Archive for the ‘IMF’ Category


This article, published in France’s Le Monde, analyzes the use of the police’s investigations and information, by successive French Presidents….

De tout temps, la police a été l’instrument du pouvoir. Avant d’accéder à la présidence de la République, François MitterrandJacques Chirac et Nicolas Sarkozy sont tous passés par la Place Beauvau    
[Throughout history, the police has been the instrument of those in power. Before becoming president of the Republic, François Mitterrand, Jacques Chirac and Nicolas Sarkozy have all passed through Place Beauvau]

It’s in French, so use the Google translator tool to help you read it in the language of your choice.
Sexe, politique et police des mœurs – LeMonde.fr
Avertie en continu, la Préfecture de police de Paris centralise les informations sensibles.
Avertie en continu, la Préfecture de police de Paris centralise les informations sensibles.AFP/ERIC FEFERBERG
L’Elysée, bien plus que les médias, n’ignorait rien de la vie privée de Dominique Strauss-Kahn. Le pouvoir, alimenté par ses relais dans la police, sait tout des secrets les plus intimes des hommes politiques, jusqu’à user des informations graveleuses dont il dispose.
Ainsi, des proches de Nicolas Sarkozy avaient pris soin de laisser “fuiter” auprès du Monde, ces derniers mois, l’existence d’une note, rédigée peu avant la présidentielle de 2007, par un policier de la base. Quelques lignes signalant la présence de M. Strauss-Kahn, surpris en fâcheuse posture dans une voiture, à l’ouest de Paris, dans un haut lieu des rencontres tarifées, à l’occasion d’un banal contrôle.
Sollicités, ni la Préfecture de police de Paris ni le ministère de l’intérieur n’ont souhaité confirmer – ou démentir – l’existence de cette note. Trois sources différentes ont pourtant assuré au Monde que ce rapport avait existé, et qu’il avait été porté à la connaissance de l’entourage de M.Sarkozy.
Selon l’une de ces sources, l’original de cette note a été passé au broyeur. A l’époque des faits, il fut décidé, en haut lieu, de ne pas donner de suites à cette affaire sur le plan pénal – ou médiatique. Candidat malheureux à la primaire du PS fin 2006, DSK ne présentait pas alors le même enjeu pour le pouvoir. Et c’est en parfaite connaissance de cause que M. Sarkozy, une fois élu, le propulsa à la tête du Fonds monétaire international (FMI).
Mais ces derniers mois, au fur et à mesure de la progression de DSK dans les sondages, des hommes de confiance de M.Sarkozy se sont vantés devant des journalistes de “tenir” le patron du FMI, dont ils menaçaient de révéler les frasques. C’est ainsi que cette note a refait providentiellement surface. Au même moment, le chef de l’Etat se posait en “moine trappiste”, par opposition à la réputation de coureur de jupons de DSK.
ÉQUIPE LA MIEUX RENSEIGNÉE DE FRANCE
C’est un fait : M.Sarkozy, depuis 2002, connaît certains aspects de la vie privée des personnalités susceptibles de présenter un jour un danger électoral. A son arrivée au ministère de l’intérieur, il a constitué une équipe de fidèles qui lui doivent tout. De Bernard Squarcini, patron de la Direction centrale du renseignement intérieur (DCRI), à Claude Guéant, ministre de l’intérieur, en passant parAlain Gardère, directeur adjoint du cabinet de ce dernier, ou Michel Gaudin, préfet de police de Paris, cette équipe est la mieux renseignée de France.
