lines.” In the event, there was little discussion of the 2020 swaps. Perry’s and Menand’s proposal that swaps be done under the Fed’s 13.3 authority would make the swaps subject to a Treasury veto, as required by the 2010 Dodd Frank Act’s amendment of 13.3.
See Hauser and Logan (2022).
It is not certain whether the president has the legal authority to fire the Chair of the Federal Reserve Board without cause. Even if so, the former chair could remain as governor and be voted chair of the FOMC. In the 16 April interview, Chair Powell (2025) said that the Fed was carefully following the case of two labour board members fired by the president. The legal position of the Fed is different from many independent agencies in that the Congress has delegated to it monetary power that the Constitution clearly gives to the Congress. Justice Samuel Alito (2024), although a proponent of the unitary Executive, in a dissent against a ruling that the Consumer Financial Protection Bureau can be funded by the Fed, set out the unique status of the Fed: “The Government also suggested that the Federal Reserve Board is a close historical analog for the CFPB…But that setup should not be seen as a model for other Government bodies. The [Fed] Board, which is funded by the earnings of the Federal Reserve Banks…is a unique institution with a unique historical background. It includes the creation and demise of the First and Second Banks of the United States, as well as the string of financial panics (in 1873, 1893, and 1907) that were widely attributed to the country’s lack of a national bank…. The structure adopted in the Federal Reserve Act of 1913 represented an intensely-bargained compromise between two insistent and influential camps: those who wanted a largely private system, and those who favored a Government-controlled national bank. … For Appropriations Clause purposes, the funding of the Federal Reserve Board should be regarded as a special arrangement sanctioned by history.”
Steve Kamin and Mark Sobel (2025), formerly senior officials of the Fed Board and US Treasury, respectively, wrote on 10 March that “Trump is undermining the dollar’s global financing and reserve role…The world is openly questioning whether the US is a reliable partner…” Compare to the authors’ “Dollar dominance is here to stay…” in January 2024.
Martinuzzi et al. (2025): “Some European central banking and supervisory officials are questioning whether they can still rely on the U.S. Federal Reserve to provide dollar funding in times of market stress, six [!] people familiar with the matter said, casting some doubt over what has been a bedrock of financial stability. The sources told Reuters they consider it highly unlikely the Fed would not honour its funding backstops — and the U.S. central bank itself has given no signals to suggest that. But the European officials have held informal discussions about this possibility — which Reuters is reporting for the first time — because their trust in the United States government has been shaken by some of the Trump administration’s policies.”
Saravelos (2025): “Ultimately, a withdrawal of the Fed as the international lender of last resort is equivalent to a suspension of the dollar’s role as the safest of global currencies. Doubts about a commitment from the Fed to maintain dollar liquidity — especially against [sic] major allies — would accelerate efforts by other countries to reduce their dependence on the US financial system. It would ultimately lead to lower foreign ownership of US assets and a broad-based weakening of the dollar’s role in the global financial system.” This is a very different scenario of dollar decline from that of Menzie Chinn and Jeffrey Frankel (2007), who imagined a shift from the dollar based on high US inflation. An update by Chinn et al. (2024) finds little role for inflation.
The Kindleberger Trap, one of a vacuum of power, must be distinguished from the Thucydides Trap of Allison (2014), in which the dominant power fears the rising power and goes to war. See Mehrling (2022) for a discussion of Kindleberger’s global public goods that the leader (or ‘hegemon’) needs to provide to supply global financial stability.
Ten years ago, the Economist’s Patrick Foulis (2015) argued that those central banks that were not included in the Fed’s swaps could pool their dollar reserves and thereby insure each other against a sudden need for dollars. Then and now, the undisputed key dollar reserve holder in this negatively defined group is China. Already in 2015, the odd gathering – a case of life imitating an investment bank strategist’s conceit — of Brazil, Russia, India, China, and South Africa (BRICS) – started down the road to a swap facility. They have not gotten very far. In the event, “BRICS is ending up as a hub and spoke model with China as the centre” (Garcia-Herrero 2024), but the swap arrangement is according to an insider ‘small’ and ‘frozen’ (Nogueira Batista 2023). This leaves China’s network of bilateral swaps as the real game, which Argentina has demonstrated can be tapped for dollars in extremis.
The author thanks Colin Weiss (2022) for his estimates based on publicly available data, which are doubtless closer to the mark for aggregates like the 14 than for particular countries. For example, Weiss’s procedure overstates known UK dollar reserves, but understates known Swiss dollar reserves. The 14’s total foreign exchange reserves at the end of 2024 were about double the $1.9 trillion. Note that Weiss is working only with dollar reserves held in the US. McCauley (2019) estimates that $1 trillion in dollar reserves were held offshore in 2017.
Oddly, the Bank of Austria was in a position to help owing to earlier fiscal dominance: “After years of unbalanced budgets and seigniorage finance, Austria was in a regime of inconvertible paper and fluctuating exchange rates, which partly insulated it from shocks on convertible countries: the specie reserve of the Bank of Austria was thus useless and could be profitably [at 6% interest] used in foreign support…” writes Flandreau (1997, p 750).
The British consul in Hamburg noted that it was fortunate for Britain that Austria and not Prussia had brought the aid since there would then be no pressure on Hamburg to join the Zollverein.” Note that the borders of the German economy were at issue again in 1931, when the French demanded that Austria renounce a customs union with Germany as the price of another BIS-arranged credit from 11 central banks (Aliber et al. 2023, p 302).
It must have required five separate loadings (two in Paris, one in Calais, one in Dover, and one in London). Martin (2024) notes that central bank swaps are sometimes affected on the same day but often are T+1.
Flandreau’s general scepticism about central bank cooperation as opposed to profitable central banking sits uneasily with his report on the parliamentary debate on the 1890 gold loan: “On the French side, the operation resulted in hostile interpellation in the chamber of deputies. But the minister of finance replied that such help had been necessary to prevent harmful repercussions for France of a deeper crisis in London.” Flandreau (1997, p 761) concludes, ”In all cases, international help had not resulted from a bilateral realization of common interests. In its most favourable form, it was a consequence of the unilateral perception of the possible gains associated with unilateral support.” In 2025, such enlightened self-interest would be most welcome. See also Bordo and Schwartz (1999), who rate the 1890 help by the Banque de France to the Bank of England a success.
Aliber et al. (2023, p 296), citing Clapham, the historian of the Bank of England.
Schenk (2010, p 373-374) notes that drawings on the swap paid interest at the US Treasury bill rate, so the swap was presumably all in dollars. Dollar reserves had grown significantly since 1964.
Or even at a profit. In the Global Crisis, the SNB sold dollar paper to fund its rescue of UBS. Where central banks do not have such power to borrow dollars, the government debt manager could borrow dollars and deposit them with the central bank; for top-rated sovereigns the cost of such borrowing net of the return on the reserves is close to zero. In Sweden the Swedish Debt Office borrowed dollars and euros after the GFC and the net cost given the returns earned by the Riksbank was close to zero. See Gislén et al. (2021, p 30) on ex ante versus ex post dollar borrowing.

