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Wednesday, June 10, 2009

More "Green Shoots" - Latvian Exports, German and Japanese Capital Goods Output

Well yesterday there was plenty of fresh news for collectors of "green shoot" negatives. Starting in Latvia, where the Statistics Office announced that exports were down by 30.9% year on year in April (the fastest rate of decline to date), while imports dropped a massive 45.6%. It looks like the Latvian Parliament is set to pass another round of budget cuts today, in the hope that these will bring back growth (how is not clear). All I can say is "these poor people", I do wish those who were advising them had a better idea what they were doing.

In Luxembourg today, Latvian Finance Minister Einars Repse told reports: "We will be cutting no less than 10 percent of our GDP over three years but this will bring our imbalances down and pave a very solid basis for recovery,". He means, of course, expenditure equivalent to 10% of GDP - which means 3.3 percent a year. The mystery is, how such cuts will help restore growth. All West European economies are increasing spending, following the normal intuition of supporting an economy in time of weakness. And remember, Latvia has not gotten into this mess by excessive government spending. Back in 2007, before all this started, debt to GDP was around 10%. It's the money lost by the banking sector (with Parex in the forefront) which is causing all this. Oh, I know, I know, they are following the new orthodoxy:

In emerging market countries with debt overhangs, the “Keynesian” effect of fiscal adjustment is likely to be outweighed by “non-Keynesian” effects related to expectations and credibility. Non- Keynesian effects have to do with the offsetting response of private saving to policy-related changes in public saving. In particular, if fiscal adjustment credibly signals improved public sector solvency, a fiscal contraction could turn out to be expansionary, as private consumption rises based on the view that future tax hikes will be smaller than previously envisaged.
IMF - Hungary, Request for Stand-By Arrangement, November 4, 2008

But I still have no idea of the exact mechanics of quite how people imagine all this can work in the current environment, when the private sector is also totally loaded up with debt. Meanwhile exports go down and down, falling from 288 million Lats in March, to 274.2 million in April.

The only saving grace here was that the goods trade deficit was also down, and fell from 124.6 million Lat in March to 96.9 million Lat in April.

Basically I agree with the following from Morgan Stanley's Oliver Weeks:

We continue to think that devaluation in Latvia is eventually almost inevitable. The timing seems largely to depend now on the EU, but may not be quite as imminent as the market seems now to expect. We believe the IMF is likely to be reluctant to keep funding the peg, but the EU is paying for most of the support programme, and may choose to accelerate disbursement to delay this another few months while Estonia shores itself up, and perhaps agrees on a loan as protection.....

The government and central bank do not appear quite ready to capitulate yet, and technically fx policy is a decision for the central bank alone. We agree with the views of the advisor that helped to trigger the latest panic but would not make too much of his interview since such views are not uncommon and the government has many advisors.....

We think the government will eventually accept the EU s position has not been to Latvia s benefit, encouraging maintaining the peg but also not allowing EUR entry, hence effectively prolonging the pain. There are also signs that politicians are positioning themselves not to be too damaged by devaluation. Note Scandinavian banks are already positioned short local currencies they will be affected by the wave of defaults to follow but these were eventually likely anyway. We think devaluation is inevitable and obviously getting closer, but this is still not an open market where foreign consensus on devaluation is immediately irresistible.

Which is effectively to say that a move which now has many advantages for Latvia, and few evident disadvantages, is being postponed due to fear of the impact on other countries (and not just Estonia and Lithuania). Latvia is being sacrificed at this point to the "greater good", but the support she is receiving is in the form of loans (to be repaid), not gifts.

First Mover Advantage?

One additional and highly relevant argument to consider is raised by Variant Perception's Jonathan Tepper:

One final point worth making is that defaulting - for a country on the verge of it - is often, paradoxically, not always a bad idea. If you have two countries, both of whose finances are in a fractious state, and one decides to renege on its debt while the other struggles on and tries to meet its commitments, then the former country is generally able to return to financial health more quickly. They can start again and are able to get their economy back to a situation that nurtures growth, while the non-defaulting country struggles on with the damaging spending cuts and tax rises necessary to pay back their creditors. Markets have short memories, and often misprice the risk of the defaulting country once it starts to borrow again. Argentina, for one example, after its default in 2001/02, had to wait only 3 years for its cost of borrowing to return to a level commensurate with a typical emerging market economy (see chart below - click on image for better viewing).

