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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

EU

Posted by WARREN MOSLER on July 19th, 2010

This is what I was writing about last week-

China and others buying euro to support exports to that region.

The euro member nations want their debt sold, but they don’t want the loss of ‘competitiveness’ that necessarily comes with it, as the moves to eliminate solvency issues continue to drive up the euro:

China offers vote of confidence in euro

(FT) China delivered a strong vote of confidence in the euro on Friday when Premier Wen Jiabao said that Europe would always be one of the main investment markets for China’s foreign exchange reserves. Mr Wen said “Europe will certainly overcome its difficulties”. “The European market has been in the past, is now and will be in the future one of the main investment markets for China’s foreign exchange reserves,” Mr Wen said. “I want to say that at this time, when some European countries are suffering sovereign debt crises, China has always held out a helping hand,” he added. “We believe that with the joint hard work of the international community, Europe will certainly overcome its difficulties,” he said. According to people familiar with Spain’s recent bond issue, China’s State Administration of Foreign Exchange was allocated up to €400m ($505m) of Spanish 10-year bonds in a debt deal last Tuesday.

10 Responses to “EU”

  1. roger erickson Says:

    >> “China and others buying euro to support exports to that region.”

    ?? this is a sign of inane economies, where core inefficiencies abound, even as we optimize details of circular logic;

    when you follow this rabbit to the bottom of the hole, class warfare is always found, or at least aimless class manipulation;

    this is like putting a VCR in your mini-van so the little kids will stay quiet – even though it likely causes autism & other problems in the very young

    (might as well give ‘em heroin? if you’re going to have kids, or grow a population, find them WORTHWHILE, productive things to do instead of just be zombies & indentured exporters – or else what’s the point? & where’s the ROI?)

    there’s so much more we could all be doing!!

    Reply

  2. beowulf Says:

    I want to say that at this time, when some European countries are suffering sovereign debt crises, China has always held out a helping hand

    Smart politics if nothing else. It sounds like a public service ad, “Brought to you by your friends at the People’s Liberation Army”. :o)

    Reply

  3. Tom Hickey Says:

    On the other hand, a lot of current thinking is that China the other Asian savers need to start consuming (importing from the developed countries where they have a capital surplus) in order to rebalance the global economy. Instead, Chinese exports are increasing. (Remember Greenspan and “the global savings glut”?)

    That means larger deficits and more debt for the West, which is driving the deficit hawks loonie and creating push-back against China at the same time that Western workers are protesting their jobs being exported. This doesn’t seem politically sustainable to me.

    Reply

    strawberry picker Reply:

    More asian consumption? No way Jose. I am poor and want more loans made to me, some say these affirmative action policies cause too many bad loans, but I am enjoying my nice McMansion, thank you USA.

    =DJ UPDATE:Fed’s Duke:Time For Review Of Community Reinvestment Act

    By Shayndi Raice
    Of DOW JONES NEWSWIRES
    WASHINGTON (Dow Jones)–Federal Reserve Governor Elizabeth Duke called Monday for a thorough review and update of a federal law that limits discriminatory credit practices in low-income neighborhoods.

    “Today’s financial landscape is vastly different from the one in which the Community Reinvestment Act was enacted in 1977,” Duke said. “In the wave of the foreclosure crisis, there are new challenges.”

    Congress passed the Community Reinvestment Act in 1977 to reduce discriminatory credit practices in poor neighborhoods, a practice known as red-lining. There has been no comprehensive review of the law since 1995.

    Duke’s comments came at the first in a four-part series of hearings across the country on regulatory changes to the CRA being held by the Fed’s Board of Governors, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

    CRA advocates testified that bank regulators should broaden the statute’s examination criteria, strengthen enforcement mechanisms, apply CRA to nonbank institutions like mortgage companies and credit unions, and encourage banks to engage more in community development.

    Specifically, panelists argued that banks’ examinations are too restrictive to specific geographical areas that include a bank’s headquarters or branches. In 1977, lending primarily occurred through bank branches, but branches are no longer the primary channel through which banks make loans. Advocates also argued that banks can shield discriminatory practices because the current regulations do not require CRA-eligible banks to report on the lending practices of its depository, credit and mortgage affiliates.

    “CRA has brought about major improvements,” said Jonathan Mintz, commissioner of the New York City Department of Consumer Affairs, at the hearing. “However, there’s more that CRA can and ought to accomplish.”

