Where do we go from here?by Robert Skidelsky

enviado por oscar blanco a la lista macroperu

Where do we go from here?by Robert Skidelsky

The markets have ruled for a third of a century, but it has all ended in tears. A return to selfish nationalism is possible. If we are to avoid this sombre outcome, we must find ways to rub the rough edges off globalisation

Robert Skidelsky is the author of John Maynard Keynes 1883-1946: Economist, Philosopher, Statesman (Pan)

Any great failure should force us to rethink. The present economic crisis is a great failure of the market system. As George Soros has rightly pointed out, "the salient feature of the current financial crisis is that it was not caused by some external shock like Opec… the crisis was generated by the system itself." It originated in the US, the heart of the world's financial system and the source of much of its financial innovation. That is why the crisis is global, and is indeed a crisis of globalisation.

There were three kinds of failure. The first, discussed by John Kay in this issue, was institutional: banks mutated from utilities into casinos. However, they did so because they, their regulators and the policymakers sitting on top of the regulators all succumbed to something called the "efficient market hypothesis": the view that financial markets could not consistently mis-price assets and therefore needed little regulation. So the second failure was intellectual. The most astonishing admission was that of former Federal Reserve chairman Alan Greenspan in autumn 2008 that the Fed's regime of monetary management had been based on a "flaw." The "whole intellectual edifice," he said, "collapsed in the summer of last year." Behind the efficient market idea lay the intellectual failure of mainstream economics. It could neither predict nor explain the meltdown because nearly all economists believed that markets were self-correcting. As a consequence, economics itself was marginalised.

But the crisis also represents a moral failure: that of a system built on debt. At the heart of the moral failure is the worship of growth for its own sake, rather than as a way to achieve the "good life." As a result, economic efficiency—the means to growth—has been given absolute priority in our thinking and policy. The only moral compass we now have is the thin and degraded notion of economic welfare. This moral lacuna explains uncritical acceptance of globalisation and financial innovation. Leverage is a duty because it "levers" faster growth. The theological language which would have recognised the collapse of the credit bubble as the "wages of sin," the come-uppance for prodigious profligacy, has become unusable. But the come-uppance has come, nevertheless.

Historians have always been fascinated by cyclical theories of history. Societies are said to swing like pendulums between alternating phases of vigour and decay; progress and reaction; licentiousness and puritanism. Each outward movement produces a crisis of excess which leads to a reaction. The equilibrium position is hard to achieve and always unstable.
In his Cycles of American History (1986) Arthur Schlesinger Jr defined a political economy cycle as "a continuing shift in national involvement between public purpose and private interest." The swing he identified was between "liberal" (what we would call social democratic) and "conservative" epochs. The idea of the "crisis" is central. Liberal periods succumb to the corruption of power, as idealists yield to time-servers, and conservative arguments against rent-seeking excesses win the day. But the conservative era then succumbs to a corruption of money, as financiers and businessmen use the freedom of de-regulation to rip off the public. A crisis of under-regulated markets presages the return to a liberal era.

This idea fits the American historical narrative tolerably well. It also makes sense globally. The era of what Americans would call "conservative" economics opened with the publication of Adam Smith's Wealth of Nations in 1776. Yet despite the early intellectual ascendancy of free trade, it took a major crisis—the potato famine of the early 1840s—to produce an actual shift in policy: the 1846 repeal of the Corn Laws that ushered in the free trade era.

***

In the 1870s, the pendulum started to swing back to what the historian AV Dicey called the "age of collectivism." The major crisis that triggered this was the first great global depression, produced by a collapse in food prices. It was a severe enough shock to produce a major shift in political economy. This came in two waves. First, all industrial countries except Britain put up tariffs to protect employment in agriculture and industry. (Britain relied on mass emigration to eliminate rural unemployment.) Second, all industrial countries except the US started schemes of social insurance to protect their citizens against life's hazards. The great depression of 1929-32 produced a second wave of collectivism, now associated with the "Keynesian" use of fiscal and monetary policy to maintain full employment. Most capitalist countries nationalised key industries. Roosevelt's new deal regulated banking and the power utilities, and belatedly embarked on the road of social security. International capital movements were severely controlled everywhere.

This movement was not all one way, or else the west would have ended up with communism, which was the fate of large parts of the globe. Even before the crisis of collectivism in the 1970s, a swing back had started, as trade, after 1945, was progressively freed and capital movements liberalised. The rule was free trade abroad and social democracy at home.

The Bretton Woods system, set up with Keynes's help in 1944, was the international expression of liberal/social democratic political economy. It aimed to free foreign trade after the freeze of the 1930s, by providing an environment that reduced incentives for economic nationalism. At its heart was a system of fixed exchange rates, subject to agreed adjustment, to avoid competitive currency depreciation.

The crisis of liberalism, or social democracy, unfolded with stagflation and ungovernability in the 1970s. It broadly fits Schlesinger's notion of the "corruption of power." The Keynesian/social democratic policymakers succumbed to hubris, an intellectual corruption which convinced them that they possessed the knowledge and the tools to manage and control the economy and society from the top. This was the malady against which Hayek inveighed in his classic The Road to Serfdom (1944). The attempt in the 1970s to control inflation by wage and price controls led directly to a "crisis of governability," as trade unions, particularly in Britain, refused to accept them. Large state subsidies to producer groups, both public and private, fed the typical corruptions of behaviour identified by the new right: rent-seeking, moral hazard, free-riding. Palpable evidence of government failure obliterated memories of market failure. The new generation of economists abandoned Keynes and, with the help of sophisticated mathematics, reinvented the classical economics of the self-correcting market. Battered by the crises of the 1970s, governments caved in to the "inevitability" of free market forces. The swing-back became worldwide with the collapse of communism.

A conspicuous casualty of the swing-back was the Bretton Woods system that succumbed in the 1970s to the refusal of the US to curb its domestic spending. Currencies were set free to float and controls on international capital flows were progressively lifted. This heralded a wholesale change of direction towards free markets and the idea of globalisation. This was, in concept, not unattractive. The idea was that the nation state—which had been responsible for so much organised violence and wasteful spending—was on its way out, to be replaced by the global market. The prospectus was perhaps best set out by the Canadian philosopher, John Ralston Saul, in a 2004 essay in which he proclaimed the collapse of globalisation: "In the future, economics, not politics or arms, would determine the course of human events. Freed markets would quickly establish natural international balances, impervious to the old boom-and-bust cycles. The growth in international trade, as a result of lowering barriers, would unleash an economic-social tide that would raise all ships, whether of our western poor or of the developing world in general. Prosperous markets would turn dictatorships into democracies."

Today we are living through a crisis of conservatism. The financial crisis has brought to a head a growing dissatisfaction with the corruption of money. Neo-conservatism has sought to justify fabulous rewards to a financial plutocracy while median incomes stagnate or even fall; in the name of efficiency it has promoted the off-shoring of millions of jobs, the undermining of national communities, and the rape of nature. Such a system needs to be fabulously successful to command allegiance. Spectacular failure is bound to discredit it.

The situation we are in now thus puts into question the speed and direction of progress. Will there be a pause for thought, or will we continue much as before after a cascade of minor adjustments? The answer lies in the intellectual and moral sphere. Is economics capable of rethinking its core principles? What institutions, policies and rules are needed to make markets "well behaved"? Do we have the moral resources to challenge the dominance of money without reverting to the selfish nationalisms of the 1930s?

***

The enquiry must start with economics. If the case for the deregulated market system is intellectually sound, it will be very hard to change. Free- marketeers claim, contrary to Soros, that the crisis is the fault of governments. US money was kept too cheap for too long after the technology bubble burst in 2000 and the attacks of 11th September 2001. The market was temporarily fooled by the government. This is a shaky defence, to say the least: if the market is so easily fooled, it cannot be very efficient.