German Capital Goods Output Falls

Let's start with the story so far. According to GDP data for the first three months of this year, German companies invested 16.2% less in machinery, equipment and vehicles in Q1 than they did in the last quarter of 2008.

But perhaps this fall in investment bottomed out after the first quarter? Well, apparently not, since according to the Economy Ministry in Berlin today, German industrial output declined again in April (over March) with the lead role being taken in the fall by investment goods. Manufacturing output was down 2.9 percent from March (when it rose 0.6 percent), and from a year earlier by 24.2 percent (when adjusted for working day changes).

Output of investment goods such as machines slumped 6.4 percent in April from the previous month, and by 29.6 percent year on year (following a 23.9 percent drop in March). Production of intermediate goods fell 1 percent and manufacturing output slipped 2.9 percent from March. Output of consumer goods rose 0.5 percent in April from the previous month. Energy production was up 5.8 percent and construction output rose 0.5 percent.

And despite the fact that many were putting a brave face on yesterday's April industrial orders data, orders for investment good were down month on month by 4.4 percent in April (following a 5.6 percent rise in March over February.

German industrial orders, a key indicator in Europe's biggest economy, were stable in April compared with the previous month, the economy ministry said on Monday. Orders had risen strongly in March, their first rise in six months, and the ministry said the latest reading, a change of exactly zero percent, showed a "noticeable improvement in the medium-term perspective" for German industries. The March figure was revised slightly higher moreover to a gain of 3.7 percent from a previous estimate of 3.3 percent. Analysts were divided on what the steady result meant, but most saw the glass as half-full as Germany struggles to pull out of its worst post-war slump.

Export orders for investment goods were down 5.1 percent following a 9.1 percent increase in March. Year on year, export orders for investment goods were down no less than 46 percent (down from only a 34.9 percent annual drop in March). Anyone who can see signs of a developing recovery here - the German Technology Ministry said they saw signs of a "noticeable improvement in the medium-term perspective" (see citation above) - might like to explain to me how, since I certainly can't see it.

Similar results were found in a survey by Frankfurt-based trade association VDMA. German plant and machinery orders dropped an annual 58 percent, the most since data collection started in 1950, after falling an annual 35 percent in March, according to the association. Export orders were down 60 percent while domestic demand dropped 52 percent. The VDMA is forecasting a decline in orders of between 10 percent and 20 percent for the year as a whole.

“Signs of a trough aren’t recognizable yet,” according to VDMA Chief Economist Ralph Wiechers.

Japan A Similar Picture

Japan’s economy - just to remind ourselves - shrank at a record rate in the first quarter as exports collapsed and businesses drastically cut back on investment spending (an almost identical picture to the German one). Gross domestic product fell by an annualized 15.2 percent in the three months ended March 31, following a revised fourth- quarter drop of 14.4 percent. The economy contracted 3.5 percent in the year ended March 31, the most since records began in 1955.

As in Germany, employment and consumer spending held up reasonably well - only dropped by 1.1 percent year on year. But business investment was down a record annual 10.4 percent, and a massive 35.5% over the last quarter. And companies are likely to keep cutting spending because the decline in external demand has left factories operating well below capacity level, and semi idle workforces can only be retained for so long.

While industrial output bounced back a bit in April, general machinery products continued to fall, and were down 14.5 percent month on month, a sign that managers remain wary of upgrading factories and equipment before they are convinced an economic recovery has taken hold. If you look at the chart below (click on image for better viewing) you will see that the year on year drops (indicated by black triangle) in machine output continued to be massive in April, with production of general machinery down almost 50 percent on the year.

And the future continues to look very bleak. Japanese companies plan to slash capital-investment spending by 16% in 2009 according to the business daily Nikkei, the steepest drop in the history of their survey. Companies suggested they expect to spend 22.7 trillion yen ($230 billion) on capital investments in fiscal year 2009, a 4.28 trillion yen decrease from a year ago, according to the survey which covered 1,475 firms.

Previously the steepest cut in spending was a 12% decline in 1993. This year's decline marks the second year in a row that capital-investment spending dropped.The Nikkei reported that with 15 of 17 manufacturing sectors planning capital-investment cuts, spending by manufacturers overall is expected to drop a record 24% to a total of 11.7 trillion yen.

According to the survey, electronics firms will spend 3 trillion yen, a 29% drop from a year ago, and automakers said they'd spend 2.3 trillion yen, a 33% decrease. Among manufacturers, only the food and pharmaceutical industries intend to increase spending.