Wife of Mongolian ambassador falls to death from Bangkok condo

By: Barkar Nash

On: May 9, 2025

In: South-East Asia

PUBLISHED: 9 May 2025 at 17: 06

A witness gives her statement to a police officer after the wife of the Mongolian ambassador fell to her death from the 17th floor of a condominium in Bangkok's Khlong Toei district early Friday morning. (Photo supplied/Wassayos Ngamkham) — A witness addresses a police officer after the woman of the Mongolian adviser was killed early on Friday night when she fell from the 17th surface of a property in Bangkok’s Khlong Toei area. ( Photo provided/Wassayos Ngamkham )

The family of the Thai embassy to Mongolia perished early on Friday night from the 17th flooring of a condo in Bangkok’s Khlong Toei area.

At 1.09am, Thong Lor officers responded to a report of a person falling from a high-rise tower on Soi Sukhumvit 24.

Orkhon Lkhamsuren, 41, was lying on the ground floor of Samitivej Hospital when an emergency health services team from Samitivej Hospital arrived. She was declared deceased by the medical staff.

A quiet beat was audible on the third floor, according to comments from the condominium’s security team around 12.50am.

As they searched the area, they discovered Tumur Amarsanaa, the defendant’s husband, urgently requesting help before lowering his wife to the ground floor.

The woman reportedly fell from her 17th-floor system and landed on the 4th-floor balcony, according to the preliminary investigation.

Although the precise situation are still being looked into, investigators believe the drop may have been caused by mental problems.

Police check the ledge of the 17th-floor property room. ( Photo provided/Wassayos Ngamkham )

Trump tariffs put China on a deflationary razor’s edge – Asia Times

By: Bolen C

On: May 7, 2025

In: Asia

TOKYO – US Treasury Secretary Scott Bessent should be careful what he wishes for when he demands that the International Monetary Fund be a “brutal truth teller” on China.

At a business conference on Monday (May 5), Bessent urged IMF Managing Director Kristalina Georgieva to “call out countries” that “have pursued globally distortive policies and opaque currency practices for many decades.”

