ABSTRACTS FOR SEPTEMBER 2000 NEWSLETTER
The following are the abstracts taken from newspapers, magazines, and other sources
which are used to write my economic newsletters. Because of the seriousness
of the September 2000 newsletter and the fundamental shift to the euro, I
have provided this research for you.
Notes: The intervention of the euro is to exchange dollars for euros in order to shift dollars to South America to get rid of the overabundance of dollars still hanging around from the 70s when we got off of the gold standard. "Some economists said the ECB should adopt a more considered approach involving the gradual sale over months of some of its dollar-denominated foreign exchange assets." (9/25/00 FT G7 Nations stand by action tor revive euro)
New action: the U.S., as a G7 member state agreed to intervene in the Euro - new policy "strong Euro, not stable euro"
--Last week IMF board of directors voted to cut back slightly its long-term and repeat lending to countries so it could refocus its reosurces on its role as a lender of last resort when the next global cash crisis hits. [Guess what? It may be our turn]
--THE REAL REASON FOR THE EURO'S DECLINE ANALYSTS SAY [in other words, it isn't speculationit is far worse] HAS BEEN THE INEXORABLE OUTFLOW OF LONG-TERM CAPITAL FROM THE EURO-ZONE. DRIVEN BY THE PROMISE OF SUPERIOR RETURNS, EUROPEAN COMPANIES AND EQUITY INVESTORS HAVE BEEN DRAWN TO THE US.
--Nor does the US have much motive to try to push up the euro and drive down the dollar because this could force up both US inflation and interest rates.
-- The euro has fallen 28% against the dollar in less than 21 months.
--The appetite of European companies for US acquisitions remains unsated as underlined by Credit Suisse's agreement to buy Donaldson, Lufkin & Jenrette for $13.7B. Of the $95B of large cross- border mergers an acquisitions announced in the past month,$478B consisted of European companies buying US companies. To many economists, the only way out of this vicious circle of a falling euro, rising inflation and faltering growth is structural reform in Europe.
Note: both the dollar and yen are strong against the euro Sony and others looking to switch production to Europe. Here we are.
GROUP OF SEVEN AND EURO
FT, 8/31/00, 10 "Sterling unties the dollar knot" editorial
For nearly 7 years,` sterling was stable against the US dollar. It moved in a narrow range around $1.60. Fluctuations against European currencies were far greater. The relationship has now changed. This year, volatility between sterling and the dollar has been greater than that between the sterling and the euro. Yesterday the sterling hit a 7 year low against the dollar and it has fallen 10% since the start of the year. It is imossible to know if this separation will be lasting. A common view in the City is that much of the fall is due to thin liquidity in August.
FT, 8/31/00, 10, "ECB takes the plunge" by Ed Crooks and Christopher Swann
The 17 members of the ECB's governing council will meet on the 36th floor of the Eurotower in Frankfurt to raise interest rates for the euro-zone. It lifted interest rates by 1.75% since last Junetightening monetary policy faster than the Federal Reservebut it has done the ailing euro no good. Investors and markets continue to look to the US for superior rates of return. The appetite of European companies for US acquisitions remains unsated as underlined by Credit Suisse's agreement to buy Donaldson, Lufkin & Jenrette for $13.7B. Of the $95B of large cross-border mergers an acquisitions announced in the past month,$478B consisted of European companies buying US companies. To many economists, the only way out of this vicious circle of a falling euro, rising inflation and faltering growth is structural reform in Europe.
FT, 9/1/00, 1 "Rate rise fails to prop up eoro" Christopher Swann/Jeremy Grant
The euro fell to a new law as market shrugged aside a .25% point rise in interest rates by the ECB. This came as a blow to ECB officials who have been trying to stem the currency's decline since it was introduced 1/1/99. The ECB's main lending rate is now 4.5%. The euro feel back to its previous low of $.8844 to hit $.8838. The reason for the new low is due to investments in the U.S. A 25 basis point rise will do nothing to stop the hemorrhaging of long-term investment capital out of Europe.
FT, 9/4/00, 14 "Euro-bound pound" Ed Crooks
In recent years it has become popular to believe that Britain is an offshore branch of the US economy, and the pound is a sort of surrogate dollar. The traditional ties of language were reinforced in the 1980s and 1990s by shared political philosophies and corporate ownership and the dynamic US has been seen as a more appropriate role model than the sclerotic European Union. While the yen and European currencies swung back and forth against the dollar, the pound was steady at about $1.65 from 1996 to 1999. Not any more. This year the pound has lost almost 15% against dollar, falling last week to a 7 year low below $1.45, although it recovered a little on September 3. The more significant reason for the pound being decoupled is that it is caught between two great currency blocs and may be swinging out the dollar into the euro's. The prime cause of the pound's decline against the dollar has been the crossover in UK and US interest rates as short-term interest rates have risen above UK rates for the first time since 1986.
FT, 9/7/00, 15, "A greater Europe by Reform" Hubert Vedrine,
The enlargement is a doubling from 15 member states to 28 or 30. Current members include: Ireland, UK, Finland, Sweden, Denmark, Netherlands, Belgium, Germany, Luxembourg, France, Austria, Italy, Spain, and Portugal. Front runners to join: Cyprus, Estonia, Poland, the Czech Republic, Slovenia, Other applicants: Bulgaria, Hungary, Latvia, Lithuania, Romania, Slovakia, Malta and Turkey. "Yet we must not drag ourselves into a war of words. Nor do we need a theological dispute on the ultimate goals of the EU. Federalism, sovereignty, supra nationality, intergovernmentally and variable geometry are all entrenched pre-conceptions that some may find attractive."
FT, 9/9-10/00, 8 - "the euro's chronic weakness" editorial
The weakness of the euro during the first few months of the single currency was fairly easy to explain away. But these explanations are now wearing thin. The euro's fall has turned from a puzzle to a real worry. Against the dollar, the euro is now at its weakest since 1985 (using a synthetic rate prior to 1999). There are great positives a wave of corporate restructuring in Europe, the beginnings of structural reform. France's CAC stock index has risen by 65% since the launch in 1/1/99. In Germany the DAX is over 39% versus 23% in the U.S. Dow Jones in 1999.
WP, 9/10/00, E1, "when Will the Euro's Slide End?" Steven Pearlstein
The euro's fall continued despite the European Central Bank's announcement Thursday that it would use some of its dollars and yen to buy up $2 billion worth of euros. Investors were spooked by the decision of the French government to cave in to demands of protestors and cut fuel taxes. By some estimates, as much as $1 billion a day in foreign investment capital has been flowing into the U.S. in recent months in search of higher returns. Much of the European investment in the U.S. is coming in the form of corporate takeovers of US. Firms. In other cases, it's individual investors selling European stocks and buying American.
