Benn Steil

Geo-Graphics

A graphical take on geoeconomic issues, with links to the news and expert commentary.

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Showing posts for "Emerging"

Can Russia Escape Dollar Dependence?

by Benn Steil and Dinah Walker
Russia investment in BICS

Russian president Vladimir Putin is determined to wean his country off the dollar, or so he says.

In July, after insisting that the international monetary system depended too much “on the U.S. dollar, or, to be precise, on the monetary and financial policy of the U.S. authorities,” Putin signed off on a new BRICS development bank whose initial paid-in capital would be entirely in dollars – unlike the World Bank, where only 10% of paid-in capital was in dollars.  So the new BRICS bank actually creates a new source of demand for dollar assets. Read more »

Is the BRICS Contingent Reserve Arrangement a Substitute for the IMF?

by Benn Steil and Dinah Walker
BRICS CRA vs IMF borrowing

Russian President Vladimir Putin has hailed the new BRICS contingent reserve arrangement (CRA) as a substitute for the IMF, saying that it “creates the foundation for an effective protection of our national economies from a crisis in financial markets.” But does it? Read more »

Is the BRICS Bank More “Democratic” Than the World Bank?

by Benn Steil and Dinah Walker
brics bank world bank founders vs non founding members

The launch of the new BRICS development bank “reflects the disparity and democratic deficiency in the global governance and is trying to restart, to rethink that,” according to Nobel economist Joseph Stiglitz.  But is the BRICS bank really more “democratic” than the World Bank, whose governance legitimacy its founders are challenging? Read more »

Hurling BRICS at the World Bank and the $

by Benn Steil and Dinah Walker
brics bank world bank

Brazil, Russia, India, China, and South Africa (the “BRICS”) made a splash last week with the official launch of their new development bank.  The backers made no secret of their intention to challenge the way things are done in the established international financial and monetary architecture. Read more »

IMF Reform and Ukraine: Amateur Hour for U.S. Economic Diplomacy

by Benn Steil and Dinah Walker
ukraine imf reform

In our March 5 post, we argued that the Obama administration linking Ukraine aid to IMF reform was disingenuous and counterproductive.  We were right: the legislation failed, congressional Republicans were angered, foreign governments were annoyed, and aid was delayed.  All for what?  Without IMF reform, Ukraine will still get every penny it would have gotten with IMF reform.  Today’s Geo-Graphic shows this.  And more… Read more »

Lew Does Not Need IMF Reform to Aid Ukraine

by Benn Steil and Dinah Walker
Ukraine IMF

The new provisional government in Ukraine is seeking $15 billion in assistance from the International Monetary Fund.  This would represent 700% of the country’s quota with the Fund, added on top of the loans it has already outstanding, amounting to 214% of its quota. Read more »

Was Ukraine Tapered?

by Benn Steil and Dinah Walker
ukraine

For Ukraine’s beleaguered bond market, the seminal event of 2013 was Ben Bernanke’s now-famous taper talk of May 22.  As today’s Geo-Graphic shows, it sent yields soaring to levels they never came back from.

Ukraine was uniquely susceptible to taperitis, having been sporting a current account deficit of 8% of GDP—considerably worse than other big victims such as India, Brazil, Indonesia, Turkey, and South Africa.  Its current political crisis clearly has deep roots, yet it is interesting to speculate as to whether Yanukovych could have held on had it not been for the country’s spiraling debt costs—sent spiraling by the Fed last May. Read more »

The New Geo-Graphics iPad Mini Index Should Calm Talk of Currency Wars

by Benn Steil and Dinah Walker

The “law of one price” holds that identical goods should trade for the same price in an efficient market.  To what extent does it hold internationally?

The Economist magazine’s famous Big Mac Index uses the price of McDonalds’ burgers around the world, expressed in a common currency (U.S. dollars), to estimate the extent to which various currencies are over- or under-valued.  The Big Mac is a global product, identical across borders, which makes it an interesting one for this purpose.  Yet it travels badly – cross-border flows of burgers won’t align their prices internationally. Read more »

A GDP-Based IMF Would Boost China’s Voice . . . and America’s

by Benn Steil and Dinah Walker
reallocation

Since its creation after the 1944 Bretton Woods conference, membership of the International Monetary Fund (IMF) has grown from 29 countries to 188.  Representation, in terms of votes and quotas, has also become less connected with the relative weights of each country in the global economy.  As today’s Geo-Graphic shows, China would be by far the biggest beneficiary of an IMF voting reallocation based purely on gross domestic product, gaining eight percentage points.  What is much less well known, however, is that the United States would be the second biggest beneficiary, well above third-place Japan and fourth-place Brazil.  As the United States already has enough votes to wield unique veto power, this would have little practical effect on its already enormous influence.  But it does explain why the United States has been consistently more aligned with the so-called BRIC developing nations on IMF reform than with its fellow rich nations in Europe. Read more »