Though Bessent was referring to China, hypocrisy abounds as his boss, Donald Trump, pursues the most “globally distortive policies” Asia has ever seen from Washington.

And as Bessent’s Treasury team mulls, on Trump’s behalf, how to execute “opaque currency practices” that have put developing nations in a whirl. These include a possible dollar devaluation and threatening to fire the head of the US Federal Reserve.

But posterity may show that Trump’s most distortive policy of all is making Chinese deflation great again, to the detriment of global prosperity.

For two straight months now, Chinese consumer prices have been in the red. They’ve dropped 0.1% and 0.7% year on year in February and March, respectively.

More ominous, though, is that the producer price index is now down for 29 straight months. In March, wholesale prices fell 2.5%, the deepest decline in four months.

Risks are rising that China faces a “worse-than-expected demand shock” as the “economy is set to face two major drags simultaneously,” says Ting Lu, chief China economist at Nomura.

Those drags include China’s property sector troubles coupled with cartoonishly large US tariffs, currently set at 145%. As these two headwinds collide, Asia’s biggest economy could indeed be in for a shock.

Trump’s tariffs aim to torpedo China’s export engine by erasing US demand for Chinese goods. As factories go quiet and container ships get anchored in the ports off Shanghai, Shenzhen, Ningbo-Zhoushan, Guangzhou and Hong Kong, tens of millions of mainlanders will be furloughed or fired. Nor will they be receiving steady pay to spend in the Chinese economy in the months ahead.

Last month, Goldman Sachs estimated that as many as 20 million workers in China are employed by US-bound export businesses. And then there are the negative knock-on effects of unemployed factory hands. Eateries, transport operators and shopping districts that rely on workers who won’t be working could go quiet, too.

What deserves more attention with regard to mainland consumer sentiment is how the plunge in shipments from China will result in “significant layoffs” in trucking, logistics, retail and other key sectors, says Torsten Slok, chief economist at Apollo Global Management.

Zichun Huang, China economist at Capital Economics, notes that as China “is coming under pressure as external demand cools,” efforts by Xi Jinping’s government to pump money into the economy seem “unlikely to fully offset the drag.” Capital Economics thinks China’s economy will grow by only 3.5% this year, well below the government’s 5% target.

These are hardly the dynamics that an economy struggling to get households to save less and spend more wants. And yet Trump’s tariffs, and the extreme uncertainty surrounding their implementation and timing, might only intensify the deflationary currents roiling Asia’s 2025.

China’s deflation to date has been mild compared with what Japan experienced after the late 1990s. Wang Dan, an analyst at Eurasia Group, notes that Beijing officials “don’t view deflation as a crisis.” Rather, they see weak prices “as a buffer to support household savings during a period of economic transition.”

To be sure, deflation can be benign when falling prices are driven down by productivity improvements, though it’s rare and not typical of broad economic deflation. That said, China’s rapid-fire deployment of artificial intelligence across the economy could be making efficiency gains not yet apparent in total factor productivity (TFP) statistics, which have long been in decline in China.

Economist Kosuke Motani, author of the 2010 book “The Real Face of Deflation”, notes in Japan’s case many viewed falling costs deflation as a stealth tax cut of sorts, offering households a break.

Economist Sheng-Tze Cheng at Peking University also argues that falling prices can help Chinese households by acting as a buffer in times of significant change.

Only time will tell if China is currently experiencing “disinflation” rather than a long-term trend toward deflation. Yet if Japan taught policymakers around the globe anything, it’s that deflation concerns can quickly take on a life of their own.

That’s a problem that China must not take lightly, economists say. It’s now a growing problem for People’s Bank of China Governor Pan Gongsheng, who’s walking a tight policy tightrope.

Along with navigating the property crisis, Pan is struggling to gauge the severity of the trade-war fallout heading China’s way. Pan is also juggling President Xi’s big-picture financial priorities.

They include keeping the yuan stable, not incentivizing bad lending and borrowing decisions with excess liquidity, and avoiding a place on Trump’s “currency manipulator” list.

Xi and Pan are also trying to avoid shaking up the neighborhood in Asia. “The PBOC is only gradually, and intermittently, weakening the dollar-yuan fix in response to US tariffs, partly to avoid damaging trade relationships with non-US partners,” argues Ashok Bhundia, an economist at the Institute of International Finance.

Yet just like Japan, China is learning the hard way that defeating deflation requires more than just monetary easing. Even more than China needs increased amounts of yuan in circulation, it needs productive uses for the capital.