The weak euro helps hold down U.S. inflation by keeping the prices of European imports low, but hurts U.S. exports to Europe by making them more expensive. The euro's slide also reduces the value of U.S. corporate revenues from European operations. The appreciation of the dollar has helped keep disinflationary lid on the U.S. economy. Similarly the weakness of the euro has raised real activity in the euro-zone. The euro's weakness is a symptom. It reflects the outward flood of capital to pastures greener abroad. The ECB can do nothing sensible about this.
FT, 9/18/00, A25, As Euro Falls, U.S. firms don't Pounce" Marcus Walker and Anna Wilde Mathews
In 1999, U.S. corporate purchases of European companies fell 29% while deals in the other direction rose 32% to $193.2 billion. U.S. companies have a harder time financing a trans-Atlantic deal because there is no European equivalent of the American depositary receipt, the instrument U.S. shareholders can use to invest in European companies. Instead American companies have to pay cash. In contrast Deutsche Telekom was able to use its ADRs to finance most of its $40B deal with Voice-Stream which still needs regulatory approval.
FT, 9/20/00 1, "Calls grow for joint action on euro" Swain, Beattie, Barber
Pressure was mounting yesterday for co-ordinated intervention to halt the euro's slide after the ailing currency hit new lows against the dollar, yen and Swiss franc. Although Gillette and Dupont have complained that the euro's weakness was denting earnings, the US is still thought to have little interest in intervention. If the euro was not reversed soon, it risked a sharp and destabilizing correction higher against the dollar in the future.
FT, 9/21/00, 15, "Reaching out to all of Europe" Tony Blair and Goran Perrson
Europe stands on the brink of a new era. Within the next few months decisions will be taken that affect how and when the cold war division will finally be erased and the Continent truly reunited. We have both (Britain and Sweden) have modernizing, progressive governments and share the same view of enlargement. The EU should never lose sight of what enlargement means for the political future of Europe. It means uniting our Continent in peace and democracy, a goal that has eluded all previous generations. It means stability and prosperity, not just for the new members but for existing member countries too. It means Europe will be able for the first time to take Continent-wide action to counter environmental degradation and organized crime as well as strengthening the respect of human rights. Just as the original community helped to underpin successful democracies in Western Europe, so enlargement will help stabilize and develop democracy across our continent.
To counter environmental degradation and organized crime as well as strengthening the respect of human rights. Political reform must be matched by economic reform. At Lisbon this year the EU agreed a strategic goal around which all the existing and candidate members of the union can unite: to become by 2010 the world's most competitive and dynamic knowledge-based economy, with more and better jobs and social cohesion. This is a new agenda that is making Europe more open, more competitive, more dynamic.
FT, 9/21/00 14, "A struggling currency" Tony Barber and Christopher Swann
The euros fall against the dollar, yen and other world currencies has now become more of a problem than an embarrassment. When do you intervene? According to some European policymakers, the heart of the matter is a "dollar problem" rather than a euro one. The dollar's strength partly reflects the fact that the US is sucking in vast amounts of European capital to fund its current account deficit which is now 4% of US gross domestic product. The IMF suggests that the euro is 20 to 25% undervalued against the dollar. Nor does the US have much motive to try to push up the euro and drive down the dollar because this could force up both US inflation and interest rates. The European view is that the euro can hardly be described as a failure when it is helping bring about a single European capital market, spurring corporate restructuring and tax reforms, maintaining price stability inside the euro-zone and generating economic growth. Before the euro, European currencies gyrated against each other whenever the dollar moved strongly because international capital flows affected each country in different ways. With exchange rates among the euro-zone's 11 members (son to be 12), members are now permanently fixed and gyrations are no longer a problem.
Last week the ECB announced it was buying euros with interest from its foreign exchange reservesan action that falls short of official intervention but is a hint of more to come This was in place of raising interest rates aggressively in defense of the euro. The euro has fallen 28% against the dollar in less than 21 months.
WP, 9/21/00 A35, "Saying No to the Euro" George F. Wills
Proponents of the euro are relying on two arguments. One is patently false, the other tellingly spurious. The falsehood is that this is "just about money." Actually it is another giant step toward creation of a European superstate, a Leviathan requiring surrender of nations' sovereignties, leaching away the prerogatives of national legislatures. Cultural homogenization"harmonization," in the EU's prettified patois-would follow. Monetary union entails a unitary state, not a Europe of democratic nations. As William Blackstone understood more than two centuries ago, "The coming of money is in all states the act of the sovereign power."
Pro-euro forces stress that the value of Denmark's krone is linked to the currency of Germanywhich uses the euro. The spurious argument is the last resort of intellectually bankrupt political causes: inevitability. Danes say those advocating replacement of their 1000 year old currency with the 21 month old euro "have no choice." But Denmark, like Britain, is flourishing outside the euro, which is sinking in value. And an economic panel called the Three Wise Men has concluded that any economic benefits of joining the euro would be "slight and uncertain." By firmly saying "NO" to the euro, Denmark can slow the continent's slide into "harmonization."
FT, 9/22/00, 2, "Danes warned against rejecting euro" Clare MacCarthy
The Danish government launched an 11th hour effort to rally support for its plan to bring the country into the euro-zone by spelling out the economic consequences of rejecting it on Thursday. Acceptance of the euro would create 20,000 jobs, boost purchasing power by 2% and give the government $1.2B extra for welfare and save 10B in Danish kroner in foreign debt interest payments.
FT/9/22/00, 2, "Capital outflows put euro on slippery slope" C. Swann, Adrienne Roberts
Christian Noyer, ECB's vice president described the euro as "dangerously undervalued" and warned that his judgement would be confirmed by a meeting of the G7 in Prague. Ernst Welteke, president of the Bundesbank said the depreciation of the euro owed little to logic or economic fundamentals but more to the herd-like behavior of traders and analysts. The first currency crisis of the 21st century is proving a more prosaic affair. Nor have currency speculators played much of a role in the euro's misfortune. Data from Chicago's mercantile Exchange suggests the reverse. When the currency showed signs of reviving in May and June, speculative traders leapt enthusiastically on the euro bandwagon. " THE REAL REASON FOR THE EURO'S DECLINE ANALYSTS SAY HAS BEEN THE INEXORABLE OUTFLOW OF LONG-TERM CAPITAL FROM THE EURO-ZONE. DRIVEN BY THE PROMISE OF SUPERIOR RETURNS, EUROPEAN COMPANIES AND EQUITY INVESTORS HAVE BEEN DRAWN TO THE US. THE EUROPE ZONES BASIC BALANCE DEFICIT WAS $123b LAST YEAR. The first six months of this year the outflows has been 44.5B euros.
