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China's affluent people could become nervous about the value of the currency and try to convert into dollars. Aaron Back of the WSJ poses the question what if the affluent 1-2% of China's urban population of 737 million convert the maximum of $50,000 permitted from yuan into dollars. He says the simple math shows this would result in outflows of around $370 billion to $740 billion. This does not include other ways in which money could exit the country. China's foreign exchange reserves are $3.3 trillon, but this includes illiquid investments such as loans to Venezuela for oil assets, and the Asian Infrastructure Investment Bank. With a large and aging population China has to have reserves to meet social security and other plans for the future. This means the reserves could quickly dwindle with unanticipated capital outflows. This is what keeps central bank PBOC planners focussed on limiting depreciation of the yuan currency.

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A Wall Street Journal poll of economists shows that China's growth is slowing to around 8%. Because the economy grew rapidly in the first half of 2010, the full year growth is expected to be 11.1%. China's central bank and the government see the slowdown as a positive indication in an effort to reduce the risks to the Chinese economy from a real estate price bubble. Rising debt of local governments after the stimulus encouraged lending by state owned banks to get projects started quickly, and led to unsustainable growth levels and real estate speculation.

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Achievements of Elvira Nabiullina as central bank chief in Russia since 2013 are the reducing of US dollar reserves from 40% to 11%of $600 billion in Russian reserves shifting to hold most of its reserves in euros, gold or renminbi Chinese currency. She also implemented the alternative to SWIFT the global bank messaging system, and changed the payments infrastructure to process credit card transactions in the country so departure of Visa and Mastercard had minimal effect.

In this way this highly respected banker has protected Russia's economy from western sanctions, says NYT. She is trusted by president Putin and was adviser to Putin in 2012, minister of economic development before that when Putin was prime minister. When Russia suffered an economic crisis in 2014 as oil prices fell sharply and Saudis increased oil production, the ruble fell. Nabiullina increased rates to 17%, and the economy shrank till it stabilized with inflation down to 4% by 2017.

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The US central bank the Fed's Powell leaves interest rates unchanged July 30, 2025- as he waits to see what happens with inflation following tariffs action by DJT to level playing field with EU, Japan, China. A tariff of 15% is set in US Trade Agreements with Japan, EU and South Korea. Powell says the impact on US consumers will be minimal but not zero, with some effects expected even though EU, Japan and South Korea will not attempt to pass through the tariffs and risk the other benefits of trade access to the US market.

Overall both the European Union and the US have a good economy, with inflation at 2% and the the unemployment situation the best it has been in some decades near 6% in EU and near 4% in the US. 

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Gao Xiqing, vice chairman, president of China Investment Corporation, told a panel discussion during meetings of the International Monetary Fund, on September 24, 2011, China cannot be expected to provide solutions to the eurozone debt crisis. Xiqing said: "We're not saviors. We have to save ourselves." He added that CIC would consider buying bonds of troubled eurozone countries -"if it has a risk profile that fits into our allocation, but don't expect us to buy more than our risk appetite would take." And the head of China's central bank, Zhou Xiaochuan, told the panel that China cannot raise its growth rate because of inflation and other problems from unsustainable growth.

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India's central bank RBI's efforts to hold back inflation. Minimum export prices set for Basmati rice and import tariffs removed on edible crude oil are steps taken bythe Indian government. The RBI for its part raised the proportion of deposits banks keep as cash with the central bank to 8% last month and this is expected to take 185 billion rupees from the banking system according to experts. The first phase of the increase goes into effect April 26, the second phase May 10, 2008. The RBI holds its annual monetary policy review April 29, 2008 and most anlaysts expect it to hold rates steady.

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Patrick Chovanec of Tsinghua University, says the loan target for 2011, though smaller than 2010, will still be over one and a half times the money lent in 2008. Stephen Green, head of research for Standard Chartered, says if anyone is printing money, it appears to be China's central bank, not the US. During a meeting of the Central Economic Work Conference in Beijing goals are being set for the next 12 months. One expert predicts the governmet may set official targets of 4% inflation (it is running at about 4.7% at this time) and 6.5 trillion yuan of lending in new loans in 2011, compared to 7.5 trillion in 2010. Questions remain whether China can manage a soft landing after the huge surge in lending and the continued asset bubble.