Fin avril, DSK avait d’ailleurs identifié le danger, comme l’a rapporté Libération : son appétence pour les femmes, certes, mais surtout les méthodes supposées de M. Guéant, à l’origine selon lui de la propagation des rumeurs sur sa vie intime.
De tout temps, la police a été l’instrument du pouvoir. Avant d’accéder à la présidence de la République, François MitterrandJacques Chirac et Nicolas Sarkozy sont tous passés par la Place Beauvau. Lors de son retour à l’intérieur, en juin 2005, M.Sarkozy avait confié :“Je serai mieux protégé.”
De fait, il en profita pour retourner l’affaire Clearstream en sa faveur, et surtout placer ses hommes aux postes clés. L’une de ses premières mesures fut de renvoyer Gérard Dubois, un conseiller du préfet de police – chiraquien – Philippe Massoni, accusé de s’être répandu sur la liaison de son épouse de l’époque, Cécilia, avec Richard Attias.
Il est vrai que les policiers, qu’ils appartiennent aux renseignements généraux (RG, désormais fondus dans la DCRI), à la sécurité publique, voire à la brigade de répression du proxénétisme, reçoivent des renseignements ultrasensibles. Ainsi, les patrons de boîtes échangistes ont pour coutume de signaler à la police – avec qui ils soignent leurs relations – la présence de personnalités politiques dans leurs soirées.
Etablissement connu du centre de Paris où le libertinage se célèbre au quotidien, Les Chandelles ont ainsi inspiré plus d’un “blanc”(note sans en-tête ni signature) aux RG. Les services sont aussi capables d’aller creuser des détails incongrus : durant la campagne présidentielle de 2007, les RG planchèrent ainsi sur le coût de la garde-robe de Ségolène Royal
MÉCANIQUE EXTRÊMEMENT EFFICACE
Les renseignements les plus “utiles” remontent naturellement à l’Elysée. C’était déjà le cas sous d’autres présidences. Dans les années 1990, les RG enquêtèrent ainsi sur la vie privée deBertrand Delanoë ou de Jack Lang. Des notes blanches furent même établies. Rien n’était étayé, mais plus d’un journaliste fut bénéficiaire de drôles de “tuyaux”
Etiqueté chiraquien, Yves Bertrand, patron des RG de 1992 à 2004, joua un rôle central dans ce dispositif. Mis en cause pour s’être intéressé à la vie intime des politiques, il assume ses enquêtes très “privées”, se voyant même“réhabilité” par l’affaire DSK, qu’il qualifie de“victoire posthume” ! “Je ne sais rien de l’affaire du Sofitel, mais de manière générale, cela prouve qu’il est légitime de s’intéresser à la vie privée des hommes politiques. D’ailleurs, on me commandait parfois des enquêtes pour savoir si une personne pressentie au gouvernement avait des fragilités”, dit-il.
L’un de ses principaux interlocuteurs était Claude Guéant. “Lorsqu’il était directeur de la police (1994-1998) puis du cabinet du ministre(2002-2004), je lui rendais compte de tout. Il notait ce que je lui rapportais, y compris les éléments privés, dans des petits cahiers”, affirme-t-il.
M. Guéant avait pourtant assuré en 2008 à Mediapart : “Concernant des éléments de vie privée relatifs à des personnalités, il n’en a jamais été question dans nos discussions.”Arme de déstabilisation – ou de dissuasion – contre un adversaire menaçant, la “police des mœurs” sert, parfois, à défendre le président.
La DCRI a ainsi mobilisé ses forces en 2010 pour savoir d’où provenaient les ragots sur le couple présidentiel. Suspectée, Rachida Dati fut mise sous surveillance. Même les plus fidèles des sarkozystes ne sont pas à l’abri de cette mécanique extrêmement efficace.