While some speculative attacks can be fought through central bank intervention, capital flows are more difficult to turn the tide. "How do you make the chairman of a conglomerate quake in his boots? You can't. If he likes the brands in the US and he wants to buy them, it doesn't matter if you intervene" says Mr. Bloom. The absence of speculative positions makes intervention more difficult because "intervention would be swimming against a powerful flow of long-term investments.
Meanwhile there is growing pressure on US mutual funds to cut back their investments in European equities as the euro weakens. Funds flowing into European-focused US mutual funds have recently fallen, adding to the pressure on the euro.
FT 9/22/00, 2 "Hedge funds absent from slide in euro's fortunes" - Joshua Chafflin
There are no hedge funds affecting the euro. They are absent. Soros and Julian Robertson quit the big- time hedge funds. The euro, dollar and yen are all floating. Given the enormous size and depth of those markets, hedge funds simply do not have the muscle to substantially affect prices. Unpegged currencies may make bad bets for many because their price movements are not governed entirely by rational factors.
G7 Finance Ministers and Central Bank Governors Communique - Prague, Czech Republic 9/23/00
3. We discussed developments in OUR exchange and financial markets. We have a shared interest in a strong and more stable international monetary system. At the initiative of th ECB, the monetary authorities of the US, Japan, UK and Canada joined with the ECB on 9/22 in concerted intervention in exchange markets because of the shared concern of Finance Ministers and Governors about the potential implications of recent movements in the euro for the world economy.
FT, 9/23-24/00, 1, "Euro's relentless decline prompts world's central banks to step in" tony Barber and Christopher Swann
The world's main central bank's took financial markets by surprise yesterday with a coordinated intervention aimed at ending the euro's relentless decline against other major currencies. The move, initiated by the ECB, the US Federal Reserve, the Bank of Japan, the Bank of England and the Bank of Canada, had an immediate impact, sending the euro from $.853 to $.90 but during the day it faded to $.88. In a joint statement, the central banks said they had taken action with their own reserves because the euro's fall could jeopardize the world economy. The intervention, on the eve of a Prague meeting of the G7 finance ministers was the first such concerted action by the major central banks since 1995.
It was also the first time that the ECB had risked intervention in an explicit attempt to reverse market sentiment on the euro. Japanese officials said the intervention had aimed as much at curbing the yen's strength against the euro as at boosting the euro against the dollar. Until yesterday, the euro had fallen by more than 30% against the yen and more than 25% against the dollar since its launch in January 1999. Estimates by foreign exchange dealers of the amount of euros purchased by central banks ranged upward from $1.5B.
FT, 9/23/24-00, 2, "Participation of US Fed was critical" Gerard Baker, Richard Wolffe
The critical new element in yesterday's action was the participation of the US. Previous limited attempts at intervention by the ECB had no effect in stemming the currency's decline. Traders had been convinced that action that did not include the US Federal Reserve would have insufficient credibility to stabilize the beleaguered European currency. A poll of currency traders at 65 of the leading finance houses showed the significance the markets ATTACHED TO INTERVENTION BY THE US AUTHORITIES. With US demand still growing, an election six weeks away, dollar depreciation, which might contribute to inflation concerns, did not look especially welcome to US policy makers. So what made US authorities change their mind? U.S. Treasury secretary said it had acted in response to European concerns about the potential effect on the global economy of a weak Euro. It emphasized that the move was a European initiative, not a US one, that the US was assisting in the operation, not leading it. Summers said the US has been assured of structural reforms. This put the Treasury's move in line with its last intervention to support the yen in 1998. At the time, Treasury officials insisted that intervention would be useless without fundamental economic reforms by the Japanese authorities. This was done in the "national interest of the US".
In 1998, June, the yen had declined against the dollar. Giving rise to immediate concerns about the health of Japan's financial system, and the impact to investors' judgements about global economic stability. The yen's weakness was exacerbating the woes of Asian economies, already battered by the region's financial crisis. While the euro did not present threats as great as the yen in 1998, there is concern that developments on a number of fronts threatened to intensify market volatility. The rise in oil prices and its con comitant political effects on governments in Europe, the squeeze on US corporate profits from the combined effect of oil and the euro have all contributed to heightened volatility. If a floor can be put under the euro, at least that element of uncertainty would be removed.
FT, 9/23-24/00, 8 - "Deeds, not Words" Barber and Swann
By marshaling the world's main central banks behind a combined effort to support the euro, the ECB has put its reputation and that of the yong currency on the line. The Sentiment has deteriorated so sharply in recent months that failure could even provoke questions about the future of Europe's monetary union. Given the mixed record of central bank interventions over the past 20 years, some experts doubt whether yesterday's coordinated action will succeed in the long term. By general consent, yesterday's action achieved maximum impact: (12) its timing took markets by surprise, (2) the US Fed Reserve';s involvement gave the operation vital credibility. Said Hans-Jurgen Meltzer of Deutsche Bank, "The decisive point is that the markets see the readiness for joint intervention." The US decided to act as a result of "shared concern about the potential implications of recent movements in the euro exchange rate for the world economy." In other words, the euro's dive was becoming a potential problem not just for the euro-zone but for the world as a whole, including the U.S. That this no on illusion is shown by the fact that an increasing number of large US corporations have begun to warn that a weak euro is eating into their profits. Analysts argue that the world's central bank's will need to dig deep into their reserves to push the euro substantially higher. "This move will have scared off any speculators who might have been tempted to start selling the euro said Sonja Hellemann, currency strategist at Dresdner Kleinwort Benson, "But essentially, they will have to soak up the capital outflows from the euro-zone. This requires a lot of money."
In 8/1985 - Plaza Accord - 5 leading powers, central banks sold more than $10B in successive waves over a period of six weeks. To drive the dollar down 13% against the yen and 10.5% against the Dmark.
2/ 1987 - Louvre Accord, G7 intervenes to push up dollar
9/92 - BOE tries to prevent sterling falling out of ERM
7/95 - US Fed and BOJ intervene to push dollar higher against yen
6/98 BOJ and Fed intervene to prevent yen falling further after it reached 1.47 yen to the $
Other interventions which they did not name.
WP, 9/24/00 A34, "If Euro Declines Again, G7 May Prop It Back UP" Steven Pearlstein
Fresh from their successful market intervention Friday to prop up Europe's ailing currency, the euro, financ officals sais they would contiue to monitor its value and left opne the possibility of further interventions. They also warned that the currency $37 per barrel price of oil is a direct threat to global economic prosperity and stability, but stopped short of announcing initiatives to bring it down. The G7 industralized democracies said the euro had fallen below levels justified by eocnomic fundamentals with serious implications for the x//world economy. Japan's finance minister Kiichi Miyazawa said if traders continue to sell euros en masses and drive down its value, they are determined to do what they did on Friday. Central banks bought billions of dollars worth of euros in a successful effort to drive up its value from its low to 84 cents.
