Dominique Strauss-Kahn, the head of the International Monetary Fund, suggested Friday the organization might one day be called on to provide countries with a global reserve currency that would serve as an alternative to the U.S. dollar.

"That day has not yet come, but I think it is intellectually healthy to explore these kinds of ideas now," he said in a speech on the future mandate of the 186-nation Washington-based lending organization.

Strauss-Kahn said such an asset could be similar to but distinctly different from the IMF’s special drawing rights, or SDRs, the accounting unit that countries use to hold funds within the IMF. It is based on a basket of major currencies.

He said having other alternatives to the dollar "would limit the extent to which the international monetary system as a whole depends on the policies and conditions of a single, albeit dominant, country."

Source/Full Story:   ABC News

In surprise news which sent the pound sliding on Thursday, official figures showed that the Government borrowed £4.3 billion last month.

It was the first time since 1993 that the public finances had gone into the red in January – a month in which tax revenues usually push the Exchequer into the black.

Economists said that the scale of the shortfall in the budget could this year mount to above £180 billion – higher than even the Chancellor’s forecast of a record £178 billion.

Such a deficit would, at 12.8 per cent of British gross domestic product, be even greater than the deficit faced in Greece, which is facing a full-scale fiscal crisis and may need to be bailed out by fellow euro nations or the International Monetary Fund.

The public borrowing figures coincided with further bad news from the housing market, as the Council of Mortgage Lenders reported that mortgage lending dropped last month by 32 per cent, hitting the lowest monthly total in a decade.

The Bank of England also reported a decline in lending to businesses, indicating that the economic slowdown is far from over.

Source/Full Story: Telegraph

Aaron Regent, president of the Canadian gold giant, said that global output has been falling by roughly 1m ounces a year since the start of the decade. Total mine supply has dropped by 10pc as ore quality erodes, implying that the roaring bull market of the last eight years may have further to run.

“There is a strong case to be made that we are already at ‘peak gold’,” he told The Daily Telegraph at the RBC’s annual gold conference in London.

“Production peaked around 2000 and it has been in decline ever since, and we forecast that decline to continue. It is increasingly difficult to find ore,” he said.

Ore grades have fallen from around 12 grams per tonne in 1950 to nearer 3 grams in the US, Canada, and Australia. South Africa’s output has halved since peaking in 1970.

The supply crunch has helped push gold to an all-time high, reaching $1,118 an ounce at one stage yesterday. The key driver over recent days has been the move by India’s central bank to soak up half of the gold being sold by the International Monetary Fund. It is the latest sign that the rising powers of Asia and the commodity bloc are growing wary of Western paper money and debt.

Source/Full Story::  Telegraph

The wrenching financial crisis of the past two years will provide the catalyst for a profound change in the global economy – which, according to the man running the World Bank, will see China and India become established centres of power, the dollar eclipsed as the sole reserve currency, and Latin America, south-east Asia and Africa emerge as new sources of growth.

But as he surveys the wreckage caused by what the bank and its sister organisation, the International Monetary Fund, agree is the most severe crisis since the devastation caused by the second world war, Robert Zoellick is surprisingly upbeat about the future.

Asked by the Observer how he envisages the global economy in 20 years’ time, Zoellick says: “There will certainly be a larger role for the emerging powers, there will be multipolar sources of growth, there will be more south-south trade between developing countries.

“The crisis gives us the opportunity to hasten this process. If we are concerned about the past reliance for growth on the US consumer, we have to make sure consumers in developing countries have enough finance to buy.”

Zoellick says that, while this does not mean the end of the US as a big player on the world stage, it has brought the curtain down on the unipolar world that followed the collapse of communism 20 years ago.

Source/Full Story: The Observer
Technorati Tags: Robert Zoellick

U.S. Treasury Secretary Timothy Geithner on Tuesday called on the International Monetary Fund to provide rigorous surveillance to spot new investment bubbles and keep country foreign exchange policies in line with goals to rebalance the global economy.

In remarks prepared for delivery to the IMF and World Bank annual meetings here, Geithner said the IMF needed to help police economic and currency policies among the Group of 20 developed and emerging countries.

“The IMF will need to be a truth-teller,” Geithner said in the remarks, which were to be delivered by Treasury Acting Assistant Secretary Mark Sobel.

“For the IMF, this means that rigorous surveillance must help us shed light on trends that could lead to the next unsustainable boom,” Geithner said. “Under the new G20 framework for strong, sustainable and balanced growth, the IMF must provide forward-looking analysis of whether the world’s major countries are implementing economic policies, including exchange rate policies, which are collectively consistent with G20 objectives.”