Gérard Davet et Fabrice LhommeArticle paru dans l’édition du 25.05.11


THIS IS FURTHER GOOD NEWS FOR THE GOLD MARKET
China pushes for gold; India follows suit
Hot on China’s heels, India’s Central bank is mulling over a proposal to allow banks to trade in gold. If cleared, the move will only strengthen the validity of the bull case in gold.

Author: Shivom Seth
Posted:  Monday , 09 Aug 2010
MUMBAI  –  Mineweb

Hot on the heels of moves in China to expand the gold market in the country, several Indian bans have submitted a proposal to the Reserve Bank of India (RBI), India’s central bank, to permit them to trade in gold in the domestic market and also hedge their requirements.

These banks hope to take advantage of the current bout of bargain-hunting taking place in the country as investors take advantage of lower prices.

At present, banks are only allowed to buy gold. India’s central bank has permitted certain banks to import bullion on consignment basis for domestic jewellers and exporters but they do not stock gold. And, while a couple of the nominated banks authorised to import gold, sell gold coins at a premium of 10% to 15% over the market rate but, they are not permitted to buy back the gold they sell. Among their proposals, Indian banks have asked for permission to invest in gold exchange traded funds a move which is hoped will boost the trading of gold in demat and securitised forms.

Incidentally, banks and agencies such as the MMTC (Mines and Metals Trading Corporation) account for nearly 80% of the country’s gold imports.

Asian tiger

China’s central bank has said that it will allow its banks to import and export more gold as part of a programme to push forward the development of the country’s market in the precious metal. China is already one of the largest gold producers in the world and a leading consumer.
According to reports, China’s central bank is also ruminating over allowing second-tier institutions such as the Minsheng Banking Corp and China Merchants Bank to team up with four major state banks, including Bank of China, to hedge bullion positions in the overseas markets.
In a bid to increase the competitiveness of its domestic financial markets and broaden investment channels for ordinary customers, China’s central bank is also looking at allowing foreign suppliers to provide gold bullion directly to the Shanghai Gold Exchange.
Analysts have reportedly pointed out that China is keen that more of its banks trade with overseas counterparts, in a move that will reduce their reliance on the Shanghai Gold Exchange for hedging.
At the exchange, trading volumes have risen by more than half during the first six months of this year. HSBC and Standard Chartered are among five banks that are members of the Shanghai Gold Exchange.
For the full year 2009, India managed to import just over 35 tonnes, far below the 400 tonnes the country imported in 2008. China’s purchases in 2009, on the other hand, equalled 11% of global gold demand.
During the last quarter of 2009, however, demand for the precious metal increased 84% in India. The country already accounts for over 20% of the world’s gold demand.
Similarly, in the first quarter of 2010, India was termed the strongest performing market by the World Gold Council, as total consumer demand surged 698% to 193.5 tonnes. Indian jewellery demand rose 291% to 147.5 tonnes during the same period, the Council said.
World Gold Council’s investment managing director, Marcus Grubb, told reporters recently that the full-year gold demand in India was expected to be stronger than in 2009.