And the conclusion of all this? Well it is clear that there will be no recovery lead by export dependent economies like Japan and Germany. But this is not the big problem. The big problem is who is actually going to lead the world forward with a new round of import growth? At the present time this is a question without an answer.

And talking of which, I can only agree with this sentiment from Brad Setser:

"Like everyone else, I am curious to see what China’s May trade data tells us. If China truly is going to lead the global recovery, China needs to import more – and not just import more commodities for its (growing) strategic stockpiles."

Brad, you will find if you follow the link over, has been busy digging for green shoots over in the Korean trade data, but he had a hard time finding them.


Hynek Filip said...

"Latvia is being sacrificed at this point to the "greater good", but the support she is receiving is in the form of loans (to be repaid), not gifts."

Edward, as I argued before, there is little hope that Latvia will ever be able to repay the EUR 7.5bn, let alone any further assistance it may receive. Latvia MAY roll it over for some time, but I really can not see a way how Latvia could raise EUR 7.5 billion extra cash for debt repayment in any foreseeable future.

So these loans are non-performing from day one, and therefore must be classified as "gifts" or "subsidies" or "donations".

If you then start looking at the problem from a slightly different perspective, maybe some ingenious solutions can be found.

Ivo Cerckel said...

Basically you agree with Morgan Stanley's Oliver Weeks which continue to think that devaluation in Latvia is eventually almost inevitable.

Sorry, Latvia issued a currency, the lat.

I thought the issuer of a currency needs reserves in order to determine the value of that currency.

Without reserves to that effect, the currency administered by the issuer has no value whatsoever.

Does Latvia have such reserves?

No apparently. Latvia has no gold reserves.

The issuer of the lat has only foreign exchange, forex, reserves.

Forex reserves consisting of worthless paper money can only possibly be used for intervention on forex markets.

Such reserves are worthless, no, useless, to determine the value of the lat.

Only gold reserves can determine the value of a currency.

Latvia has no gold reserves.

The (intrinsic) value of the lat is ZERO.

You want to devaluate from zero?

Ivo Cerckel said...

Sever the link between lat and euro?

The contraction of Latvia's economy led to speculation that it would be forced to SEVER THE LINK between the lat and the euro. (1)

The euro is the first currency that has not only SEVERED ITS LINK TO GOLD, but also its link to the nation-state, said the late ECB-president Wim Duisenberg on 9 May 2002. (2)

Latvia must sever the link to the euro which has severed the link to gold.

Latvia must re-link to gold?

(For the ECB, its gold reserves are freely floating
and marked to market (-price),
not marked to (the) model of 40-something dollar like in the US of A,
on a regular basis.)


From The Times
June 9, 2009
Latvia budget cuts ease fears of Sweden's nervous banks
Carl Mortished

International Charlemagne Prize of Aachen for 2002
Acceptance speech by Dr. Willem F. Duisenberg, President of the European Central Bank, Aachen, 9 May 2002

Edward Hugh said...

Hi Hynek,

"So these loans are non-performing from day one, and therefore must be classified as "gifts" or "subsidies" or "donations"."

I wish I could believe this Hynek toatl loans amount to over 30% of GDP. I mean, it is one thing to say that they will eventually need to be treated as NPLs. That is what I mean by "restructuring". This will obviously have to happen with Hungary too. This is what the debate with the debta agency people that you commented on on HEW blog was all about.

Due to the demographic issue, these countries are long run insolvent without some injection or other.

And I of course agree with you about having more ingenious solutions available if you could treat this money as non-returnable from day one. Among other issues I would be using part of it to enable those women who want to have children to take time out and have them. Oh, there are all sorts of things you could do.

But I don't think this is realistic. These loans will become NPLs when they have been wasted defending a stupid peg which can't be defended in the long run.

And in the meantime the Latvian in the street sees virtually none of it, and only gets unemployment, higher taxes and reduced government services for their pains.

Hynek Filip said...

I would suggest that the "ingenious solution" has already been forced upon the Riksbank. Write most of the Latvian debts off and start again.

It now appears that handing out hard cash in Latvia for many a long year was a very bad credit decision and that the resulting receivable is a total loss.

Bad credit decisions happen. Nobody wants to make them, but they are being made on a daily basis anyway.

So I would suggest to deal with the Latvian disaster in the same way as with any other very bad credit decision. Write the bad debt off, fire the credit officer, put the debtor on a blacklist for at least five years, then maybe start dealing with him again. Latvia would have to keep both the budget and the CA balanced, but it will achieve that quite soon.