One can also argue that the problem is not with the market system, but the fact that markets are too few and inflexible. This seems to be the view of Yale economist Robert J Shiller. He likens the financial system to an early aircraft. Just because it is prone to crash doesn't mean we should stop trying to perfect it. Shiller claims that new derivative products will soon be able to insure homeowners against the risk of house prices going down. To my mind, this is an example of trying to cure a state of inebriation by having another whiskey. There are two things wrong with it. First, if financial innovation is, in fact, the route to greater market efficiency, the financial system would have been getting more stable in the last 25 years of explosive financial engineering. Instead it has become more volatile. Second, the assumption that, given enough innovation, uncertainty can be reduced to risk, is just wrong. There will never be sufficient knowledge to enable contracts to be made to cover all future contingencies.

An analogous argument is that there was not enough marketisation in the global monetary system. Instead of the "clean" floating of currencies, "dirty" floating became the rule. Importantly, China and most of east Asia refused to float their currencies freely. China reverted unilaterally to a form of Bretton Woods, deliberately undervaluing the yuan against the US dollar. The resulting imbalances enabled American consumers to borrow $700bn a year from the parsimonious but super-competitive Chinese, at the cost of losing millions of manufacturing jobs to them. The Chinese saved, the Americans spent, and their debt-fuelled spending created the asset bubbles that led to the credit collapse. This source of instability needs no revision of economic theory, simply the establishment of a free market in foreign currencies. However, the assumption that a world in which currencies were allowed to float freely would be immune from the financial storms we have experienced depends on the belief that currencies will always trade at the correct prices—the global version of the efficient market hypothesis.

A different claim, which goes back to Marx, is that certain structures of economy are less stable than others. Globalisation has increased instability by producing a shift in world GDP shares from wages to profits as the release of low-wage populations into the global economy has undermined the bargaining power of labour in rich countries. This has led to a crisis of under-consumption, staved off only by the expansion of debt (as Gerald Holtham points out, in Prospect's December 2008 issue). There is some truth in this. A greater equality of incomes would create more stable purchasing power.

But the main source of instability lies in the financial markets themselves. And here it is clear that the battle of economic ideas still needs to be fought. Keynes is important in this because he produced the most powerful case for supposing that financial markets are not efficient in the sense required by efficient market theory. As he explained in The General Theory of Employment, Interest, and Money (1936), classical economics had ignored the two main causes of systemic financial failure: the existence of (unmeasurable) uncertainty and the role of money as a "store of value." The first led to periodic collapses of confidence; the second led investors to hoard cash if interest rates fell too low, making automatic recovery from collapses difficult. The function of government was to remove the depressive effect of both by giving investors continuous confidence to invest.

Contrary to the belief of some recent economic theories, the future is just as unknowable as Keynes thought it was. The mathematical "quants" who set up the Long Term Capital Management hedge fund in 1994 worked to a risk model which showed that the kind of financial meltdown which, in fact, bankrupted them four years later, could occur only once every four million years. This was not a rationalisation of financial interests: it was self-deception.

What economics needs, therefore, if it is to have any purchase on real world behaviour, is a new starting point. It needs to accept that the changing nature of the world precludes people from having enough information to always make contracts at the "right" prices. Such a change is a necessary condition for a permanent change in policy. Each previous crisis has produced a leading economist with the authority to challenge the prevailing consensus. So the call for a new Keynes is not just rhetorical.

Opinion as to the degree of supervision, regulation and control needed to make a market economy well-behaved is to be found along a continuum. At one end are the free-marketeers who believe only the lightest touch only is needed; at the other are classical Marxists who believe it requires public ownership of the whole economy. In between are varieties of social democrats and middle wayers, the most famous of whom is Keynes. This territory is sure to be extensively explored over the next few years as the pendulum starts swinging back. For the question of making markets well behaved goes beyond the question of securing their efficiency. It involves making the market economy compatible with other valued aspects of life. The French social democratic slogan of the mid-1990s—"market economy yes, market society no"—encapsulates the idea that limits should be placed on the power of the market to shape social life according to its own logic.

The battleground will be about the role of the nation-state in the globalising economy of the future, for the nation-state is the main repository and guardian of the values and traditions threatened by the disruptive power of the global market. A paradox of globalisation—which was supposed to see a withering of the nation-state—is that it has led to a revival of nationalism. A deregulated world turned out, unsurprisingly, to be one dominated by the strong. This process reached its apogee with the presidency of George W Bush and the Iraq war—which emphasised US determination to act as a free agent. Other states, too, in Europe and elsewhere, are now acting as semi-free agents. The effective choice is between a more regulated global capitalist system and its possibly violent breakup into a menagerie of warrior nationalisms.
But to ensure we have an ordered system requires us to make globalisation efficient and acceptable. In the course of that debate, I expect one crucial point to emerge: the benefits of globalisation are real, but have been exaggerated. Improvements in the allocation of capital and reductions in opportunities for corruption are offset by increased volatility. Globalisation also raises huge issues of political accountability and social cohesion that are scarcely considered by economists, and only lazily by politicians.

There seem to be four main reasons for this blind spot. The first is the intellectual domination of economics in this debate, with its individualistic and developmental perspective. Globalisation—the integration of markets in goods, services, capital and labour—must be good because it has raised many millions out of poverty in poorer countries faster than would otherwise have been possible. Any interference with this process is impious. A second idea is that it is inevitable: technology—most conspicuously the internet—abolishes national frontiers. Technology cannot be undone. So, whether we like it or not, globalisation is our fate, and our morals and social conventions must adapt to it. The third idea is that globalisation is evolutionary; any check would be regressive. Fourthly, globalisation forces us to think of the world as a unit, which is necessary if we are to solve planet-wide problems.

These are powerful propositions, derived from the era of scarcity and not adjusted to the era of partial abundance, nor to the existence of natural limits to growth. Today the benefits of globalisation are much more obvious for poor than for rich countries. In the 1950s and 1960s, the northern hemisphere was for free trade, the southern protectionist. Today the position is partly reversed. Globalisation offers the best hope for poor countries to catch up with the rich. But growth has become less important for rich countries. In the early 1930s, Keynes thought that the international division of labour could be carried too far. "Let goods be homespun," was the title of an article he wrote in 1932. He wanted a "well-balanced" or "complete" national life, allowing a country to display the full range of its aptitudes, and not simply to be a link in a value-adding productive chain spanning the globe. Moreover, the economic benefits of offshoring are far from evident for richer states. Since 1997, Britain has lost 1.1m manufacturing jobs—29 per cent of its total—many of them to developing countries. The result has been a dramatic deterioration in Britain's current account balance, and a decline into deficit on the investment income balance too, meaning we pay more to foreign investors in interest and dividends than we receive from abroad. This makes it harder for Britons to pay down their huge debts to the outside world.

Keynes's warning that the pursuit of export-led growth is bound to set nations at each others' throats is still relevant. But that does not mean just sticking as we are. Some rowing back of financial globalisation and cross-border financial institutions is required to rebalance market and state. This process is underway, as national regulators take a tighter grip over the financial institutions they are bailing out. Regulators are increasingly sceptical of banks that depend excessively on wholesale funding. Without this, there will be a natural tendency for banks to shrink back within their own frontiers.

One of the biggest problems with the global trading order remains the enormous arbitrages in tax, labour and non-wage costs that exist. These have encouraged companies to relocate operations, and depressed the bargaining power of labour. Companies like WalMart of the US and Nokia of Finland have been huge outsourcers to Asia. The only solution short of raising barriers is for governments to co-operate in flattening out some of these differences—for China, for example, to increase wages.. Ralston Saul has noted that the era of globalisation saw "multiple binding economic treaties… put in place while almost no counterbalancing binding treaties were negotiated for work conditions, taxation, the environment or legal obligations." It will be difficult to create new global systems that balance public good and self interest. But the alternative is the beggar-my-neighbour world of protectionism.

Another way to curb outsourcers would be to use antitrust powers. Breaking up megalithic multinationals would at least prevent them enjoying quasi-monopoly rents, and thus reduce the incentive.

Globalisation is necessarily blind to the idea of political accountability because none exists at the planetary level. Yet the crisis has challenged the idea that we should all unthinkingly follow the logic of the bond market. When the crunch came, we discovered that national taxpayers still stand behind banks, and national insolvency regimes matter. A more rules-based exchange rate system is not inconceivable. This might seek to put some curbs on capital movements—especially at times of economic stress.

