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Javier Paz

 
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  • Inching Toward Fixed G10 Currency Rates? [View article]
    The pegged rate negotiation is indeed a huge sticking point. For it to be somewhat sustainable and fair, would countries base it on some historic average or on changes in technology/innovation taking place in both countries? I think it would be fair to say there would be a global black market for FX rates.
    The Chinese peg holds the the US BoP balance hostage, and the US holds the Chinese hostage using the USD as currency of reference for trade and its Treasuries debt as the logical destination to park those USD China captures via trade..
    Aug 9 05:19 PM | Likes Like |Link to Comment
  • Inching Toward Fixed G10 Currency Rates? [View article]
    Hi Moon, I agree. But isn't it ironic that the globe's #2 economy has pegged its rate to the currency of the globe's #1 economy? This is not a question about the credit of the currency you peg yourself to, but rather the dangerous distortions on the overall free floating system created, in part, by a huge fixed rate nation.
    Aug 9 05:09 PM | Likes Like |Link to Comment
  • The 'Merkel Intervention' - A German Response to QE2? [View article]
    Some lessons could be drawn from the Argentina-Brazil experience. Argentina devalued its currency in 2001-02. The two currencies were near parity and were tied commercially by the hip through Mercosur, the free trade alliance. Today the Argentina currency is worth less than half what the Brazilian real is worth.

    Brazil, like Germany, did not devalue its currency and did not lose virtually any industrial production capacity to Argentina. I am boiling a complex relationship to a paragraph, but my point is that industrial concerns do not always go for the low currency country to setup shop. The other unknowns (changing rules of the game, high unemployment/crime/int... rates/inflation, potential new tariffs) may not justify such a move. Frankly, I see the world in the medium term unwinding some free-trade gains.
    Nov 30 10:48 AM | Likes Like |Link to Comment
  • The Stealth Devaluation of the Dollar [View article]
    for what is worth, this article's title was originally "Bernanke and Geithner at odds - Europe onto US stealth devaluation" and SA editors made the change to make it shorter I guess.

    Stealth? well, to those of us who have followed the USD for a while there is nothing stealth about it. So I take it you are in the "in" crowd. ;)
    Oct 25 11:01 AM | Likes Like |Link to Comment
  • John Mauldin: Mortgage Crisis II Is Here and It's Not What I Thought [View article]
    this does not stop. It seems that Pimco and the NY Fed are looking into forcing Bank of America into repurchasing some MBS securities because Countrywide has not demonstrated sufficient urgency or that it has the manpower to service the loans (i.e., to carry out loan modifications or foreclosures). Could it be that Countrywide does not have a clean mortgage note to carry out those measures?? The clock is ticking for BoA to do something or face countrywide being declared in default by bondholders.

    www.bloomberg.com/news...
    Oct 19 03:05 PM | Likes Like |Link to Comment
  • John Mauldin: Mortgage Crisis II Is Here and It's Not What I Thought [View article]
    Lovely article - a FL lawyer billing hundreds of millions to banks in exchange for legalese justifying bank evictions is now under scrutiny. I guess the reported luxury yacht, Bugatti, and mansions he bought with this money made him a bit of a target. . . oops

    www.bloomberg.com/news...
    Oct 19 12:43 PM | Likes Like |Link to Comment
  • John Mauldin: Mortgage Crisis II Is Here and It's Not What I Thought [View article]
    For what is worth, I heard on national public radio this morning that Bank of America intends to resume foreclosures as early as next week or next month, don't recall. . . maybe they found some way out of this I suppose.
    Oct 19 10:41 AM | Likes Like |Link to Comment
  • Be-BOP: Sudden Stop of Capital Flows into the U.S. [View article]
    This persistent talk of imminent US doom/gloom is as enjoyable as chewing an old piece of gum.

    For what is worth, if you shorted the USD with the gusto shown by author and commenteurs, you'd end up with a zero balance in a matter of days. Today for example, the aussie fell a remarkable 4.0% to the USD - hardly the example of global crowds ditching the USD for gold rich Australia. . . the Canadian loonie fell another 2.0% to the USD, the euro has just broken through key support levels at 1.30 and risks a large loss this week.

    Conversely, if your investment scenario is multi-year, then I can certainly see that an investor would see the US condition as very worrysome. But in an age of bailouts, can the world afford to let its best customer and financier go down alone? Conversely, is it possible that the US is too big to bailout for the world? probably so.

    Apr 20 06:18 PM | 2 Likes Like |Link to Comment
  • The Next Hurdle: Keeping Interest Rates Low [View article]
    Nmelendez, do consider that the swap arrangements that China is putting together are a modest step towards portfolio diversication. And they are probably more likely due to both, the falling level of USD reserves at places like Argentina, and the fact that the Fed does not engage in unlimited usd swaps with every country that asks for it.

    The retail/trade finance world (bottom up demand) are clamoring for US dollars to put under their matrices. They understand USD, they do not understand, know or care that much about portfolio diversification. They have known for decades that the USD is a paper currency that goes a long way when their local currency devalues. So when these people go to their local bank and says to the banker, I want to convert my 10 million pesos into 3 million usd, guess what they get told? Sorry, we dont have that amount to deliver. What does the bank do? they ask the central bank for usd, the central bank tells them, sorry, we have to keep usd on reserve for potential interventions. what does the client do? he goes to the black market and pays a premium for usd, which in turn puts pressure on the local currency.

    The chinese swap helps central banks to avoid using precious USD, at least on trade with China. The more usd reserves a central bank has, the lower the pressure on the local currency.
    Apr 14 01:06 AM | Likes Like |Link to Comment
  • The Next Hurdle: Keeping Interest Rates Low [View article]
    Folks, the Chinese government is in a quagmire, not in a position of dictating much. I read an NYT article by Keith Bradsher today citing the same news item as James Picerno in this piece. The difference, however, was that Bradsher mentioned the link between the lower purchases of US Treasuries over the first quarter directly mirroring the performance of the Chinese accumulation of USD in FX reserves: fewer USD coming in as a result of lower foreign trade ==> fewer purchases of US Treasuries.

    In the mean time, the Chinese are not able to diversify their investment portfolio just like they can't diversify overnight their trading counterparties. The Bradsher article also has an interesting quote by J.M. Keynes: “If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy.” When a top Chinese economist is candidly telling you this, I think we can support the view that the Chinese are in a quagmire.

    So, where will the demand for Treasuries come from if the Chinese government is not buying as much? I think it is likely to come from international private funds - retail and institutional investors who are not holding their breath that their domestic economies will outperform that of the United States.
    Apr 13 06:16 PM | Likes Like |Link to Comment
  • Obama Helps China in Preparation for a Dollar Collapse [View article]
    I think the article's author reads too much into the Chinese misgivings about its inventory of US assets. A much more plausible explanation of the Chinese dilemma is given by Paul Krugman in one of his posts at the NY Times.

    Link: www.nytimes.com/2009/0...

    Javier Paz, ForexDatasource.com
    Apr 5 06:58 PM | Likes Like |Link to Comment
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