Brad DeLong's Semi-Daily Journal: A Weblog

Indispensable it may be, but obtainable it is not.

The requested URL /~nroubini/asia/ Roubini-Setser-US-External-Imbalances.pdf was not found on this server.

:(

If you can't obtain it, you certainly can't dispense with it. Hence, indispensable.

Roubini's blog is here - you can read more recent commentary on the dollar there.

http://www.roubiniglobal.com/archives/2004/10/are_we_back_to.html

OK, I just read the executive summary. That was really scary. "Net debt" has gone from 5% of GDP in 1997 to 28% by the end of the year? Um, eek?

Russia moves to EUR FX basket?

OK, not quite an Asian central bank defection, but a major EurAsian one...

From a correspondent in the finance world:

The Nikkei news is reporting that from 2005, Russia's central bank will adopt a EUR-dominated basket peg for the EUR. The BoR does not have a formal USD/EUR basket, but has a notional basket containing a split of 70% USDs and 30% EURs which it uses when it targets trends in the RUB's REER. Its FX reserve composition tends to reflect this notional basket. The vast majority of FX intervention (roughly USD2bn a week) is conducted via the USD/RUB market given that EUR/RUB is illiquid. The BoR is believed to then convert roughly 30% of its incremental FX reserve growth into EURs. FX intervention in Russia is therefore positive for EUR/USD.

http://infoproc.blogspot.com/2004/11/russia-moves-to-eur-fx-basket.html

http://infoproc.blogspot.com/2004/11/dollar-loses-luster-in-china.html

Here is a link to the piece (updated in Nov), it works for me:
http://www.stern.nyu.edu/globalmacro/Roubini-Setser-US-External-Imbalances.pdf

The external imbalance is far more worrying than the government budget deficit, which is for the future. The current account has been in deficit for decades (it was briefly close to balance under Bush I), and will continue to be, without rapid remedial action of the sort that would slice 5% off American living standards overnight.

Roubini's globalmacro web site seems to be down at the moment in its entirety.

I can't get any link to work.

Jim Harris, me too I found that the links did not work, but I downloaded it from Google cache. It may work for you.

DSW

yes please, can I have a working link?

this link is working now

http://www.stern.nyu.edu/globalmacro/Roubini-Setser-US-External-Imbalances.pdf

My NYU server was down for a couple of hours; thus, the inability to access the paper. The URL Brad gave is correct:
http://www.stern.nyu.edu/globalmacro/Roubini-Setser-US-External-Imbalances.pdf
On my Global Macro site (http://www.stern.nyu.edu/globalmacro/), I have a whole section with papers and materials on the US current account unsustainability; the URL is:
http://www.stern.nyu.edu/globalmacro/cur_policy/cad.html

As I was driving the wife to work this morning I flashed on an image of us in third class riding a train running backwards towards a cliff. The loco and 1st class are behind us and we can see the cliff but the loco driver and 1st class can't. We know there is a train wreck coming. What economic stars would have to be in alignment such that a bridge over the cliff could be built before we reach it or the people in 1st class could tell the driver to stop and he had the time and brakes to do so?
If the bridge is built or the train wreck is avoided you econ guys have a lot of interesting theorizing to do and a lot of intesting papers to write. A fun task for you but us in 3rd class get the hell scared out of us.
The most probable event will be that 1st class will tell the driver to disconnect the 3rd class cars and hit the brakes.
Enjoy

The site is back up and the links work. A blessing.

On the Russian move away from the USD:

http://globblog.blogspot.com/2004/11/we-all-know-that-japan-and-china-are.html

http://www.nytimes.com/2004/11/18/international/asia/18asia.html

Chinese Move to Eclipse U.S. Appeal in South Asia
By JANE PERLEZ

CHIANG RAI, Thailand - In pagoda-style buildings donated by the Chinese government to the university here, Long Seaxiong, 19, stays up nights to master the intricacies of Mandarin.

The sacrifice is worth it, he says, and the choice of studying Chinese was an easy one over perfecting his faltering English. China, not America, is the future, he insists, speaking for many of his generation in Asia.

"For a few years ahead, it will still be the United States as No. 1, but soon it will be China," Mr. Long, the son of a Thai businessman, confidently predicted as he showed off the stone, tiles and willow trees imported from China to decorate the courtyard at the Sirindhorn Chinese Language and Culture Center, which opened a year ago.

The center is part of China's expanding presence across Southeast Asia and the Pacific, where Beijing is making a big push to market itself and its language, similar to the way the United States promoted its culture and values during the cold war. It is not a hard sell, particularly to young Asians eager to cement cultural bonds as China deepens its economic and political interests in the region.

Put off from visiting the United States by the difficulty of gaining visas after 9/11, more and more Southeast Asians are traveling to China as students and tourists. Likewise, Chinese tourists, less fearful than Americans of the threat of being targets of terrorism, are becoming the dominant tourist group in the region, outnumbering Americans in places like Thailand and fast catching up to the ubiquitous Japanese.