And, in this new climate, national politicians are likely to reach for ideas and influences that until recently would have seemed exotic. The idea, for example, that economic growth does not, beyond a certain point, make people happier. David Cameron, a market-friendly Conservative, has talked about the importance of general wellbeing as an alternative to the mania for economic growth. Rich countries could probably abandon the globalist project without much damage to their material standards and with possible gain to their quality of life. Rejecting the inevitability of market-based globalisation would not necessarily be harmful—especially if it were accompanied by a reassertion of democracy at a national level. This is not a pipe dream. New Zealand, which was the first country to attempt to become a post-national nation state in the 1980s with a radical programme of privatisation and deregulation, changed tack in 1999. The electorate endorsed an interventionist government devoted to raising taxes, reimposing economic regulations and establishing a stable private sector. It happened because reform failed to deliver the goods. Other countries may follow suit if the political costs of maintaining a global economy are seen as too high. Rich countries surely have a duty to help poor countries, but not at the expense of an awful way of life.

"Well-behaved" markets should not only be more stable, they should be more morally acceptable. It is indefensible for a top American CEO to earn 367 times more than the average worker (against 40 times in the 1970s). Part of the swing-back in political economy will be to use the tax system to redress the balance between capital and impotent labour.
The crisis has rightly led to a revival of interest in Keynes. But he was a moralist as well as an economist. He believed that material wellbeing is a necessary condition of the good life, but that beyond a certain standard of comfort, its pursuit can produce corruption, both for the individual and for society.

He reunited economics with ethics by taking us back to the primary question: what is wealth for? The good life was one to be lived in harmony with nature and our fellows. Yet "we destroy the beauty of the countryside because the unappropriated splendours of nature have no economic value. We are capable of shutting off the sun and the stars because they do not pay a dividend." Not everything should be sacrificed for efficiency. And Keynes was a liberal nationalist.

In terms of our pendulum analogy, he was someone who instinctively sought an equipoise: not in the timeless equilibrium of classical economics, but in a balance in political economy between freedom and control, national and international wellbeing, efficiency and morality. He was an Aristotelian, who believed that vices are virtues carried to excess. This is a good philosophy for today.

Discuss this article at First Drafts, Prospect 's blog

CUBA: ENTRA AL&CARIBE

http://news.bbc.co.uk/hi/spanish/multimedia/video/newsid_7785000/7785363.stm

EURO:APRECIACION CAMBIARIA

La bajada de tipos de la Fed impulsa al euro hasta los 1,4358 dólares

Los analistas pronostican que la moneda única europea trepará hasta el nivel de los 1,50 dólares en 2009

Fráncfort (Alemania). (EFECOM).- El euro experimentó una fuerte subida en el mercado de divisas de Fráncfort como reacción al la política de tipos de interés cero adoptada ayer por la Reserva Federal estadounidense.
MÁS INFORMACIÓN

* Estados Unidos roza la barrera del tipo cero tras la última bajada de la Fed
*

Hacia las 16:00 GMT, el euro se cambiaba a 1,4358 dólares, frente a los 1,3754 dólares de ayer. El Banco Central Europeo (BCE) fijó hoy el cambio oficial del euro en 1,4059 dólares.

"La transición de la Fed a una política de tipos de interés cero ha tenido como efecto una fuerte apreciación del euro respecto de billete verde", declaró al término de la sesión en Fráncfort la experta en divisas de HSBC Trinkaus, Antje Hansen. Agregó que las ofertas en dólares fueron masivas, pues además de recortar los tipos rectores, la Fed dejó claro su disposición a facilitar liquidez sin límite al mercado.

Esta medida sin precedentes en la historia es entendida por los expertos como una muestra más del empeoramiento de la economía estadounidense y de los presupuestos federales. En estas circunstancias, Hansen pronosticó que la moneda única europea trepará hasta el nivel de los 1,50 dólares el año entrante.

Recordó que la situación en la eurozona no es tan dramática como en Estados Unidos y tampoco se regirá por tasas tan bajas, aunque es de prever que el Banco Central Europeo (BCE) rebaje sus tipos hasta el 1,5 por ciento. "En comparación con Estados Unidos, unos tipos algo más altos apoyarán al euro. Además, el BCE nunca dejó entrever medidas tan poco convencionales como las impulsadas por la Fed", dijo.

MADOFF:MEA CULPA

Mea culpa por fraude de Madoff
Redacción BBC Mundo

El órgano regulador del mercado bursátil en Estados Unidos iniciará una investigación interna para determinar las causas por las que no pudieron detectar a tiempo la gigantesca estafa llevada a cabo el inversor y ex presidente de Nasdaq, Bernard L. Madoff.

Bernard L. Madoff.
Las autoridades quieren investigar cómo fue posible el fraude

El fraude, calculado en unos US$50 mil millones, no fue detectado antes a pesar de repetidas alertas desde 1999, según explicó la Securities and Exchange Commission (SEC, por sus siglas en inglés).

"La comisión tiene conocimiento que denuncias creíbles y precisas alertando sobre el mal proceder de Madoff habían sido puestas a la atención del personal de la SEC de manera repetida desde al menos 1999, pero nunca fueron informadas a la comisión para que ésta actuara", explicó el presidente de la SEC, Christopher Cox.

"He ordenado un estudio completo e inmediato de las denuncias que conciernen a Madoff y su empresa y de las razones por las cuales no fueron consideradas creíbles", añadió.

Según corresponsales de la BBC en EE.UU., la SEC ha sido fuertemente criticada desde el arresto de Madoff, el pasado jueves. La estafa podría convertirse en el mayor fraude conocido hasta el momento, cinco veces superior, por ejemplo, a WorldCom o Enron.

Incredulidad

¿Cómo fue posible que la dudosa situación no llamó la atención de los reguladores hasta ahora?, se preguntan incansablemente aquellos que sufrieron fuertes pérdidas.

El lunes, por ejemplo, el presidente del Fondo Monetario Internacional, Dominique Strauss-Kahn, acusó directamente a las autoridades reguladoras estadounidenses por su pasividad.

"La sorpresa no es que hubiera unos ladrones. La cuestión es: ¿quién vigila?", enfatizó.


"La comisión tiene conocimiento que denuncias creíbles y precisas alertando sobre el mal proceder de Madoff han sido puestas a la atención del personal de la SEC de manera repetida desde al menos 1999"
Christopher Cox, presidente de la SEC
En una entrevista con la BBC, Jon Moulton, de la firma Alchemy Partners, señaló que desde 1999 varios inversores se habían quejado del esquema de Madoff.

"La SEC lo hizo estupendamente bien para no darse cuenta de ningún problema", ironizó.

Steven Bell, del fondo de inversión GLC opina de la misma manera y asegura que hubo gente que se quejó mucho antes.

"Es como si alguien llamara a la policía y dijera que tiene un vecino ladrón y pide que por favor revisen qué pasa, pero su llamada es ignorada", enfatizó.

Para algunos analistas, la razón para que no investigaran antes a Madoff es el resultado de una combinación entre su prestigio personal y unos vacíos en el sistema que fueron cuidadosamente aprovechados.

Vea también: El hombre que desapareció millones

Ahora los funcionarios dicen que esta actitud fue imperdonable. La investigación va a concentrarse primero en el funcionamiento interno de la SEC, con el fin de determinar si las reglas vigentes fueron aplicadas y si se deben efectuar modificaciones para evitar nuevos casos en el futuro.

Edificio donde vive Madoff
Se espera que Madoff salga hoy de su casa para comparecer ante un tribunal

También se quiere determinar si los contactos entre el personal de la SEC y la empresa o la familia de Madoff pudieron interferir en la toma de decisiones.

Se espera que hoy Madoff, quién está fuera de prisión tras pagar los US$10 millones de fianza, comparezca ante un tribunal en Nueva York. La audiencia estaba prevista para el lunes, pero fue aplazada.

Si se prueba que los cargos en su contra son ciertos, su condena podría ser de hasta 20 años de cárcel y una multa de hasta US$5 millones.