A cheap euro means foreign goods, oil included, are more expensive to Europeans. This is hampering the European economies. They dislike its effect of running up the U.S. trade deficit by making European products cheaper to American buyers.
WP, 9/24/00, A34, "Debating How to Repair global Financial System" Steven Pearlstein
Finance ministers, central bankers and legions of protestors have converged on Prague. What is likely to be overlooked is that another financial summit will go by without agreement on the most crucial long-term challenge to these masters of the financial universe: how to deal with global finance crises that have shaken the system to its foundations several times over the past decade. In recent weeks officials at the U.S. Treasury, WB/IMF has taken great pains to trumpet moves they've already taken to redesign the global financial architecture since the crises in Mexico, Asia and Russia. These include discouraging countries form pegging their currency to the U.S. dollar while shamming them into improving their banking regulation and publishing timely reports on their national balance sheets. Last week IMF board of directors voted to cut back slightly its long-term and repeat lending to countries so it could refocus its resources on its role as a lender of last resort when the next global cash crisis hits.
While Summers characterized such actions as "revolutionary", many outside observers view these as merely modest first steps. They point to the fact that after 2 years of study and high-level negotiation, there is no consensus on the controversial issue of how to manage crises without bailing out banks, bondholders and other private investors [Global bankruptcy court]. One top U.S. official acknowledged recently that all the talk of a new financial architecture probably raised expectations too high. "Probably the best we can say right now is that we've upgraded the plumbing." It was R.Rubin who launched the architectural redesign effort in the midst of the Asian crisis, it is the U.S. that now opposes the boldest proposals for reform which include: the IMF want to issue what amounts to a concise financial report card each year, grading countries on such criteria as to how much debt they have relative to their reserves or how their bank regulation stacks up against those in other countries. Developing countries hat the idea which U.S. officials argue that it's enough to require countries to file timely factual information. Even more contentious is a proposal that to qualify for IMF lending, countries must include a provision on their bonds setting out a legal mechanism for a country facing default to work out a repayment schedule with a majority of its lenders, much like a bankruptcy court. The Treasury is opposed to imposing such mechanisms on borrowing countries reflecting concerns on Wall Street that such a move would encourage countries to default and destabilize the system. The debate arises from criticism of the rich nations' handling of some past financial crisesnotably those in Mexico and some Asian countriesbecause the emergency loans were used largely to pay off foreign investors and lenders while the general populace endured the deep recessions and austerity.
It will fall to Canada and Britain to push for clearer guidelines on how it will "bail in" private investors. Summer, and Greenspan and many IMF officials have made it clear they prefer trhe current system in which they are free to handle each crisis on a case-by-case basis, using a variety of carrots and sticks to wring concessions from the private lenders. That approach, recently proved successful in negotiating a restructuring of private-sector debts in Ecuador, Ukraine, and Pakistan.
Such fixes may not rival the kind of bold experimentation that led to design of the global financial system at Bretton Woods 56 years ago but it is the kind of step- by step approach favored by Fisher, Summers and other officials who will have to deal with the unintended consequences of a more sweeping redesign.
FT, 9/25/00, 1 "G7 Nations Stand by action to revive Euro" Alan Beattie, Stephen Fidler
Governments of the world's leading economies gave foreign exchange markets a clear warning over the weekend that they were prepared to repeat Friday's surprise intervention to support the euro. Wim Duisenberg said that the weapon of intervention "is always in our arsenal". The G7 intervention which market analysts estimated at several billion dollars involved COORDINATED PURCHASES OF EUROs BY THE CENTRAL BANKS OF THE US, JAPAN, CANADA, AND THE UK AS WELL AS THE ECB. The central bank will compensate for the foreign exchange intervention by issuing extra euros to avoid any effect on euro-zone money supply. European governments also pledged to continue structural reform in euro-zone economies to support the currency. Some economists said the ECB should adopt a more considered approach involving the gradual sale over months of some of its dollar-denominated foreign exchange assets.
New role of finance ministers and c.bankers outlined - U.S. agreed to participate.....
FT, 9/25/00, 3 "CAREFUL PLANNING BEHIND BANK'S EURO SURPRISE" - Alan Beattie/S. Fidler
Intervention in support of the euro took foreign exchange markets by surprise last Friday but the plan to intervene and the involvement of the US emerged more than 2 weeks earlier in a meeting of EU finance ministers in Versailles September 8-9, according to G7 finance officials. The key meeting comprised ministers from the euro-zones 11 countries and the ECB. These ministers agreed for the first time that a STRONG EURO RATHER THAN A STABLE EURO WAS IN THE INTEREST OF THE SINGLE- CURRENCY AREA. Governments have remained tight-lipped about when Summers actually agreed in principle to the interventionthe final US decision to move was not taken until last week (9/18?). This action was described as a "victory for the euro-group. 'What has occurred strengthens the euro- group's credibility. When the Europeans say something it should be taken seriously, ' said Laurent Fabius, the French finance minister who chairs Ecofin." Duisenberg stressed that the actual decision to intervene last Friday was taken by the ECB's governing council and the finance ministers' permission was not needed because "we don't need permission. [they] had a role in the overall orientation of exchange rate policy, the management of the foreign exchange markets was a matter for the ECB."
But others present at Versailles said the overall consensus in favor of intervention meant the formal division of roles between ministers and central bankers was unimportant.
The decision to intervene lies with the Treasury Secretary alone, in consultation with the Fed Reserve Board and the Fed Reserve Bank of NY. The key discussions over last week's decision would be between Summers and Greenspan. Summers was not expected to sanction intervention before November's presidential elections but he has been involved closely with intervention policy since moving to Treasury seven years ago. Friday represented the3rd invention since the: the previous was June 1998 when R. Rubin sanctioned joint intervention with the Bank of Japan to boost the yen. The timing was meant to provide maximum surprise to the markets which had been looking to the G7 meeting in Prague.
FT 9/25/00, p. 16 Editorial "G& tries to save the euro"
The 7 leading high-income countries intervention support of the euro last Friday. This was more than surprising: it was risky. Whether it was wise remains an open question. In their communique, the finance ministers and central bank governors of the G7 justified the action by pointing to their "shared concern...about the potential implications of recent movements in the euro for the world economy."
The decline of the euro has become worrying: (1) it threatens higher inflation in the euro-zone (2) imposes pressure on internationally exposed segments of the UK economy; (3) could general further huge increases in the U.S. current account deficit." They can succeed if they wish: the Federal Reserve is able to create an infinite number of dollars. But it is unlikely in practice to undertake an intervention that affects US monetary policy. The ECB has $235B in reserves at its disposal.