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About $200 billion in speculative or hot money entered China and landed mostly in bank deposits which pay 4% interest rate compared to 2% for dollars in the USA with the idea of profiting from the interest rate and the appreciation of the yuan, in the first 5 months of 2008, according to economists at Logan Wright, an economics research firm and at Beijing University's Guanghua School of Management. Beijing's foreign exchange reserves are at 1.8 trillion dollars at the end of May 2008 so even if their is an abrupt reversal of flows of this hot money China would not be protected but an abrupt outflow could hurt the banking system. Amore relevant fear is that this speculative inflow will raise inflation in China as the central bank prints more yuan to buy dollars and keep the yuan from appreciating and then sterilizing the excess liquidity by issuing bills or increasing bank's reserve requirements. Sterilization is now upto its limit and the central bank has raised the reserve requirement 16 times since January 2007 from 9% to 17.5%. The Peoples Bank of China, China's central bank only pays i.9% on reserves so this hurts bank profits and there is a limit to raising reserve requirements also. This leaves one time appreciation of the yuan but this would have to be of some magnitude about 20% to stem the speculative inflows of money trying to take advantage of the appreciation of the yuan. Another problem this situation presents for the central bank is making monetary policy tools like increasing interest rates to calm inflationary expectations not available as the increase in interest rates would only increase the profit to be made in bringing in speculative money into China. So where does this leave the Chinese economic policy managers? Monetary policy will continue to be losse and with large amounts of speculative inflows in the rest of 2008 and into 2009 inflation is likely to continue its upward climb. Inflation was at an annual rate of 7.7% in May. 2008....

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As German chancellor Merkel pointed out at the EU summit, all central European states and Eastern European staes are not doing the same. Czech Republic and Poland are doing relatively better, Hungary, Romania and the Baltic Countries are in serious crisis. And smaller Slovenia and Slovakia are part of the core countries in the EU which use the euro. The Baltic countries are looking to Sweden to help and the Swedish Finance Minister has said it is the political responsibility of Sweden to help the Baltic countries, which Sweden should consider as part of the home region. Romania is looking to a reluctant Germany for help. And voices in Europe are asking if it isn't the political responsiility of Western European countries like Germany to help, and if not what does it mean to be part of the European Union? The Eastern European countries caught up in this crisis with their currencies losing value and large loan repayments to western European banks, feel they embraced the liberal capitalist model without any knowledge or experience with its fluctuations and crisis prone nature, as part of the integration into a united Europe. Now they are left they feel, to drift on their own. The recent emergency European summit meeting in Brussels saw the Czech prime minister Topolanek, who holds the rotating presidency of the EU, say that no member would be left in the lurch, and the need to avoid a dividing line in Europe that North-South or East-West. The Hungarian prime minister insisted on a special European Union fund of upto $241 billion to protect the weakest members, and circulated a paper saying that Central Europe's refinancing needs for 2009 were $380 billion. So far the governments of the EU have already spent $380 billion in bank recapitalizations and put up $3.17 trillion to guarantee bank's loans and to get credit moving again. And the European Bank for Reconstruction and Development, the European Investment Bank and the World Bank have promised $31.1 billion to Eastern European countries....

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Countries dependent on remittances of workers overseas are hit hard by the coronavirus. This WSJ report shows the situation in Central America which gets $24 billion in remittances form its workers in the U.S. E Salvador gets $5.6 billion in remittances. This is down by 40% in April central bank numbers show, because of jobs lost in the U.S. by workers from El Salvador who migrated to the U.S.  Unemployment rate for Hispanics in April was 20%. El Salvador depends on remittances more than any other Latin American country as remittances are higher than exports. In some rural areas this means older residents have no money to buy food and depend on charities for food supplies.

Today the situation in India, Pakistan and Bangladesh, and other countries in Asia which depend on remittances of overseas workers is also leading to a difficult time for families dependent for such support.

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The writedown on Greece bonds held by large banks in Cyprus of 50% after an EU agreement in Oct 2011, added to the stress on Cyprus banks from the property bubble, and from loans to Greek companies. The central bank and the country's president at the time were not on speaking terms according to reports and the regulatory was extremely weak. The head of Laiki bank was a Greek tycoon and made loans to well connected Greek companies. The property bubble created problems that remained hidden till the large writedown on Greece bonds led to an impossible situation in 2011. Cyprus's economic model of an offshore tax haven, which included laundering of dirty money according to reports, was based on lax banking laws. These very banking laws made regulatory supervision, capital requirements and eurozone wide deposit guarantees, the necessary framework for the euro currency that is now being built, outside the scope of this economic model. Seen from this perspective of setting a sound basis for the euro, the German position that this economic model had to go was a logical move. Something the Cypriot leaders and the bank management entirely failed to anticipate and grasp. These very lax banking laws made it impossible to know the real condition of the banks, and plan for contingencies, right down to the end. ...

