Asian countries call for global currency
Posted by
,
No Comments
">
Monday, April 6, 2009
Leaders and central banks in Russia, China, Malaysia, Indonesia, Thailand, and Kazakhstan have called for an international currency system.
Speaking on April 1 in advance of the G-20 summit in London, Russian president Dmitry Medvedev argued that the international finance system needed a “new construction” including “new currency systems”, saying that such a new system could be the purpose of a revamped IMF and World Bank. The IMF was originally founded in 1946 as the overseer of the Bretton Woods system, which from its founding until the 1970s tied the western world’s currencies to the US Dollar, which was in turn backed by gold. Russia’s proposal was for the new currency to serve as a reserve currency, one which would take the place of the dollar, euro, and other heavily-traded currencies as an international standard of exchange.
Medvedev’s comments are a reversal of Russian position from a lukewarm response following a looser outline for a worldwide currency by Kazakhstani president Nursultan Nazarbayev. On March 11, Nazarbayev suggested the establishment of the “acmetal”, a portmanteau of “acme” and “capital“, as a reserve currency replacing the ruble in international transactions, first for Central Asia and then worldwide. 1999 Economics Nobel laureate Robert Mundell, speaking to the Daily Telegraph, endorsed the idea, saying “It would be a very good idea if the G-20 took that idea up in London”.
2001 Nobel economics prize winner Joseph Stiglitz, meanwhile, said the new currency could come about quickly if it was based on an expansion of the IMF’s already established system of Special Drawing Rights, units of exchange used by the IMF which already have some of the features of currency. Stiglitz argued that, as the US dollar has become the standard global reserve currency, it has inadvertently created a system which hurts the world economy. “It’s a net transfer, in a sense, to the United States of foreign aid,” he argued, reasoning that when other countries purchase US dollars in order to use them on international markets (such as for the buying and selling of petroleum), they effectively give the US a zero-interest loan — sometimes at times when they can least afford it. Stiglitz made his comments as head of a United Nations panel of economists giving recommendations to address the global financial crisis.
In the weeks leading up to the G-20 conference, the People’s Republic of China also began discussing a new system for reserve currencies. In a March 23 speech, Zhou Xiaochuan, governor of the People’s Bank of China, endorsed a new reserve currency, saying “the desirable goal of reforming the international monetary system, therefore, is to create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies.” Zhou went on to endorse the expansion of the SDR system in the long-term creation of a reserve currency government by the IMF. While Zhou did not mention the US dollar specifically, analysis by Qu Hongbin, chief China economist for HSBC, for the Financial Times said that the speech “is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money”.
China holds $740 billion as assets; inflation in the US economy, which has been low in recent years, would directly cause those assets to lose value.
While the Chinese government has engaged in currency swaps with several other growing economies, such as South Korea, Argentina, Malaysia and Indonesia, the Chinese Yuan cannot be used itself as a reserve currency as it cannot be freely traded on the global market.
The Chinese-Russian proposal was not entered onto the agenda at the G-20 meeting itself. Nonetheless, British Prime Minister Gordon Brown said that the G-20 was open to considering the proposal if and when a detailed one is presented. United States President Barack Obama, meanwhile, endorsed the continuation of dollar supremacy, saying that the US dollar is “extraordinarily strong” and arguing that its strength was the result of the intrinsic stability of the United States economic and political system; US treasury secretary Timothy Geithner had, the week before, made comments that while he supported an expansion in the SDR mechanism he rejected the idea of a global currency. Rather than change the role of SDRs, the G-20 meeting instead added $250 billion in support to the fund backing SDRs.
After the G-20 conference ended on Thursday, Malaysia’s The Star BizWeek reported that the central banks of Indonesia, Malaysia and Thailand had endorsed the Chinese proposal. All three countries have close economic ties with China and suffered heavily from the collapse of their currencies in the 1997 Asian Financial Crisis; the sudden growth in the value of the US dollar relative to those countries’ native currencies sharply increased debt in Southeast Asia’s economies, leading to a wave of bankruptcies.
International reaction from other economies has been mixed and guarded. Luiz Inacio Lula da Silva, President of Brazil, said that the currency proposal was important to discuss but did not give extensive comment. And while UPI reports that India supported the SDR proposal at the G-20 conference, the Indian Press Trust quotes Indian Prime Minister Manmohan Singh as saying last month, “It is too early to talk about common currency.”
Calls for an independent global reserve currency are not new. In 1944, John Maynard Keynes proposed the “bancor“, a unit like the SDR supported by a basket of commodities. Keynes’ idea was rejected and the US dollar took the equivalent role under the Bretton Woods system. Keynes proposed that the bancor system would be reinforced by a tax on participating countries’ current accounts, the difference between their exports and their imports, in order to encourage balanced trade. Meanwhile, monetary unions have become more popular since the end of the gold standard, with most of the European Union now trading the euro, and several countries outside the EU using it as a de facto currency; five West African countries adopting the eco at the end of this year; and the African Union planning to introduce the afro in 2028. Proposals for a North American currency union based around the so-called “amero” have been frequently discussed as the focus of conspiracy theories in the United States, but none of the US, Canada or Mexico have actively pursued the establishment of any such monetary union, however the dollar is the currency of several Latin American countries.
No Comments
">
Third explosion at Fukushima Daiichi nuclear power plant
Posted by
,
No Comments
Monday, March 14, 2011
An explosion was reported at 0610 local time Tuesday morning at the Fukushima Daiichi nuclear power plant’s second reactor. The blast is feared to have breached the pressure chamber.
The explosion is thought to have been in the reactor’s “pressure suppression room” — part of the cooling system. It damaged the area that contains water to cool the reactor, but it is not yet clear whether it affected the containment structure near the core.
Government officials have said that there was limited damage as a result of the explosion, and efforts to cool the reactor would go on, but nuclear industry executives in Japan have said that the situation is far worse, and other unnamed officials said the containment structure had been damaged, but did not say to what extent. In the wake of the explosion, officials at the Tokyo Electric Power Company (TEPCO), the plant’s operator, said for the first time a partial meltdown could be taking place within the reactor.
After the explosion, radiation levels near the facility rose from 1,941 to 8,712 microsieverts, a level still short of that required to cause immediate health effects, and radiation decreased again some time after the explosion. The legal limit for radiation in one year is a thousand microseiverts, but radiation sickness does not occur until a million microseiverts.
Prior to the explosion the fuel rods in the reactor reported to again be exposed after the pressure valve closed at 11pm local time, preventing pumping in cooling water.
“The reactor containment vessel, which is the last line of defence to contain the radiation, this may have experienced some damage…it seems that there are damages at several different places of these walls around radioactive substances.” [excerpted from live translation transcription by CNN of NHK coverage of press conference, stream]
According to TEPCO, all but 50 employees of the plant were evacuated after the incident.
Workers at the 40-year old plant have been struggling to deal with the aftermath of Friday’s massive earthquake and tsunami. On Saturday, a hydrogen explosion occurred at the number one reactor, followed by a second explosion on Sunday to the number three reactor. The number two reactor was reported to be overheating, with exposed fuel rods, earlier today. Nearly 185,000 people have been evacuated from the 20 km zone around the plant.