As the new Chinese tourists from the rapidly expanding middle class travel, they carry with them an image of a vastly different and more inviting China than even just a few years ago, richer, more confident and more influential. "Among some countries, China fever seems to be replacing China fear," said Wang Gungwu, the director of the East Asian Institute at National University in Singapore.

Over all, China's stepped up endeavors in cultural suasion remain modest compared with those of the United States, and American popular culture, from Hollywood movies to MTV, is still vastly more exportable and accessible, all agree. The United States also holds the balance of raw military power in the region.

But the trend is clear, educators and diplomats here say: the Americans are losing influence.

As China ramps up its cultural and language presence, Washington is ratcheting down, ceding territory that was virtually all its own when China was trapped in its hard Communist shell.

"The Chinese are actively expanding their public diplomacy while we are cutting back or just holding our own," said Paul Blackburn, a former public affairs officer of the United States Information Service who served at four American embassies in Asia in the 1980's and 90's.

China Radio International, with light fare and upbeat news and features, now broadcasts in English 24 hours a day, while Voice of America broadcasts 19 hours and will soon be cut back to 14 hours, he said.

CCTV-9, China's flagship English-language television channel, which features suave news anchors and cultural and entertainment shows, is broadcast worldwide. America may have CNN International, but in the realm of public policy, the United States has "nothing comparable," Mr. Blackburn says.

Across Southeast Asia, American centers run by the State Department's United States Information Service, which once offered English-language training and library services, were closed and staff was slashed as part of the worldwide cutbacks in the 1990's.

The impact is still being felt.

http://www.nytimes.com/2004/11/18/opinion/18thu3.html?

A Good Deal Goes Begging

Last week, President Bush professed a desire to see a true peace in the Middle East, one where Israel can live alongside its Arab neighbors in serenity and harmony and all other good things. So why in the world is his administration holding up a trade deal between Israel and Egypt that could increase economic cooperation between the two countries?

Back in 1996, Congress passed a law giving Jordan and Egypt duty-free access to some parts of the American market if those products included some Israeli content. The point of the law was to encourage commercial ties between Israel and the Arab world, and to weaken the Arab boycott of Israel. Jordan embraced the law and set up special industrial zones for textile exports that included Israeli content, like zippers and fabric lining. Egypt, for its part, dallied for years; Egyptian officials cited the Palestinian intifada as one reason why they didn't want to be seen as embracing Israel.

But this year, Egypt finally came to its senses. The coming end in December of the United States quota system that has protected textile manufacturers from Chinese competition may have had something to do with the Egyptian turnaround. But whatever the cause, Cairo has agreed to establish special trade zones for duty-free exports to the United States. Such exports - mostly clothing and textiles - would include 11.7 percent Israeli content. Israel and Egypt quietly signed the pact in September. Great news, right?

Wrong. United States trade officials haven't approved the deal, citing concerns that it could hurt American textile and apparel companies. Apparently peace in our time isn't quite so important after all, especially not when measured against protecting important political constituencies.

Reading the article and the dilbert comments makes me think of back during the bubble when those of us that believed it was a bubble but had to invest in the US stock market described it as trying to rationally deal with an irrational world.

When I look at the implications of US fiscal policy I feel the same way.

Why did Clinton and the MSM let this happen?

I posted this on the other dollar thread, but people here might be interested as well...

Russia moves to EUR FX basket?

OK, not quite an Asian central bank defection, but a major EurAsian one...

From a correspondent in the finance world:

The Nikkei news is reporting that from 2005, Russia's central bank will adopt a EUR-dominated basket peg for the EUR. The BoR does not have a formal USD/EUR basket, but has a notional basket containing a split of 70% USDs and 30% EURs which it uses when it targets trends in the RUB's REER. Its FX reserve composition tends to reflect this notional basket. The vast majority of FX intervention (roughly USD2bn a week) is conducted via the USD/RUB market given that EUR/RUB is illiquid. The BoR is believed to then convert roughly 30% of its incremental FX reserve growth into EURs. FX intervention in Russia is therefore positive for EUR/USD.

http://infoproc.blogspot.com/2004/11/russia-moves-to-eur-fx-basket.html

http://infoproc.blogspot.com/2004/11/dollar-loses-luster-in-china.html

Fellow cassandra Stephen Roach of Morgan Stanley has recently become a bit more sanguine about the risks here thanks to the Chinese government's willingness to let its currency appreciate and the apparent peak in the price of oil. See his commentary here:

http://www.morganstanley.com/GEFdata/digests/20041115-mon.html#anchor0

Globalisation involves security. Perhaps US financial imbalances shouldn't be seen in isolation.

A paper in July gave an idea of how desperately security is needed.