The G7 has taken a big risk in two ways: (1) it is not prepared to do enough. The currency is being driven down more by long-run investment OUTFLOWS than by speculation. If these OUTFLOWS ARE SUSTAINED, the euro-zone needs to run a corresponding current account surplus to finance them. The weakness of the euro is then merely the mechanism through which this surplus is being achieved. If this outflow persists, spasmodic intervention will fail to halt the decline.
(2) the second risk is that intervention will succeed all too well. In the past central bank intervention has often succeeded in marking the turn in a currency. The dollar's rise could now reverse. Given the scale of the current account deficit, it could turn into a cumulative and destabilizing fall. This concern is, no doubt, why Summers insisted upon the continued US desire for a strong dollar.
But having started, they must now succeed in stabilizing the euro without destabilizing the dollar. The G7 has merely made the first move in a long and complex game.
9/30-10/1/00, 26, "Sony plans production switch to Europe because of the weak euro", Harney, Tett
Sony is planning to shift production of high-technology consumer electronics products from Japan to Europe to offset the recent sharp decline of the euro against the yen. This comes as euro weakness has eroded the company's profits in its vital European market. Europe accounted for nearly 20% of sales and operating revenue in the first quarter of the fiscal year. Sony will look to seek an alliance with a European semi-conductor maker to keep costs down and meet booming demand since it is cheaper than starting with scratch. They are also interested in tie-ups or acquisitions in the mobile telecommunications industry. The impact of the strong yen/weak euro is likely to be seen in other Japanese companies next month then they report interim results.
The euro has tumbled 30% against the yen since its launch and although intervention by central banks has stopped the decline, Japanese companies are not convinced the currency is poised to rebound sharply.
Business Week, 10/9/00, 39, - "Business Outlook", "what if the Greenback Suddenly Gets Sick?"
Summers has taken on a tricky balance act: the U.S. Decided to assist other governments in the September 22 currency-market intervention aimed at propping up the euro at the cost of a weaker dollar. But at the same time, Summers must continue to assure foreign investors that the U.S. remains committed to a strong greenback.
The two goals are at cross-purposes when must is at stake, both economically and politically. A brawny dollar is important right now because the US requires an unprecedented flow of foreign capital to finance growth, especially in business investment. Equally crucial, the dollar has been a key anti-inflation force. A sudden weakening in the currency would have sharp negative consequences for U.S. growth and inflation. That's why the Treasury Department made it clear that the intervention was initiated by the euro zone, not the U.S.
WP, 9/29/00, e2, "With Test, Boeing Strikes First" Greg Schneider
Boeing successfully flew a demonstration version of its Joint Strike Fighter warplane yesterday in California turning up the heat of Lockheed martin Corp. to Fly its entry in the competition for what could be the biggest military contract ever. Lockheed Martin's version is a few week away from flying. The contact in question is worth $300 billion over the next two decades. The aircraft, dubbed the X-32A, took only baby steps after its takeoff. The Joint Strike Fighter program is an ambitious attempt to build a single family of planes to replace a whole host of current-day aircraft beginning in 2008. I twill serve as a versatile, low-cost fighter- bomber for the Air force; a bulker version will have to withstand carrier landings for the Navy and another version must be able to hover before landing for the Marines and the British navy. The basic Air Force version is supposed to carry a sticker price of $30 millionfar below the comparable cost of $84 million for the more sophisticated F22and the Pentagon plans to buy nearly 3000 copies. The military spending bill before Congress for 2001 delays picking a Joint Strike Fighter winner by 3 months, until next June.
Because the impact on the defense industry is expected to be so profound the Pentagon has debated picking a design and then awarding the work to both companies. Northrop Grumman and BAE Systems are partners on the Lockheed Martin entry. Boeing stock rose to $56.094 while Lockheed Martin closed down at $29.31.
FT, 9/21/00, 9, "dollar's embrace leaves Ecuadoreans tender for passing of their sucre" - Nicholas Moss
Beginning in March 2000, Ecuador began a six month transition to the dollarization of Ecuador's economy in which the U.S. dollar replaced the local currency. Ecuador's economy was already heavily dollarised before the official change passed into law in March. Rents, and the prices of cars, electrical goods and other imports were often fixed in dollars. The cost to convert was 25,000 sucres to the dollar, now there are new coins to get used to. The sucre lost 2/3s of its value in 1999 as the economy shrank 7.5%, its worst downturn since central bank records began 100 years ago.;l The country's finances were ravaged a year earlier by a slump in world prices for its oil and other commodity exports, just as the rebuilding had begun after El Nino tropical storms. The exchange of sucres of dollars will continue through march 2001. Batches of new Ecuadorean coinspennies, nickels times and quarters from $80 million worth minted in Mexico and Canadaarrived last week.
FT, 1/25/00, 4 "East Timor drops euro plan for dollar" C. Swann
East Timor's provisional rulers have decided to adopt the U.S. dollar as its official currency while the country is under United Nations rule for the next two or three years. At that time, they will be free to adopt another currency. The decision was reached by a 15 member National Consultative Council, a body established by the UN in December to involved East Timorese in decisions affecting the country. The move has angered the CNRT, the dominant political force representing the Timorese, which had pressed for the adoption of the Portugese escudo, subsumed last year into the euro-zone. In January, Ecuador's new president Gustavo Noboa pledged to press ahead with his deposed predecessor's plan to dollarize. U.S. officials had threatened to withdraw aid and oppose a long-awaited IMF loans.
OIL - ENERGY CRISIS
Environment - Clinton has not allowed new refineries to be built
take reserves and put in parks where can't touch - Utah
National Energy Policy 2000 - by Senator Frank Murkowski -
American is going to face an energy train wreck. National energy security is at risk. Gas not cheap any more. No energy policy. Nation thrives on energy. Need all forms: hydro, oil, gas, coal, wind. www.senate.gov/ `Murkowski
History of OPEC
1960 - Opec formed at the Baghdad Conference by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela as a counterweight to the 7 sisters big western oil companies that dominated the global petroleum sector
1973 - Opec storms to prominence as oil prices surge to unprecedented levels in the wake of the Arab oil embargo of industralized countries following the October war between Israel and its Arab neighbors
1979 - Second oil shock of the decade hits the world as a result of widespread disruption of the Iranian oil industry after the Islamic revolution
1985/86 - After rising steadily in the early years of the decade, oil prices suddenly collapse after widespread Opec cheating on quotas forces Saudi Arabia to slash exports from 7 m barrels a day to 2.6 million barrels
1990/91: Panic buying send oil prices soaring after Iraq invasion of Kuwait
1998/99: Oil rices collapse UNDER THE $10 BARREL AS A Result of chronic open quota cheating and the economic collapse in Asia
1999/2000: Opec responds with a series of deep production cuts that eventually reverse bearish sentiment and trigger the long bull run in oil prices
2000: fears that the world will be starved of sufficient oil supplies to maintain economic expansion.