Reasons galore

Some bankers have noted that one of the major reasons why gold imports to India have been plunging in recent months is because Indian banks hold a lot of carry-over gold stocks. “Many consumers have stopped buying gold jewellery and are instead concentrating on imitation jewellery. Gold’s high price in the last four months is another factor that has kept some of them away, leading to a further slump in imports,” said an official with Mumbai-based Indian Bank, which is one of the 20 banks allowed to import gold. The bank’s proposal in 2008, to launch gold bullion trading, was stymied due to the disapproval of the Central bank.
A Bombay Bullion Association report noted that gold imports have fallen this year, from 34 tonnes in January to 13.8 tonnes in June, with the trend broken only in April, when the country imported 34.2 tonnes. The spurt in April was to meet additional demand during the Akshya Trithiya festival, considered an auspicious occasion to buy gold.
An executive of the Punjab & Sind Bank said:  “Gold is a popular investment vehicle in India, as well as being a traditional option for gifts. There is a lot of demand. In the present scenario, gold provides an excellent hedge against inflation, a source of liquidity and a form of savings as well,” the executive, who declined to be named, pointed out. The bank is also awaiting clearance from the RBI, and is eager to trade in gold.
It may be recalled that gold had stormed to record highs following news that India’s central bank had bought 200 tonnes of the metal from the IMF in October last. The Indian purchase had ensured that the RBI became the world’s 10th largest central-bank gold holder. It was the biggest single central-bank purchase in at least 30 years over such a short period, according to Timothy Green, author of The Ages of Gold.
“India did not buy that gold to sell it. It wanted to own it and keep it,” said the head of global markets at IndusInd Bank, another bank permitted by the Reserve Bank of India to import gold. “If banks are allowed to trade in gold, the move will only strengthen the validity of the bull case in gold,” the official added.
Citing the example of China, the official said, in its bid to overtake India as the world’s top consumer, Beijing has allowed more domestic banks to export and import bullion. China has reportedly increased its official gold holdings by more than 400 tonnes in the past few years to 1,054 tonnes.
“Beijing is keen to focus on bringing more gold into the country to satisfy domestic demand, but will not stir up global prices through official purchases,” the banker added. Other than banks, a few nominated government agencies and premier trading houses have also been allowed to import gold. With more banks in India now eager to step up to the plate, trading in the yellow metal could soon be a possibility.


Treasuries Lack Safety, Liquidity for China, Yu Says
Bloomberg
August 03, 2010, 4:08 AM EDT
By Bloomberg News
(Adds government researcher!s comment from 7th paragraph.)
Aug. 3 (Bloomberg) — U.S. Treasuries fail to provide safety or liquidity when it comes to managing China!s $2.45 trillion foreign-exchange reserves, said Yu Yongding, a former central bank adviser.
“I do not think U.S. Treasuries are safe in the medium-and long-run,” Yu, a member of the state-backed Chinese Academy of Social Sciences, wrote yesterday in an e-mailed response to questions. China is unable to sell the securities in a “big way” and a “scary trajectory” of budget deficits and a growing supply of U.S. dollars put their value at risk, he said.
The State Administration of Foreign Exchange, which manages the nation!s reserves, said last month that U.S. government debt has the benefits of “relatively good” safety, liquidity, low trading costs and market capacity. China!s holdings of Treasuries, the largest outside of the U.S., totaled $867.7 billion at the end of May, down from $900.2 billion in April and a record $939.9 billion in July 2009.
To help cool demand for the securities, China needs to curb the growth of its foreign reserves by intervening less in the currency market, Yu said. The People!s Bank of China said June 19 it would let the yuan float with reference to a basket of currencies, ending a two-year-old dollar peg.
The yuan has since appreciated 0.8 percent to 6.773 per dollar and analysts surveyed by Bloomberg predict the currency will end the year at 6.67, based on the median estimate. China limits appreciation by buying dollars, fueling its demand for Treasuries.
Less Intervention
“China has to depend more on demand and supply in the foreign exchange market for the determination of the yuan exchange rate,” Yu wrote. “Only God knows how much value that China has stored in the U.S. government securities will be left in the future when China needs to run down its reserves.”
The cost of pegging the Chinese currency to the dollar is “intolerably high” and threatens the welfare of Chinese people, Zhang Ming, deputy chief of the International Finance Research Office at the Chinese Academy of Social Sciences, wrote today on the website of China Finance 40 Forum.
“The U.S. government has strong incentives to reduce its real burden of debt through inflation and dollar devaluation,” he said. “Whichever way it is, the yuan-recorded market value of Treasuries will fall, causing huge capital losses to China!s central bank.”
Sliding Dollar
The dollar has weakened against all 16 major currencies monitored by Bloomberg in the past month, sliding 5.4 percent versus the euro and 4.7 percent against the pound. The Dollar Index, which the ICE futures exchange uses to track the greenback against the currencies of six major U.S. trading partners, is headed for its lowest close since April 15.
Premier Wen Jiabao in March urged the U.S. to take “concrete steps” to reassure investors about the safety of dollar assets after President Barack Obama stepped up spending to help end a recession. The White House predicts the U.S. budget deficit will hit a record $1.47 trillion this year, about 10 percent of gross domestic product.
An “appropriate” policy for China would be to allocate its reserves with reference to the weightings of Special Drawing Rights, a unit of account of the International Monetary Fund, Yu said in May. China bought a net 735.2 billion yen ($8.3 billion) of Japanese bonds in May, doubling purchases for this year.
–Editors: James Regan, Ven Ram
%CNY %USD
To contact the Bloomberg news staff on this story: Belinda Cao in Beijing at lcao4@bloomberg.net
To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.