Geithner said the global economy was stabilizing and showing initial signs of recovery but conditions remained fragile. He said the international community had recognized that “the world cannot return to a pattern of uneven growth, characterized by an excessive reliance on a single engine of consumption-led growth, while others relied heavily on external demand.”

“First and foremost, the responsibility for tackling these problems rests with sovereign governments, including my own,” he said.

Source/Full Story: ABC News
Technorati Tags: IMF

The crisis is redrawing the world map of economic power as the influence of US consumer spending declines and major emerging markets like China and India take the lead, finance chiefs said.

“One of the legacies of this crisis may be a recognition of changed economic power relations,” World Bank president Robert Zoellick said Friday in Istanbul ahead of annual meetings of the World Bank and the International Monetary Fund.

“Recent forecasts show that China and India are helping to pull the global economy out of recession…. A multipolar economy less reliant on the US consumer will be a more stable world economy,” he added.

Consumer spending accounts for around two-thirds of economic activity in the United States — by far the world’s biggest economy — and experts say lower spending could have radical effects on the US’s world standing.

The IMF on Thursday forecast emerging and developing economies would grow 5.1 percent in 2010 — in contrast with just 1.3 percent in advanced economies.

China’s economy was projected to grow by 9.0 percent next year and India’s by 6.4 percent — far ahead of 1.5 percent expansion in the US economy.

“The American engine is not as strong as it was before,” IMF managing director Dominique Strauss-Kahn said in a speech in which he called for emerging markets to be given more say in the IMF’s decisions.

“Emerging economies are becoming more and more the real partners,” he said.

Source/Full Story:  MSN
Technorati Tags: New World Order

The International Monetary Fund pitched its case Friday for becoming a global central bank, a function that would require a hefty capital injection but could help even out imbalanced and unsustainable growth patterns.

Dominique Strauss-Kahn, the IMF’s managing director, said the organization has been given a “new mandate” to serve as global lender of last resort and signaled that pledges of international cooperation made last month by global leaders in Pittsburgh could be amplified.

“I believe we can achieve even more,” he said at a speech in Istanbul, where the IMF is holding its annual meeting.

Source/Full Story:  WSJ.com
Technorati Tags: International Monetary Fund, Central Bank

Banks round the world have still to reveal about half of their likely losses resulting from the financial and economic crisis, the International Monetary Fund said on Wednesday, warning that there was still a “significant” risk of another downward lurch in the global recession.

The IMF described credit risks as remaining “elevated” even though financial conditions have improved significantly since spring.

It said these risks, alongside weakened banks, were likely to depress the availability of new credit and damp the global economic recovery unless significant additional capital was raised to improve the health and lending capability of banking systems.

In its twice-yearly Global Financial Stability Report, published on Wednesday in Istanbul, the IMF, estimated the ultimate losses in the financial system would total $3,400bn between 2007 and 2010, an improvement from the $4,000bn estimate it published in April.

Source/Full Story: FT.com
Technorati Tags: IMF, recession

The Federal Reserve System has disclosed to the Gold Anti-Trust Action Committee Inc. that it has gold swap arrangements with foreign banks that it does not want the public to know about.

The disclosure, GATA says, contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.

The Fed’s disclosure came this week in a letter to GATA’s Washington-area lawyer, William J. Olson of Vienna, Virginia (http://www.lawandfreedom.com/), denying GATA’s administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks. (See the International Monetary Fund’s treatise on gold swaps here: http://www.imf.org/external/bopage/pdf/99-10.pdf.)

The letter, dated September 17 and written by Federal Reserve Board member Kevin M. Warsh (see http://www.federalreserve.gov/aboutthefed/bios/board/warsh.htm), formerly a member of the President’s Working Group on Financial Markets, detailed the Fed’s position that the gold swap records sought by GATA are exempt from disclosure under the U.S. Freedom of Information Act.

Warsh wrote in part: “In connection with your appeal, I have confirmed that the information withheld under Exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you.”

When, in 2001, GATA discovered a reference to gold swaps in the minutes of the January 31-February 1, 1995, meeting of the Federal Reserve’s Federal Open Market Committee and pressed the Fed, through two U.S. senators, for an explanation, Fed Chairman Alan Greenspan denied that the Fed was involved in gold swaps in any way. Greenspan also produced a memorandum written by the Fed official who had been quoted about gold swaps in the FOMC minutes, FOMC General Counsel J. Virgil Mattingly, in which Mattingly denied making any such comments. (See http://www.gata.org/node/1181.)

The Fed’s September 17 letter to GATA confirming that the Fed has gold swap arrangements can be found here:

http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf

While the letter, GATA says, is far from the first official admission of central bank scheming to suppress the price of gold (for documentation of some of these admissions, see http://www.gata.org/node/6242 and http://www.gata.org/node/7096), it comes at a sensitive time in the currency and gold markets. The U.S. dollar is showing unprecedented weakness, the gold price is showing unprecedented strength, Western European central banks appear to be withdrawing from gold sales and leasing, and the International Monetary Fund is being pressed to take the lead in the gold price suppression scheme by selling gold from its own supposed reserves in the guise of providing financial support for poor nations.