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Anat Admati, is a professor of finance and economics at Stanford University School of Business. He says banks should depend on generating 30% of their assets from equity, something the banking industry of today in the U.S. and Europe considers heretical. More of the bank's assets should come from equity and much less from borrowed funds. Outside of banking healthy corporations in the U.S. carry debt at about 70% of assets and there is no reason banks should not do the same. In 2013 says Admati, the situation is not much different from that after the 2008 global financial crisis- large banks carry liabilities and debt at over 90% of their assets. The $2.2 trillion in debt at JP Morgan Chase bank is about 91% of assets of $2.4 trillion. Basel III regulations allow banks to borrow upto 95% of assets, and proposed banking regulations in the U.S. put this at 95%, with the way this is measured still being debated. At such high levels of debt the margin of error is small, and systemic risk which is high in a globally interconnected banking system means the whole banking system can freeze from one large bank going into failure such as Lehman Brothers. This happened in 2008 and the margin of error is still small, which is why global banking is such a high wire act with the U.S. Federal Reserve, the ECB and other central banks issuing regular warnings and regulators faced with the task of keeping the banking system in check through vigilance and investigations of banks violating laws. How much difference has Dodd-Frank legislation in the U.S. made after 2008? Jason from Atlanta says in response to Admati's article, that the Glass-Steagall Act of 1933 was 37 pages and the banking system did not freeze up in the way it did in 2008 for the rest of the twentieth century until its repeal. The 879 page Dodd-Frank legislation of 2011 is overly voluminous and still leaves 243 rules to be written by regulators in consultation with the financial industry. Banks are larger now than they were in 2008 and have an outsized influence in shaping the rules, leaving the U.S. Federal Reserve's supervisory committee and Fed Governor Daniel Tarullo with the job of somehow keeping banks out of trouble. JP Morgan Chase, Admati reminds readers, has $2.4 trillion in assets as of June 30, 2013, and debts of $2.2 trillion, with $1.2 trillon in deposits and $ 1 trillion in other debt owed to money market funds, other banks, bondholders and the like. ...

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It comes as a shock to central banks and is pressuring governments- the food price explosion that won't go away even as energy prices are moderating. OECD graphs in this WSJ report show food prices up in 2023 over the prior year by 15-20% in France, Germany and Britain, compared to 5-10% in the US, Canada and Japan. In France households have cut food purchases by 10%, and in Germany by 10.4% over prior year in the largest drop since records were being kept in 1994. In Britain the statistics agency shows that 40% of the poorest 20% of people are cutting back on food purchases. Ludovic Subran who worked at the UN World Food Program says it is an "access problem." Food production has not dropped, people just can't afford to pay the prices. In Britain The Resolution Foundation says higher food prices since 2020 means the British public by summer 2023 will have to pay more in food bills $35 billion more than the 25 billion pounds for energy bills. Policymakers call higher profit margins by retailers as a possible cause as in world commodity markets food prices are falling since April 2022. Andrew Baileyof the Bank of England says it is the "fourth shock to inflation" after the supply chain bottlenecks, the energy price increases from the war in Ukraine, the tight labor markets. In Italy, Spain and Portugal governments have offered sale tax relief, in France and the UK government is leaning on retailers to curb price increases. ...

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China's central bank the PBOC lowered the reserve requirement ratio for commercial banks, the amount of deposits set aside for financial safety, by half a percentage point to 19.5% on Feb. 5, 2015. The move is intended to get banks to lend more to stimulate growth. Growth is slowing in China, with GDP up 7.4% in 2014, and expected to go below 7% in 2015. With China's debt up to an estimated 282% of GDP, the PBOC has resisted efforts for monetary easing that would make the debt problems worse. The lowering of the reserve requirement ratio by half a percentage point gives commercial banks an additional 500 billion yuan or $81 billion to lend out to customers. Another 160 billion yuan comes from measures targeted at small business and agriculture. With the soft business conditions worldwide China's manufacturers may be reluctant to borrow more at this time, making it uncertain how much actual lending will take place following the move.

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The European Central Bank says it will no longer accept Greek bonds as collateral for loans. A similiar move preceded negotiations in 2012 for revisions to loan conditions from the ECB-EU and the IMF. Greece's banks will no longer have access to cheap loans at 0.05% from the ECB. The banks can still use the Emergency Liquidity Assistance facility for loans without which Greek banks would face serious problems. The ECB's reason for this action was that it no longer had confidence that Greece would comply with the bailout terms and could not conduct an ECB review in the current conditions. Both sides are staking out initial positions in the negotiations. Greece's prime minister Tsipras says he wants to work within the eurozone rules and at the same time respect the mandate from the Greek people for better terms on the loans. Tsipras met with the EU's Martin Schulz, and the ECB's Draghi, as the EU and ECB begin discussions.