Treasuries Lack Safety, Liquidity for China, Yu Says – BusinessWeek

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Tyler Durden

Subject: Hypo Fails, All Other German, Portuguese, French Banks Pass Test

And we uncover that the German Landesbanks (the equivalent of the bankrupt
Spanish cajas) did their own stress tests. Time for the PPT to step in with
this pretext and soak up all offers. Totally pathetic BS.
Update 1: Somehow Bank of Ireland “passes” the test but needs over €2
billion in extra equity… uhm… WTF??? This is the point where the
audience rushes the stage and burns the theater down.
Update 2: 5 Spanish cajas, 1 German and 1 Greek banks are eliminated on
their quest to marry the US taxpayer. 84 other banks will soon be the
recipients of far more US taxpayer generosity. And with that the season
finale of the farce comes to a close.
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View article…
Hypo Fails, All Other German, Portuguese, French Banks Pass Test | zero hedge


They Did Their Homework (800 Years of It)

THE advertisement warns of speculative financial bubbles. It mocks a group of gullible Frenchmen seduced into a silly, 18th-century investment scheme, noting that the modern shareholder, armed with superior information, can avoid the pitfalls of the past. “How different the position of the investor today!” the ad enthuses.
It ran in The Saturday Evening Post on Sept. 14, 1929. A month later, the stock market crashed.
“Everyone wants to think they’re smarter than the poor souls in developing countries, and smarter than their predecessors,” says Carmen M. Reinhart, an economist at the University of Maryland. “They’re wrong. And we can prove it.”
Like a pair of financial sleuths, Ms. Reinhart and her collaborator from HarvardKenneth S. Rogoff, have spent years investigating wreckage scattered across documents from nearly a millennium of economic crises and collapses. They have wandered the basements of rare-book libraries, riffled through monks’ yellowed journals and begged central banks worldwide for centuries-old debt records. And they have manually entered their findings, digit by digit, into one of the biggest spreadsheets you’ve ever seen.
Their handiwork is contained in their recent best seller, “This Time Is Different,” a quantitative reconstruction of hundreds of historical episodes in which perfectly smart people made perfectly disastrous decisions. It is a panoramic opus, both geographically and temporally, covering crises from 66 countries over the last 800 years.
The book, and Ms. Reinhart’s and Mr. Rogoff’s own professional journeys as economists, zero in on some of the broader shortcomings of their trade — thrown into harsh relief by economists’ widespread failure to anticipate or address the financial crisis that began in 2007.
“The mainstream of academic research in macroeconomics puts theoretical coherence and elegance first, and investigating the data second,” says Mr. Rogoff. For that reason, he says, much of the profession’s celebrated work “was not terribly useful in either predicting the financial crisis, or in assessing how it would it play out once it happened.”
“People almost pride themselves on not paying attention to current events,” he says.
In the past, other economists often took the same empirical approach as the Reinhart-Rogoff team. But this approach fell into disfavor over the last few decades as economists glorified financial papers that were theory-rich and data-poor.
Much of that theory-driven work, critics say, is built on the same disassembled and reassembled sets of data points — generally from just the last 25 years or so and from the same handful of rich countries — that quants have whisked into ever more dazzling and complicated mathematical formations.
But in the wake of the recent crisis, a few economists — like Professors Reinhart and Rogoff, and other like-minded colleagues like Barry Eichengreen and Alan Taylor — have been encouraging others in their field to look beyond hermetically sealed theoretical models and into the historical record.
“There is so much inbredness in this profession,” says Ms. Reinhart. “They all read the same sources. They all use the same data sets. They all talk to the same people. There is endless extrapolation on extrapolation on extrapolation, and for years that is what has been rewarded.”
ONE of Ken Rogoff’s favorite economics jokes — yes, there are economics jokes — is “the one about the lamppost”: A drunk on his way home from a bar one night realizes that he has dropped his keys. He gets down on his hands and knees and starts groping around beneath a lamppost. A policeman asks what he’s doing.
“I lost my keys in the park,” says the drunk.
“Then why are you looking for them under the lamppost?” asks the puzzled cop.
“Because,” says the drunk, “that’s where the light is.”
Mr. Rogoff, 57, has spent a lifetime exploring places and ideas off the beaten track. Tall, thin and bespectacled, he grew up in Rochester. There, he attended a “tough inner-city school,” where his “true liberal parents” — a radiologist and a librarian — sent him so he would be exposed to students from a variety of social and economic classes.
He received a chess set for his 13th birthday, and he quickly discovered that he was something of a prodigy, a fact he decided to hide so he wouldn’t get beaten up in the lunchroom.
“I think chess may be a relatively cool thing for kids to do now, on par with soccer or other sports,” he says. “It really wasn’t then.”
Soon, he began traveling alone to competitions around the United States, paying his way with his prize winnings. He earned the rank of American “master” by the age of 14, was a New York State Open champion and soon became a “senior master,” the highest national title.
When he was 16, he left home against his parents’ wishes to become a professional chess player in Europe. He enrolled fleetingly in high schools in London and Sarajevo, Yugoslavia, but rarely attended. “I wasn’t quite sure what I was supposed to be doing,” he recalls.
He spent the next 18 months or so wandering to competitions around Europe, supporting himself with winnings and by participating in exhibitions in which he played dozens of opponents simultaneously, sometimes while wearing a blindfold.