Nyt- 10/16/73, "Saudi Threat on Oil Reported, Edward Cowan, 1
The Saudi Arabian Oil Minister ws reported today to ahve told Western oil executives that if the U.S. overtly undertook to resupply Israel's fighting forces, Saudi Arabia would cut crude-oil production by 1q0% at once and by 5% a month thereafter. This announcement came after the U.S. said that it was dispatching military equipment to Israel. S.A. produces 8.5 million barrels of crude a day with 600,000 going to refineries in the U.S. The U.S. consumes about 17 million barrels of crude oil and refinery products a day, of which 6.4 million are imported. Imports of crude from Arab states have been estimated by Government officials at 1.1 million barrels a day and by industgry sources at 1.4 million.
with anxiety about Middle Eastern oil supplies mounting each that that the war goes on, officials here have been reviewing emergency plans. One calls for the establishment of a foreign petroleum-supply committee consisting of Government officials and representatives of 21 American oil comp;anies iwth foreign operations. Another sign of apparent willinginess of the Arab states to use oil as a lever on Washington came from Bahrain. Their foreign minnisters said that support of Israel would ahve a serious effect on his country's relations with Washington. Libya, Kuwait and S. A. are regarded as the countries best able to reduce output for political reasons.
FT, 8/26-27/00, 6, "Shock tactics" Ed Crooks
In the past 18 months, oil prices have tripledBrent crude the benchmark, has risen from $10 in 2/99 to more than $30 yesterday. Germany is set to slow down as a result. "It is really becoming serious. We are in a situation maybe not so different from the oil shocks of the 1970s," said Eric Chaney of Morgan Stanley Dean Witter. Prices rise and real income fall as resources re lost to oil producers. If unions and companies try to restore real wages and profits by pushing up pay and prices, inflation can start to spiral upwards. The developed economies have become more energy-efficient over the past 2 decades, improving energy consumption per unit of output by about 25% since 1980. Some analysts also argue that the shift of modern economies away from manufacturing towards communications and internet- based services has made oil prices less pivotal. But, despite the changes in the structure of the US economy since 1989, oil consumption has still risen by 11%.
"Energy is still a key input: the new economy runs on gasoline and aviation fuel" says Andrew Oswald of Warwick university. The US is home to the gas-guzzler car is home to gas-guzzler car and the walk-in refrigerator, and the consumption of oil is often regarded as close to an inalienable right. Germany has a fascination with using fuel economically. The US economy is indeed much more energy- hungry than Europe. US needs 330 tonnes of oil to generate $1m of gross domestic product, compared with 190 tonnes in France and Germany and 140 tonnes in Europe. US Taxes are minimal relative to those in most European countries.
The US manages to produce 40% of its oil consumption whereas Europe does not. With stocks low and the winter on its way, some analysts predict a new all-time record of $50- a barrel for Brent crude. That would put severe pressure on the global economy. Even if prices merely stick near $30, pessimists expect that both inflation and unemployment will rise in the US and Europe.
No article - did not quote
Al Gore has yield to the temptation to use $18B worth of oil in an election. Bush says it was established in 1975 for real emergencies. In 1991, George Bush Sr. opened the values at the start of the Gulf War. The effect was dramatic: world oil prices fell from $31 per barrel to $21. Clinton tried to pull off a similar trick. It agreed to release 30 million barrels into the market over one month. The effect of releases from the Strategic reserve will be on the global balance of supply and demand for crude. With a strategic reserve that could release 1.3m barrels a day for 430 days the US can clearly influence the world price for a while. The US reserve is only the equivalent of 7 « days of the world's 76 million barrels a day of oil consumption. So as with the central bank's currency interventions, the ability to move the market will depend very much on underlying pressures of supply and demand.
9/8/00, 1 "Profits caught in oil-euro squeeze" Phillip Coggan, Adrian Michaels
Fears about the impact of the soaring price of oil and the plunging euro spread yesterday as companies warned investors to expect lower profits. Dupont blamed substantially higher oil prices for increasing its costs and said a weak euro was hitting its revenues as it issued a profits warning. Investors forced the company's shared down 11% to $41.81. Dow Chemical fell 6.38% to close at $25.69. Analysts are expecting that the oil price rise will cause a much sharper-than-expected economic slowdown.
International Herald Tribune, 9/8/00, 1 "oil Soars to a 10 year high" - John Schmid
Fresh fears about Europe's economy emerged Thursday as pronouncements by the continent's politicians failed to lift the euro significantly off its record low and crude oil prices hit a 10 year high. Clinton told Crown Prince Abdullah ibn Abdulaziz of S.A. at the UN Millennium Summit "I told him I was very concerned that he price of oil is too high, not just for America, but for the wold". In Europe, high oil costs and a weak euro form a double-barreled threat to the region's recovery and set the stage for rising inflation in the 11 nation single currency bloc. The plight of the European Central Bank which began operations with the euro's January 1999 launching, has never been more dire. Since its birth the common currency has fallen 26% against the dollar and 31% against the yen.
9/15/00, p 9 "G7 countries ponder common oil policy" Peter Ehrlich and Ralph Atkins
The world's leading industrial nations are discussing forging a joint position on soaring oil prices and the euro, dollar and yen exchange rates. Initial contacts between members of the G7 have already taken place on the level of the sherpas who prepare summit meetings. In Britain, the Treasury confirmed that Gordon Brown the UK chancellor will also use the forthcoming G7 meeting of finance minister in Prague to push for a statement demanding action to deal with the rise in oil prices. He is expected to press G7 counterparts to apply pressure on OPEC oil-producing nations to raise output to drive down the price of crude. Brown said, "In general terms, we are interested in any practical ways where pressure can be brought to bear on oil-producing powers and on Opec in particular to reduce the oil price." Both initiatives could help send important signals to financial markets and to thousands of lorry drivers and farmers who continued to protect across Europe yesterday demanding governments provide compensation for the crippling costs on fuel-dependent businesses.
The G7 club dates frm the 1975 world economic summit that followed the oil and exchange rate crises of the early 1970s.
