The truth about China’s currency
Derek Scissors | The Hill The primary goal of Beijing’s exchange rate policy is not to boost exports, as US critics believe. It’s not to adjust to domestic economic shifts, as basic economics indicates. It is impossible to identify the yuan’s “true market value,” and hence undervaluation or overvaluation. China has a nonmarket financial system. It is a nonmarket system that dictates the yuan’s level and movement.
Growing bloc aims to dethrone US dollar
BY ASIA TIMES STAFF Slowly, but surely, a small group of countries are moving to throw off the shackles of the greenback
Former RBI Governor Rajan On China's Debt, Economy
interview with Raghuram Rajan via Yahoo Finance Hoover Institution fellow Raghuram Rajan talks about China's debt, China's move away from export-led growth to domestic-led growth, and his outlook for the economy.
Central Banks Lack Tools To Boost Inflation, Raghuram Rajan Says
interview with Raghuram Rajan via Bloomberg Quint Hoover Institution fellow Raghuram Rajan discusses inflation and notes that central banks across the globe lack the tools to boost inflation. Rajan says that earlier the fight for central banks was against high inflation but unfortunately, we have the opposite problem now that inflation in many cases is a little too low.   Fed risks roiling global markets Desmond Lachman | Official Monetary and Financial Institutions ForumFed Chair Jay Powell will need to normalize interest rates in order to curtail inflation. However, today’s global political environment, with several troubled economies abroad, will make Chair Powell’s task significantly more challenging. He will have to raise rates without causing disruptive credit repricing that could unsettle troubled financial markets abroad. On the Accuracy of Alternative Approaches for Calibrating Bank Stress Test Models
Paul H. Kupiec | AEI Economics Working Paper Series In his most recent working paper, Paul Kupiec analyzes the accuracies of alternative methods for forecasting bank performance over multi-year stress scenarios, using the financial crisis as a “natural experiment.” The results show that complex Federal Reserve CLASS-style models produce stress test forecasts that severely underestimate the income before taxes and extraordinary items earned by a representative bank over the first three years of the financial crisis. In contrast, simplified stress test model specifications produce far more accurate forecasts. The results highlight the need for national regulators, multinational standard setting bodies, and researchers to focus on developing reliable methods to assess the accuracy of supervisory stress testing models. 
Oriana Skylar Mastro | US-China Economic and Security Review Commission
How is China preparing for a contingency in North Korea? What forces would be available to respond to a contingency, and what might those operations look like in different scenarios? Testifying before the US-China Economic and Security Review Commission last Thursday, Oriana Skylar Mastro described how Beijing is most likely to act if such a scenario broke out. China’s People’s Armed Police and border security would likely be responsible for securing the border and handling refugees. This frees up the People’s Liberation Army to engage in more traditional military operations within North Korea. The most important thing to remember is that China is looking out for its own interests, whether at the negotiating table or on the battlefield, and not those of the United States. Smart policy can mitigate the risks of Chinese involvement and exploit the benefits, but Chinese “cooperation” always comes at a price. Read her prepared remarks.
Devaluation game?
BY ASIA TIMES STAFF Twitter rant aside, the Chinese yuan's exchange rate versus the dollar has roughly doubled over the past 25 years
Sino-American trade: We know where this is headed
Derek Scissors | War on the Rocks The United States will not accept another decade of a much-larger China warping competition in its home market while demanding open markets overseas. It will not tolerate another decade of China mining the relationship for resources to seize technological leadership. The economic relationship will shrink. We’re just arguing about timing.
Challenging China
Gary J. Schmitt and Jamie M. Fly | The Weekly Standard President Trump’s National Security Strategy states that China is challenging “American power, influence, and interests, attempting to erode American security and prosperity.” And while much attention has been focused on Beijing’s expanding military presence in the South China Sea, its effort to expand its influence across Asia and Europe, and its unfair trade practices, China’s challenge to the administration’s vision of a free and open Indo-Pacific region is increasingly taking place in Taiwan and Hong Kong.  What Democracy Now Means? Which Way Is India Headed? mentioning Larry Diamond via The Indian Panorama The Lok Sabha eventually adjourned sine die after weeks of being non-functional. The Opposition’s no-confidence motion was ruled by the Speaker as un-implementable as the House was not in order. Under similar conditions, the important annual Budget was allowed to be passed without debate. Raghuram Rajan Says India's Economic Growth Looks Pale Only When Compared With China
quoting Raghuram Rajan via Financial Express (India) Former RBI governor Raghuram Rajan has said that the comparison between India and China is unfair because the latter has upper hand in building infrastructure as there the state owns every asset, while in India there are enormous pushbacks. Need New Economic Theory To Explain How Demonetisation Helped India: Raghuram Rajan quoting Raghuram Rajan via Money Control Rajan said that the negative effects of demonetisation have already been seen, whereas the positives stemming from it, if any, will only be visible in the future.  Devaluation of yuan still a threat despite Xi’s promises BY WILLIAM PESEK Xi granted Trump's wish of an opened up economy, but an old demon – the competitive devaluation of the yuan – still hovers in the background Fed risks roiling global markets
Desmond Lachman | Official Monetary and Financial Institutions Forum  Why Iran moved to unify dual exchange rates Iran’s government was left with no choice but to resort to unifying the official and open market currency exchange rates to tame the rial's slide during a currency crisis, which has spurred some positive efforts. What's really driving currency depreciation in Iran? Rather than an indicator of a poor economy, the devaluation of the Iranian currency is the result of investment behavior, and what we are witnessing now looks more like a bubble. Iran, Russia, Turkey see their currencies tumble in tandem BY DAVID P. GOLDMAN Western powers turn the screws one week after meeting in Istanbul to discuss Syria Iran MPs call on Central Bank governor to resign as rial plummets Iranian President Hassan Rouhani and Central Bank Gov. Valiollah Seif have come under heavy fire over the sudden devaluation of the rial. What's behind Iran's massive capital flight?
While a large amount of hard currency has left Iran in the years since the implementation of the nuclear deal, the picture is more complex than a simple case of investors rushing to move their capital outside the country.  Twin deficit danger of America First Desmond Lachman | Official Monetary and Financial Institutions Forum China trade basics amid the confusion Derek Scissors | AEIdeas Trump administration officials have emphasized the harm of Chinese practices, the failure of previous administrations to respond, and the need for strong corrective action. The president’s stated preference for conflict can also be a diplomatic advantage up to a point, keeping China off-balance. In a second AEIdeas blog, Scissors lays out five basic trade observations about the US-China spat. Read it here.
 A Debt Crisis Is On The Horizon
by Michael J. Boskin, John H. Cochrane , John F. Cogan, George P. Shultz, John B. Taylor via The Washington Post We live in a time of extraordinary promise. Breakthroughs in artificial intelligence, 3D manufacturing, medical science and other areas have the potential to dramatically raise living standards in coming decades. But a major obstacle stands squarely in the way of this promise: high and sharply rising government debt.  A brief guide to strategy and sanctions
Thomas Donnelly | Strategika There is widespread belief that economic sanctions can be a powerful tool of statecraft, but the problem is that they are taken out of context. Absent a larger strategy — that is to say, one grounded in military power — trade is a weak means of compelling a competitor to do one’s bidding. |
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