Tuesday, December 31, 2013

TPS - L’euro, moneta senza Stato


"PADOA-SCHIOPPA: Ma guardi, di moneta europea si e’ cominciato a parla alla fine degli anni 60 quando l’Europa era fatta di sei paesi e la Comunità’ Europea era fatta di sei paesi e la divisione dell’ Europa in blocchi sembrava un fatto destinato a durare chissà’ quanto tempo. Quindi in quel momento certamente non si aveva l’idea di trovarsi dove oggi ci troviamo con la Slovenia diventata uno stato indipendete uscita dal sistema delle economie socialiste, entrata nell’Unione Europa e molto rapidamente anche nell’Euro. Tutti questi sono sviluppi che quando si comincio’ a parlare di moneta unica europea nessuno immaginava..."

Audio (Italian): http://www.tommasopadoaschioppa.eu/wp-content/uploads/2009/10/20061229_18191.mp3

Source: http://www.tommasopadoaschioppa.eu/europa/leuro-moneta-senza-stato



PARIS, December 10-11, 2010
Venue: Pavillon Ledoyen, Paris

Source: www.tommasopadoaschioppa.eu/wp-content/uploads/2010/12/Agenda-Paris.pdf

TPS - 13th Annual International Conference Chicago, September 23-24-2010

"Research efforts and policy initiatives in the field of macroprudential regulation in my view are steps towards the correction of those flows. However, the construction of the viable and sustainable constitution of money consistent with a financial system which is highly sophisticated and with globalization requires probably further and more radical steps than the one that our goal today under the name of macroprudential regulation. This is a summary and I will develop my argument by first describing what I would call the old concept of central banking, then describe what I could name as the deconstruction of that concept. Third, I will briefly lead that through the crisis and finally say something about possible reconstruction.
So the elements of the old construct, the key elements are the following: First, central banks had a three-fold or triadic mandate which can be related to the three classic functions of money. They have a mandate in the field of price ability through the conduct of monetary policy and this can be related to the numeral function of money. They have paid a function in the field of financial stability, supervision of banks and these can be related to the store value of money, and they had a function in the payment system and this, of course, relates to the medium of the exchange function of money.
The essence of money is to perform these three functions which are inseparable and in my view equally inseparable where the three functions in the institution of central banks. A second element was the existence of an international anchor or a super-national anchor which put limits to the extent which money could be manipulated. That anchor was a commodity, it was gold; but conceptually, it could also be a different type of anchor. The essence is it was an international one that went beyond the sphere of exclusive influence of nation states.
The third element was the definition of the mandate of central banks in rather loose terms. If you read the statutes of the legislation of central banks prior to the wave of reforms of the last 30 years, the mandate of the central bank was tainted in very generic terms like looking after the currency, having some currency, safeguard the currency, notions like this. And the fourth element, the last was what I could call a single jurisdiction or monoline jurisdiction. I mean by this that in that old construct the debtor, the creditor, the intermediary, the currency, the legislation, the central bank all were belonging to the same, within the same perimeter of the nation state.
It took about a century for this construct to take shape. It began with the event of paper currency. It went on with the event of commercial bank money. It originates from the medium of exchange function of money with new ways to organize monetary exchanges. It developed into a banking supervision function, not on the basis of any specific mandate, but simply on the basis of a ‘know your client/know your customer’ type of need for the central bank, which was the bank operating with other banks and needed to know how sound their clients were..."

Source: http://www.tommasopadoaschioppa.eu/wp-content/uploads/2010/10/speech_TOMMASO-PADOA-1.pdf

TPS - Uneven global growth understandble

Interview by: Jamie McGeever

"JM: The Euro zone debt crisis reached a crescendo in May but already a second wave of market and economic uncertainty is upon us. Here to discuss the Euro zone policy and economic outlook is Tommaso Padoa-Schioppa, one of the founding fathers of the Euro and the European Central Bank. Mr. Padoa-Schioppa, thanks very much for joining us. Good day. There’s seems to be a sense within markets certainly that there’s a lack of policy coordination and cooperation on a global level. Do you agree with this?
TPS: To some extent, it’s true that now that the most acute phase of the crisis is over, countries tend to revert to their own policy agendas. In the meantime, the situation from country to country and from areas to areas is completely different and I think we are in a phase in which growth will be much less homogenously distributed across the world than it was before the crisis and I think rightly so.