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Mario Draghi, former head of the European Central Bank, who ran ECB policy to rescue the Euro currency in 2012 is being asked to form a new government by the president. Mr. Conte's coalition failed to get the support of Matteo Renzi's left party in parliament leading to its collapse.  Italians are wary of the austerity policies of Mario Monti,  professor and EU bureaucrat appointed by premier Berlusconi to the EU Commission, who was appointed  during the eurozone financial crisis in November 2011 by the president.  At the time prime minister Berlusconi had lost the confidence of EU officials. Mario Draghi has a different history after his work at the European Central Bank counteracting the austerity approach of German finance ministry. He also steered the ECB policy at a difficult time for Italy with rising interest on debt. Today Italy has lost about 89,000 lives, and 8.8% of GDP was lost in 2020. Moderate factions of all parties right and left wing are expected to support Draghi. Draghi also has the advantage of 200 billion in euro funds coming from the EU for Italy's recovery in 2021. Germany today is not the austerity policy Germany of 2011, as it supports going big and spending for the recovery. ...

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Egypt's new prime minister, Hazem el-Beblawi, in July 2013, is a professor of Economics who received his doctorate from the University of Paris in 1964. He has taught economics at universities in Egypt, Kuwait, France and the U.S. After 15 years teaching at the University of Alexandria, he worked in development banks in the Middle East for another 15 years, joining the Finance Ministry in 2011. He resigned in protest against military shooting of protesters at the time. Egypt has about $14.9 billion in reserves according to Egypt's central bank, less than the $15 billion needed for three months of imports. Egypt needs to negotiate a $4.8 billion loan from the IMF. Earler negotiations were stymied by the military in 2011, and el-Beblawi will now be negotiating with the head of the Constitutional Court as president, after the ouster of president Morsi of the Muslim Brotherhood.

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Compared to the Fed, Treasury and and American regulators hands off approach as the bubble in mortgages and in financial markets developed, China took some steps to restrain the real estate bubble in China. Starting in 2004 Beijing officials tried to limit speculation in real estate by administrative measures like setting quotas on how much real estate lending each bank could do. In August 20007 bank regulators began requiring larger down payments for second and third homes, and banks began charging linterest rates upto 3% points higher for those homes than for first home buyers. And other things make the Chinese market for mortgages quite different. About half of all chinese buy their homes with outright all cash. And down payments are 30% for first time buyers and 40% for buyers who are getting a second home. And male borrowers term of mortgage ends by law a age 60 and 55 for women whichmeans they build up equity in the home quickly and are less likely to walk away from a home. As far as the banks are concerned no securitization of mortgages has ocurred and banks hold a higher percentage of cash with capital equal to 12 to 14% of assets, compared to international regulatory standards of 8%. Prices have fallen by a third inplaces like Shenzen, and the central bank asked commerical banks to reduce mortgage rates and help borrowers with lower down payments, with the hope that this would stabilize home prices. However with the credit crisis economists expect further decline in home prices....

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The extraordinary story of Nadhim Zahawi who came to the UK as a child fleeing Iraq in the seventies with his parents. His grandfather was the governor of the Central Bank of Iraq. He says he survived by coming to Britain as he might have been killed in the Iran- Iraq war of the 1980's. He started life in Sussex and studied at the University College of London. In 2018 he was made Education minister by Theresa May. He continued under Boris Johnson as Education Minister, and in 2020 took the position of Vaccine Rollout minister.In July 2022 he was appointed Chancellor of the Exchequer to replace Rishi Sunak.

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Indian finance minister Nirmala Sitharaman meets IMF managing director Kristalina Georgieva to discuss impact of the geopolitical situation on world growth especially oil prices. Sitharaman said India was pursuing a policy of strong federal spending with capital expenditures increasing by 35% for fiscal 2022-23 to continue a public investment led recovery, raising capital expenditures from 5.5 lakh crore rupees to 7.5 lakh crore rupees. Indian GDP growth is now expected at 8-8.5%, the highest of large economies. Sitharaman also met with Indonesian finance minister Sri Mulyani Indrawati on the sidelines of G-20 Finance Ministers and Central Bank Governors meeting and discussed the current global situation.