Occasionally, he slept in five-star hotels, but other nights, when his prize winnings thinned, he crashed in grimy train stations. He had few friends, and spent most of his time alone, studying chess and analyzing previous games. Clean-cut and favoring a coat and tie these days, he described himself as a ragged “hippie” during his time in Europe. He also found life in Eastern Europe friendly but strained, he says, throttled by black markets, scarcity and unmet government promises.
After much hand-wringing, he decided to return to the United States to attend Yale, which overlooked his threadbare high school transcript. He considered majoring in Russian until Jeremy Bulow, a classmate who is now an economics professor at Stanford, began evangelizing about economics.
Mr. Rogoff took an econometrics course, reveling in its precision and rigor, and went on to focus on comparative economic systems. He interrupted a brief stint in a graduate program in economics at the Massachusetts Institute of Technology to prepare for the world chess championships, which were held only every three years.
After becoming an “international grandmaster,” the highest title awarded in chess, when he was 25, he decided to quit chess entirely and to return to M.I.T. He did so because he had snared the grandmaster title and because he realized that he would probably never be ranked No. 1.
He says it took him a long time to get over the game, and the euphoric, almost omnipotent highs of his past victories.
“To this day I get letters, maybe every two years, from top players asking me: ‘How do I quit? I want to quit like you did, and I can’t figure out how to do it,’ ” he says. “I tell them that it’s hard to go from being at the top of a field, because you really feel that way when you’re playing chess and winning, to being at the bottom — and they need to prepare themselves for that.”
He returned to M.I.T., rushed through what he acknowledges was a mediocre doctoral dissertation, and then became a researcher at theFederal Reserve — where he said he had good role models who taught him how to be, at last, “professional” and “serious.”
Teaching stints followed, before the International Monetary Fund chose him as its chief economist in 2001. It was at the I.M.F. that he began collaborating with a relatively unfamiliar economist named Carmen Reinhart, whom he appointed as his deputy after admiring her work from afar.
MS. REINHART, 54, is hardly a household name. And, unlike Mr. Rogoff, she has never been hired by an Ivy League school. But measured by how often her work is cited by colleagues and others, this woman whom several colleagues describe as a “firecracker” is, by a long shot, the most influential female economist in the world.
Like Mr. Rogoff, she took a circuitous route to her present position.
Born in Havana as Carmen Castellanos, she is quick-witted and favors bright, boldly printed blouses and blazers. As a girl, she memorized the lore of pirates and their trade routes, which she says was her first exposure to the idea that economic fortunes — and state revenue in particular — “can suddenly disappear without warning.”
She also lived with more personal financial and social instability. After her family fled Havana for the United States with just three suitcases when she was 10, her father traded a comfortable living as an accountant for long, less lucrative hours as a carpenter. Her mother, who had never worked outside the home before, became a seamstress.
“Most kids don’t grow up with that kind of real economic shock,” she says. “But I learned the value of scarcity, and even the sort of tensions between East and West. And at a very early age that had an imprint on me.”
With a passion for art and literature — even today, her academic papers pun on the writings of Gabriel García Márquez — she enrolled in a two-year college in Miami, intending to study fashion merchandising. Then, on a whim, she took an economics course and got hooked.
When she went to Florida International University to study economics, she met Peter Montiel, an M.I.T. graduate who was teaching there. Recognizing her talent, he helped her apply to a top-tier graduate program in economics, at Columbia University.
At Columbia, she met her future husband, Vincent Reinhart, who is now an occasional co-author with her. They married while in graduate school, and she quit school before writing her dissertation to try to make some money on Wall Street.
“We were newlyweds, and neither of us had a penny to our name,” she says. She left school so that they “could have nice things and a house, the kind of things I imagined a family should have.”
She spent a few years at Bear Stearns, including one as chief economist, before deciding to finish her graduate work at Columbia and return to her true love: data mining. “I have a talent for rounding up data like cattle, all over the plain,” she says.
After earning her doctorate in 1988, Ms. Reinhart started work at the I.M.F.
“Carmen in many ways pioneered a bigger segment in economics, this push to look at history more,” says Mr. Rogoff, explaining why he chose her. “She was just so ahead of the curve.”
She honed her knack for economic archaeology at the I.M.F., spending several years performing “checkups” on member countries to make sure they were in good economic health.
While at the fund, she teamed up with Graciela Kaminsky, another member of that exceptionally rare species — the female economist — to write their seminal paper, “The Twin Crises.”
The article looked at the interaction between banking and currency crises, and why contemporary theory couldn’t explain why those ugly events usually happened together. The paper bore one of Ms. Reinhart’s hallmarks: a vast web of data, compiled from 20 countries over several decades.
In digging through old records and piecing together a vast puzzle of disconnected data points, her ultimate goal, in that paper and others, has always been “to see the forest,” she says, “and explain it.”
Ms. Reinhart has bounced back and forth across the Beltway: she left the I.M.F. in Washington and began teaching in 1996 at the University of Maryland, from which Mr. Rogoff recruited her when he needed a deputy at the I.M.F. in 2001. When she left that post, she returned to the university.
Despite the large following that her work has drawn, she says she feels that the heavyweights of her profession have looked down upon her research as useful but too simplistic.
“You know, everything is simple when it’s clearly explained,” she contends. “It’s like with Sherlock Holmes. He goes through this incredible deductive process from Point A to Point B, and by the time he explains everything, it makes so much sense that it sounds obvious and simple. It doesn’t sound clever anymore.”