JM: But how much of a risk does this pose to financial market stability and also to the recovery prospects?
TPS: Global recovery is underway but in an uneven way and I think this is understandable and justified. Emerging markets are growing faster, mature economies are growing more slowly and I think this is inevitable. Markets have to understand that but policies have to indicate clearly that they are able to manage global imbalances better than they did before the crisis.

Video interview: http://insider.thomsonreuters.com/link.html?ctype=group_channel&chid=3&cid=140981&shareToken=Mzo4NjE2ZmMyZC1mYThmLTQwMDAtYTEwYi00NmJmNmJiOTRiOGU%3D%0A

Source: http://www.tommasopadoaschioppa.eu/europa/uneven-global-growth-understandble-padoa-schioppa

Pre 1973 timeline - 1972

  • 1972 January 20: Six exporting countries - Abu Dhabi, Iran, Iraq, Kuwait, Qatar and Saudi Arabia - conclude ten days of meetings with Western oil companies. An agreement is reached to raise the posted price of crude by 8.49 percent to offset the loss in value of oil concessions attributable to the decline in value of the U.S. dollar. 
  • 1972 March 11: OPEC threatens "appropriate sanctions" against companies that "fail to comply with . . . any action taken by a Member Country in accordance with [OPEC] decisions." 
  • 1972 May 10: 229. Volcker Group Paper  
  • 1972 June 1: Iraq nationalizes Iraq Petroleum Company's (IPC) concession owned by British Petroleum, Royal Dutch-Shell, Compagnie Francaise des Petroles, Mobil and Standard Oil of New Jersey (now Exxon). The concessions were valued at over one billion dollars. 
  • 1972 June 9: In a show of support for Iraq, OPEC moves to prevent companies whose interests were nationalized in Iraq from increasing production elsewhere; appoints mediators between Iraq and IPC. 
  • 1972 July 31: 239. Paper Prepared in the Department of the Treasury
  • 1972 September 30: Libya acquires a 50 percent interest in two ENI concessions. 
  • 1972 October 27: OPEC approves plan providing for 25 percent government ownership of all Western oil interests operating within Kuwait, Qatar, Abu Dhabi and Saudi Arabia beginning on January 1, 1973, and rising to 51 percent by January 1, 1983. (Iraq declines to agree.) Agreements signed on December 21.

Pre 1973 timeline - 1971

  • 1971 Since the agreements of 1971 and 1973, OPEC oil is exclusively quoted in US dollars. This created a permanent demand for dollars on the international exchange markets.
  • 1971 January 12: Negotiations begin in Teheran between 6 Persian Gulf oil producing countries and 22 oil companies.
  • 1971 February 3: OPEC mandates "total embargo" against any company that rejects the 55 percent tax rate.
  • 1971 February 14: Tehran agreement signed. Companies accept 55 percent tax rate, immediate increase in posted prices, and further successive increases. 
  • 1971 February 24: Algeria nationalizes 51 percent of French oil concessions.
    March 1971, four months before Nixon closed the Gold window, the "permanent" U.S. debt ceiling had been frozen at $US 400 Billion.  
  • 1971 April 2: Libya concludes five weeks of negotiations with Western oil companies inTripoli on behalf of itself, Saudi Arabia, Algeria and Iraq. Agreement raises posted prices of oil delivered to Mediterranean from $2.55 to $3.45 per barrel; provides for a 2.5 percent annual price increase plus inflation allowance; raises tax rate from a range of 50-58 percent to 60 percent of posted price. 
  • July 31: Venezuela's Hydrocarbons Reversion Law mandates gradual transfer to government ownership of all "unexploited concession areas" by 1974 and "all their residual assets" by 1983. 
  • 1971 May 9:  153. Paper Prepared in the Department of the Treasury
  • August 15: U.S. Government institutes Phase I price controls. Invoking the powers granted to the president by the Economic Stabilization Act of 1970, President Richard Nixon orders 90-day nationwide freeze on all wages, prices, salaries and rents. President Richard Nixon unilaterally suspended the convertibility of dollars into gold, effectively ending the gold standard. The United States then entered negotiations with its industrialized allies to appreciate their own currencies, in response to this change.
  • 1971 August 17: 171. Memorandum of Conversation
  • 1971 September 22: OPEC directs members to negotiate price increases to offset the devaluation of the U.S. dollar. 
  • 1971 November: U.S. Phase II price controls begin. Plan is to allow for gradual 2-3 percent annual price increases, however, domestic petroleum prices remain at Phase I levels. 
  • 1971 November 27: 209. Information Memorandum From the President's Assistant for International Economic Affairs (Peterson) to President Nixon
  • 1971 December 5: Libya nationalizes British Petroleum concession. 
  • 1971 Nixon Shock, when the US unilaterally suspended the direct convertibility of the United States dollar to gold and made the transition to a fiat currency system. The last currency to be divorced from gold was the Swiss Franc in 2000.  
  • 1971 December: The Smithsonian Agreement  that ended the fixed exchange rates established at the Bretton Woods Conference of 1944. The Group of Ten agreed to appreciate their currencies against the United States dollar. 
  • 1971 December 31: 212. Editorial Note

