Comments on: US: China shouldn’t peg to the dollar but the Gulf should … http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/ Sat, 21 Nov 2009 16:40:10 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Jeffrey Frankel’s Weblog » Blog Archive » Prospects for Inflation outside America - Guest Post from Menzie Chinn http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-134601 Jeffrey Frankel’s Weblog » Blog Archive » Prospects for Inflation outside America - Guest Post from Menzie Chinn Thu, 19 Nov 2009 19:42:15 +0000 http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-134601 [...] as reserves balloon (see Brad Setser has diligently tabulated on a number of occasions; e.g., [1]), often under pegged-to-the-dollar exchange rate regimes, and the monetary authorities are unable [...] [...] as reserves balloon (see Brad Setser has diligently tabulated on a number of occasions; e.g., [1]), often under pegged-to-the-dollar exchange rate regimes, and the monetary authorities are unable [...]

]]> By: Prospects for Inflation outside America - Guest Post from Menzie Chinn | Jeff Frankels Weblog | Views on the Economy and the World http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-109141 Prospects for Inflation outside America - Guest Post from Menzie Chinn | Jeff Frankels Weblog | Views on the Economy and the World Thu, 26 Jun 2008 20:08:05 +0000 http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-109141 [...] as reserves balloon (see Brad Setser has diligently tabulated on a number of occasions; e.g., [1]), often under pegged-to-the-dollar exchange rate regimes, and the monetary authorities are unable [...] [...] as reserves balloon (see Brad Setser has diligently tabulated on a number of occasions; e.g., [1]), often under pegged-to-the-dollar exchange rate regimes, and the monetary authorities are unable [...]

]]> By: bsetser http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108099 bsetser Thu, 05 Jun 2008 14:32:01 +0000 http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108099 Peter -- Thanks for the link. I have been very impressed with Dr. Lyons work on the gulf and sovereign funds. Peter — Thanks for the link. I have been very impressed with Dr. Lyons work on the gulf and sovereign funds.

]]> By: Peter http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108098 Peter Thu, 05 Jun 2008 13:52:37 +0000 http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108098 Standard Chartered economists think the Gulf should depeg and revalue, see post today: http://arabianmoney.net/2008/06/05/stanchart-forecasts-1-fed-base-rates-by-early-next-year/ Standard Chartered economists think the Gulf should depeg and revalue, see post today:
http://arabianmoney.net/2008/06/05/stanchart-forecasts-1-fed-base-rates-by-early-next-year/

]]> By: don http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108083 don Wed, 04 Jun 2008 17:52:32 +0000 http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108083 The title (and the implied similarities between the Gulf's currency pegging and China's currency pegging) are, in my view, completely misleading. I think Gulf pegging has little effect on shifting global aggregate demand away from other countries to the Gulf. Pegged currency or not, it will take the Gulf some time to adjust their consumption to the new oil windfall. The same is not true for China's currency pegging. The title (and the implied similarities between the Gulf’s currency pegging and China’s currency pegging) are, in my view, completely misleading. I think Gulf pegging has little effect on shifting global aggregate demand away from other countries to the Gulf. Pegged currency or not, it will take the Gulf some time to adjust their consumption to the new oil windfall. The same is not true for China’s currency pegging.

]]> By: glory http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108046 glory Tue, 03 Jun 2008 13:34:54 +0000 http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108046 lex acknowledges there isn't a compelling _economic_ reason for gulf pegs, and i think it's fairly common knowledge (if not 'PC' per se) that they're being kept for political reasons; kinda like <a href="http://www.ft.com/cms/s/0/bc756fc0-2d9b-11dd-b92a-000077b07658.html" rel="nofollow">fuel subsidies</a>... btw, <a href="http://wachovia.com/ws/econ/view/0,,4318,00.pdf" rel="nofollow">any thoughts</a> on resolving global imbalances thru developing world inflation/RER appreciation? lex acknowledges there isn’t a compelling _economic_ reason for gulf pegs, and i think it’s fairly common knowledge (if not ‘PC’ per se) that they’re being kept for political reasons; kinda like fuel subsidies…

btw, any thoughts on resolving global imbalances thru developing world inflation/RER appreciation?

]]> By: The Indian Economy Blog » Guest Post: On the price of crude oil http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108041 The Indian Economy Blog » Guest Post: On the price of crude oil Tue, 03 Jun 2008 07:46:49 +0000 http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108041 [...] that this article was buried too deeply in the inside pages of WSJ than it deserved to. See this interesting post by Brad [...] [...] that this article was buried too deeply in the inside pages of WSJ than it deserved to. See this interesting post by Brad [...]