Lo que se desconoce hasta ahora es el monto total de las pérdidas para aquellos que invirtieron en Bernard L. Madoff Investment Securities. Grandes bancos y fondos de inversión en todo el mundo se han visto afectados.

FED: COMPRARA PAPELES HIPOTECARIOS

Baja de tasas histórica en EE.UU.
Redacción BBC Mundo

Gráfico de tasas de interés
La Reserva Federal de Estados Unidos recortó la tasa de interés de referencia a un rango entre 0% y 0,25%, su nivel más bajo desde que se empezó a llevar registro en 1954.

La tasa de Fondos Federales es un parámetro para los préstamos entre bancos en los que puede influir pero no fijar directamente.

El recorte es la más reciente medida en una serie de gestos agresivos de las autoridades estadounidenses destinadas a revivir su vacilante economía.

La Fed además está considerando más planes inusuales para enfrentar la recesión.

El comunicado del equivalente al Banco Central en EE.UU. marca un momento importante en su esfuerzo por lidiar con un problema económico que se dificulta cada vez más.

Lo que sea necesario

El nuevo objetivo es muy cercano a cero y no puede caer más bajo.

Además propone mantener su política de comprar diversos títulos financieros, incluidos aquellos basados en préstamos para vivienda.

Operador mira las pantallas que muestran la evolución accionaria
Con este nivel de tasas, la Fed deberá buscar ahora otras herramientas de persistir la crisis.
Adquirir esos activos hará que los otros tipos de interés bajen, entre ellos los de las hipotecas.

La Fed considerará también comprar bonos gubernamentales de largo plazo, con lo que en efecto estaría financiando el gasto público creando dinero.

Tales medidas tendrían la intención de evitar que la economía entre en un peligroso ciclo de deflación y caída de precios.

La Fed ya había tomado medidas muy inusuales en los mercados financieros, pero este comunicado indica que está dispuesta a hacer lo que sea necesario para estimular la recuperación de la economía.

Riesgos

Como señala el corresponsal de la BBC en Washington Kevin Connolly, las tasas de interés en EE.UU. han sido recortadas en un 5% en poco más de un año.

El plan es que prestar sea tan barato que la liquidez retorne a la economía y restaure la confianza y los niveles de consumo.

El futuro en cualquier caso sigue siendo oscuro y la Fed anticipa que es muy posible que los tipos se mantengan excepcionalmente bajos por algún tiempo.

Águila de la Fed
El comunicado de la Fed marca un momento importante.
La estrategia, sin embargo, es arriesgada: si no funciona, no hay posibilidades de más cortes.

Algunos analistas resaltan el hecho de que la política de bajar los intereses fue precisamente uno de los factores que contribuyó a la especulación financiera que desencadenó la crisis, como el mismo Alan Greenspan, ex titular de la Fed, reconoció.

La paradoja es que ahora, en estas circunstancias, la misma receta parezca ser el único remedio para la superar la difícil situación económica mundial.

En cualquier caso, las bolsas en Brasil, Argentina, México y Chile inmediatamente respondieron positivamente, alentadas por un recorte que podría contribuir a animar la actividad económica de tan importante socio comercial.

La bolsa de Sao Paulo cerró con un salto del 4,37% en su índice Ibovespa y el índice Merval .MERV de Buenos Aires avanzó un 2,53%, mientras que el IPC .MXX de México subió 981.99 puntos y el índice general de la bolsa de Santiago IGPA .IGPA ganó un 0,68%.

FED: O A O.25%

UN NIVEL SIN PRECEDENTES
La Fed deja los tipos de interés entre el 0 y 0,25%

La Reserva Federal, presidida por Ben Bernanke, fija los tipos de interés en una horquilla de entre el 0 y el 0,25% | Así, se queda prácticamente sin margen para seguir utilizando el precio del dinero como instrumento para reactivar el consumo y el crédito

16/12/2008| Actualizada a las 23:05h | Economía

Washington. (EFECOM).- La Reserva Federal de Estados Unidos anunció hoy, en una medida histórica, que los tipos de interés fluctuarán entre el 0 y el 0,25 por ciento, con lo que agota la posibilidad de recurrir al precio del dinero como vía para reactivar la economía.

* Wall Street aplaude la bajada de tipos con una subida del 4,2%
* Obama alerta de que "empieza a escasear la munición" tradicional contra la c * Estados Unidos roza la barrera del tipo cero tras la última bajada de la Fed
*
El anuncio de la Fed superó con mucho las expectativas de los mercados, que esperaban un recorte de medio punto, hasta el 0,50 por ciento, y fue recibido con euforia por Wall Street, que subió cerca del 3 por ciento.

Con esta decisión EE.UU. entra en un terreno desconocido en su historia, inmerso en una profunda recesión que, al parecer, será la más duradera desde la II Guerra Mundial, y con las manos atadas para abaratar los créditos e incentivar el consumo.

En esta situación, los analistas esperaban que la Fed, de una manera osada, anunciara que se iba a embarcar en un incremento de la base monetaria del país, o lo que es lo mismo, imprimir moneda, un práctica que no se utilizaba como política monetaria desde hacía décadas.

Según 'The New York Times', la autoridad monetaria ha imprimido cerca de un billón de dólares desde septiembre para frenar el deterioro económico, aunque no existe una declaración oficial al respecto.

Los expertos esperaban que la Fed utilizara eufemismos para esta medida, como "ampliar el balance" de la entidad, en referencia a incrementar la base monetaria, o también el término anglosajón "quantitative easing", que nació precisamente en Japón, otra potencia mundial que también tuvo que lidiar con tipos de interés del 0 por ciento.

Pero en su lugar, la Fed utilizó un lenguaje más ambiguo, que deja abierta la posibilidad de incrementar la base monetaria o incluso otras medidas más novedosas, como la de emitir su propia deuda, en competencia con el propio Tesoro estadounidense, según consideran algunos expertos.

En el comunicado difundido al término de la reunión de hoy, el Comité de Mercado Abierto de la Fed, anuncia que "utilizará todos los instrumentos disponibles para promover la recuperación del crecimiento económico sostenible y preservar la estabilidad de los precios", sin dar detalles de qué medidas extraordinarias va a adoptar.

Los precios no son un problema para la Reserva Federal, dado que en noviembre registraron la mayor caída de los últimos 61 años. La Fed sí anunció hoy que, debido a las actuales condiciones de debilidad económica, "los tipos de interés estarán en estos niveles excepcionalmente bajos durante un tiempo".

En su comunicado, la Fed justifica en la "deteriorada" situación económica su rara decisión de no establecer un precio fijo al que los bancos deben prestarse dinero entre sí, sino de crear un rango en el que fluctuarán los precios.

En la práctica, los bancos ya se estaban prestado dinero en el mercado en torno al 0,10 por ciento, muy por debajo del 1 por ciento oficial que marcó la Fed en su reunión del pasado 29 de octubre, lo que explicaría la decisión de hoy.

La Reserva Federal inició en septiembre de 2007 su aflojamiento de la política monetaria, cuando su tasa de interés interbancario de corto plazo estaba en el 5,5 por ciento. La última rebaja la aplicó el 29 de octubre cuando bajó los tipos del 1,5 al 1 por ciento.

Desde entonces, dice la Fed, "las condiciones del mercado laboral se han deteriorado, y otros indicadores revelan que el gasto de los consumidores, la inversión empresarial y las producción industrial han caído".

"Los mercados financieros permanecen muy constreñidos. En conjunto, las perspectivas de la actividad económica se han debilitado aún más", dice el comunicado.

La Fed es consciente de la gravedad de la situación en que se encuentra Estados Unidos, y sobre todo del futuro incierto que tiene ante sí, con una recesión que ha llevado a la economía a contraerse un 0,5 por ciento en el tercer trimestre del año, y que se prolongará al menos durante 2009.

En una medida aprobada también por unanimidad, la Junta de Gobernadores dio hoy luz verde a una disminución de 75 puntos básicos, hasta el 0,50 por ciento, de la tasa de descuento que la Reserva cobra a los bancos por los préstamos que estos toman.