A trial - Pre 1973 timeline

US Gov docs + WIKILeaks + Timeline (oil/gold/politics):

Thursday, December 12, 2013

2013 LBMA Precious Metals Conference - 3 files

Present Role of Gold as Part of the Foreign Reserves of the Deutsche Bundesbank
Clemens Werner
Deputy Head of the Market Operations Division, Deutsche Bundesbank
Rome, 30 September, 2013

Source: www.lbma.org.uk/assets/Werner%2020130930.pdf

Alternative page: http://www.lbma.org.uk/pages/printerFriendly.cfm?thisURL=index.cfm&page_id=159

Managing Gold as a Central Bank
Alexandre Gautier
Director of Market Operations Department, Banque de France 
Rome, 30 September, 2013

Source: www.lbma.org.uk/assets/Gautier%2020130930.pdf

Central Banks and Gold – A New ChallengeJuan Ignacio Basco
Deputy General Manager, Central Bank of Argentina

Rome, 30 September, 2013

Source: www.lbma.org.uk/assets/Basco%2020130930.pdf

Main source page: http://www.lbma.org.uk/pages/index.cfm?page_id=159&title=programme

H/T Woland

Tuesday, November 26, 2013

Helmut Schmidt and Jean-Claude Trichet discuss the European Crisis (video)

Published on Oct 30, 2012
Watch former German Chancellor Helmut Schmidt discuss the European crisis with former head of the European Central Bank Jean-Claude Trichet. The conversation was moderated by the investor and philanthropist Nicolas Berggruen.

This talk was held at the 'Europa nach der Krise' conference organised by the Nicolas Berggruen Institute on Governance in Berlin on 30th October 2012.

Source: http://www.youtube.com/watch?v=u_mji_h3GXE

ECB - A first assessment of the ECB's management of foreign reserve assets

I Current management OF foreign reserve assets at the ECB
I.1 Amount involved

"At the beginning of 1999, the NCBs participating in the euro area transferred foreign reserves worth approximately EUR 40 billion to the ECB. These foreign reserves are now owned by the ECB and appear on its balance sheet.

More specifically, Article 30.1 of the Statute of the European System of Central Banks and of the European Central Bank provides for transfer from the NCBs to the ECB of foreign reserve assets up to an amount equivalent to EUR 50 billion; in addition, it is envisaged that the conditions and the limits permitting the ECB to make further calls on the NCBs’ foreign reserve assets will be defined in secondary legislation of the European Community. The ECB has put forward a Recommendation in this respect, which is currently being examined.

With regard to the initial transfer of the foreign reserves, the Governing Council decided that it should take place at the very beginning of 1999; the Governing Council also decided that the initial transfer would be for the permitted maximum amount of EUR 50 billion, adjusted downwards by deducting the shares in the ECB’s capital subscription key of those EU central banks that did not participate in the euro area from the outset. The transfer was therefore equal to 78.91% of EUR 50 billion, i.e. approximately EUR 39.46 billion. Fifteen percent of this transfer was effected in gold and 85% in the major foreign currencies, i.e. US dollars and Japanese yen.

Foreign reserves represent a very large share of the asset side of the ECB’s balance sheet. The ECB’s foreign reserves have increased since the initial transfer in euro, primarily as a result of revaluations, but they also reflect the accrual of income from reserve management operations."

I.3 Passive management
The currency distribution, i.e. the shares in the ECB’s foreign reserves in the different currencies, expressed as percentages, is kept stable. That currency distribution is defined by the Governing Council of the ECB. While the Governing Council might decide to change the currency distribution if deemed appropriate, there is no active management of the currency distribution in order to avoid any interference with the single monetary policy.