Extracts are:
"If a large majority earns much less than the average income, it may be easy to obtain a majority in a universal (or wide) suffrage democracy in favour of seizing the
wealth or incomes of the rich minority. Democracy then becomes populist, as it
has long been in much of Latin America."
[A striking example of the self-defeating nature of populism is Argentina. In 1950, Argentina’s real gross domestic product per head in 1990 international dollars was $4,987. By 1998, after decades of populism, it was $9,219. By way of contrast, Italy, from which many Argentineans had come, had a GDP per head of $3,502 in 1950 and $17,759 in 1998.]

"Over the past two decades, the accelerated growth of a number of very large, poor countries, above all, China and India appears to have reduced global inter-personal inequality, somewhat. But a huge number of countries containing some 1.5bn people lag ever further behind"

"gaps in living standards will continue to grow between the richest and the poorest countries in the world. Today, that ratio is some 75 to one. . . In half a century, it could easily be 150 to one."

The United States and the European Union have different strategies for addressing this vital problem. Could they ever agree on only one strategy?

Here is a link to the HTML version of the pdf...

http://tinyurl.com/5nnns

Also, if you open Acrobar Reader, go to File> Open and paste the url into the "file name" field, you will get a working copy of the document.

GC

Anne, thanks so much for the posts. We sink money into al Hurra and Radio Sawa, two of the vainest attempts at hearts-and-mind winning ever ill-conceived, yet shut down and underfund existing, excellent programs and services. Somewhere, we seem to have lost track of the fact that the lingua franca is not the sole possession of the native speakers...

Aunt Deb :)

Agreed completely. There is so much for us to gain, so much we turn from, just now in our foreign relations.

August 28, 2004

Across Asia, Beijing's Star Is in Ascendance
By JANE PERLEZ

NEWMAN, Australia - Chris Dunbar watched as a front-end loader carved into a 60-foot wall of iron ore glinting in the red dirt of a vast open mine in the big sky country of northwestern Australia. 'This is as good as it gets,' said a satisfied Mr. Dunbar, 47, a manager with more than 20 years of experience.

He was boasting about the richness of the blue-black ore at the Mount Whaleback mine, but he might as well have been bragging about the boom that has propelled economies across the Asia-Pacific region. These days, Australian engineers - like executives, merchants and manufacturers elsewhere in the region - cannot seem to work fast enough to satisfy the hunger of their biggest new customer: China.

Not long ago Australia and China regarded each other with suspicion. But through newfound diplomatic finesse and the seemingly irresistible lure of its long economic expansion, Beijing has skillfully turned around relations with Australia, America's staunchest ally in the region.

The turnabout is just one sign of the broad new influence Beijing has accumulated across the Asian Pacific with American friends and foes alike. From the mines of Newman - an outpost of 3,000 in a corner of the outback - to theforests of Myanmar, the former Burma, China's rapid growth is sucking up resources and pulling the region's varied economies in its wake. The effect is unlike anything since the rise of Japanese economic power after World War II.

For now, China's presence mostly translates into money, and the doors it opens. But more and more, China is leveraging its economic clout to support its political preferences.

Beijing is pushing for regional political and economic groupings it can dominate, like a proposed East Asia Community that would cut out the United States and create a global bloc to rival the European Union. It is dispersing aid and, in ways not seen before, pressing countries to fall in line on its top foreign policy priority: its claim over Taiwan.

China's higher profile is all the more striking, analysts, executives and diplomats say, as Washington's preoccupation with Iraq and terrorism has left it seemingly disengaged from the region, which in turn has found the United States more off-putting and harder to penetrate after Sept. 11.

American military supremacy remains unquestioned, regional officials say. But the United States appears to be on the losing side of trade patterns. China is now South Korea's biggest trade partner, and two years ago Japan's imports from China surpassed those from the United States. Current trends show China is likely to top American trade with Southeast Asia in just a few years.

China's prime minister, Wen Jiabao, as much as threw down the gauntlet last year, saying he believed that China's trade with Southeast Asia would reach $100 billion by 2005, just shy of the $120 billion in trade the United States does with the region.

Mr. Wen's claim was no idle boast. Almost no country has escaped the pull of China's enormous craving for trade and, above all, energy and other natural resources to fuel its still galloping expansion and growing consumer demand. Though the Chinese government's growth target for 2004 is 7 percent, compared with 9.1 percent for 2003, few are worried about a slowdown soon.

Another indication of China's rapidly growing influence, Anne. A full version of the article, for anyone interested, is at http://www.theledger.com/apps/pbcs.dll/article?AID=/20040828/ZNYT03/408280416

In essence, China seems to be winning over much of Asia - and the US isn't.

"Beijing is pushing for regional political and economic groupings it can dominate, like a proposed East Asia Community that would cut out the United States and create a global bloc to rival the European Union. It is dispersing aid and, in ways not seen before, pressing countries to fall in line on its top foreign policy priority: its claim over Taiwan. . . American military supremacy remains unquestioned, regional officials say. But the United States appears to be on the losing side of trade patterns."

The NYT article goes on to say that China has beaten the US to winning over Myanmar, described as "strategically important".

And China isn't even a member of the G7.

Thanks IJ.