“China has reached the stage of development where domestic, not external, demand – especially in the non-tradable service sectors – should account for the bulk of aggregate demand,” says Michael Spence, an economist at the Graduate School of Business at Stanford University.

With GDP per capita of US$13,000, Spence says, “China has become an upper-middle-income economy approaching high-income status. So, the non-tradable part of its economy should be approaching the size seen in high-income countries: two-thirds of GDP.

“This means that even very strong demand for China’s exports, or strong tradable demand more broadly, could not offset a large shortfall in non-tradable demand. The barriers to Chinese growth primarily reflect weak aggregate domestic demand, largely owing to a shortfall in household consumption,” Spence said.

Unfortunately, he adds, relatively high unemployment, combined with uncertainty about the economy’s prospects, has encouraged Chinese households – already big savers by global standards – to double down on precautionary saving.

Yet, he notes that the declining value of real estate, which accounts for an estimated 70% of Chinese household wealth, is having significant negative effects on consumption.

“As the US learned after the subprime mortgage crisis of 2007-10, repairing balance-sheet damage in the household sector is no easy feat, let alone one that can be achieved quickly,” Spence says.

“Subdued real-estate activity,” Spence says, “has also affected local-government finances, which have long depended heavily on land sales and real-estate revenues. Rising fiscal distress among local governments compounds deflationary pressures.”

Analysts at Morgan Stanley write that “we expect Beijing to navigate the challenges with cautious and uneven stimulus policies: still relying on investment in emerging sectors and urban renewal, while gradually shifting policy towards consumption over the medium term.”

Economist Chen Kang at the National University of Singapore argues that Team Xi may have few tools to avoid the worst of Trump’s trade war. Over time, though, the costs will mount as rising unemployment depresses incomes and consumption, leading to long-term economic damage.

“The Trump tariffs may be the final push that sends it into deflation” that’s hard to reverse, Chen contends.

One big worry in Asia, including neighboring Southeast Asia, is that China will export waves of deflation the way Japan did, with the rising risk of deindustrializing various sectors that can’t compete on price with comparatively cheap Chinese goods.

Economist Brad Setser at the Council on Foreign Relations notes that China has been “driving a lot of deflation in the global price of traded goods.” Setser cites a “big fall” in Chinese export prices in 2023 and 2024.

Analysts at Loomis Sayles note that the “Chinese economy shows signs of green shoots. But deflation will not end in 2025. Uncertainty persists about scale and effectiveness of stimulus.”

At the same time, the bond house writes, US tariffs on Chinese products “would pose more downside risks to China’s growth and inflation outlook in 2025, likely leading to further declines in market rates, in our view.”

Many economists worry that today’s optimism about the US and China sitting down to negotiate a grand trade deal will fade as neither side proves willing to make big concessions. If so, then Trump’s whopping 145% tariffs could entrench, prompting China to increase its own 125% levies on the US.

“On paper, both capitals are waving detente flags,” says analyst Stephen Innes at SPI Asset Management. “But dig a layer deeper, and the path is still littered with landmines. China’s pledge to fight ‘to the end’ wasn’t retired – just shoved behind softer soundbites – and the ‘cancel duties first’ stick remains a non-starter for the White House.”

Dhaval Joshi, chief strategist for BCA Research’s Counterpoint, says that “Trump’s tariffs can be likened to America’s Brexit.” Just as capital fled UK government bonds, now “it will be the turn of US T-bonds to suffer the higher inflation rates and loss of privileged haven status.”

It follows that global investors may lose even more faith in the dollar and US Treasuries. As those shockwaves hit Asia, it might be even harder for China to keep deflation from taking on a life of its own.

Follow William Pesek on X at @WilliamPesek

Man who allegedly molested stewardess on flight to Singapore to be charged

By: Marcus Ching

On: April 21, 2025

In: South-East Asia

SINGAPORE: A 20-year-old man will be charged on Tuesday ( Apr 22 ) after he allegedly molested a 28-year-old female cabin crew member during a flight to Singapore. The Singapore Police Force said that it was alerted to the event on Feb 28 at about 12. 05pm. Preliminary studiesContinue Reading

Waterspout causes alarm near Phuket marina

By: Barkar Nash

On: April 11, 2025

In: South-East Asia

No reports of damage or injuries brought on by biological phenomena in Chalong Bay.

PUBLISHED: 11 Apr 2025 at 17: 37

A waterspout forms over the sea in Chalong Bay in Muang district of Phuket on Friday. (Photos: Government Public Relations Department) — On Friday, a tornado forms over the water in Chalong Bay in the Muang city of Phuket. Government Public Relations Department ( Photos )

Boaters and spectators in Chalong Bay, Phuket, were alarmed by a link that formed simply off a catamaran marina’s entrance on Friday.