In accordance with the Agreement of 26 September 1999, signed by many of the EU central banks, including the Eurosystem, the ECB (and the entire Eurosystem) will not increase its gold leasing operations and its use of gold futures and options.

Source: http://www.ecu-activities.be/documents/publications/publication/2000_1/rueff.html



Sunday, November 17, 2013

WGC - The Euro, The Dollar and Gold

Proceedings of the Conference
held in Rome
17th November 2000

FOREWORD by Haruko Fukuda ........................................................................................... 5
LIST OF SPEAKERS ................................................................................................................ 7
by Antonio Fazio, Governor, Banca d’Italia ........................................................................ 11
English translation ............................................................................................................ 17
by Robert Mundell .......................................................................................................... 23
by Theo Waigel ................................................................................................................ 32
by Peter Bernholz ............................................................................................................. 38
by Steve Hanke ................................................................................................................ 42
by Dick Ware ................................................................................................................... 46
by Yukio Yoshimura ......................................................................................................... 51
Panel Discussion .............................................................................................................. 52
Introduction by Giacomo Panizzutti .................................................................................. 55
by Anthony Neuberger ..................................................................................................... 56
by Hervé Ferhani ............................................................................................................. 61
Panel Discussion .............................................................................................................. 67
Introduction by Antonio Martino ..................................................................................... 69
by Ian McCannah ........................................................................................................... 71
by Douglas Jackson .......................................................................................................... 82
Panel Discussion .............................................................................................................. 91
Chaired by Antonio Martino ............................................................................................ 95
Philippe Sassier ................................................................................................................ 95
Peter Schmidhuber ........................................................................................................... 97
Tom Butler ...................................................................................................................... 98
Edmond Alphandéry ..................................................................................................... 100
Questions and comments ............................................................................................... 104
CLOSING REMARKS by Robert Pringle ............................................................................... 107

Source: http://www.gold.org/search/site/RomeProceedings.pdf

Tuesday, November 5, 2013

BdF - International Symposium of the Banque de France Regulation in the face of global imbalances Programme

Friday 4 March 2011

Global imbalances, in particular the polarisation of current account deficits and surpluses, have increased during the 2000s, until the outbreak of the financial crisis. As underlined by G20 heads of States and Government: “inconsistent and insufficiently coordinated macroeconomic policies, inadequate structural reforms […] led to unsustainable global macroeconomic outcomes.” (summit on financial markets and the world economy, Washington, November 15, 2008). This leads to today’s key question of regulation in the face of global imbalances.

This international symposium, organised by the Banque de France, will bring together a wide group of central bank governors, leading academics from all over the world as well as senior officials of major financial institutions and international organisations. The participants will debate themes that are relevant to the G20 French presidency, such as the reform of the regulation of the international monetary and financial system or the progress in the coordination of economic and financial policies.

Source: http://www.banque-france.fr/en/economics-statistics/research/seminars-and-symposiums/international-symposium-of-the-banque-de-france-regulation-in-the-face-of-global-imbalances/international-symposium-of-the-banque-de-france-regulation-in-the-face-of-global-imbalances-programme.html

Monday, October 28, 2013

IMF - Reform of the International Monetary System (IMS) - Michel Camdessus (audio)

A group of former ministers, central bank governors and other officials, led by Michel Camdessus, Alexandre Lamfalussy and Tommaso Padoa-Schioppa, outline its suggestions for fostering a more cooperative governance of the global monetary system. The initial report is complemented by a longer version with details of the suggestions.