    Critics of the law say it played a role in the credit crisis by encouraging banks to make unsafe loans. Advocates for the poor, however, say the CRA isn’t strict enough.

    And just who will take all these new loans made to me for mcmansions – well maybe new rules at the BOE will help!!

    LONDON -(Dow Jones)- The Bank of England confirmed Monday that it will expand the range of collateral accepted at its discount window to include portfolios of loans to individuals and non-banks, while also requiring greater information on asset-backed securities and covered bonds.

    In a market notice, the BOE said the extension in allowed collateral was likely to take place during 2011, but that further detail on the criteria and timescales for both initiatives would be supplied later this year. The move follows a market consultation on the reforms, announced in March.

    Website: http://www.bankofengland.co.uk/markets/marketnotice100719.pdf

    Reply

    Min Reply:

    Tom Hickey: “That means larger deficits and more debt for the West, which is driving the deficit hawks loonie and creating push-back against China at the same time that Western workers are protesting their jobs being exported. This doesn’t seem politically sustainable to me.”

    But isn’t China positioning itself for the coming era of the Multi-National Corporation? While smaller countries kowtow to Multi-Nationals and the U. S. caters to them, China will be a player.

    Reply

    Tom Hickey Reply:

    Min, China is a multi-national corporation in addition to being a national government. As such it is competing with Western multi-nationals directly. As a state it is competing for power and influence with other states in the Great Game.

    As a socialist state China owns directly or indirectly a huge swath of Chinese real estate, business and finance. It is player on the international scene in a way that capitalist states are not (unless one considers state capture).

    China is a different kind of player, and as it gains wealth and power, it is going to have an influence over the way things unfold globally.

    Reply

    strawberry picker Reply:

    Tom go watch that movie Blade Runner with harrison ford, it predicted asian influence would take over the world.

    China is now the world’s biggest energy consumer, knocking the U.S. off a perch it held for more than a century, according to new data from the International Energy Agency.

    The Paris-based agency, whose forecasts are generally regarded as bellwether indicators for the energy industry, said China devoured 2,252 million tons of oil equivalent last year, or about 4% more than the U.S., which burned through 2,170 million tons of oil equivalent. The oil-equivalent metric represents all forms of energy consumed, including crude oil, nuclear, coal, natural gas and renewable sources such as hydropower.

    The figures reflect, in part, how the global recession hit the U.S. more severely than China and hurt American industrial activity and energy use. Still, China’s total energy consumption has clocked annual double-digit growth rates for many years, driven by the country’s big industrial base. Highlighting how quickly its energy demand has increased, China’s total energy consumption was just half the size of the U.S. 10 years ago.

    http://online.wsj.com/article/SB10001424052748703720504575376712353150310.html?mod=rss_whats_news_us_business

    Their country of 1 billion are mostly the same race, religion, history, etc etc – the next century will be interesting to see how the melting pot nations go up against the borg like nations with hivemind.

    Tom Hickey Reply:

    Straw, don’t forget India and Brazil which are also coming online fast, and Indonesia, which is about to. These are large populations. The times, they are a-changin’.

    The West is desperately trying to dominate this financially and managerially, but that is only temporary.

    Min Reply:

    Tom Hickey: “Min, China is a multi-national corporation in addition to being a national government. As such it is competing with Western multi-nationals directly. As a state it is competing for power and influence with other states in the Great Game.

    “As a socialist state China owns directly or indirectly a huge swath of Chinese real estate, business and finance. It is player on the international scene in a way that capitalist states are not.”

    Yup. Yup. Yup. Yup. And yup. ;)

  4. Charles St. Pierre Says:

    Hmm. Sounds like China wants to do unto Europe as they do unto the USA. Accumulate Euros (as they accumulate dollars) to drive a trade surplus. Those lucky Europeans, getting all that inexpensive Chinese merchandise and having their price levels driven down and their domestic industries idled and driven out of business. Along with the attendant unemployment and erosion of their tax base. And competing with the Germans in their own back yard, too. Hmm. Let’s hope the Europeans are properly grateful for the vote of confidence in their currency.

    see: http://anamecon.blogspot.com/2010/04/effects-of-unbalanced-trade.html to see how it’s done.

    Reply

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