A foreign visitor witnessed the normal occurrence on camera in the area around 11am when it first appeared.

Expressions of surprise and grief can be heard as a column of swirling waters rises from the ocean on video.

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No injuries have been reported to any warships, including local fishing ships and harbour structures, despite the event taking place close to a marina for boats and speedboats.

Authorities promised to examine the picture and investigate the circumstances.

Residents and visitors to the Chalong Bay region have been urged to closely monitor reports and remain on property for the time being until safety is assured.

The Meteorological Department predicted winds to strike 60 % of the southern area, including Phuket, Krabi, Trang, and Satun provinces, with waves erupting over two meters and winds gusting up to 35 kilometers per hour.

Waterspout emerges near yacht marina Phuket, causing alarm

The real bond vigilantes hounding Trump are Asian – Asia Times

By: Bolen C

On: April 11, 2025

In: Asia, Finance

TOKYO – The dollar extended its biggest plunge in three years on Friday after China raised tariffs on the US to 125% from 84%, a tit-for-tat step that has gold surging, markets everywhere gyrating and investors more uncertain than ever about the global economic and financial outlook.

It’s now US President Donald Trump’s move. Does the Trump 2.0 White House double down and increase its own tariff rate, now at 145%, on Asia’s biggest economy? Trump, after all, has threatened before a 200% levy on certain Chinese products.

Perhaps most interesting about this week is what global investors learned about the Trump 2.0’s pain threshold. Punters learned – to their horror – that Trump is willing to stomach epic stock market losses but not telltale signs of distress in the bond market.

Posterity will show that it wasn’t the US Congress, the judiciary or voters that forced the US president into a more relational tariff policy. It was bond traders.

In Asian trading hours on April 9, the so-called “bond vigilantes” pushed the yield on 30-year US Treasury bonds above 5%, Bloomberg reported. That — and memories of events from the mid-1990s, mid-2000s and the Silicon Valley Bank bust in 2023 — saw Trump beat a hasty and rare retreat on most tariffs.

Yet it’s concerns about the next round of vigilantes to take on the Trump White House that made him blink: Asian central banks.

Central banks in the region hold roughly US$3 trillion of US Treasuries, with Japan and China, the top holders, sitting on a combined $1.9 trillion. If they were to start selling on a significant scale, who could pick up the slack? Other than the largest global banks buying steadily, arguably no one.

That’s why chatter in bond trading pits this week that Japan, China and other Asian monetary authorities might be selling so alarmed top US Treasury Department officials. For years, traders feared China might dump its trove of US T-bills in retaliation against US sanctions and restrictions. That day may have arrived.

China, after all, has an incentive to show that “it won’t hesitate to cause turmoil in the global financial market in order to improve its negotiating power against the US,” says strategist Ataru Okumura at SMBC Nikko Securities.

Reporting was that dire warnings from household name financiers like Jamie Dimon of JPMorgan Chase & Co broke through the Trumpian bubble.

The years Treasury Secretary Scott Bessent spent working in hedge fund circles came in handy. For all Trump’s public bluster, another Long-Term Capital Management-like crash could have been catastrophic for global markets and the US economy.

LTCM’s 1998 collapse was partly due to surging Treasury debt yields. Triggering a repeat in 2025, with Trump’s tariffs upending all asset classes and China flirting with deflation, could make the 2008 Lehman Brothers crash look tame by comparison.

Yet the risk that Trump’s policies might repel Asian central banks is growing by the day. This threat is imparting a unique leverage point for the Bank of Japan, the People’s Bank of China and other top Asian monetary authorities.

Asia’s main leverage over Washington right now is bonds, currencies and trade in services. This latter category refers to America’s deep dependence on Asian markets for exports of financial services, technology and intellectual property.

The mechanics of Trump’s tariff-heavy trade war suggest an imperfect understanding of the US economy’s Asia-related vulnerabilities.

Bond traders, the kinds that take matters into their own hands when a government’s policy mix seems out of whack, are all over the debt and currency realms.

“The bond vigilantes have struck again,” says Ed Yardeni, founder of Yardeni Research, who coined the phrase. “As far as we can tell, at least with respect to US financial markets, they are the only 1.000 hitters in history.”

Even though “the stock vigilantes were clearly telling President Donald Trump that his tariff policy was misguided late last week, his advisers touted falling oil prices and bond yields as ultimately helping Main Street America,” Yardeni notes. “That changed as the 10-year Treasury yield surged.”