Source: http://www.imf.org/external/podcast/2011/Camdessus030411.mp3


Thursday, October 24, 2013

A brief intro in SA history

Brief History

Abd al Aziz ibn Abd ar Rahman Al Saud, the first king of Saudi Arabia, had not gained control of the western part of the country when he granted the first oil concession in 1923. A British investment group, the Eastern and General Syndicate, was the recipient. The syndicate gambled on the possibility that it could sell the concession, but British petroleum companies showed no interest. The concession lapsed and was declared void in 1928.
Discovery of oil in several places around the Persian Gulf suggested that the peninsula contained petroleum deposits. Several major oil companies, however, were blocked from obtaining concessions there by what was known as the Red Line Agreement, which prohibited companies with part ownership of a company operating in Iraq from acting independently in a proscribed area that covered much of the Middle East. Standard Oil Company of California (Socal), which was not affected by the Red Line Agreement, gained a concession and found oil in Bahrain in 1932. Socal then sought a concession in Saudi Arabia that became effective in July 1933. Socal assigned its concession to its wholly owned operating subsidiary, California Arabian Standard Oil Company (CASOC). In 1936 Socal sold a part interest in CASOC to Texaco to gain marketing facilities for the crude discovered in its worldwide holdings. The name of the operating company in Saudi Arabia was changed to Arabian American Oil Company (Aramco) in January 1944. Two partners, Standard Oil Company of New Jersey (later renamed Exxon) and Socony-Vacuum (now Mobil Oil Company), were added in 1946 to gain investment capital and marketing outlets for the large reserves being discovered in Saudi Arabia. These four companies were the sole owners of Aramco until the early 1970s.
The original concession called for an annual rental fee of 5,000 British pounds (£) in gold or its equivalent until oil was discovered; a loan of £50,000 in gold to the Saudi government; a royalty payment of four shillings gold per net ton of crude production after the discovery of oil; and the free supply to the government of specific quantities of products from the refinery Aramco was to build after oil was discovered. (In 1933 the British pound was worth about US$4.87; there were twenty shillings to the British pound.) The company received exclusive rights to explore for, produce, and export oil, free of all Saudi taxes and duties, from most of the eastern part of Saudi Arabia for sixty years. The terms granted by the government were liberal, reflecting the king's need for funds, his low estimate of future oil production, and his weak bargaining position.

Source: http://lcweb2.loc.gov/cgi-bin/query/D?cstdy:2:./temp/~frd_shVY::

Tuesday, October 22, 2013

cigi - Global Turmoil: The International Monetary System Today

The BRICS and asia currency internalization and international monetary reform
Global Turmoil: The International Monetary System Today
Benjamin J. Cohen

"...A broader multi-currency system, it is argued, will widen the range of choice for market actors, thus making it harder for the United States to act in an arbitrary, unilateral fashion. For years Washington has been criticized for exploiting the “exorbitant privilege” of something close to a de facto monopoly, putting the exigencies of its own balance of payments and borrowing needs above any concern for systemic stability. The result, it is said, has been the long-term erosion of trust in the dollar and periodic bouts of monetary disorder — in effect, a new version of the old Triffin dilemma. Once viable alternatives are available, however, it can be expected that greater discipline will be imposed on US policy. Washington will be compelled to pay more attention to the risk of capital flight and, therefore, will have more incentive to accommodate the interests of others..."

Source: http://www.cigionline.org/sites/default/files/BRICS_ASIA_no1.pdf

Tuesday, October 15, 2013

Opec will play a different role in the future, says Sheikh Yamani

Source: CNN International , Author: Posted by BI-ME staff
Posted: Sun October 17, 2010 12:42 pm

INTERNATIONAL. 50 years ago, five oil-producing nations of the world met in Baghdad for a conference which led to the creation of OPEC. Five decades later, the 12 nation group is sitting on around three quarters of the world’s proven reserves.
Sheikh Zaki Yamani, former Saudi oil minister was made famous by being the face of the 1973 oil embargo and was also taken hostage by Carlos the Jackal. CNN’s Marketplace Middle East’s John Defterios sat down with the architect of Saudi Arabia’s energy policy in an exclusive interview, aired Friday, to discuss OPEC and its past 50 years.
A full transcript of the Sheikh Yamani interview is  below.

John Defterios: The first thing I wanted to talk to you about is in fact you coming in to the organisation, you were 32 a very, can I say, you were a young chap when you took the post as Oil Minister and were instrumental in formulating the original OPEC founding in 1960. That was a young period in life and a very important period for OPEC.

Sheikh Yamani: Well I was a member of the cabinet when I was 29 and I was involved with the beginning of OPEC and all the oil affairs in the office of the Prime Minister.

JD: So at 32 did you feel it was a great deal of responsibility only two years into the history for OEPC to have that role for the kingdom of Saudi Arabia?

SY: No I was a very ambitious person and I had certain plans in my mind so I was working very hard for that to implement it.

JD: What were those plans when you first decided to take the position?

SY: Well I, first I wanted to have the human resources and I established the University of Oil and minerals, this is number one and then I wanted to have the knowledge, practical knowledge so we established petrol min and this is how I was planning to do it step by step. I was against those who really wanted to have nationalist with talks, this is not true you have to have the knowledge, people they want to nationalise the oil companies, who is going to run it? So, I was a different person for that.

