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The Visible Hand
Who adjusts?
Event
G20 finance ministers and central bankers met in Paris.
Impact
While the official G20 statement received the most attention, more interesting
were the contributions to the Financial Stability Review produced by the
French central bank.
These articles explored the issue of global imbalances and what needs to be
done.
Despite divergent views, the weight of the analyses points to China and other
surplus countries having to adjust their savings ratios. The necessary policy
changes to achieve this adjustment will be one of the key influences on global
markets over coming years.
Analysis
The Banque de France released its latest Financial Stability Review to
coincide with the G20 meeting in Paris. This Review was unusual because it
consisted of a series of articles written by central bankers around the world.
Global imbalances and financial instability were the themes explored by the
central bankers and the analyses shed some light onto the likely path of
adjustment.
Unsurprisingly there is a lot of finger pointing with most central bankers
accusing policymakers in other countries of implementing inappropriate
policies. So any adjustment has to be made elsewhere. Yet it is still possible
to detect the most likely pattern of adjustments.
Perhaps the strongest point of agreement is that it is savings rather than
investment that is the key issue. The article by the Reserve Bank of Australia
summed this up very neatly by showing how excess savings in both China
and the wider Asian region has ballooned over the past decade. Investment
has been strong in China, but not strong enough to offset surging savings. For
the rest of Asia, investment has not been as strong as it was before the crisis
of 1997/98. But that was probably unsustainable and savings are just too high
for this sustainable level of investment.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The Visible Hand
Who adjusts?
Event
G20 finance ministers and central bankers met in Paris.
Impact
While the official G20 statement received the most attention, more interesting
were the contributions to the Financial Stability Review produced by the
French central bank.
These articles explored the issue of global imbalances and what needs to be
done.
Despite divergent views, the weight of the analyses points to China and other
surplus countries having to adjust their savings ratios. The necessary policy
changes to achieve this adjustment will be one of the key influences on global
markets over coming years.
Analysis
The Banque de France released its latest Financial Stability Review to
coincide with the G20 meeting in Paris. This Review was unusual because it
consisted of a series of articles written by central bankers around the world.
Global imbalances and financial instability were the themes explored by the
central bankers and the analyses shed some light onto the likely path of
adjustment.
Unsurprisingly there is a lot of finger pointing with most central bankers
accusing policymakers in other countries of implementing inappropriate
policies. So any adjustment has to be made elsewhere. Yet it is still possible
to detect the most likely pattern of adjustments.
Perhaps the strongest point of agreement is that it is savings rather than
investment that is the key issue. The article by the Reserve Bank of Australia
summed this up very neatly by showing how excess savings in both China
and the wider Asian region has ballooned over the past decade. Investment
has been strong in China, but not strong enough to offset surging savings. For
the rest of Asia, investment has not been as strong as it was before the crisis
of 1997/98. But that was probably unsustainable and savings are just too high
for this sustainable level of investment.
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