Just one more remark of a former banker: credit decisions are very often influenced by prejudice. For example, many credit officers tend to prefer corporations (perceived as huge, solvent entities) to individuals (common men with everyday financial worries). No matter how often this particular prejudice leads to wrong decisions, it will never be eliminated.

I would suggest that very much the same applies to the Latvian story. Latvian economy is almost exactly as small as the economy of Greater Prague.

However, nobody on Earth would ever dream of "lending" EUR 7.5bn to Prague, because Prague would never be able to repay the loan.

Yet some people seem to think that a State must always be more solvent than a mere City.

Kenneth said...

The following is a press release from Moody's Investors Service:

Implications of a devaluation for the sovereign rating London

Speculation has grown over the past few weeks about a possible devaluation of the Latvian currency. In a new SpecialComment entitled, "Living on the edge: Latvian devaluation speculation and implications for the sovereign rating", Moody's Investors Service outlines its expectation that a devaluation is likely to be avoided in the near term, and the possible impact on the sovereign rating if a devaluation becomes more likely. "Moody's believes that the net benefits of a devaluation are highly questionable; hence, the determined bid of local authorities to maintain the currency peg in spite of the painful adjustment required to do so," says Kenneth Orchard, a Vice President-Senior Analyst in Moody's Sovereign Risk Group.

"Furthermore, there is also a financial and political commitment from the international community to support the peg through the turbulence." Indeed, Moody's notes that it would be much easier and cheaper for the EU to shore up Latvia than to try and contain a regional financial crisis, especially considering that the amount of funds needed by Latvia are relatively small.

However, Moody's also stresses that the possibility of a devaluation cannot be ignored, as the economic and social pressure in Latvia will continue to be elevated for some time. Moreover, expectations of a currency devaluation can sometimes become self-fulfilling. Moody's has downgraded Latvia's rating by five notches over the past eight months; Latvia is currently rated Baa3 with a negative outlook. "Moody's Baa3 rating on the Latvian Government balances two bifurcated potential outcomes: a devaluation and no devaluation scenario," says Orchard.

"Therefore our rating already incorporates a moderate risk of a devaluation, but it would likely be lowered further if the risk of a devaluation increases further."

In the Special Comment, Moody's indicates that a devaluation, if it occurred, would be consistent with a non-investment grade rating (i.e. below the current level). Although the government's liquidity would probably be supported by the international community -- so the ability to service debt is not in serious doubt -- the shock to confidence, the government budget and private sector balance sheets would be severe, and would take several years to recover from. Alternatively, if the Latvian authorities are able to avoid devaluation, stabilise the economy and adopt in the euro in several years time, the rating could eventually rise to the 'A' category.

Moody's highlights four factors that it is monitoring to determine if another downgrade is warranted: (1) Latvia's fiscal consolidation programme; (2) interbank interest rates; (3) official foreign exchange reserves; and (4) leadership at the central bank and government. Of these, Moody's believes that factor (1) is the most important, as the other factors will likely be influenced by the progress on fiscal consolidation.

Ivo Cerckel said...

Moody's highlights four factors that it is monitoring to determine if another downgrade is warranted: (1) Latvia's fiscal consolidation programme; (2) interbank interest rates; (3) official foreign exchange reserves; and (4) leadership at the central bank and government. Of these, Moody's believes that factor (1) is the most important, as the other factors will likely be influenced by the progress on fiscal consolidation.

No gold reserves.
The lat is a worthless piece of paper.
The only function of its (forex) reserves is to cheat with its exchange rate.

The ECB confirms: only forex reserves, no gold reserves

ECB lends €3bn to Swedish bank
By Ralph Atkins in Frankfurt, Joshua Chaffin in Brussels and Robert Anderson in Stockholm
Published: June 10 2009 11:55 | Last updated: June 10 2009 23:59
The €3bn ($4.2bn. £2.6bn) the ECB is supplying to the Riksbank will be used to boost the Swedish central bank’s FOREIGN RESERVES – increasing its firepower to help Swedish private sector banks if necessary.


Ivo Cerckel said...

modern monetary systems are based on fiat money – money without intrinsic value, but declared by a government to be legal tender, that is, it must be accepted as a form of payment for 'all debts, public and private'.
Usually, the government declares the fiat currency (typically notes and coins from a central bank, such as the Federal Reserve System in the U.S.) to be legal tender, making it unlawful to not accept the fiat currency as a means of repayment for all debts, public and private.
Fiat money or fiat currency is money whose value is not derived from any intrinsic value or guarantee that it can be converted into a valuable commodity (such as gold). Instead, it has value only by government order (fiat).