JD: Interesting, OPEC today as you know, OPEC sits on three quarters of the world’s reserves, what’s going to be the role, the essential role of OPEC in the future?

SY: Well I think, OPEC will not have the same role as it had started, well they went from one phase to another but now on the economy of the world, the alternative sources of energy and then the pricing system. What is prevailing now is not really a good pricing system. It involves those who like to speculate and make money so it’s not the supply-demand as it should be.

JD: So you’re suggesting that this range of around $80 a barrel is artificial today?

SY: It does not represent the exact situation; it represents the speculation of what we call them the non-commercial and they put billions of dollars and
JD: So you’re suggesting it’s the Hedge-funds in particular, who are at play?

SY: It’s the hedge-funds, the insurance companies, anyone who wants to make quick money but he will lose money as well.

JD: So within OPEC do you think some of the countries have gotten too complacent with this price and think this is the new floor: $80 per barrel?
SY: Well I don’t take it this way, I mean if anyone is knowledgeable about oil, whether it is 80, it is 70, it is whatever it is, it doesn’t represent the exact facts

JD: What do you mean by that?

SY: I mean supply demand and how they move, so much depends. We don’t what will be the economy of the world are going to have a recession. Right now if the dollar comes down, oil goes up. So it is not oil, it is the currency and I don’t think that will really representing the exact situation with the pricing situation right now.

JD: So you’re suggesting we could see a correction and that perhaps we’re a bit too complacent that we have entered a new era?

SY: I don’t rule out this possibility but it can go one way or another. It can go up or it can go down.

JD: In fact there are some in fact, most in the community, the energy community believe that within a five to ten year window, we could hit the century mark and hold it not spike up to US$140 a barrel and come back down again but that will be the new reality in the energy business. So do you think that within a five to ten year window, we could enter a new era where US$100 dollars is the baseline for the energy business or is that being too optimistic?

SY: I should say unrealistic, we don’t know and don’t forget that politics is important. Anything can happen and it can either ruin the oil business or bring it up.

JD: Now remember thirty years ago you were very concerned that the high oil price would lead the G7 nations to seek alternative energy, the predictions are that about 30% of global demand and supply will come from alternative energy by the year 2030. Is that where we’re going?

SY: Well I don’t know about the time but definitely alternative sources of energy are in the horizon and the climate change is an incentive. The problem is gasoline. Transportation is one sector for energy and then electricity. Most of the alternative sources of energy is now for electricity. What they are doing for gasoline is only to reduce the consumption. Until they can use hydrogen, gasoline is a must and oil is a must.

JD: So we’re looking at a horizon where hydrocarbons remain at least 70% of the global supply for the next 25-30 years. You’re quite confident of that?
SY: I am not really confident, I don’t know what will happen with hydrogen whether because they are working, they are studying this but they don’t talk about it

JD: The OPEC of today seems almost too business-like, too technocratic: vis-a-vis to the days of the 1970s and 1980s when you were involved and quite a strong personality for the organisation. How has OPEC changed most recently in the last decade would you say?

SY: Well with the change of the pricing system but even in the past so much depends on politics. If you look at what happened in the increase in the price of oil, it’s either a political decision or a political event. The Arab oil measures, then the relationship between Iran and the United States to rise the price of oil and then all of a sudden you have the Islamic revolution ‘79, and then the war between Iraq and Iran also pushed the price but this is not really anything but politics but when the price of oil goes up unnecessarily, the consumption of oil comes down and this is what happened, and this what happened in ’85 and the crash of ‘86, so it’s always politics.

JD: Going back to 1986, there is a window in time here that you thought Saudi Arabia could control the oil market and keep a stable price for the global market but then you had a perfect storm. So in 1986, you almost had a perfect storm, Russia was coming on strong, Mrs Thatcher was pushing oil out from the North Sea. And it almost caught Saudi Arabia flat-footed and oil fell to US$7 per barrel in reality it cost you your job, did you mis-calculate what was happening in the market at that time?
SY: It gave me my freedom by the way but I tell you, I think America was behind it, America when the price of oil came down and if you remember President Bush, the father said any price of oil below US$18 is against the national interest of the United States and they worked very hard with the Saudi government to push the price up. Which they did but the price went up but it came down after that.

JD: So what was the lesson learned out of that process after you left the ministry, the king stepped in and took four million barrels off the market and prices still tumbled down through 1988 and 1989?