Yardeni has been a keen observer of this phenomenon for decades. In 1983, Yardeni said, “bond investors are the economy’s bond vigilantes. … So if the fiscal and monetary authorities won’t regulate the economy, the bond investors will. The economy will be run by vigilantes in the credit markets.”

A decade later, James Carville, then a strategist for US President Bill Clinton, made his famous observation about how he’d like to be reincarnated as the bond market. “You can intimidate everybody,” he quipped.

This was back during balanced-budget negotiations. At the time, debt investors were hypersensitive to the slightest hint, good or bad, about zigs and zags in Washington’s fiscal policy debates.

Today, as the US national debt approaches US$37 trillion, Asia has very valid reasons to worry about Washington’s fiscal health. Trump’s Republican Party, for example, is angling for another multi-trillion tax cut that could hasten the path to the $40 trillion national debt mark.

At the same time, disarray in Congress has lawmakers playing politics over the debt ceiling and funding the government even more so than in 2011. That was the year S&P Global Ratings yanked away Washington’s AAA credit rating.

That market-rattling step came two years after then-Chinese Premier Wen Jiabao voiced concern about Washington’s trustworthiness to safeguard vast Chinese state wealth sitting in dollars. Wen was particularly worried about the scale of bailouts amid the Lehman Brothers crisis.

“We have made a huge amount of loans to the United States,” Wen said in 2009. “Of course, we are concerned about the safety of our assets. To be honest, I am a little bit worried.” He urged Washington “to honor its words, stay a credible nation and ensure the safety of Chinese assets.”

At the time, the US debt was less than $12 trillion, two-and-a-half times lower than when Fitch Ratings downgraded the US in 2023. Today, Moody’s Investors Service is mulling whether to maintain Washington’s last AAA rating with the US debt three times what it was in 2009.

There are long-standing fears that Chinese leader Xi Jinping’s government might dump dollars as a retaliation play against Trump’s tariffs, now at 145% after a series of escalations.

It would be a Pyrrhic victory, of course. Any surge in borrowing costs would boomerang back China’s way as US households suddenly consume less.

Nor would it be in Beijing’s interest if global investors decided the US budget deficit is a train wreck in slow motion. The potential contagion effects could make the 2008 Lehman Brothers crisis seem tame by comparison.

Even so, Xi’s Communist Party may have calculated that the US has far more to lose in the event of a Global Financial Crisis 2.0. China pulling the plug now would catch US markets decidedly off-balance, amplifying the fallout.

In 1997, then-Japanese Prime Minister Ryutaro Hashimoto admitted to a New York audience that “several times in the past, we have been tempted to sell large lots of US Treasuries” to make a point. One such episode was the heated auto negotiations a few years earlier.

This time, the intrigue involves the Trumpian turmoil already on full display.

“Why is this happening?” Yardeni asks. “Fixed-income investors may be starting to worry that the Chinese and other foreigners might start selling their US Treasuries.” The bond market, he adds, worries “the Trump administration may be playing with liquid nitro.”

Count the ways this White House might damage the dollar’s credibility and the perceived sanctity of Treasuries, the linchpin of global finance.

They include: sticking with an inflationary tariffs arms race; meddling with the Federal Reserve’s independence; neutering the Internal Revenue Service; and seeking trillions of new tax cuts that Trump World assumes Washington’s Asian bankers will dutifully finance.

This last assumption is highly dubious considering reports Asian central banks are already limiting their exposure to the US. But eyeing Trump’s exploits — which could easily imperil America’s credit rating — from 7,000 miles away is causing serious anxiety among Asian policymakers.

One irony is Asia watching Trump’s government do many of the things the US chastised Asia for a quarter of a century ago. Back in 1997-98, when Hashimoto was spooking bond traders, US officials were counseling Bangkok, Jakarta, Kuala Lumpur, Manila and Seoul against crony capitalism, oligarch-dominated economic systems and extreme opacity.

Now it’s Asia’s turn to watch Washington torch its once-vaunted financial institutions with bewildering speed. This has policymakers busily gaming out how Trump’s tariffs and general erraticism might upend their economies. For now, it seems the trauma that Trump has delivered to stocks might be less than it will be for debt.

“Though stocks rose following Trump’s pause, Treasury yields haven’t fully recovered from the sharp moves of earlier this week, reflecting some potential damage to the US economic brand,” notes Ian Bremmer, president of Eurasia Group.

“The dollar has continued falling, too. The political ramifications of this are potentially more widespread than any market drops, as the higher yields make it more difficult for small businesses to access loans, with knock-on effects for the US economy,” Bremmer said.