I accept from John because you accept from me.

I can’t find this in English nor in German:
Un agent accepte de la monnaie en échange d’un bien qu’il cède parce qu’il sait que les autres agents l’accepteront en échange d’un bien qu’il souhaite acquérir.

If you find no Mary to accept from you, then you’ve got a problem,
except of course, if you have recourse to governmental guns to force the other to accept.
That’s legal tender (laws), isn’t it?

j said...

Interesting article (Hugh is also mentioned in it) :

Philippe said...

Today, the Latvian government announced a series of measures to "compress" government spending in order to fulfill the critera to get the next "money gift". Interestingly enough, all of these measures have a huge social impact: reducing the minimum salary, establishing a new income tax system that will allow all workers making more than 800 Ls a month to lose 15% of their income, reducing the non taxable minimum, reducing retirement pay, raising the VAT to 23%, and so on, and so forth.

On this latter point, there is some kind of fuzzy logic in action: VAT rate increased by 4 to 16%, VAT real revenues dropped by 28%. So now the rate will increase by 2 more percents. By how much will real revenues drop this time as businesses will look for new ways of cheating? So goes the income tax and the corporate income tax. More people and more businesses will hide their real income, feeding the grey economy even more.

All these measures will be effective on the 3rd of July. Why the hurry ? Well, readers of this blog may know why...

Other government spending though remains nearly untouched: education ministry chose these days to announce a 15 mln spending on a new computer system (replacing an existing and working one); a new bridge is being built that will connect to a new northern road ... not yet built (strangely enough it goes to the same consortium - Latvijas Tilts - that already built the new Daugava bridge for a price exceeding 500 mln and considered by all experts as blatantly overpriced. The consortium is based on companies that already got most of the road repair work contracts).

To keep it simple, let's say that the Latvian people is footing the bill thrice:
- Paying what is now among the highest level of taxes in Europe (without the social benefits),
- Seeing a huge reduction of their buying power and life standards (i.a. schools, hospitals, community services and retirement homes get closed, forcing people to spend more money on transportation to access always further services),
- Bearing the debt on the long term as, on one end of the age pyramid, child social benefits get cut and, on the other end, after pillaging the retirement capitalization fund (2nd level pension), government decided to reduce the benefits of the retirement repartition system.

Latvian businesses, especially SMEs, will have even more to loose, as adapting systems and programs to the new rules has a cost, that the government can't support. So how many more businesses will go belly up?

Whatever "economic new orthodoxy" or "expert theories" are used to advise (or bend the arm of) the Latvian government, they definitely don't work for the Latvian people. If we read the first commitment of the Latvian government when getting the IMF/EU/Other donors money, it was clearly stated that social instruments would be protected. In the end, all of the so-called reforms resulted in a social catastrophe.

Meanwhile, we keep on seeing deluxe cars with official plates on the streets close to the parliament. We keep on discovering every day new scandalous expenditures by high officials. The members of the board of the state companies (the famous VAS having all accounts at the Parex) keep having higher salaries than chairmen of private companies. The accounting rules keep on dating to the Soviet times -and so does a big part of our administration. And the only administrative reforms consist in lower staff layoff, operative budget cuts, disguised salary cuts -obliging people to take unpaid vacation or to work a 4 days week- or very open salary cuts.

Where are the incentives? Where is the promised support to SMEs? Where is the promised simplification of administrative procedures? Indeed, where is accountability and responsibility?

In times when most voters showed their disinterest in European matters, we are quite a lot thinking that the best way to manage Latvia would be to outsource our government to Brussels and Strasburg. Well... Maybe not... We just sent there our previous Prime Minister...

Philippe said...

Update on previous post:
At the end of the discussions, it was decided not to increase tax pressure. So it'll be just a 10% reduction on all social benefits and another decrease of civil workers salaries, and quite a few other cuts in pensions.

Anonymous said...

Philippe, your info does seem outdated to me... E.g. no 23% VAT & etc.

Ivo Cerckel said...

[Another or not?] Anonymous Says:

4. June 12th, 2009 at 1:02 pm (GMT+8)


Regarding Latvia. WGC reports Latvia has 7.7 tonnes of gold reserves with a current market value of US$236m. With a population of 2.2 million, on a per capita basis, this is a little low. Perhaps it should be 20 tonnes if the CB’s of the world share 60,000 tonnes.