]]> By: bsetser http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108039 bsetser Tue, 03 Jun 2008 03:32:53 +0000 http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108039 Eyal -- I was perhaps being a bit too coy. If every country in the gulf budgeted for $20 a barrel oil, they could peg to the dollar and see much lower levels of inflation. So in that sense, the fact that the gulf is budgeting for $50 or $60 oil and spending more is the proximate cause for the pickup in inflation. there is less fiscal sterilization. then again it is eminently reasonable for the Gulf to be spending and investment more domestically. And that higher level of domestic spending and investment would be consistent with less inflation if the gulf's currencies appreciated in nominal terms. I was trying to avoid a debate over what is the bigger driver of regoinal inflation -- more domestic spending (including big state sponsored investment projections) or the dollar peg. Both have contributed. And right now both are pushing in the same direciton -- toward more inflation. Glory -- I have never quite understood why driving your currency down against the currencies of your main trading partners (the gulf trades far more with Europe and asia than the US) by extensive government intervention in the fx market isn't considered tampering, while any change in a peg to a currency that you don't trade with it. Oh well. I have not been impressed with the IMF's approach to the Gulf countries or the currency issue. Right now they are embracing fiscal tightening (which would add to imbalances globally) and price controls rather than currency appreciation as the solution to the gulf's problems. And in practice they have embraced an adjustment path with a ton of inflation and negative real interest rates. The IMF is trying not to preach and listen more to the emerging world, but if a region's policy makers are making a big error, the IMF should say so. And I have yet to hear a very compelling reason why it makes sense for the Gulf's currencies to be depreciating in nominal terms/ why the gulf should have low uS rates. Eyal — I was perhaps being a bit too coy. If every country in the gulf budgeted for $20 a barrel oil, they could peg to the dollar and see much lower levels of inflation. So in that sense, the fact that the gulf is budgeting for $50 or $60 oil and spending more is the proximate cause for the pickup in inflation. there is less fiscal sterilization.

then again it is eminently reasonable for the Gulf to be spending and investment more domestically. And that higher level of domestic spending and investment would be consistent with less inflation if the gulf’s currencies appreciated in nominal terms.

I was trying to avoid a debate over what is the bigger driver of regoinal inflation — more domestic spending (including big state sponsored investment projections) or the dollar peg. Both have contributed. And right now both are pushing in the same direciton — toward more inflation.

Glory — I have never quite understood why driving your currency down against the currencies of your main trading partners (the gulf trades far more with Europe and asia than the US) by extensive government intervention in the fx market isn’t considered tampering, while any change in a peg to a currency that you don’t trade with it. Oh well. I have not been impressed with the IMF’s approach to the Gulf countries or the currency issue. Right now they are embracing fiscal tightening (which would add to imbalances globally) and price controls rather than currency appreciation as the solution to the gulf’s problems. And in practice they have embraced an adjustment path with a ton of inflation and negative real interest rates. The IMF is trying not to preach and listen more to the emerging world, but if a region’s policy makers are making a big error, the IMF should say so. And I have yet to hear a very compelling reason why it makes sense for the Gulf’s currencies to be depreciating in nominal terms/ why the gulf should have low uS rates.

]]> By: glory http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108029 glory Mon, 02 Jun 2008 15:54:07 +0000 http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108029 <a href="http://www.ft.com/cms/s/1/a2fbcc36-3081-11dd-bc93-000077b07658.html" rel="nofollow">lex sez</a>: "the reality is that forcing supermarkets to keep prices down is more politically palatable than tampering with currencies. It also has a global stamp of approval. Both the International Monetary Fund and the Asian Development Bank have said countries should consider direct measures to tackle food inflation rather than more orthodox tools that could slow growth. Recent announcements by GCC governments suggest currency reform is, for now, completely off the agenda." lex sez: “the reality is that forcing supermarkets to keep prices down is more politically palatable than tampering with currencies. It also has a global stamp of approval. Both the International Monetary Fund and the Asian Development Bank have said countries should consider direct measures to tackle food inflation rather than more orthodox tools that could slow growth. Recent announcements by GCC governments suggest currency reform is, for now, completely off the agenda.”

]]> By: Eyal http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108020 Eyal Mon, 02 Jun 2008 04:58:25 +0000 http://blogs.cfr.org/setser/2008/05/31/us-china-shouldnt-peg-to-the-dollar-but-the-gulf-should/#comment-108020 Brad, I'm not clear about your thoughts on this. First, regarding Paulson's statement about the role of dollar pegs, you say "that is no doubt true". But then you opine that "it isn’t an accident that nearly every country that pegs to the dollar ...all have seen an acceleration in inflation". Well, is it or isn't it? Brad, I’m not clear about your thoughts on this. First, regarding Paulson’s statement about the role of dollar pegs, you say “that is no doubt true”. But then you opine that “it isn’t an accident that nearly every country that pegs to the dollar …all have seen an acceleration in inflation”. Well, is it or isn’t it?

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