The ways Trump is imperiling US growth as alarm bells ring about a possible recession would normally cheer debt markets. But given the inflation fallout from tariffs, bond traders are viewing Trump 2.0 policies dimly.

Markets worry the Trump administration has “arguably shown a greater tolerance for causing a recession than many might have thought,” notes Thomas Mathews, head of Asia-Pacific markets at Capital Economics. But the bond-market fallout is forcing Team Trump to turn tail.

The question is when the biggest of the bond vigilantes – central banks – start actively selling Treasuries. Japan and China are Washington’s biggest bankers, followed by the UK, Luxembourg, Cayman Islands, Belgium, Canada, France, Ireland, Switzerland, Taiwan and Hong Kong.

If markets got a whiff of any of their central banks either aggressively selling debt or just halting new purchases, the result could be bedlam in global credit markets. If Trump understands this risk, he’s done little to demonstrate it to the Asian central bankers who effectively hold the deed to the US economy.

Follow William Pesek on X at @WilliamPesek

Soh Rui Yong’s former lawyer sues runner for defamation, seeks S0,000 in damages

Soh Rui Yong’s former lawyer sues runner for defamation, seeks S$180,000 in damages

By: Marcus Ching

On: April 5, 2025

In: South-East Asia

SINGAPORE: A attorney who previously represented regional athlete Soh Rui Yong in two distinct defamation suit has sued the skater over a Facebook post published last month, saying the claims made were “false, slanderous and detrimental” to his popularity.

According to court documents seen by CNA, Mr Clarence Lun alleged that Mr Soh defamed him when he&nbsp, posted on his Facebook page on Aug 25, 2024 about three “dishonest, incompetent lawyers” he had to deal with.

Mr Lun initially represented Mr Soh in his defamation suit mounted by Ashley Liew, before the runner opted to switch to lawyers led by Mr Eugene Thuraisingam.

Though the post, which was made public, did not directly name Mr Lun, the plaintiff argued that he could be identified as Mr Soh went on to state that one of the three lawyers had previously been suspended from practice. &nbsp,

Mr Lun was handed an 18-month suspension on Oct 10, 2022, for acting as supervising solicitor to two practice trainees when he was not qualified.

He further argued that he could be identified in the post as Mr Soh had, on multiple occasions in the past, mentioned him on his Facebook page, saying that he was his lawyer. &nbsp,

The lawyer also claimed Mr Soh’s post was defamatory due to the&nbsp, “malicious intent in making unwarranted personal attacks” against him, by referring to his poor health and marital problems. &nbsp,

In his claim, Mr Lun listed some of his professional accolades and mentioned several high-value commercial trade cases he had worked on, such as&nbsp, advising and acting for the liquidator of Castlewood Group in a S$ 98 million ( US$ 73 million ) insolvency dispute.

According to the website of Fervent Chambers, he is the founder of the law firm, and is its director and head of dispute resolution and international arbitration.

Mr Lun claimed that&nbsp, his reputation had been” seriously damaged” and he had” suffered hurt, distress and embarrassment” due to the post.

He pointed out that the Court of Three Judges did not find that he was “dishonest in respect of the misconduct which led to the suspension”. &nbsp,

A letter of demand via Fervent Chambers was sent to Mr Soh in September 2024. &nbsp,

However, the marathoner did not respond to the letter, prompting Mr Lun to take legal action.

The plaintiff is seeking S$ 180, 000 in damages, a court order to remove the Facebook post and an injunction restraining Mr Soh from repeating what was said in the post. As of January 2025, Mr Soh’s Facebook page had about 19, 000 followers, and the post had garnered a number of likes, comments and shares, Mr Lun’s claim noted.

Mr Lun represented Mr Soh in his defamation suit against former Singapore Athletic Association ( SAA ) executive director Malik Aljunied. Mr Soh lost that suit in June 2022. &nbsp,

The 10, 000m silver medallist at the 2023 SEA Games also had to pay Dr Liew, a chiropractor and fellow runner, S$ 180, 000 in damages, after a High Court judge dismissed his appeal in March 2022.

SOH DENIES ALL ALLEGATIONS

In a court filing dated Apr 2, a lawyer acting for Mr Soh, Akesh Abhilash from Silvester Legal, &nbsp, denied all of the allegations made by Mr Lun.

Referring to the post that said” Today, 1 of them has been charged by the Law Society”, Mr Abhilash, who leads the disputes practice team at his firm, said Mr Lun could not be identified as the first lawyer as he was not charged on Aug 25, 2024.

He added that no comments on the post made reference to Mr Lun, and previous mentions of him were made on the Facebook page in 2020 and 2021, while the post was made on Aug 25, 2024.