Philippe said...

To anonymous
Too fast information kills the information.
In the end, after an evening of discussions, the Latvian government backed down. No tax hike and no progressive income tax. The tax increase will touch only the "sin taxes". Accise increase by 50,3% on beer and 8% on strong alcoholic beverages.
Other measures with a high social price stay:
- 10% reduction of social support to young mothers,
- 50% reduction of the non taxable income,
- 20% reduction of all state workers income,
- 10% decrease of retirement pensions (70% if the retired person still works),
- 30% decrease of all ministries budgets. 50% for other government agencies.

In the end, the government expects to gain some 200 mlns Lati from the social measures and 300 mlns from the administrations' budget cuts.

(all information can be found in Latvian on http://www.diena.lv/lat/politics/hot/samazinas-pensijas-un-algas-nodoklus-nemainis)

This still means that the Latvian people will directly fund 40% of these measures from their collective pocket, after having already seen a huge decrease of their living standards during the few last months. Notwithstanding the indirect losses from the budget cuts.

So indeed "Latvia is being sacrificed at this point to the "greater good". The D-word is now more frightening Europe and the Latvian government than the Latvians themselves.

The number is increasing of those who think (and openly say) that devaluation would at least bring some hope. Even sovereign default now looks like an option as the country could bounce back faster instead of seemingly forever drown. Being the first ones in the queue for debt restructuration would give us at least some advantage and markets' short memory would mean that we would become again "financialy acceptable" after a few years. Of course, we understand that the greater picture commands that we give some time to neighbouring countries to stabilize their position. But this has a cost that may last longer than just throwing the towel now and start rebuilding our economy on sounder foundations.

Anonymous said...

To my mind, there is no big difference in the type of devaluation being in place. I see no difference whether it is done through changing/removing the peg or through salary and state funding reductions. It doesn't matter how if there is no idea how country can earn itself a living. What was done with EU/IMF money from previous thanches except from closing different sorts of gaps in countries' finances? I don't see anything worth mentioning. That's the real problem.

Anonymous said...

Having just read FT on the Web I would like ask the IMF and the Latvian government, why they are punishing the people that definitely did not cause the Latvian problems? A devaluation would not hit retired persons but the ones that have big eur loans. It is awfull that IMF lets the Latvian government to use IMF loan (which is money from taxpayers from other countries!) to defend the peg and the price is that pensions etc. must be cut:

As part of the austerity package, the public sector wage bill will be cut by 20 per cent - for the second time this year - while pensions will be reduced by 10 per cent.

"How will we survive?" said Anna Matouk, a Russian-speaking pensioner at a street market in the Riga surburb of Jurmula. She is supporting herself and her unemployed son on a pension of 156 lats ($311) a month, turning her fridge off for a few hours each day to save money.

"I haven't bought anything," she said tearfully. "I can't afford to buy anything. The only thing left to do is to die."

I truly hope Ch. Rosenberg would think what he is doing to the average Latvians. Now he is trying to save the elite who took eur nominated loans.


Ivo Cerckel said...

Anonymous says:
It is awfull that IMF lets the Latvian government to use IMF loan (which is money from taxpayers from other countries!) to defend the peg and the price is that pensions etc. must be cut:

Twelve months ago, I said:
Whereas before 15 August 1971, when US President Richard Nixon broke the Bretton Woods system, the US dollar was a Gold derivative, current IMF rules (article IV, section 2, (b), of the IMF Articles of Agreement) prohibit members from linking their currencies to Gold.
Since that date, the IMF has no more reason of existence.
If the IMF continues to exist, this is in order to support the bankrupt dollar regime, thereby making of Gold a dollar derivative.

Who’s this time being supported by the IMF?

EU Commissioner Joaquín Almunia?

Ivo Cerckel said...

Or does the IMF want to prevent the euro (from) being adopted by Latvia
because this would mean
(1) an immediate end to the status of the US of A dollar as the world reserve currency
(2) the repeal of the pimps of the dollar regime, the repeal of the useless IMF?

Crisis times call for great leaders and projects that create hope. We call on the EU leaders to show leadership and launch a “big bang” euro area expansion to introduce the euro in all 27 member states by 2012. Such a bold decision would give a credibility boost to the enlarged eurozone, accelerate replacement of the dollar by the euro as the global reserve currency and breathe new life into a united Europe.
(Let us roll out the euro to the whole Union
By Marcin Piatkowski and Krzysztof Rybinski
Published: June 11 2009 19:27 | Last updated: June 11 2009 19:27

Ivo Cerckel said...