NOURIEL ROUBINI: CURRENCY DYNAMCIS

Altamente recomendable, gonzalo
The Peruvian sol (PEN) has been quite stable, trading at an average rate of 3.04 per USD over the past month; during the recent wave of financial turmoil it has also experienced the lowest volatility amongst peer-group floating currencies within Latin America. The central bank will continue to heavily intervene in the foreign currency market if need be. The USD/PEN is expected to close this year at 3.00.

RGE Monitor Logo
RGE Monitor's Newsletter

Greetings from RGE Monitor!



In today’s newsletter we focus on currency dynamics around the globe.



Does the U.S. dollar’s December slide mean the USD has passed its peak? Most likely not. The turn-of-the-year profit-taking on long USD positions creates a near-term blip in the dollar's uptrend but doesn't alter the medium-term trend of appreciation versus the euro. The four horseman of the carry trade apocalypse - Deleveraging, Risk Aversion, Growth Differentials and the Dollar's Reserve Currency Status - would need to retreat before we see a sustained pullback in the EUR/USD from the slide to near-parity ($1.10-$1.30). Governments, banks and other firms are still scrambling for dollars to repay their USD-denominated debt while signs of global recession and credit crisis spur on the flight-to-safety in U.S. Treasuries. European sovereign bonds offer an alternative but inferior safe haven because of the European bond market’s fragmentation and exposure to emerging Europe. More aggressive policy response in the U.S. compared to Europe, could bring the U.S. out of a recession faster than the Eurozone (though growth will most likely remain subdued for some years to come), supporting the dollar against the euro. In the longer term, however, once risk appetite revives, the greenback might lose its defenses in wake of worries surrounding U.S. public debt expansion and the potential inflationary effect of quantitative easing.



The Japanese yen hit a 13-year high against the dollar in mid-December when it broke below 90 per dollar. It may hold the distinction of being the only currency apart from the Swiss Franc that could appreciate against the dollar in early 2009 due to carry trade unwinding and repatriation of Japanese funds invested overseas. The recent surge in the yen is being driven by carry trade unwinding as well as a substantial shrinkage in US-Japan rate differentials. While there is room for the JPY to strengthen in the short-term, Japan’s increasingly gloomy macroeconomic outlook raises questions about its continued strengthening over the medium-to-long term.



The rest of Asian and the Pacific currencies are losing ground against the dollar. Faced with slowing growth and exports as well as withdrawal of foreign capital, many Asian currencies have fallen against the dollar, with those with current account deficits like South Korea and India hardest hit. Despite central bank intervention, the currencies of India, S. Korea, Thailand, Philippines, Indonesia have depreciated recently as global risk aversion contributed to outflows from EMs.



Declines of around 20% for these currencies may have contributed to some slackening by Asia’s other strong currency, the Chinese yuan. After appreciating against the dollar at the beginning of 2008, and tracking it closely through spring, summer and most of the fall, the yuan is now depreciating slightly against the dollar as Chinese growth slows and the Chinese try to temper the 25% appreciation against the Euro since mid 2008. Last weekend’s powwow between China, Japan and Korea which followed the Japanese and Chinese extension of credit lines to support the Won, may be the first step in greater exchange rate coordination within Asia and may help to support some faltering Asian currencies at least in the short-term. Meanwhile the dollar’s rally is putting the Hong Kong dollar under pressure when Hong Kong is in recession, despite the strong support for its peg from authorities.



The Korean won has been victim of the selloff of emerging market assets in an environment of acute risk aversion. South Korea gives the world an example of a net creditor in a currency crisis. The won’s downfall also has its roots in Korea’s high ratio of short-term external debt to foreign reserves (60% at end-2007). After international capital markets essentially shut down, Korean banks and firms have sought dollars to repay their external debt or sell off assets to do so – raising demand for USD versus KRW. This deleveraging, plus the export slowdown and portfolio outflows from Korean equity and debt markets, might keep the won weakening versus the USD until late 2009. The current account will likely improve if commodity prices remain low and import demand falls, but capital outflows will outweigh the effect of the current account surplus on the won.



Free floating commodity currencies like the Australian, Canadian and New Zealand dollars and the Norwegian Krone have followed their commodity exports values down - together the fall in commodity prices and currency corrections of 20-30% have eroded their terms of trade. Despite the chance that they may already have overcorrected, with further rate cuts to come, these currencies could slide further. And so might the South African rand, especially now that the Reserve Bank has joined the cutting cycle. But these currencies might not gain much from any prolonged dollar weakness unless commodities pick up much steam as all of these economies are facing sharp slowdowns at best and recessions at worst.



Other fuel exporters like Russia and Nigeria were reluctant to let their currencies slide and in Russia’s case spent significant portions of their ample reserves to avert it. But with Russia’s current account about to shift to deficit as early as this quarter and its reserves falling by almost 30%, it is now allowing more frequent 1% devaluations. The rouble may fall another 20% at current price points through Q109, meaning that Russia’s fx-denominated debt may become an even greater burden for the government especially as the devaluation expectation is contributing to retail and corporate deposit withdrawals from the banks – expect to see more declines in fx reserves. Nigeria too is allowing the Naira to shift downwards and the Kazakh Tenge may not be far behind. Meanwhile the dollar peggers among the oil exporters, especially the GCC, are no longer facing the appreciation pressure they suffered earlier this year even as the dollar’s rally has increased their purchasing power. In all of these countries, inflation is slowly coming down, even if it remains stubbornly in the double digits and weakening local currencies offset falling global price declines.



Most MENA currencies are pegged either to the dollar or to a basket which includes exposure to the euro - these pegs are expected to remain in place. However, the region's more flexible currencies have been allowing more depreciation. Egypt's pound plunged from a five-year high of LE 5.31 per USD in August 08 to a rate of almost LE 5.53 in December 08 and may continue depreciating in 2009 as Egyptian – and global growth – slows and Egypt's balance of payments continues to be weak. With inflationary pressures easing, the Central bank of Egypt (CBE) may do little to prevent the pound’s depreciation in hopes of boosting growth via cheaper exports, increasing tourism and Suez Canal revenues and attracting more FDI. Israel's monetary easing comes as the country is witnessing a significant growth slowdown - another rate cut on December 29 may further weaken the shekel. With many of Israel's export partners faltering, a weaker shekel has been 'desired' by the BOI for some time. However, government support of the financial sector may cause intermittent strengthening of the shekel.



Eastern European currencies are coming under pressure, in part due to spill-over from global market turmoil and in part due to domestic fundamentals. Many analysts are bearish on all CEE currencies given these economies’ heavy dependence on capital inflows. Nevertheless, some economies (i.e. Czech Republic and Poland) seem better placed than others (i.e. Hungary and Romania) and this should feed through to their currencies. Similarly, despite steep devaluation on the Ukrainian Hryvnia, pressure continues given its large current account and reliance on steel exports.



Devaluations in the works in the Baltics? The currency pegs in the Baltic economies, particularly Latvia’s, have been coming under pressure recently. Given their large external imbalances and the global financial crisis, the question has arisen as to whether these countries will be forced to give up their currency pegs to the euro. Many analysts, however, see no appetite for a devaluation as the high degree of foreign currency borrowing in these countries mean a devaluation could undermine financial stability. Moreover, the possibility of a speculative attack is limited by the shallow financial markets in the region.



The Turkish lira is among most risk-sensitive of EM currencies. The TRY shows a strong correlation to carry trade baskets given Turkey’s high interest rates and is therefore sensitive to unwinding. In the near-term, expectations of an IMF deal, as well as global risk appetite and monetary policy moves, are the factors determining the currency’s path. Analysts expect the lira to depreciate further in next 6 to 12 months given Turkey's large current-account deficit, increased global risk aversion, and sluggish foreign direct investment (FDI) inflows since beginning of the year.



Moving to Northern Europe, economic recession, vulnerability of Swedish banks (due to their exposure to sharply slowing Baltic economies) and the rate cycle have been weighing on the SEK, which hit record lows against the euro in December. Yet, a number of analysts now see the SEK strengthening over the next 12 months from its current levels.



In Latin America, the Brazilian Real (BRL) remains a source of concern on the inflation front, continuing to show a weakening bias after having depreciated over 30% in the last three months. While Brazil’s external indicators suggest the currency is overshooting, the authorities cannot ignore its persistent weakening. Estimates of the historical pass-through from BRL movements to domestic consumer prices stand at around 8-10% after approximately one year.