” Readers of Facebook posts do not subject them to close analysis”, he said.

Mr Abhilash argued the&nbsp, post, when read in context, was understood to mean Mr Soh “had dealt with unnamed dishonest and/or incompetent lawyers in the past”.

As part of the defence’s filing, Mr Soh&nbsp, claimed Mr Lun had made a series of “dishonest” statements to him- either in person or via WhatsApp- during the course of their solicitor-client relationship from&nbsp, August 2019 to May 2021.

These included “false statements scandalising members of the judiciary and the Bar” to explain why&nbsp, legal applications in the lawsuit involving Dr Liew had been dismissed.

According to court documents, Mr Soh referenced comments allegedly made by Mr Lun about the competence of the judge presiding over the case and how the court was biased.

The runner also brought up other purported instances of Mr Lun’s “incompetent conduct”, such as failing to clear a media statement before sending it to the press, his” constant stammering” in court and filing a request to remove the judge when there had been no grounds to do so or a history of successful applications.

As for Mr Lun’s professional accolades and some of the&nbsp, prominent cases he had been involved in, Mr Soh said those matters were not within his&nbsp, knowledge.

On the letter of demand, he added that it was served while he was out of Singapore.

The court heard he had recently graduated with a law degree, with Mr Soh posting on Facebook in September last year pictures of his convocation ceremony at University College London (UCL ) in the UK. &nbsp,

Clearing State Audit Office debris could take ’60 days’

By: Barkar Nash

On: April 4, 2025

In: South-East Asia

PUBLISHED: 5 Apr 2025 at 05: 02

Operation presses on: Excavators remove concrete debris on Friday to clear the way for online search-and-rescue operations at the collapsed State Audit Office building in Bangkok's Chatuchak district. (Photo: Pattarapong Chatpattarasill) — Activity press on: Tractors remove concrete dirt on Friday to clear the way for online search-and-rescue procedures at the fell State Audit Office building in Bangkok’s Chatuchak area. ( Photo: Pattarapong Chatpattarasill )

The operation to clear debris from the collapsed State Audit Office ( SAO ) building could take 30 to 60 days as search and rescue efforts for survivors continue amid difficult conditions.

Citing specialists, Bangkok government Chadchart Sittipunt said about 15, 000 square feet of wreckage weighing 40, 000 kilograms were expected to get removed from the webpage, and less than 5 % of the dirt has been cleared thus far.

Mr Chadchart also announced a decision to change strategies after firefighters were unable to reach areas where more survivors may be found due to heavy piles of heavy cement, steel and other particles obstructing their development.

He said the plan has been adjusted to incorporate heavy machinery, allowing for quicker debris removal and clearing the way for the search-and-rescue operation and facilitating evidence-gathering for the ongoing investigations.

This marks a shift from the previous approach, which relied largely on rescuers removing debris by hand due to concerns about the potential dangers to survivors, he said.

On Thursday, search crew detected signs of life and over 100 personnel were deployed to clear the path.

As of midnight, they managed to reach the location but were blocked by steel and a narrow cavity, according to the governor.

” We will need heavy machinery to further progress. Everyone is heartbroken, but we believe we’ve done our best.

” Heavy machines will play a greater role, but we have never given up hope of finding survivors.

” Rescue teams are on standby around the clock to prepare for searches once the machines clear the area”, he said.

Mr Chadchart also reassured the public of their safety, saying public confidence is expected to be restored as almost all structures withstood the recent earthquake.

Dr Wantanee Wattana, permanent secretary at the BMA, said yesterday that psychiatrists have been deployed at the site to support the families of the victims and to also provide mental support to the rescue team in the operation area who may be stressed from their duties.

She also expressed deep gratitude to His Majesty the King, who has taken all injured victims as patients under royal patronage.

Dr Wantanee called on media outlets not to mix coverage of the earthquake-related damage in Myanmar with the collapsed building, warning it could cause misunderstanding and emotional distress among the victims ‘ families.

Clearing SAO debris could take ’60 days’

By: Barkar Nash

On: April 4, 2025

In: South-East Asia

PUBLISHED: 5 Apr 2025 at 05: 02

The operation to clear debris from the collapsed State Audit Office ( SAO ) building could take 30 to 60 days as search and rescue efforts for survivors continue amid difficult conditions.

Mr Chadchart also announced a decision to change tactics after firefighters were unable to reach areas where more survivors may be found due to heavy piles of heavy cement, steel and other particles obstructing their development.

He said the program has been adjusted to include large equipment, allowing for quicker dust treatment and clearing the way for the search-and-rescue activity and facilitating evidence-gathering for the ongoing studies.