Comments on: What happened to financial globalization?

By: Anonymous

Anonymous — Mon, 31 Mar 2008 14:33:10 +0000

“…by 2004 there were more than 5,000 of them. Though export processing zones are promoted as an easy way for countries to earn badly need foreign currency, and thus may be set up with funds from international institutions such as the World Bank, their positive impact on economies and societies is as absent as their tax contributions… such zones often require a lot of government infrastructure… There are at least 73 countries and territories that fit the classification of a tax haven [p. 24]… profits show up in jurisdictions with more lenient tax collectors… a large part of international trade is intra-firm trade, and thus takes place with the same corporations either as sales between subsidiaries or as sales between parent and subsidiary companies, where prices are not set by market forces… A third way of reducing corporate taxes is by transferring the ownership of a trade name, often a very valuable asset, to a low-tax location, and then charging a company’s taxable operations large royalties to use the name. It can also be done with patents, where subsidiaries then charge licensing fees for the use of these patents. Such parking of intellectual property offshore can effectively shelter huge profits….” http://www.icftu.org/www/pdf/taxbreak/tax_break_EN.pdf

By: Anonymous

Anonymous — Mon, 31 Mar 2008 13:13:40 +0000

power deficits might be the greatest direct and indirect impediments to financial globalization

“…regulated prices for electricity could rise from 20 – 23% next year…” http://www.moscowtimes.ru/article/1009/42/361607.htm

“…While each country tells a different story…” South Africa, Middle East, Iran, Argentina, Bolivia, Chile, India, China and Russia having “hit capacity constraints, power shortages are expected to remain a common feature…” ‘Power deficits will get worse’ http://www.globeinvestor.com/servlet/story/RTGAM.20080328.woxfordanal0331/GIStory/

By: Anonymous

Anonymous — Mon, 31 Mar 2008 12:45:28 +0000

3/31/2008 2:51:02 PM “The US currency advanced against its Brazilian counterpart… Extending last week’s up trend, the pair climbed to a 6-week high…” http://www.rttnews.com/FOREX/Currency_mkt.asp?date=03/31/2008&item=78

By: bsetser

bsetser — Mon, 31 Mar 2008 12:41:22 +0000

gabor — i have no idea if the data is solid. my guess is that a flight into safe money market funds has contributed to the growth in m3, but i would need to spend some time digging into the data. I never have paid all that much attention to the us monetary aggregates to be totally honest. the absence of m1 growth in the data though i can confirm. the fed’s overall balance sheet hasn’t been growing.

By: Anonymous

Anonymous — Mon, 31 Mar 2008 12:39:30 +0000

“…the value of the dollar is not weak but is actually very strong…” http://www.ft.com/cms/s/0/1b13cbee-fc69-11dc-9229-000077b07658.html

By: Guest

Guest — Mon, 31 Mar 2008 12:19:33 +0000

The bursting of the Wall Street finance and U.S. Credit Bubbles marks an End of an Era. But the start of a deflationary spiral? Importantly, these bursting Bubbles are in the process of consummating the demise of the dollar as the world’s functioning “reserve currency” and monetary standard. Examining global markets, I note the ongoing strength of currencies in China, Russia, Brazil, and India, for example. Considering mounting financial and economic imbalances in all these economies – not too mention histories of less than exemplary monetary management – I can state categorically that these are fundamentally very weak currencies. Today, however, it’s all relative to the sickly dollar. In the face of rampant domestic Credit growth, these currencies nonetheless attract endless global finance and appreciate.

By: Anonymous

Anonymous — Mon, 31 Mar 2008 12:01:30 +0000

“…corporate giants such as Boeing, Haliburton, Morgan Stanley, Pepsi and Xerox have increased their subsidiaries in tax havens by several hundred or thousand percent in just five years…” http://www.icftu.org/www/pdf/taxbreak/tax_break_EN.pdf

By: Gabor

Gabor — Mon, 31 Mar 2008 12:00:13 +0000

Brad, how do you explain the explosion in non official M3 readings, if there was such a serious deleveraging?
http://www.shadowstats.com/alternate_data
Is this data creditworthy?

By: mheck82

mheck82 — Mon, 31 Mar 2008 11:53:03 +0000

there were temporary reductions in financial globalisation before. Maybe that some vehicles are breaking down now, but in the long run financial globalisation will remain if political stability remains (e.g. that people can be sure they will get their money and there is no confiscation for political reasons). Assuming that in a modern society most people will get a share of their income from work and another from capital, investing the capital in a different country is a very good hedge against a bad economic development at home, as the income balance of the US at the very moment proves.
Therefore I would bet, that we see only a temporary backlash.

By: bsetser

bsetser — Mon, 31 Mar 2008 11:08:21 +0000

Gadhafi isn’t making it easy for the us to welcome the libyan investment fund …

but i would like to see more comments that address some of the questions around financial globalization that i raised — is the fall in q3 and q4 a temporary break, or a permanent shift (as df argues)? was a lot of the apparent increase in financial globalization fake, as it amoutned to us banks (and money market funds) lending to uk entities to buy logn-term us debt without any real fall in the share of us savings invested in us and dollar assets (or rise in foreign investment in the us and the us dollar)? how has the growing use of offshore entities (the caribbean for hedge funds/ uk it seems for sivs and the like) influenced the data?