But, she says, “economists love being clever.”
“THIS TIME IS DIFFERENT” was published last September, just as the nation was coming to grips with a financial crisis that had nearly spiraled out of control and a job market that lay in tatters. Despite bailout after bailout, stimulus after stimulus, economic armageddon still seemed nigh.
Given this backdrop, it’s perhaps not surprising that a book arguing that the crisis was a rerun, and not a wholly novel catastrophe, managed to become a best seller. So far, nearly 100,000 copies have been sold, according to its publisher, the Princeton University Press.
Still, its authors laugh when asked about the book’s opportune timing.
“We didn’t start the book thinking that, ‘Oh, in exactly seven years there will be a housing bust leading to a global financial crisis that will be the perfect environment in which to sell this giant book,’ ” says Mr. Rogoff. “But I suppose the way things work, we expected that whenever the book came out there would probably be some crisis or other to peg it to.”
They began the book around 2003, not long after Mr. Rogoff lured Ms. Reinhart back to the I.M.F. to serve as his deputy. The pair had already been collaborating fruitfully, finding that her dogged pursuit of data and his more theoretical public policy eye were well matched.
Although their book is studiously nonideological, and is more focused on patterns than on policy recommendations, it has become fodder for the highly charged debate over the recent growth in government debt.
To bolster their calls for tightened government spending, budget hawks have cited the book’s warnings about the perils of escalating public and private debt. Left-leaning analysts have been quick to take issue with that argument, saying that fiscal austerity perpetuates joblessness, and have been attacking economists associated with it.
Mr. Rogoff, because of his time at the I.M.F., has also come under fire.
In the years before and during Mr. Rogoff’s tenure, critics including the prominent economist Joseph Stiglitz accused the I.M.F. of having a cold-hearted, doctrinaire approach to its work in poorer countries. Some of that criticism still clings to Mr. Rogoff. For his part, he contends that the I.M.F. did what it could for countries with intractable problems, and that the critics’ approaches would have made troubled economies even weaker.
Perhaps because “This Time Is Different” is empirical rather than proscriptive, it has defied categorization.
The New York Times Op-Ed columnist David Brooks, for example, praised the book as “the best explanation of the crisis” but referred to it as a history book, rather than a work of economic analysis, since it is “almost entirely devoid of theory.” (The implication being, of course, that genuine “economic analysis” must be hypertheoretical.)
Of course, it’s not as if history is an entirely new ingredient in economic study. There have been other vibrant historical recountings of financial crises, including “Manias, Panics and Crashes,” the 1978 book by Charles Kindleberger. Such books have typically been narrative, though, unlike the data-intensive “This Time Is Different.”
But even in its quantitative perspective and breadth, the book still stands on the shoulders of an economic classic, “A Monetary History of the United States: 1867-1960,” written by another great male-and-female pair of economists, Milton Friedman and Anna Jacobson Schwartz.
“What Friedman and Schwartz did for the U.S. was heroic,” says Ms. Reinhart. “Ken and I have benefited from the use of the Internet to track down books, sources and experts to help us with our work. Friedman and Schwartz did not.”
While Professors Reinhart and Rogoff may have had technological advantages in their research, they weren’t able to outsource much of the number-crunching to graduate students — in part because they wanted to be able to stay close to the data themselves, but also because few students are interested in or trained for that kind of work.
The economics profession generally began turning away from empirical work in the early 1970s. Around that time, economists fell in love with theoretical constructs, a shift that has no single explanation. Some analysts say it may reflect economists’ desire to be seen as scientists who describe and discover universal laws of nature.
“Economists have physics envy,” says Richard Sylla, a financial historian at the Stern School of Business at New York University. He argues that Paul Samuelson, the Nobel laureate whom many credit with endowing economists with a mathematical tool kit, “showed that a lot of physical theories and concepts had economic analogs.”
Since that time, he says, “economists like to think that there is some physical, stable state of the world if they get the model right.” But, he adds, “there is really no such thing as a stable state for the economy.”
Others suggest that incentives for young economists to publish in journals and gain tenure predispose them to pursue technical wizardry over deep empirical research and to choose narrow slices of topics. Historians, on the other hand, are more likely to focus on more comprehensive subjects — that is, the material for books — that reflect a deeply experienced, broadly informed sense of judgment.
“They say historians peak in their 50s, once they’ve accumulated enough knowledge and wisdom to know what to look for,” says Mr. Rogoff. “By contrast, economists seem to peak much earlier. It’s hard to find an important paper written by an economist after 40.”
MICROECONOMICS — the field that focuses on smaller units like households and workers, as opposed to big-picture questions about how national economies function — has embraced real-world data-mining. (Think “Freakonomics.”)
Macroeconomics has been slower to change, but the popular success of “This Time Is Different” and related work seems to be changing how macro practitioners approach their craft.
It has also changed how policy makers think about their own mission.
Mr. Rogoff says a senior official in the Japanese finance ministry was offended at the suggestion in “This Time Is Different” that Japan had once defaulted on its debt and sent him an angry letter demanding a retraction.
Mr. Rogoff sent him a 1942 front-page article in The Times documenting the forgotten default. “Thank you,” the official wrote in apology, “for teaching the Japanese something about our own country.”

