Financial Tsunami ( FT ) ( continued ) - ( 21 ) - Feb., 20, 2011

The Financial Tsunami ( FT ) ( continued ) - ( 21 ) - G20 in Paris ( ( 巴黎G20高峰會 ) - Feb., 20, 2011

( Report from BBC NEWS : http://www.bbc.co.uk/news/business-12499214 )

First of all, I must express my deepest regret that the aftermath of the 2008 financial tsunami is still hindering the recovery of the world economy. This is my #21 blog post on the FT. Had there been better cooperation between the different economies in the world a full recovery should have been a reality by now.
首先，我想表達我的遺憾，因為2008年八月開始的金融海嘯餘波，到了兩年多的今天，仍現然持續，令世界經濟未能復元。這是我有關金融海嘯的第二十一篇部落格 （ BLOG ）文章。假若各國衷誠合作的話，世界經濟早已復甦了。


At the ongoing Paris meeting of G20 to deal with the aftermath of the 2008 financial tsunami members sadly failed to agree on targets to address economic imbalance. I list out below the various important issues under discussion :-
正在巴黎進行中的G20 峰會，可悲地又無法同意，如何調整經濟不平衡的目標。他們討論的主題如下:-


( 1 ) The exchange rate of the Yuan
人民幣的匯率


There is a continued call from the western countries to pressure China to revalue the Yuan. The RMB is by all standards undervalued but the true extent cannot be objectively determined unless it becomes a freely circulating currency which value could then be decided by supply and demand. This in turn would more fairly reflect the strength of a country's trading position. Despite the huge deficits accumulated by USA the dollar did not devalue accordingly because it is also a banker or reserve currency of most economies. Therefore, it is not solely China's fault that this is so. As numerous economic entities are holding assets in US dollars no one wants to see it fall drastically. If it really does this will again precipitate another financial tsunami. This is both a privileged and vulnerable position of a banker currency the advantage being higher purchasing power despite huge spending deficits and the disadvantage being less competitive in trade. As for the devaluation of the Yuan, there is not much room for devaluation without hurting her economy. This is so because China mainly depends on cheap labour to accumulate her surplus. The profit margin for such low value added production is but a few percentage points. Devaluing too much would completely wipe out her competitive edge over other developing economies. Anyway, by the current practice of money printing to finance her deficits USA is actually devaluing the dollar unilaterally. Mind you this is a fast track down to a third world country once people can find a replacement reserve currency. This is happening fast. Please see ( 2 ) below.
以西方國家為首的予會者，又再度要求人民幣貶值。確實地說， 人民幣的價值是偏低，沒有完全反映中國的經濟強化。至於確實低了多少，是十分難以確定，除非它是自由匯兌的貨幣，則可以由供應和需求決定其價值。這也可以 反映中國的貿易狀況。儘管美國累積了巨額赤字，但是美元仍沒有大幅貶值。這是因為它也擔當其他國家儲備貨幣的責任。因此，美元的偏高，不完全是中國的責 任。有很多經濟單位都擁有大量美元資產，沒有人希望它大幅貶值。如果這成為現實，更會導致全球災難性的金融大慘劇。作為儲備貨幣，有益處也有害處。益處在 巨大赤下也能夠保持購買力，害處在降低了競爭能力。就以人民幣貶值一事，其實它的貶值空間不大。原因是中國以廉價工資為優勢，高增值工業佔少數。邊際利潤只 有幾個百分比，大幅貶值會摧毀中國的競爭能力。其實，美國現行以印鈔票的方法去支付花費，已經是在單方面自行貶值美元了。可悲的是，這會令美國淪為第三世界國家，別人會更換其他貨幣為儲備，不再倚靠美元了。這會十分快成為事實的，請看以下（ 2 ）段。


( 2 ) Including the Yuan as a part of the IMF Special Drawing Rights ( SDR )
將人民幣加入為國際貨幣基金的特別提支權利中

This is a first step to using it as a reserve currency like the US Dollar. China may not like it at this point in time because her autocratic political system requires total control over everything. Anyway, it is not very feasible at this stage because it is not a freely circulating currency as yet. Special Drawing Rights are financial support provided by the International Monetary Fund to its members in case of financial emergency. Members contribute to the setting up of the reserve of SDR according to their agreed share. SDR are composed of various major currencies that are mostly freely circulating although this emergency asset is denominated in US dollars for accounting purposes. However, it is a good start to sideline the US dollar as the main reserve currency of the world which signifies a decline in the dominance of the US economy.
這是將人民幣變成一種儲備貨幣的第一步。中國在這個時刻，未必想這樣做。為因中國政府是要求在各個範疇都可加以控制的。而且，在人民幣未成為自由匯兌貨幣前，這做法意義不大。特別提付權，是國際貨幣基金給予成員國的緊急金融支援。富有成員各自提供金錢，以主要貨幣組成SDR。不過在原則上，這是降低美元在SDR 的比重， 是明智的做法。這也意味到美元地位的下降。