The crisis is a banking crisis. (1)

Banks used to have the right to issue receipts for the gold they held in reserve in warehouse.
This right was taken away from them by the institution of central banks. (2)

Central banksters are unable to perform that task.

Bartering is therefore returning in Latvia to some areas because cash is running out. (3)

People are returning to the status quo ante, before central banking appeared on the scene.

This will allow them to grasp what money stands for.

Economists know that money is defined by the functions it performs, as a means of exchange, a unit of account and a store of value. (4)

Slowly but surely, we may reach the right conclusions.

Repeal central banking now!


G-8 Divided on Stimulus Exit Strategies, Bank Tests (Update1)
By Rainer Buergin and Flavia Krause-Jackson
June 13 (Bloomberg) — Group of Eight finance ministers meet today amid divisions over how soon to start unwinding their economic rescue packages and whether Europe should subject banks to tougher stress tests.

Roland Leuschel and Claus Vogt, “Das Greenspan Dossier, Wie die US-Notenbank das Weltwährungssystem gefährdet. Oder: Inflation um jeden Preis”, http://www.finanzbuchverlag.de, 2006, 3rd ed., p. 299

From The Times
June 11, 2009
Prime Minister of Latvia struggles to save country from bankruptcy

International Charlemagne Prize of Aachen for 2002
Acceptance speech by Dr. Willem F. Duisenberg, President of the European Central Bank, Aachen, 9 May 2002

Ivo Cerckel said...

Peer Steinbrueck is of course no Juergen Stark.

Steinbrueck is German finance minister.
Stark is member of the ECB governing council for Germany.

But I said above that the IMF was supporting EU Commissioner Joaquín Almunia.

Is there also a rift between the EU Kommission and the ECB?

Rifts on crisis response split G8 finance talks
By Dario Thuburn
LECCE, Jun 13, 2009 (AFP) - Rifts emerged at G8 talks in Italy on Saturday as Germany pressed governments to prepare to scale back huge deficits and spending while the United States urged countries to stay the course.
There were also divisions over US-style "stress tests" to check on the financial stability of crisis-hit European banks, with Washington and London in favour but Berlin warning that they could undermine economic confidence.
German Finance Minister Peer Steinbrueck said he shared the International Monetary Fund's view that stabilisation measures for economies hit by the economic crisis must "increasingly be combined with a credible exit strategy."

Ivo Cerckel said...

These are the stakes as viewed from .... London:

Hamish McRae: Renminbi on the way to being the world's most important currency

Economic Life: The road to a world of multiple reserve currencies will be a bumpy one, and people will get hurt

Friday, 12 June 2009
Are the dollar's days as the prime world reserve currency numbered? Yes, but dethroning it will take a long time, and the road to a world of multiple reserve currencies will be a bumpy one. Along the way people will get hurt.

Several things have come together in the past few days which highlight the inherent fragility of the dollar's position
What I think will happen is different. I think we will move gradually towards a multicurrency reserve system, with central banks holding a variety of foreign currencies, including the Chinese renminbi and the Indian rupee alongside the dollar, euro and so on. And they will hold them not because of any formal agreement but because it makes commercial sense to hold in reserves the currencies of your principal trading partners.

As for the currencies in which the main commodities will be denominated, that will be a toss-up between a single currency, the dollar or the renminbi, and a basket of currencies. But that will be a matter of convenience. At the moment the dollar is used for oil because the US is the world's biggest oil user. But many international steel contracts are in euros, reflecting the importance of Europe as a steel user. Both may change. Once China is the world's largest economy the renminbi will become the world's most important currency.

Ivo Cerckel said...

As I said June 13, 2009 3:21 AM
Repeal central banking now!

Guv’mints cannot do anything right.

Viva l’Anarchia!