WP, 9/21/00, E3, "Oil prices Again Climb: Calls to Tap Reserve Rise, K. Bredemeier
There are 570 million barrels of crude oil in the Strategic Petroleum Reserve which is stored in four undergrown salt caverns along the Gulf of Mexico in Louisiana and Texas. The reserve is intended for use in cases when there is a national supply emergency. High prices alone do not qualify but private oil reserves are at a 24 year low and the American Petroleum Institute reported this week that the stockpiles of crude fell by 2 million barrels in the week ended September 15 to 286.5 million barrels. Less than 10% of the nation's homeowners warm their homes with heating oil, 35% in the Northeast do. The price of diesel fuel has gone up 73% in the last 18 months and now sells for !65 a gallon.
BP's step beyond petroleum - FT, 8/9/00, 19, by Robert Corzine
Need to do.
9/22 Washington Post, "gore Urges Use of Oil Reserve, 1, "Mike Allen"
both running mates joined the oil debate. In Arkansas, Cheney said gore "wants to point the finger of blame at everyone but his own Energy Department and said it "would be silly not to open the Arctic National Wildlife Refuge near Prudhoe Bay for Drilling." Two years ago, 11 million barrels of oil from the reserve were shipped to Mexico in exchange for Mexican oil that was better suited to U.S. refiners' needs. In June, two U.S. oil companies were each supplied with 500,000 barrels of oil after a blockage in a ship channel serving their refineries threatened to shut them down.
Ft, 9/22/00, 9 "high oil prices will hit developing nations" Fidler and Beattie
Oil prices at current levels would wipe a percentage point off expected growth rates in developing countries next year and the impact could be made worse by moves towards lower energy taxes in rich countries, World Bank officials said yesterday. The issue of higher oil prices is one of twothe other being the weakness of the euro that threaten to dominate the coming meetings of the IMF/WB in Prague.
The world's 30 or more oil exporting countries would gain 6% of GDP: or $135B. Developing countries commodity exporters have limited access to external capital markets
[NOTE: in the 70's the developing countries were not broke like they are today with IMF/WB loans]
G7 Finance Ministers and Central Bank Governors Communique - Prague, Czech Republic 9/23/00
3. We are concerned about the adverse effects on the world economy of the recent sharp increase in the world oil price. It is important that world oil prices return to a level consistent with lasting global economic prosperity and stability for both oil producing and consuming countries. It is crucial fo the world economy that OPEC and other oil producing countries take actions to contribute to a reduction in oil prices and greater stability in oil markets. Improved efficiency in the use of energy in all economies would contribute to that objective.
FT, 9/25/00, 1, Clinton may release more oil"
The Clinton Admin said it would consider additional releases of oil from emergency supplies yesterday, as officials defended the president's decision to open the US Strategic Petroleum Reserve against intense Republican criticism. Bill Richardson, energy secretary, insisted the decision to release 30m barrels over the next month was taken to "head off a heating-oil shortage in the north-east." Mr. Richardson said the White House objective was "not to manipulate prices" and suggested more oil could be released if the market did not respond adequately. At the IMF/World Bank meetings in Prague, industralized countries also claimed widespread international support for driving oil prices lower after oil-exporting countries joined a call for an increase in production by the IMF policy-seeing committee.
FT, 9/22/00 Gore calls for release of strategic oil reserves" Gerard Baker, Matthew Jones, Hillary Durgin
Al gore placed the escalating global energy crisis at the heart of the American presidential debate. Richardson urged Clinton to approve the release of 60 million barrels. The MOVE COMES AS GOVERNMENTS FO THE G7 COUNTRIES MEET IN PRAGUE THIS WEEKEND TO CONSIDER A COORDINATED RESPONSE TO THE CRISIS. G7 countries CONTROL MORE THAN 1 BILLION BARRELS OF OIL HELD IN TANKS AND PIPELINES AS A BACK-UP RESERVE FOR USE DURING NATIONAL EMERGENCIES.
9/28/00, 30, "Oil traders pit their wits against fundamentals" Andrew Ward and Lesia Rudakewych
A few hundred traders at the New York Mercantile Exchange and the International Petroleum Exchange in London have played a central role in the rise in oil prices to 10 year highs amid fears about a winter fuel shortage in the northern hemisphere.
Prices are affected by the mood of traders as they consume the data and news headlines fed to them on the huge electronic screens hanging above the pit. A cold wind whipping around the World Financial Centre, where NYMEX is situated can inflame fears that a harsh fall could further strain US heating oil stocks already at a 26 year low. While traders exert an influence on the price, they are not the real force behind the market's ascent to levels not seen since the Gulf War. In London, a handful of speculative day tradersidentified by their red jacketsplay the market to make money for themselves. But most dealers are employed by commodities trading companies which broker transactions between oil producers and consumers.
Brakes were applied to the market last Friday when Clinton announced the release of 30 million barrels of oil from US emergency reserves. "It broke the bullish fever of the market. "Oil refiners under-invested when the market was poor. They had no margins to spend upgrading their plants. Now they don't have the capacity to cope. Laughlin forecast that prices will fall to around $28 once the supply bottleneck begins to ease.
9/28/00, 30, "Gold rises despite news of Swiss sale" - Andrew Ward
Gold prices jumped to a 3 week high as markets shrugged off news from the Swiss National Bank that it would see 200 tonnes before this time next year. The December gold contact flirted with $280 an ounce before falling back to $279.40. Platinum remained relaxes about the industrial action at Anglo American Platinum in S. Africa despite talks to end a 9 day dispute break down. The commodity was fixed lower at $565 an ounce. Copper slumped down to $1,986 a tonne on profit taking.
FT, 9/3010/1/00 8, Pouring Oil on Troubled Markets editorial
The world's industrial leaders have shown a surprising ability to turn the tides in two important markets. Nine days ago just before the G7 meeting in Prague, central banks, including the US Fed Reserve intervened to stop the fall of the euro against the dollar. The effect was hardly dramatic. It rose 4% from its low of $.847. Even more important, the G7 leaders appear to have swung the oil price by a combination of bluster, persuasion and intervention. The US 's decision to release 30 m barrels from its strategic petroleum reserve helped to push oil prices back from a peak of $34 per barrela 15 year high excluding a brief peak in the Gulf War. After Saudi Arabia's Crown Prince Abdullah promised to increase production oil fell back below $30.
If oil prices were to remain high for a period, OPEC did a study and concluded that 1/2% point would be knocked off world growth and inflation would increase by 3/4%. Investors who remember the sharp falls in corporate returns during the oil crises of the 70s might brace themselves for another plunge.
FT, 8/9/00, 19, , "Important of a brand new direction"
[could it be that brands are the 21st century shields and crests?]
"BP is "re-brandingit is being less British, more global, less about fuel more about energy. Brands are now a critical force driving economic performance. The world's most powerful brands are about more than just product or image. In an increasingly commoditized world where products and services are all fairly similar, a brand does not just enable a company to stand out, it determines what the company stands for. That, in turn, attracts and motivates staff and gives the company the mens by which to build relationships with customers and partners.
