Some good news for EMs

Two pieces of good news for emerging markets today.  One is that the IMF has just announced a new short-term liquidity facility (SLF), which will provide certain countries quick-disbursing assistance with minimal conditionality up to five times their quotas. The other is that the Fed has announced an extension of its swap arrangements to four emerging market economies (Mexico, South Korea, Brazil, and Singapore). This is exactly the kind of initiative that is needed, but two questions remain.  Will the amounts involved be enough?  And what will happen to countries that are not named in the Fed program or will not qualify for the IMF's new facility?   

Comments

[robertdfeinman]

What happens when the "short term" loans come due and the crisis hasn't been resolved?

It seems as if most governments are focused on quick fixes created in an ad hoc manner and that there still is not acknowledgment that there needs to be some fundamental changes to the present system of international finance or that the downturn may last for years, or even longer.

The prior examples aren't hard to find: the 1930's, the US in the 1970's and Japan in the 1990's, for example.

It seems the economists want to get back to a situation where their old models applied as soon as possible since they don't have any that are appropriate to the current situation. Hopeful, but not prudent.

[SpeciousRiches]

And some not so good news for the emerging, emerging markets... The credit crunch is hitting the microfinance market: http://economictimes.indiatimes.com/News/Economy/Finance/Rate_hike_meltdown_shut_liquidity_window_for_MFIs/rssarticleshow/3656212.cms

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[Luis Felipe Jaramillo]

It will be interesting to see how the central bankers and politicians of the developed world and the financial technocrats of IMF will react if there's a liquidity crisis in the emerging markets.

At this time, they designed pragmatic approaches (save the banks, it does not matter the "moral issue" of rescuing Wall St.")and that seems to have worked well: In most media, I've read financial analyst talking about the start of the end of the financial part of the crisis, and the severe start of the crisis of the real economy. Will they apply the same pragmatic approach to the EM not named in the "well behaved boys" list of the IMF and the FED? or will they continue with the moral speech of "well behaved countries", as was not done in Wall St.?
I don't know, but I would prefer another pragmatic approach...

[Nathan Smith]

I must confess I'm confused that emerging markets are vulnerable to this when they-- not all of them of course, but many-- have accumulated such massive dollar reserves. How big are the funds the IMF can draw on relative to the reserves emerging markets already have? The IMF has been scaling back recently, as far as I know: selling gold, streamlining staff. Are they ready for this?

[Per Kurowski]

Nathan Smith.

You are indeed right scratching your head.

In the Financial Times, October 29, George Soros wrote about the possible assistance the IMF might give a country like Brazil in terms of “$15bn, a pittance when compared with Brazil’s own foreign currency reserves of more that $200bn”.

So when push comes to shove the most important assignment for the IMF in helping Brazil, is to make sure that those $200bn are worth the same $200bn, when Brazil might need to use them.

In God… and in the American taxpayer we trust!

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Die Bank von England krise

Die Bank von England hat in dieser Woche als erste große Notenbank mit einer Politik der direkten Ausweitung der Geldmenge (quantitative Lockerung) begonnen. Ihre erste Auktion, in der sie für 2 Milliarden Pfund britische Anleihen (Gilts) von Investoren kaufte, wurde am Markt als voller Erfolg gewertet. So wurden der Bank von England Gilts im Wert von 10,5 Milliarden Pfund offeriert, also weit mehr, als die Notenbank kaufen wollte.

Gleichzeitig sind die Anleiherenditen britischer Staatspapiere seit Ankündigung der Politik der Mengenlockerung um mehr als einen halben Prozentpunkt gefallen - genau diesen Effekt wollte die Bank von England mit ihren Maßnahmen erreichen. Nach der Auktion lag die Rendite zehnjähriger Gilts mit 3,08 Prozent gleichauf mit der Rendite entsprechender Bundesanleihen (3,07 Prozent).

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Die amerikanische Regierung wird in dieser Woche ihren Plan vorlegen, wie Banken und andere Marktakteure von jenen giftigen Wertpapieren und faulen Krediten befreit werden sollen, die seit Monaten den Kreditkanal an Haushalte und Unternehmen verstopfen. Womöglich schon an diesem Montag werde Finanzminister Tim Geithner Einzelheiten zum Kauf fauler Hypothekendarlehen und damit verbundener Wertpapiere für bis zu eine Billion Dollar bekanntgeben, hieß es am Wochenende in Washington.

Berichten zufolge wird die Regierung eine neue Investmentgesellschaft mit dem Namen „Public Investment Corporation“ gründen. Sie soll mit einem Startkapital von 75 bis 100 Milliarden Dollar ausgestattet werden, die aus dem im vergangenen Oktober beschlossenen Rettungspaket für das Finanzsystem kommen sollen. Die Gesellschaft, die eine Reihe von Investmentfonds auflegen wird, soll eng an das Finanzministerium und an die staatliche Einlagensicherungsgesellschaft, die Federal Deposit Insurance Corporation (FDIC), angebunden sein. Ziel des Plans ist es, nach Möglichkeit auch privates Kapital zum Kauf der problematischen Wertpapiere und Kredite zu mobilisieren. Um privaten Investoren Anreize hierfür zu geben, will die Regierung nicht nur finanzielle Zuschüsse, sondern auch Ausfallgarantien geben. Die FDIC würde dann einen Teil der möglichen Verluste übernehmen. Die Schaffung dieser öffentlich-privaten Partnerschaft, die Geithner vor einigen Wochen in Aussicht gestellt hatte, ist aber nur ein Element des Vorhabens.

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Emerging markets are growing at a faster rate.The growth rate is very fast.Emerging markets are nations with social or business activity in the process of rapid growth and industrialization. Currently, there are 28 emerging markets in the world, with the economies of China and India considered to be by far the two largest. According to The Economist many people find the term dated, but a new term has yet to gain much traction.

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