The Mexican peso (MXN) seems to be stabilizing after a volatile adjustment phase that affected energy-linked emerging-market economies. Interest rate differentials, banking sector systemic health, a swift government response to the global financial crisis, still large central bank FX reserves, and the reciprocal currency arrangement between the US and Mexican central banks have been MXN-supportive.



The Chilean peso (CLP) has discounted a sharp contraction in trade-linked currency flows, despite a relatively solid fiscal position. Interest rate differentials are not a CLP supporting factor in spite of the fact that the central bank has earmarked the fight against inflation as a key priority. The sharp commodity price adjustment anticipates a weakening prospect for Chile’s export sector.



The Peruvian sol (PEN) has been quite stable, trading at an average rate of 3.04 per USD over the past month; during the recent wave of financial turmoil it has also experienced the lowest volatility amongst peer-group floating currencies within Latin America. The central bank will continue to heavily intervene in the foreign currency market if need be. The USD/PEN is expected to close this year at 3.00.



In Venezuela, the government has stashed away substantial funds during the windfall oil years. With prices falling bellow USD60pb and local inflation rampant the government fiscal accounts remain vulnerable. This will lead the government to devalue the VEF currency sharply in Q1, likely by 30%.



In Argentina, the central bank is letting the peso devalue in a gradual and controlled manner. The central bank is managing the slide in an effort to avoid further eroding investor confidence in the peso.

NOURIEL ROUBINI: CURRENCY DYNAMCIS

Altamente recomendable, gonzalo
The Peruvian sol (PEN) has been quite stable, trading at an average rate of 3.04 per USD over the past month; during the recent wave of financial turmoil it has also experienced the lowest volatility amongst peer-group floating currencies within Latin America. The central bank will continue to heavily intervene in the foreign currency market if need be. The USD/PEN is expected to close this year at 3.00.

RGE Monitor Logo
RGE Monitor's Newsletter

Greetings from RGE Monitor!



In today’s newsletter we focus on currency dynamics around the globe.



Does the U.S. dollar’s December slide mean the USD has passed its peak? Most likely not. The turn-of-the-year profit-taking on long USD positions creates a near-term blip in the dollar's uptrend but doesn't alter the medium-term trend of appreciation versus the euro. The four horseman of the carry trade apocalypse - Deleveraging, Risk Aversion, Growth Differentials and the Dollar's Reserve Currency Status - would need to retreat before we see a sustained pullback in the EUR/USD from the slide to near-parity ($1.10-$1.30). Governments, banks and other firms are still scrambling for dollars to repay their USD-denominated debt while signs of global recession and credit crisis spur on the flight-to-safety in U.S. Treasuries. European sovereign bonds offer an alternative but inferior safe haven because of the European bond market’s fragmentation and exposure to emerging Europe. More aggressive policy response in the U.S. compared to Europe, could bring the U.S. out of a recession faster than the Eurozone (though growth will most likely remain subdued for some years to come), supporting the dollar against the euro. In the longer term, however, once risk appetite revives, the greenback might lose its defenses in wake of worries surrounding U.S. public debt expansion and the potential inflationary effect of quantitative easing.



The Japanese yen hit a 13-year high against the dollar in mid-December when it broke below 90 per dollar. It may hold the distinction of being the only currency apart from the Swiss Franc that could appreciate against the dollar in early 2009 due to carry trade unwinding and repatriation of Japanese funds invested overseas. The recent surge in the yen is being driven by carry trade unwinding as well as a substantial shrinkage in US-Japan rate differentials. While there is room for the JPY to strengthen in the short-term, Japan’s increasingly gloomy macroeconomic outlook raises questions about its continued strengthening over the medium-to-long term.



The rest of Asian and the Pacific currencies are losing ground against the dollar. Faced with slowing growth and exports as well as withdrawal of foreign capital, many Asian currencies have fallen against the dollar, with those with current account deficits like South Korea and India hardest hit. Despite central bank intervention, the currencies of India, S. Korea, Thailand, Philippines, Indonesia have depreciated recently as global risk aversion contributed to outflows from EMs.



Declines of around 20% for these currencies may have contributed to some slackening by Asia’s other strong currency, the Chinese yuan. After appreciating against the dollar at the beginning of 2008, and tracking it closely through spring, summer and most of the fall, the yuan is now depreciating slightly against the dollar as Chinese growth slows and the Chinese try to temper the 25% appreciation against the Euro since mid 2008. Last weekend’s powwow between China, Japan and Korea which followed the Japanese and Chinese extension of credit lines to support the Won, may be the first step in greater exchange rate coordination within Asia and may help to support some faltering Asian currencies at least in the short-term. Meanwhile the dollar’s rally is putting the Hong Kong dollar under pressure when Hong Kong is in recession, despite the strong support for its peg from authorities.



The Korean won has been victim of the selloff of emerging market assets in an environment of acute risk aversion. South Korea gives the world an example of a net creditor in a currency crisis. The won’s downfall also has its roots in Korea’s high ratio of short-term external debt to foreign reserves (60% at end-2007). After international capital markets essentially shut down, Korean banks and firms have sought dollars to repay their external debt or sell off assets to do so – raising demand for USD versus KRW. This deleveraging, plus the export slowdown and portfolio outflows from Korean equity and debt markets, might keep the won weakening versus the USD until late 2009. The current account will likely improve if commodity prices remain low and import demand falls, but capital outflows will outweigh the effect of the current account surplus on the won.



Free floating commodity currencies like the Australian, Canadian and New Zealand dollars and the Norwegian Krone have followed their commodity exports values down - together the fall in commodity prices and currency corrections of 20-30% have eroded their terms of trade. Despite the chance that they may already have overcorrected, with further rate cuts to come, these currencies could slide further. And so might the South African rand, especially now that the Reserve Bank has joined the cutting cycle. But these currencies might not gain much from any prolonged dollar weakness unless commodities pick up much steam as all of these economies are facing sharp slowdowns at best and recessions at worst.



Other fuel exporters like Russia and Nigeria were reluctant to let their currencies slide and in Russia’s case spent significant portions of their ample reserves to avert it. But with Russia’s current account about to shift to deficit as early as this quarter and its reserves falling by almost 30%, it is now allowing more frequent 1% devaluations. The rouble may fall another 20% at current price points through Q109, meaning that Russia’s fx-denominated debt may become an even greater burden for the government especially as the devaluation expectation is contributing to retail and corporate deposit withdrawals from the banks – expect to see more declines in fx reserves. Nigeria too is allowing the Naira to shift downwards and the Kazakh Tenge may not be far behind. Meanwhile the dollar peggers among the oil exporters, especially the GCC, are no longer facing the appreciation pressure they suffered earlier this year even as the dollar’s rally has increased their purchasing power. In all of these countries, inflation is slowly coming down, even if it remains stubbornly in the double digits and weakening local currencies offset falling global price declines.



Most MENA currencies are pegged either to the dollar or to a basket which includes exposure to the euro - these pegs are expected to remain in place. However, the region's more flexible currencies have been allowing more depreciation. Egypt's pound plunged from a five-year high of LE 5.31 per USD in August 08 to a rate of almost LE 5.53 in December 08 and may continue depreciating in 2009 as Egyptian – and global growth – slows and Egypt's balance of payments continues to be weak. With inflationary pressures easing, the Central bank of Egypt (CBE) may do little to prevent the pound’s depreciation in hopes of boosting growth via cheaper exports, increasing tourism and Suez Canal revenues and attracting more FDI. Israel's monetary easing comes as the country is witnessing a significant growth slowdown - another rate cut on December 29 may further weaken the shekel. With many of Israel's export partners faltering, a weaker shekel has been 'desired' by the BOI for some time. However, government support of the financial sector may cause intermittent strengthening of the shekel.