Globalization, merges and acquisitions mean we are seeing fundamental shifts in business. BP acquisition spree has turned it into a global powerhouse with a market value of $200B. Rather than taking a multi- brand approach and retaining Amoco and Arco names, BP has opted for a global brand. In terms of its staff, supply, distribution and retailing, this makes perfect sense.
BP got it wrong when it replaced the union flag design on its fleet's tail-fin's with ethnic artwork. Its re- branding was meant to show that Britain's national carrier had a global reachbut retain a sense of Britishness.
FT, 9/25/00 - 28, "winter fears for US supply of heating fuel" Hillary durgin
US refiners say that winter heating oil shortages remain a potential problem in spite of the Clinton efforts to clam oil markets. The combination of exceptionally low inventories of distillates which include home heating oiland low inventories of natural gas could turn into an explosive situation in the north-east US. "I'm more concerned about he shortage of natural gas and the potential impact that might have on the distillate market than I am about the distillate market itself," said Edward Murphy, general manager of downstream operations for the American Petroleum Institute. Mr. Murphy and others say the release of the SPR oil will not increase the level of distillate supplies, although it has already brought down prices. Currently refiners are producing record amounts. Refiners are running at 95% capacity a level considered maximum. And if the weather gets really severe, the north-east, which has few major refineries or terminals could suffer, as happened last year when icy roads and frozen rivers cut off heating oil deliveries to the Connecticut and Boston areas.
FT, 9/28/00, 1 "Opec warns West against release of oil reserves" FT staff
Leading oil exporters yesterday warned the West against releasing more emergency stocks as EU countries considered following a move by the US to tap its strategic reserves in a bid to cut soaring prices. Venezuela's President Hugo Chavez said a move by Europe was unnecessary and could prompt an Opec reaction. "In times of war it would be normal to use reserves in extraordinary situations. I would recommend they evaluate this very carefully. There is no extraordinary situation," said Chavez.
FT, 9/28/009, 1, "Opec sense west can afford high oil prices" Robert Corzine and Andy Webb-Vidal
The cacophony of 11 national anthems played against the clatter of helicopters provided the musical background to the opening of the only second summit of the OPEC. The average oil prices for the Brent blend are running at more than $28 a barrel, a full $10 above the long-term average for the 1990s. This year total Opec oil export revenues are expected to be almost $250bn, compared with $155bn last year and $110bn in 1998, the year in which the dark clouds of the last oil prices collapse descended over the cartel.
Opec ministers would prefer to see average prices in the $22-$28 band.
9/29/00, WP, A22, "OPEC blames Taxes for High Oil Prices Scott Wilson
Concluding its first summit conference since 1975, OPEC declared that rich countries complaining about high oil prices should instead cut their gasoline taxes and help the developing world meet fuel costs by forgiving Third world Debt. With the "Caracas Declaration," a 20 point manifesto setting out the cartel's goals, OPEC members sought the moral high ground in the debate with industralized nations over who is to blame for high world oil prices. Casting itself in a not-so-accurate light, OPEC urged "industralized countries to recognize that the biggest environmental tragedy facing the globe is human poverty."
The document amounted to a negotiating position for the 11 OPEC member nations which have shown uncharacteristic unity in the face of mounting international press to reduce the price of crude oil now hovering near $30 a barrel. OPEC was called by both the US and EU to increase production as a way to drive down prices which peaked earlier this month at $35. The declaration and subsequent comments by OPEC members laid the blame for high gasoline and home heating oil prices on taxes imposed by industralized nations. "This heavy burden of debt hampers development far more than the circumstantial prices of oil at any given moment" Venezuelan President Hugo Chavez an activist leader who has been carving out a role for himself as a voice of the Third World.
The outcome leaves world oil markets in limbounder November when OPEC members confer in Vienna and oil-producing countries are to meet with representatives of oil consuming nations in Saudi Arabia. As part of the final document, OPEC leaders agreed to hold a meeting of heads of state every five years to strengthen national ties. The only previous OPEC summit was held 25 years ago in Algeria during a similar period of high oil prices. Saudi Arabia is the only OPEC nation with the capability to boost oil production significantly, a move that would harm the finances of other member nations by reducing prices on the world market. As oil prices have quadrupled over the past year, OPEC members have collected a bounty of unexpected revenue that has financed government pay raises, public works projects and other much needed national investment.
In public statements, OPEC leaders blamed economic globalization for widening inequality between rich and poor countries and reasserted their right to price their own natural resources.
FT, 9/25/00 3 "US presses IMF on Loans Role Stephen Fidler
The US further pushed its campaign to reduce borrowings from the IMF by governments with access to private capital. US Treasury secretary Summers said that making sure the IMF supported but did not supplant private capital markets was "vital to preserving the value of the institution and to maintaining broad-based support for it." Summers wants the International Monetary and Financial Committee to undertake quarterly reviews of outstanding obligations with a focus on countries that have, or have regained sufficient access to private markets.. Summers is seeking financing from the republican-led Congress for a debt relief initiative for the worlds poorest countries but is under continuing pressure to secure further reforms from the IMF as a condition of that. Recent crisis borrowers from the fund have ben under US pressure to repay ASAP. Mexico has repaid nearly all of the $14B it borrowed since its 1994-95 financial crisis. The committee's communique also suggested governments were moving towards consensus on the contentious issue of private sector involvement resolving financial crises.
FT, 7/24/009, "European countries set to sign security pact" Alexander Nicoll
Six European countries are expected to sign an accord this week easing export and security restrictions that hinder defense manufacturers from operating across borders through mergers and joint ventures. The "framework agreement" due to be concluded by ministers at the Farnborough Air Show which begins today follows two years of difficult negotiations since the governments of Britain, France, Germany, Italy, span and Sweden signed a "letter of intent" to harmonise regulations. It will represetn the latest step to streamline and modernize European defence arrangements following the European Union's commitment to make 60,000 troops available for rapid deployment to crises, and the formation of an embryonic joint procurement agency, Occar.
The past 2 yeas have also seen rapid cross-border consolidationdemanded by governmentsof Europe's defense industries. The framework agreement is intended to tackle these issues. It will cover export controls within the six countries; security classification; intellectual property; research and technology, and harmonization of procurement requirements.
The US is also trying to meet manufactures' demands to adapt manufacturers' demands to adat regulations to meet the needs of global companies. The Pentagon and State Department recently agreed a 17 point "defense trade security initiative" intended to boost collaboration within NATO. The Pentagon has signed a "Declaration of Principles" with the UK ministry of Defense, covering similar areas to the planned European agreement.