Apart from the discussion of revamp of the SDR some economists at the meeting have squarely put the blame on China for contributing to the 2008 financial tsunami by buying up US government bonds ( when bond prices are high the effective interest rate will be low because bonds are fixed monetary value debt instruments ) causing US interest rates to remain low thus culminating in the tsunami. While this is a contributing factor the root of the tsunami had actually originated from over spending in USA which was not in line with the corresponding increase in her productive efficiency. Excess speculation and more importantly illegal and unethical practices of some Wall Street gurus are the final straw that broke the camel's back. The evils of excessive speculation are now obvious in the drastic increase in food prices which is another looming catastrophe. Please see ( 3 ) below.
除將SDR改進外，有些經濟學家指控中國的大量購買美國政府債券，因而推低美國利息，是2008金融海嘯的懸凶。由於債券是固定價錢的債務，所以價錢越 高，回報利息便越低。雖然這是原因之一，但是更重要的因素是美國花費遠超過其生產效率，加以過分投機，和華爾街不良經紀的非法活動，才導致大災難。過度投機的禍害，可在飛漲的基本商品價格中看到。請看以下第（ 3 ）段。


( 3 ) The drastic increase in prices of basic commodities.

It is a good sign that G20 started to address the rapid increase in prices of basic commodities. While speculation is part and partial of a market or capitalistic economy it can be fatal at times. Speculation which involves buying and selling forward ( the futures market ) was originally meant to allowed consumers to cover their risk. For example, a Hong Kong citizen has bought a house in New York which he has to settle payment in six month. With the futures market in US dollars operating he or she can cover the exchange risk by booking the required amount of US dollars now. It is just like a kind of insurance. However, people can speculate purely on the future price without using the future US dollar contract for normal trading purpose. With the availability of financial leverage ( paying just a fraction of the total price of the future contract and paying interest on the balance owed ) and the prevailing low interest rate speculators can create what we call a lot of speculative demand on basic food commodities. That is the main reason for the sudden surge in food and petroleum prices apart from effects of natural disasters and political instability like the current crisis in the Middle East.
G20開始討論基本商品和食糧價格飛漲問題，這是一個好現象。雖然投機是市場經濟的一部分，但是在某種情況下，它是會致命的。投機是指買空賣空商品，本來是給 予消費者一個保險的安排。例如，一個香港人買了一所紐約的房子，要在六個月後付款。為了保險，他可以在期貨市場，以現在的匯率買下需要的美元，當然需要付 點費用，但可以保証不用將來付更高的匯率。不過有時，人們也可以為賺取利潤而投機的。如果利息低，人們更可以利用槓桿原理，或俗稱媽展(MARGIN)買 賣，只用價錢的少部分買更多的期貨。於是，這投機的需要，便構成了更多需求，引致基本商品價錢暴漲了。這便是近日，基本商品價錢飛升的主要原因。雖然，自 然災害和例如中東政治動蕩，都會影響物品價錢。


Although an ideal market should be totally free just like a full load of passengers on a cruise ship at sea ( who must be allowed to move around to enjoy their cruise ) there must , nevertheless, be some kind of safety precaution like asking passengers not to make a sudden rush to one side of the ship to avoid capsizing. Nothing is totally free in terms of action in this world. Therefore, some kind of restriction must be imposed on speculation of basic commodities that affect the lives of billions of global citizens. However, it must not be overdone to the point of creating artificially low prices which will not reflect the true demand needs and thus giving rise to short supply of a particular item. This will happen just like when governments are subsidizing the price of agricultural products for political reason leading to artificially low prices that will deter people from engaging in agricultural production. This will ultimately lead to a shortage of supply. We see this phenomenon in China where a lot of farm land is converted to real estate development thus leading to the need of more import of staple food items.
雖然一個理想的市場是應絕對自由的，但是在某些情況下，恰當控制是無可厚非的。例如，一艘滿載乘客的海上郵輪，乘客是必須自由活動，才可以享受旅程的。不過，某些安全指引，如乘客不可全部同一時間衝往船的一邊，以防發生意外，這是可以理解的限制。在 這世界裏，是沒有百份百的自由這回事的。例如關乎千百萬人的基本生活需要，便有需要加以恰當的監管了。話需要說回來，這些控制卻不能過量，引致有關商品價 錢過低，令到生產者卻步，最後會變成供應短缺，這便壞了大事。中國的農地，多變為地產項目，這都是因為國家補貼農產品所至。


Hopefully, common sense will prevail in the Paris G20 meeting. All countries must work hand in hand sincerely to put the world economy on the right path to a full recovery. Most importantly, a world food crisis cannot be allowed to materialize.
希望G20的予會國家保持理性的態度，拿出誠意來攜手合作，令世界經濟返回復甦之路。最重要的是不能容許食糧危機，成為事實。


JKHC. ( 鄭冠合 )