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As the US central bank, the Federal Reserve, pushes up interest rates in a period of high inflation its goal is to raise rates to "neutral" a rate which neither spurs growth or slows it, says this report in the WSJ. Only problem is that no one really knows what that interest rate is. The Fed is expected to raise interest rates by half a percentage point at its meeting in May. And raise interest rates by another half point in June. Fed chairman Jerome Powell says of the policy "we are going to be raising rates and getting expeditiously to levels that are more neutral."

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European economies are likely to weather the winter better than expected with sufficient energy supplies on hand after the Russian cutoff of oil and gas. This means says this WSJ column that the central bank for Europe, the ECB, can continue to raise interest rates to fight inflation. As Fed chairman Jay Powell pointed out at the Brookings Institution recently out of control inflation poses a major risk for upward mobility in American society. This is a risk that exists in both the US and Europe. In this sense 2023 is a critical year for the Fed and the ECB, for Lagarde and for Jay Powell, to bring it back under control.

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The Bank of England under Governor Carney cut interest rates 0.25% from a low of 0.5%, and suggested further cuts were on the way. This follows Brexit and action by the central bank to avoid a recession. The British pound fell about 1.6% to $1.3112 against the dollar, and euro 1.770 against the euro. Government borrowing costs declined, and the 10 year bonds yield dropped to 0.639%. Economic growth in Britian for the second half 2016 will be little or none. The GDP growth forecast for 2017 is now 0.8%, down from 2.3% before the Brexit vote. Bank of England staff say their calculations show Brexit vote has "conservatively" reduced growth by 2.5 percentage points over 3 years even after the rate cuts and stimulus action of the Bank of England, which other estimates show could add 0.5% over 2 years. This brings the Brexit impact to about 3% loss in GDP over 3 years, with these reliable estimates. Months after the Brexit vote the question remains whether Brexit supporters misled British voters, leaving the Bank of England to come up with a way to prevent a recession. After the austerity cuts since 2009 and the prospect of some improvement in the economy, this is a step backwards at a time when some of the working and middle class find themselves left behind. ...

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During the Greek debt crisis in 2011 the ECB bought Greek bonds at a discount to face value to support the price of Greek bonds. It did so under the agreement that the bonds would be worth the full amount. Now as part of the negotiations between Greece and private bondholders (mostly French and German banks) about how much losses private bondholders will take- to make Greek debt serviceable as its economy shrinks and tax revenues decline- the ECB says it will take $11 billion in losses on these bonds as its contribution. The ECB will do this on the condition that Greece comes up with an agreement with private bondholders that makes debt serviceable. This could mean increasing private bondholder losses to 70%. from 50%. The central banks of EU countries hold $12 billion of Greek bonds. The ECB says this will not apply to these bonds. Negotiations are also underway between the EU and Greece for a 20% reduction in Greece's minimum wage and an additional 3 billion euros in government spending cuts, and pension cuts for retirees. The EU is asking for a written committment from the Greek government and from Antonio Samaras of the New Democracy party to the austerity program, as the measures are highly unpopular in Greece and are leading to continued street protests in Athens. ...

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Collapse of the easten european economies says the Economist would raise questions about the idea of a united Europe, the idea of the EU itself, and destabilize the euro - as countries in the EU like Ireland and Greece are in just as bad a shape. And in talk of enlargement of the EU will be doomed, and this is true of the western Balkans, TUrkey, and some countries int he former Soviet Union. Politically letting these countries derift could mean they fall for populists and nationalists of the bad type. And there is the serious economic consideration for banks in Austria, Italy and Sweden, which are heavily involved in lending to Eastern Europe. They could see catastrophic losses and put the banking systems of these countries at risk. Sweden has already chosen to help the Baltic Countries, and sees it has its political responsibility, and the whole Baltic region as its home, see link. The Economist suggests a differentiated approach depending on which group of countries in Eastern and Central Europe something that Angela Merkel of Germany also supports. For Ukraine the Economist says its best to let the IMF provide assistance. For the Baltic countries, plus Bulgaria, the Economist advocates an accelerated path to the euro, on the grounds that they are tiny and shouln't affect confidence in the euro. The Baltic countries have a population of 7 million. This approach is not supported by the European Commission or the European Central Bank. For the 4 larger countries, Poland, Czech Republic, Hungary, and Romania, the Economist says the priority should be to prevent further currency collapse, and to rescue the banks responsible for the foreign currency loans that are going bad, with the pain being shared between debtors and the banks, governments of lending and borrowing countries. Financial institutions like the ECB, the IMF, and the European Bank for Reconstruction and Developemnt, and the European Investment Bank should help support the rescue effort. ...