GATA will seek to bring a lawsuit in federal court to appeal the Fed’s denial of our freedom-of-information request. While this will require many thousands of dollars, the Fed’s admission that it aims to conceal documentation of its gold swap arrangements establishes that such a lawsuit would have a distinct target and not be just a fishing expedition.

In pursuit of such a lawsuit and its general objective of liberating the precious metals markets and making them fair and transparent, GATA again asks for financial support from the public and from all gold and silver mining companies that are not at the mercy of market-manipulating governments and banks. GATA is recognized by the U.S. Internal Revenue Service as a non-profit educational and civil rights organization and contributions to it are federally tax-exempt in the United States. For information on donating to GATA, please visit here:

http://www.gata.org/node/16

People also can help GATA by bringing this information to the attention of financial news organizations and urging them to investigate the Fed’s involvement in gold swaps particularly and the gold (and silver) price suppression generally.

Source/Full Story: Yahoo! Finance

China unexpectedly increased pressure Sunday on the United States in a widening trade dispute, taking the first steps toward imposing tariffs on American exports of automotive products and chicken meat in retaliation for President Obama’s decision late Friday to levy tariffs on tires from China.

The Chinese government’s strong countermove followed a weekend of nationalistic vitriol against the United States on Chinese Web sites in response to the tire tariff. “The U.S. is shameless!” said one posting, while another called on the Chinese government to sell all of its huge holdings of Treasury bonds.

The impact of the dispute extends well beyond tires, chickens and cars. Both governments are facing domestic pressure to take a tougher stand against the other on economic issues. But the trade battle increases political tensions between the two nations even as they try to work together to revive the global economy and combat mutual security threats, like the nuclear ambitions of Iran and North Korea.

Mr. Obama’s decision to impose a tariff of up to 35 percent on Chinese tires is a signal that he plans to deliver on his promise to labor unions that he would more strictly enforce trade laws, especially against China, which has become the world’s factory while the United States has lost millions of manufacturing jobs. The trade deficit with China was a record $268 billion in 2008.

China had initially issued a fairly formulaic criticism of the tire dispute Saturday. But rising nationalism in China is making it harder for Chinese officials to gloss over American criticism.

“All kinds of policymaking, not just trade policy, is increasingly reactive to Internet opinion,” said Victor Shih, a Northwestern University specialist in economic policy formulation.

Eswar Prasad, a former China division chief at the International Monetary Fund, said that rising trade tensions between the United States and China could become hard to control. They could cloud the Group of 20 meeting of leaders of industrialized and fast-growing emerging nations in Pittsburgh on Sept. 24 and 25, and perhaps affect Mr. Obama’s visit to Beijing in November.

“This spat about tires and chickens could turn ugly very quickly,” Mr. Prasad said.

China exported $1.3 billion in tires to the United States in the first seven months of 2009, while the United States shipped about $800 million in automotive products and $376 million in chicken meat to China, according to data from Global Trade Information Services in Columbia, S.C.

Source/Full Story @: NYTimes.com

Britain had an 8 billion-pound ($13.2 billion) budget deficit in July, the largest for the month since records began in 1993, as the recession ravaged tax revenue and the cost of unemployment benefits surged.

The shortfall compared with a surplus of 5.2 billion pounds a year earlier, the Office for National Statistics said in London today. It came in a month when the Treasury usually gets a boost from quarterly tax payments. Britain last had a deficit in July in 1996.

The U.K. will have the biggest deficit in the Group of 20 next year, when Prime Minister Gordon Brown faces reelection, according to the International Monetary Fund. Brown is urging G- 20 leaders to keep up a coordinated fiscal stimulus until a world economic recovery is more certain. The Conservative opposition says spending cuts and possible tax increases are needed to curb debt.

“They’re completely disastrous numbers,” Paul Mortimer- Lee, an economist at BNP Paribas SA, said on Bloomberg Television in London. “With the economy in a parlous state, not much tax is being collected. The chancellor’s estimate for the deficit is going to be overshot by a considerable margin.”

The Treasury forecasts a deficit of 175 billion pounds in the fiscal year that began in April. In the first four months, the shortfall was 50 billion pounds, more than triple the level a year earlier.

Source/Full Story: Bloomberg.com

Confidence in the world economy dropped for the first time in four months in July as government stimulus efforts showed little sign of reducing unemployment, a Bloomberg survey of users on six continents showed.