SY: Well he did not take four million barrels, the market took away from Saudi Arabia that much, they realised and they went back to the market price after this. I think that is a serious lesson if we learn from lessons.

JD: 1973, the Arab oil embargo you were a key player during that process. The former US Secretary of State Henry Kissinger said it was political blackmail what Saudi Arabia and OPEC were doing to the rest of the world. In retrospect how did you see it?

SY: That’s a very long story and the reaction of America of what happened is not a one reaction it’s one after the other and it needs even a book, it’s not a blackmail, the need to raise the price of oil even before that. There is a book called a Century of War and it gives you the story of a meeting at an island in Sweden, attended by Henry Kissinger and they decided to raise the price of oil 400 times, 400% and this is a very important incident. They needed and that is one of the reactions of America is to help the oil companies to invest outside OPEC in Mexico, in North Sea and so on; and this will not happen without a high price of oil. And this is how they deprived OPEC from their strategical power and that’s another thing and I really highly respect Henry Kissinger he is really a planner and strategically he is a man to be respected

JD: So you’re suggesting it wasn’t the Arab oil embargo that was political blackmail but this was a plan by the US oil industry to push prices up.

SY: Not really much but the plan was there and I separate between the two. The Arab oil was meant and I was behind it, not to hurt the economy just to attract the national public opinion that there is a problem between the Palestinians and the Israelis that’s the only thing and we were against what happened after that. Unfortunately money is very attractive, numbers in OPEC, they love money and revenue and this is why they pushed the price up as quickly as possible and they paid the price for what they did

JD: You would suggest though that 1973 was really the first time that OPEC flexed its muscles as an organisation, you’d agree with that?

SY: Unfortunately that’s what happened but sometimes you you cannot really manage the price. It was a mis-management of price, a mis-management of power, you have to respect facts and what will happen, you don’t run after money only

JD: Do you regret the actions of 1973?

SY: No, I don’t regret that, I regret what OPEC did

JD: Which is taking it a step further there after

SY: Yes and there was an agreement between the Shah of Iran and  between Dr.Henry Kissinger to raise the price of oil

JD: 1975, two years later, you were subject of a kidnapping by Carlos the Jackal, that must have been extraordinary. At that stage did you say that the politics around oil were basically too thick. You didn’t know what you got yourself into?

SY: I don’t think it was about oil. There were two Arab countries, two Arab presidents who behind this. And it was politics between these two Arab countries and Saudi Arabia and they found me to be the scapegoat

JD: What did you think during the process of the kidnapping?

SY: Well I learnt a lot from that. I knew from the beginning that I would be killed. Carlos told me that they would take me at the very end in the South of Yemen and they would execute me there with the Iranian minister.

JD: Your really did think you were going to die during that stage

SY: Oh, I was positive I wrote my will, yes.

JD: Oh my goodness, if I could shift attention now. This is a fascinating interview and so I appreciate your insights

SY: OPEC stands by this number of 1.2 trillion barrels of reserves, as you know many outside of OPEC don’t agree with that total, they think that perhaps Iran and Iraq are inflating their numbers. Who should we believe?

I don’t take that seriously really. We have to make a study by some people outside the countries you’ve mentioned. So we have to know as a matter of fact when it came to Saudi Arabia and I was an oil minister, I engaged the services of some American experts and they came and they studied. So the Saudi announcement of the reserve was based on what a neutral body gave us

JD: So an independent study should be done of the OPEC reserves

SY: I think so. I don’t know whether they exaggerated or they did not? I want, I need a neutral one.

JD: So a third party would be very sufficient in your view?

SY: Oh yes, it’s not difficult really.

JD: A US geological study recently upped it’s projected reserves around the world for potential to find oil above three trillion barrels, what should we make of that? Are we going to get much better at finding oil in the next thirty years?

SY: You know I did work with the American geological survey and I know how they act but there are possibilities to find oil. For instance we have in Brazil an area, don’t forget what Canada has they have a reserve which can have even be greater than what Saudi Arabia has and other areas. I mean oil is there I don’t find a problem in finding oil, they have to find alternative sources of energy.

JD: To be able to stretch out the resources.