Tax is theft! Guv'mint is fraud!

von Stefan Müller vor 11 Stunden
Ivo Cerckel hat teilweise recht. Grünenthal verkaufte Contergan, ohne es ordnungsgemäß geprüft zu haben. Einer Rezeptpflicht für Contergan hatte sich Familie Wirtz ebenso stets widersetzt wie der von vielen Experten geforderten Rücknahme aus dem Handel...und die Aufsichtsbehörden hatten versagt.antworten

von Ivo Cerckel vor 23 Stunden
Nein, Stefan, Im Jahre 1957, haben die Aufsichtsbehörden in einigen Ländern Contergan auf den Markt erlaubt. 30. April/1. Mai 1960: Auf einem Neurologen-Kongress in Düsseldorf berichtet der Neurologe Ralf Voss über die Nervenschädigungen, die seinen Beobachtungen zufolge durch Thalidomid verursacht werden. Die Aufsichtsbehörden haben NICHTS getan. Es war Grünenthal die in November 1961 die Initiative zu ergreifen hatte um Contergan vom Markt zu nehmen. Es ist deshalb nicht Wirtz aber Merkel die zahlen müssen. Aber alle Geld Merkel habt kommt von Steuern. Und steuern is Diebstahl. (Der Dieb kommt nicht periodisch zurueck und der Der Dieb gibt nicht vor, zu stehlen, im öffentlichen Interesse / im allgemeinen Wohl.) Deshalb ist es IMMORALISCH Geld von Bundesrat an zu nehmen.antworten

von Ivo Cerckel vor 23 Stunden
Außerdem haben rund 350 Menschen, die im Ausland leben, ebenfalls Anspruch auf die Zahlungen, weil sie durch Lizenzprodukte des Contergan-Herstellers geschädigt worden sind. - Was bedeutet das? Und warum wird die Unterscheidung gemacht zwischen Hersteller und Lizenzgeber? - Höhere Zahlungen? – Wieviel ist höher als Null? ivocerckel@siquijor.wsantworten

von Stefan Müller am 12/06/09
Die 50 Mio. Euro von Grünenthal müssen als eine Verhöhnung der teilweise schwerstbehinderten contergangeschädigten Menschen angesehen werden. Der in dem Artikel angesprochene Hungerstreik von Betroffenen hat die Öffentlichkeit darauf aufmerksam gemacht. Weitere Aktionen der Opfer ist natürlich notwendig, um die Grünenthal-Eigner, die Milliardärsfamilie Wirtz davon zu überzeugen, weitere Zahlungen zu leisten.

Ivo Cerckel said...

Yes Tina,

If we repeal central banking, it will only be the imbecile parasites who will suffer.

If we repeal central banking, it will no longer be the weak who will suffer.

But the bastards (no apology) know better.

Warmest regards.

Edward Hugh said...

Hello Ivo,

You clearly have some sort of drum to bang here. I'm not sure I understand it, but it seems to be to do with gold and central banks, or something.

Anyway, the level of your comments is now approaching that of outright spam. On future posts please try to direct your comments more towards the matters in hand, as I think this type of thing only kills off genuine debate.

If you want to explore your ideas further, why not start your own blog?

Thanks for your understanding.


Edward Hugh said...

Oh, sorry, I just noticed you do have a blog. Well, everyone who is interested in persuing further the sort of issues Ivan is raising is cordially invited to click over and join in the debate he is hosting.

Anonymous said...

"in the Riga surburb of Jurmula"

Somebody has a damn good knowledge of geography here. :)

Leonid said...

"Somebody has a damn good knowledge of geography here. :)"

My God, you're right. I remember it well. Especially the "riding" therapy.

Jūrmala (Latvian: [juːrmala]( listen) "seaside") is a city in Latvia, about 25 kilometers west of Riga. Jūrmala is a resort town stretching 32 kilometres (20 mi) and sandwiched between the Gulf of Riga and the Lielupe River. It has a 33 km stretch of white-sand beach, and a population of 55,580, making it the 5th largest city in Latvia.

While Latvia was a part of the Soviet Union, Jūrmala was a favorite holiday-resort and tourist destination for high-level Communist Party officials, particularly Brezhnev and Khrushchev. Although many amenities such as beach-houses and concrete hotels remain, some have fallen into disrepair. Jūrmala remains a tourist attraction with long beaches facing the Gulf of Riga and romantic wooden houses in the Art Nouveau style.

Imants Ziedonis, one of Latvia's most important poets and folklorists of the Soviet and post-Soviet eras, was born in the Jūrmala district.

Visitors can access Jūrmala from Riga in around 20 to 40 minutes either by train or by bus, or along the highway by car. Since 2008 Jūrmala and Riga airport are connected with a bus service.

In Soviet times Jūrmala was popular with the Communist officials because of its beach and sanatoriums - holidays were also given as rewards for top union members. It became one of the most popular holiday directions in the whole Union. The spas offered facilities from mud baths to riding therapy and hiking in the woods. In summer there are many concerts.