Eastern European currencies are coming under pressure, in part due to spill-over from global market turmoil and in part due to domestic fundamentals. Many analysts are bearish on all CEE currencies given these economies’ heavy dependence on capital inflows. Nevertheless, some economies (i.e. Czech Republic and Poland) seem better placed than others (i.e. Hungary and Romania) and this should feed through to their currencies. Similarly, despite steep devaluation on the Ukrainian Hryvnia, pressure continues given its large current account and reliance on steel exports.



Devaluations in the works in the Baltics? The currency pegs in the Baltic economies, particularly Latvia’s, have been coming under pressure recently. Given their large external imbalances and the global financial crisis, the question has arisen as to whether these countries will be forced to give up their currency pegs to the euro. Many analysts, however, see no appetite for a devaluation as the high degree of foreign currency borrowing in these countries mean a devaluation could undermine financial stability. Moreover, the possibility of a speculative attack is limited by the shallow financial markets in the region.



The Turkish lira is among most risk-sensitive of EM currencies. The TRY shows a strong correlation to carry trade baskets given Turkey’s high interest rates and is therefore sensitive to unwinding. In the near-term, expectations of an IMF deal, as well as global risk appetite and monetary policy moves, are the factors determining the currency’s path. Analysts expect the lira to depreciate further in next 6 to 12 months given Turkey's large current-account deficit, increased global risk aversion, and sluggish foreign direct investment (FDI) inflows since beginning of the year.



Moving to Northern Europe, economic recession, vulnerability of Swedish banks (due to their exposure to sharply slowing Baltic economies) and the rate cycle have been weighing on the SEK, which hit record lows against the euro in December. Yet, a number of analysts now see the SEK strengthening over the next 12 months from its current levels.



In Latin America, the Brazilian Real (BRL) remains a source of concern on the inflation front, continuing to show a weakening bias after having depreciated over 30% in the last three months. While Brazil’s external indicators suggest the currency is overshooting, the authorities cannot ignore its persistent weakening. Estimates of the historical pass-through from BRL movements to domestic consumer prices stand at around 8-10% after approximately one year.



The Mexican peso (MXN) seems to be stabilizing after a volatile adjustment phase that affected energy-linked emerging-market economies. Interest rate differentials, banking sector systemic health, a swift government response to the global financial crisis, still large central bank FX reserves, and the reciprocal currency arrangement between the US and Mexican central banks have been MXN-supportive.



The Chilean peso (CLP) has discounted a sharp contraction in trade-linked currency flows, despite a relatively solid fiscal position. Interest rate differentials are not a CLP supporting factor in spite of the fact that the central bank has earmarked the fight against inflation as a key priority. The sharp commodity price adjustment anticipates a weakening prospect for Chile’s export sector.



The Peruvian sol (PEN) has been quite stable, trading at an average rate of 3.04 per USD over the past month; during the recent wave of financial turmoil it has also experienced the lowest volatility amongst peer-group floating currencies within Latin America. The central bank will continue to heavily intervene in the foreign currency market if need be. The USD/PEN is expected to close this year at 3.00.



In Venezuela, the government has stashed away substantial funds during the windfall oil years. With prices falling bellow USD60pb and local inflation rampant the government fiscal accounts remain vulnerable. This will lead the government to devalue the VEF currency sharply in Q1, likely by 30%.



In Argentina, the central bank is letting the peso devalue in a gradual and controlled manner. The central bank is managing the slide in an effort to avoid further eroding investor confidence in the peso.

MADOFF: SIGUE 2, MONEY MORNING

How to Avoid Madoff Mayhem

By Martin Hutchinson
Contributing Editor
Money Morning

Bernard Madoff, former chairman of the NASDAQ Stock Market Inc. (NDAQ), was turned into the authorities by his sons last Thursday after his firm, Bernard L. Madoff Securities LLC, was declared an insolvent “giant Ponzi scheme,” with estimated losses of $50 billion.

Madoff had provided investors with modest, steady returns, claiming to be making money by trading in Standard & Poor’s 500 Index options, and closing all positions prior to mandatory reporting dates so that investors had no window into the fund’s holdings.

Apart from individuals, charities and numerous “funds of funds” investing in hedge funds, such as HSBC Holdings PLC (ADR: HBC) and Banco Santander SA (ADR: STD), lent billions to investors participating in the Madoff fund, secured only by holdings in a fund that is now insolvent. The debacle is likely to strengthen criticism of the U.S. Securities and Exchange Commission, for its failure to protect investors, and to cast doubt on the hedge fund sector and on “alternative investments” in general.

It is not surprising that the recent unpleasantness on Wall Street has exposed a gigantic Ponzi scheme. It wasn’t even really even surprising that the Ponzi-scheme losses were an enormous $50 billion: After all, 13 years of excessive money creation have allowed bad Wall Street behavior to grow like weeds, so you’d expect the inevitable Ponzi scheme to be huge, like an out-of-control, possibly radioactive bindweed.

However, it is surprising that the major investors in Madoff’s scheme were not a bunch of suckers he met at a country club, nor a set of unworldly charities seduced by a smooth sales pitch (though both of those were involved), but instead were actually hedge funds, the most obnoxiously professional of professional investors. This raises a hugely heretical question: Is it possible that hedge fund managers aren’t the “best and the brightest” after all?
The Life and Times of Charles Ponzi

The original Ponzi scheme was a much smaller-scale operation, with losses of only few million. In the disturbed years after World War I, Charles Ponzi got the idea that postal reply coupons could be purchased in Italy and exchanged for U.S. stamps at a substantial profit – essentially an early form of arbitrage.

The anomaly existed because the international postal agreements had been designed in a pre-1914 Gold Standard world, which had disappeared, with different currencies having devalued by different amounts. The kernel of Ponzi’s scheme was thus a genuine moneymaker, albeit on a tiny scale (at its peak, 160 million postal coupons should have been shipped from Italy to the United States, compared with 27,000 actually outstanding worldwide). However, using this moneymaker as incentive, Ponzi attracted millions of dollars in deposits, paying profits on the early deposits from the proceeds of later ones.

This is the essence of a Ponzi scheme; if there is a genuine moneymaking operation at its center, it is swamped by the amount of money invested, which can only appear to make profits through later investments being used to pay out earlier ones. Even in 1920, the authorities realized this was a no-no. Ponzi was convicted of mail fraud and sentenced to five years in prison on federal charges. Released after three and a half years, Ponzi then faced state charges in Massachusetts. He fled and remained at large for a time, but was eventually captured, tried and sentenced to nine years imprisonment in Massachusetts, where the bulk of his schemes took place.
Modern-Day Schemes Abound

Ponzi schemes are a well-known hazard in the banking world, and the SEC and other regulatory authorities have great experience unraveling them. They are fairly easy to detect by any reasonably suspicious professional: when offered an investment opportunity you simply keep asking questions of the promoter until you are absolutely confident of the mechanism by which money is made.

If you can’t figure it out, you don’t invest – you are, after all, a financial professional and finance is an area in which there should be no impenetrable mysteries to the experienced and competent. In the emerging capitalism of 1990s Eastern Europe, Ponzi schemes were a well-known hazard, because the populace didn’t understand how capitalism worked and regulation was weak. The MMM scheme in Russia collected $1.5 billion, the Caritas scheme in Romania collected $1 billion, and in Albania in 1997, the entire banking system and the government collapsed under a $1.2 billion scheme.

In the West, successful Ponzi schemes rest on the gullibility of simple folk. Two groups in particular stand out. Some rich country club types tend to believe far too much in “connections” – to the exclusion of everything else – and neither understands nor cares about the details of how investment returns are generated.
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Thus, rather than invest through well-qualified specialist investment managers, they buy rubbish investment products from people whose “connections” are believed to provide an “inside track” to extra returns. Madoff, a former chairman of NASDAQ with a charming personality, was naturally well qualified to appeal to these gullible amateur investors. Charitable organizations and state funds often have substantial endowments that are run by under-qualified people, because the charities and states don’t pay enough; these people can also be seduced by the well-connected, and are not necessarily competent to assess the details of how investment returns are generated.