The Bloomberg Professional Global Confidence Index declined to 39.13 in July from 43.57 in June. A reading below 50 means pessimists outnumber optimists. A measure of U.S. participants’ confidence in the world’s largest economy fell to 29.5 from 36.7, the survey showed.

The MSCI World Index is down close to 2 percent since the U.S. Labor Department on July 2 reported higher-than-expected job losses and an unemployment rate approaching 10 percent. Treasury Secretary Timothy Geithner said yesterday the world will probably suffer “more than the usual” setbacks in exiting the worst slowdown since the Great Depression.

“No one can wave a magic wand,” said David Semmens, an economist at Standard Chartered Bank in New York and a regular survey participant. “We aren’t pulling out of the recession in the same way as in past recessions. The economic outlook isn’t improving as strongly as people would have hoped.”

The survey of more than 2,700 Bloomberg users was conducted between July 6 and July 10. Since the previous survey, the International Monetary Fund and the World Bank lowered their forecasts for global growth this year, while leaders from advanced nations say the recovery is too fragile to consider reversing more than $2 trillion in stimulus efforts.

Source/Full Story: Bloomberg.com

The world’s most affluent nations will take decades to work off the biggest buildup in debt since World War II. The political costs may be permanent, laid bare at this week’s Group of Eight summit of leading industrial powers.

Bank bailouts and recession-fighting measures will explode the debt of the advanced economies to at least 114 percent of gross domestic product in 2014, more than triple the 35 percent of the main emerging economies including China, the International Monetary Fund forecasts.

The run-up in debt has hastened a power shift that is sapping the industrial world’s authority to impose its economic doctrine, currency arrangements or greenhouse-gas reduction strategies. Even some G-8 officials acknowledge that the group has lost its grip amid the global recession they spawned.

The eight-nation forum that starts tomorrow in L’Aquila, Italy is “a lot less relevant given its makeup and given developments in the world,” French Finance Minister Christine Lagarde said July 5. “Big players, like emerging economies, India, China or Mexico, are invited, but they’re given only a jump seat outside of the main summit.”

The industrial world is beset by the harshest economic conditions in a lifetime: a projected U.S. budget deficit of 13.6 percent of GDP in 2009, unmatched since World War II; an annualized 14.2 percent contraction in Japanese GDP in the first quarter, also the worst since the war; in the first three months of 2009, German exports had their steepest quarterly decline since 1970 when the data were first compiled.

Source/Full Story: Bloomberg.com

Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6 billion foreign-exchange reserves and hold fewer dollars.

“The major part of Indian reserves is in dollars — that is something that’s a problem for us,” Tendulkar, chairman of the Prime Minister’s Economic Advisory Council, said in an interview yesterday in Aix-en-Provence, France, where he was attending an economic conference.

Singh is preparing to join leaders from the Group of Eight industrialized nations — the U.S., Japan, Germany, Britain, France, Italy, Canada and Russia — at a summit in Italy next week which is due to tackle the global economy. China and Brazil will also send representative to the summit.

As the talks have neared, China and Russia have stepped up calls for a rethink of how global currency reserves are composed and managed, underlining a power shift to emerging markets from the developed nations that spawned the financial crisis.

“There should be a system to maintain the stability of the major reserve currencies,” Former Chinese Vice Premier Zeng Peiyan said in a speech in Beijing yesterday, highlighting China’s concerns about a global financial system dominated by the dollar.

Fiscal and current-account deficits must be supervised as “your currency is likely to become my problem,” said Zeng, who is now the head of a research center under the government’s top economic planning agency. The People’s Bank of China said June 26 that the International Monetary Fund should manage more of members’ reserves.

Source/Full Story: Bloomberg.com

The head of the IMF questioned on Monday any debate about when to roll back stimulus spending, saying the world economy had yet to weather the worst of a recession that claimed a record number of European jobs.

The 16-country euro zone lost a record 1.22 million jobs in the first quarter, official data showed. Employment during the first quarter fell 1.2 percent year-on-year, the deepest annual drop since measurements started in 1995.

Even if some form of economic recovery is not far off, analysts say unemployment will climb for many months to come.

Underlining the fragile state of the global economy, an influential economist said China would not see a rapid rebound and South Korea’s finance minister said its economy was still sliding, although the pace had slowed.

But in southern Italy, Group of Eight finance ministers meeting at the weekend described their economies in the most positive terms since the collapse of U.S. bank Lehman Brothers nine months ago heightened the world’s worst financial crisis since the Great Depression of the 1930s.

“Their (G8) stance is that we are beginning to see some green shoots but nevertheless we have to be cautious,” International Monetary Fund chief Dominique Strauss-Kahn said during a visit to Kazakhstan. “The large part of the worst is not yet behind us.”

Source/Full Story: Reuters