Economists Who Did Their Homework (800 Years of It) – NYTimes.com

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The MasterBlog



WB: GDP decline is partly due to crumbling private activity in Venezuela

ECONOMY
Venezuela’s GDP fall in 2009 and the negative projections for 2010 are due to a collapse of private activity in the country, said on Wednesday Augusto de la Torre, the World Bank chief economist for Latin America and the Caribbean.

Venezuela’s Gross Domestic Product (GDP) will fall more than 2 percent in 2010, according to the World Bank in a research paper on the region, AFP reported.

“We are witnessing in Venezuela a phenomenon in which private activity, productivity, businesses, private production are falling,” De la Torre told a group of journalists.

In its Country and Regional Perspective report published on Wednesday, the International Monetary Fund (IMF) estimated that Venezuela’s GDP would fall 2.6 percent this year.

Venezuela and two Caribbean countries, Antigua and Barbuda and the Bahamas, are the only countries in the region included in the list of countries with negative growth in the hemisphere, according to the analysis made by the World Bank.



Confidence in Greek Debt Sinks Again

April 26, 2010

BERLIN — Chancellor Angela Merkel kept up the pressure on Greece on Monday, demanding deeper cuts over three years in exchange for approval of an international bailout. At the same time, her finance minister, Wolfgang Schäuble, was preparing the ground for quick passage in the German Parliament, saying the stability of the euro was at stake.
Amid the uncertainty, investor confidence in Greek assets sank to a new low, and the euro fell as well.
On top of questions about when the aid package of up to €45 billion, or $60 billion, might be delivered, fears are increasing that even with funds in place, Greece will have to restructure its debts, with investors liable to book losses and see the duration of the assets they hold extended.
“Germany wants to help,” Mrs. Merkel said in Berlin. But she insisted that any agreement by Germany to lend its share of the package — €8.3 billion — depended on Greece’s meeting new conditions set out by the International Monetary Fund and the European Union.
Greece has to accept “hard measures,” and that does not mean adopting a program for only a year, Mrs. Merkel said. “The International Monetary Fund’s program is for three years. I think that is right and important.”
“When Greece accepts these tough measures not for one year but several, then we have a chance for a stable euro,” she added.
When the idea of a Greek bailout was first floated this year, the assumption had been that an international aid package would buy Greece the time to pay down its debt — estimated by the European Union at 115 percent of national output.
That confidence has now slipped as investors focus on the long-term debt pile, which continues to grow as the cost of refinancing mounts. Investors appear unwilling to wait the months that it would require to see an improvement in Greek budget deficit from the austerity measures being implemented.
Despite Athens’s official request for an aid package from its euro-zone partners and the International Monetary Fund on Friday, the yield on 10-year Greek bonds rose again Monday — to 9.4 percent. That is yet another record since Greece joined the euro.
“There’s an assumption that €45 billion will be inadequate,” said Robin Marshall, director of investment management at Smith & Williamson in London.
He estimates that Greece will need to refinance up to €60 billion in bonds that are maturing during the next three years in addition to meeting interest repayments.
Also, the lack of a plan for Greece to either leave the euro area, which might help the situation by allowing it to devalue its currency, and the absence of a formal mechanism for the transfer of funds inside the Union has laid open the structural weakness of the euro area.
On top of that, domestic political wrangling in Germany ahead of an important regional election next month has led to doubts about how swiftly the aid will be transferred.
“The negotiations are still going on,” Mrs. Merkel said. They might be wrapped up by early May, she added.
Mr. Schäuble said Monday that it might be possible to complete legislation granting Greece financial aid on May 7, in time to enable Athens to refinance €8.5 billion in bonds that mature May 19.
There is added danger for Germany and France in delaying financing: Banks in those two countries retain significant holdings of Greek debt so any default by Greece could have broader implications.
Politicians from across the spectrum in Germany have demanded that private lenders participate in the financial assistance package for Greece.
Mrs. Merkel had wanted to postpone any decision about the financial aid package to Greece until after the elections in North Rhine-Westphalia on May 9.
There, as at the federal level, the conservatives are in coalition with the Free Democrats. But opinion polls show that the coalition will not win enough votes to form the next government, meaning it may need the support of a third party if it wants to remain in power.
The German public has opposed any major bailout of Greece, something which Mrs. Merkel has had to accept. Still, after adopting a hard line toward Greece, the German government seems reconciled to the idea of lending Greece around €8 billion. That would make it the biggest contributor of the total loan package.
At the federal level, Mrs. Merkel’s coalition has a comfortable parliamentary majority, so it is highly likely that she will be able to push the measures through. Still, her coalition partners, the pro-business Free Democrats, said over the weekend that they would not support any “blank check” for Greece.
Mr. Schäuble spent Monday morning explaining to finance experts from all the political parties the details of the financial aid package and what legislation would be needed. Later at a news conference, he referred repeatedly to the stability of the euro.”
“Our national responsibility is connected to Europe and will be guaranteed,” said Mr. Schäuble. He even asked Germans to be “more friendly” to their European partners. “It is not about judging the individual behavior of people in individual countries. It is about the question of one currency. This common European currency must remain stable.”
On Sunday, in an interview with the German newspaper Bild am Sonntag, Mr. Schäuble had warned that Greece could lose financial aid any time it failed to meet E.U. demands on fiscal discipline.
Away from Berlin there were more conciliatory comments toward Greece on Monday.
President Nicolas Sarkozy of France released a statement after a bilateral meeting in Paris with the president of the European Commission, José Manuel Barroso, highlighting the need for “rapid and resolute action against the speculation that is targeting Greece, in order to ensure the stability of the euro zone.”
Speaking Monday in New York, the French economy minister, Christine Lagarde, said the possibility of restructuring Greek debt was “off the table,” according to Reuters.
While most European stock markets were higher in afternoon trading — the CAC 40 indicator was up 1 percent in late trading in Paris — the main benchmark index in Athens was down 2.9 percent.
The yield on Irish and Portuguese debt also climbed amid concerns that those countries would also struggle to pay down their mounting debts.

Matthew Saltmarsh reported from Paris.





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