Ponzi schemes were given an enormous boost by the advent of derivatives and trading desks in the 1980s. Whereas the doziest country club member or charitable trustee has some idea of how bonds or stocks make money, even many financial professionals are a bit hazy about derivatives and trading profits. Hence, Madoff was able to maintain a plausible smokescreen over his activities. Since private partnerships do not have the same disclosure rules as public investment funds, he had no need to disclose the precise trades by which profits were made, nor any details about his methodology.

The increased complexity of modern investment does not however excuse the gullibility of professionals such as those who manage hedge funds and “funds of funds,” both of which invested in Madoff’s schemes. These people are paid inordinate amounts of money to provide superior investment returns to individuals and institutions that – perhaps naively – believe that by paying excessive management fees, one can obtain truly superior investment management. They should not be able to claim inexperience, a lack of an understanding of complex investment products, or even a lack of intelligence, since most of these people have degrees from top schools.

Warning Signs to Watch For

In reality, professional investors were infected with the “get-rich-quick” fever that reached epidemic proportions during the 13 years of easy money and lax regulation. As a result, these “professional” investors failed to exercise their “due diligence” in investigating how Madoff’s investment operation made money before investing in it. To the extent they were investing other people’s money, they deserve to be sued for failing in their fiduciary duty. To the extent they were investing their own money, they deserve to have their fancy degrees removed at some suitably ignominious ceremony, for crass stupidity and incompetence.

As for the lessons the rest of us should take away from this event, allow me to say that there are several:

* First and foremost, don’t invest in something you don’t understand, just because the promoter has good connections. If he can’t explain to you in terms you can understand how he makes money, there’s probably something fishy involved.

* Second, don’t believe the hype about “alternative asset classes” – most of it is just jargon designed to remove extra fees from you.

* And third, if you obey the three cardinal rules of investing – diversify, buy over an extended period, and research well what you intend to buy – you will probably do as well as most professionals, and far better than that substantial minority of professionals who are in reality utter incompetents.

* One great consolation about this recession: Ponzi schemes do much less well in recessions, because people are more suspicious. Ponzi flourished in the modest hot-money boom after World War I and Madoff made hugely more money in the correspondingly larger bubble from 1995-2008. Recessions, unlike bubbles, are relatively safe times to buy investments, because the investments themselves are cheaper and there are fewer crooks around.

MADOFF: SIGUE

El boca a boca y el buen/mal uso de la información imperfecta de mercado...
bueno pues, unas habrán sido de cal...

LOS CONTACTOS SOCIALES FUERON CLAVE PARA QUE LOS EUROPEOS CAYERAN EN LA PIRÁMIDE
DE MADOFF

Por Thomas Catan, en Madrid, y Cassell Bryan-Low, en Londres

Bernard L. Madoff obtuvo el dinero de clientes en Europa al explotar una
extendida red de fondos e individuos acaudalados desde Ginebra hasta Milán y
Madrid. Al igual que en Palm Beach, Florida, muchos contactos se hicieron de
boca en boca.

Ginebra es una de las capitales de los llamados fondos de fondos —entidades que
invierten en grupos de fondos de cobertura— y Madoff la puso en la mira. El
banco suizo Union Bancaire Privée, uno de los mayores fondos de fondos del
mundo, reveló que alrededor del 1% de sus activos, unos US$1.250 millones,
estaba expuesto al supuesto esquema de pirámide financiera llevado a cabo por el
veterano gestor de dinero de Nueva York.

En España, familias adineradas fueron arrastradas al fraude de Madoff a través
de confiables miembros de la aristocracia financiera, incluyendo a familiares
del patriarca bancario del país, el presidente del Banco Santander, Emilio Botín.

M&B Capital Advisers, —dirigida por el hijo de Emilio Botín, Javier Botín-Sanz,
y su yerno, Guillermo Morenés— promocionó fondos que eran parte del supuesto
sistema fraudulento de Madoff ante inversionistas adinerados españoles y
portugueses.

A través de M&B, inversionistas privados e institucionales compraron más de 150
millones de euros en fondos de Madoff, informó la firma. Morenés, quien forjó
una relación con Madoff en los años 90, nunca tuvo ningún indicio de que esos
fondos fueran una estafa, agregó la firma. \"No teníamos las más mínimas
sospechas de que esto era un fraude\", indicó la vocera de M&B, Pilar Trucios.
Según M&B, sus propios clientes privados tienen una exposición de más de 37
millones de euros a los activos fraudulentos.

Morenés está casado con Ana Patricia Botín, presidenta ejecutiva de Banesto, la
filial española de Santander, y a menudo mencionada como la principal candidata
a suceder a su padre, de 74 años, en el timón de Santander.

Una de las mayores víctimas que ha surgido hasta ahora ha sido Santander, el
segundo mayor banco europeo por valor de mercado. Cerca de 2.330 millones del
dinero de sus clientes están expuestos a los fondos de Madoff.

M&B ha señalado que no ha actuado como corredor para Santander ni había sido el
conducto para ninguno de los fondos de Madoff que fueron comprados por sus
clientes. Un vocero de Santander afirmó que el banco no tiene ninguna relación
comercial con M&B.

Las conexiones sociales parecen hacer sido otro vehículo para promocionar los
fondos de Madoff en España.

Andrés Piedrahita, el yerno colombiano del dueño del fondo de cobertura
Fairfield Greenwich, Walter Noel, les vendió fondos de Madoff a un gran número
de españoles adinerados. Los clientes de Santander también tuvieron exposición a
Fairfield a través de varios fondos ofrecidos por su brazo de banca privada,
Banif, que eran administrados por Piedrahita.

Piedrahita llegó a Madrid hace varios años con su esposa Corina, la hija de
Noel. Los dos son miembros destacados en los círculos sociales más prominentes
de España y acuden a menudo a las fiestas de los más ricos. Algunos dicen que
las conexiones personales llevaron a muchos a dejar de lado las dudas sobre si
los activos de Madoff realmente podían tener un desempeño tan estelar como se
decía. \"Esto se basó en la confianza, se basó en las relaciones personales\",
dijo un banquero español que optó por el anonimato, pero aclaró que no había
comprado fondos de Madoff.

En toda Europa, la confianza pareció haber sido un ingrediente clave a la hora
de promocionar los fondos de Madoff. Ahora, sin embargo, el descubrimiento de la
presunta pirámide financiera de Madoff constituye un gran golpe a la industria
de los fondos de fondos, que cobra comisiones a los inversionistas a cambio de
la promesa de diversificar el riesgo y monitorear a los gestores de fondos en
busca de potenciales fraudes.

Para llegar a instituciones como los fondos de fondos, Madoff generalmente usó
una red de \"fondos de alimentación\" como intermediario. Entre estos estaba el
Fairfield Sentry Ltd., gestionado por Fairfield Greenwich Group.

Representantes de esto fondos contactaban a los administradores de los fondos de
fondos y se jactaban de la trayectoria estelar de Madoff. En muchos casos, los
fondos de alimentación se asociaban con bancos para venderles a los propios
clientes del banco. En algunos casos, los bancos les prestaban dinero a los
inversionistas que ponían dinero en los fondos relacionados a Madoff.

Por ejemplo, NPB New Private Bank, con sede en Zúrich, ofreció a sus clientes de
fondos de fondos un producto estructurado basado en Fairfield Sentry Ltd., según
materiales de marketing y una fuente cercana. Se vendió en conjunto con Nomura
Holdings Inc., que prestó US$2 por cada US$1 invertido en el producto
estructurado. NPB New Private Bank les ofreció a los inversionistas la capacidad
de retirar dinero diariamente del producto estructurado, una disponibilidad más
frecuente que la que tienen muchos fondos de inversión. El lunes, Nomura anunció
que su exposición a Madoff era de unos 27.500 millones de yenes, unos US$304
millones.

En Italia, Banco Popolare, a través de su unidad Aletti Gestielle Alternative,
informó que tiene una exposición indirecta a Madoff a través de fondos de
alimentación incluidos en sus propios fondos de fondos de cobertura. En una
declaración hecha el lunes, Banco Popolare afirmó que sus pérdidas máximas no
superan los 8 millones de euros. UniCredit señaló que su propia exposición es de
unos 75 millones de euros.

La división de gestión de activos de UniCredit, Pioneer Investments, tiene una
exposición indirecta a Madoff.