SY: That’s for the climate change

JD: But three trillion barrels seems reasonable to you or over that amount

SY: I don’t say yes or no unless I see the facts. If sometimes you have what we call it a structure, you don’t know whether there is oil in that structure or not. The geologist will tell you this is for oil, you have to drill and when you drill maybe you find oil you don’t know how much is there. You have what we call it the delineation of that. Until we do that then we know how much oil we have, before this I don’t take what they say seriously.

JD: But King Abdullah made an interesting point a couple of years ago that fair price oil was around US$75-US$80 a barrel to in fact go after the new discoveries that are more expensive. Is that reasonable than this price to work with ?

SY: Well, this is what he was told by the experts in Aramco and the oil ministry, but in my opinion, I don’t give what is a fair price, what is needed ..... after we drill.

JD: But one would suggest that to drill into the hard to reach areas like Nigeria, off Kosovo Nigeria, so one would suggest to go after the deep salt oil in Brazil, or off the coast of West Africa you do need a base of 75, 80 dollars a barrel. That doesn’t seem like a realistic base to you?

SY: Well maybe a bit less than 75 can still give us some oil. I take Saudi Arabia for instance you can increase the oil reserve with doing very little, for instance what we are doing, we call it- if you raise the recoverable oil, a little bit 1%, in Saudi Arabia it is 30% in place, you cannot produce it all, you produce only a percentage of that, which is recoverable oil, we call it reserve. In the north sea, it’s 45% sometimes 60%, so what you need is to raise the recoverable oil, and this is technology, so if you raise it in Saudi Arabia, at 1% point, you have about 26 billion barrels of oil without really doing much.

JD: So that is 10% with technology alone?

SY: Yes

JD: One trend I’ve seen recently is natural resource nationalism where the national oil companies want to retain more of the rights and push out the international oil companies. Is there a danger in that because of the technology that is still needed by the IOC in your view?

SY: Well, the oil companies, they need a high price in oil, and they work for that after all they’re after money, national oil companies are now relaxed a little bit.

JD: One would argue differently that they’re more aggressive than the market.

SY: I think the oil companies…

JD: …Are a bit more aggressive, is what you are saying?

SY: Oh yes they have the knowledge and they work very hard.

JD: But how do we break this competitiveness between national oil companies and the international oil companies you see national companies coming on into the global stage and outside their own market for example.

SY: Well you know the integration of the oil business is very important and this is what the oil companies have, they produce the oil, they transport the oil, they refine the oil and they sell the oil, this is the integration. The national oil companies, they just produce the oil and they  sell it, they need the integration of the oil business and this is one of the problems that the oil producing countries forgot to do, so it is either with the participation and this is something I try to do and not to nationalize, I want it to have the integration so that you take the barrel from the beginning until the very end and this is very healthy for the oil business.

JD: Just a couple more questions, I wanted to delve into a couple more areas. Recently I had a high level discussion with a minister from a gulf state who worries that if Iran got their nuclear weapon, they would use it within OPEC to bully the other players to lower their productions  so they could get more market shares. Is that a real danger in your view for Iran?

SY: It’s easy said, but in reality I don’t know how you can do it. And Iran they have their oil and it is needed so far, and Iran they have other weapons in their hands…

JD: Suggesting?

SY: Well the (inaudible) is a problem and we have to be very careful and Iran has Iraq beside them, and they control a little bit for them but it is a very serious matter for America for instance.

JD: Do you have great concerns of Iran getting a nuclear weapon and it sounds like you’d put that behind your priority list of concerns.

SY: Since the time of the Shah of Iran, he had a plan to have a nuclear weapon, so I don’t whether they have a plan to have this or not.  But anyway, Iran is a fact in the area and thanks to the occupation of Iraq, Iran became more powerful.

JD: And you don’t think they would use the nuclear weapon amongst the gulf producers to get more market share and flex their muscles in the future?

SY: It’s not the question of the market share, it’s sp many other things, they want to be the only power in the gulf, but now we have the American military power and they want you to depart.

JD: The final question I’d like to ask about that then we’re in a period of time where we have the sanctions against Iran targeting oil business. Is this the wisest path in your view to apply sanctions to Iran which is going to isolate them even more.

SY: Well you applied sanctions against Iran, against Iraq, against Libya. See what Libya has now and see what Iraq has. I don’t believe in sanctions as such, there are others and means and ways to do it.

JD: What type, what do you say? What other means would you say? Which other means? What do you suggest?

SY: You’d have to employ me as an adviser (laughs)

JD Last important thing. The number one lesson you’ve learnt through all these years in the oil  business, half a century of OPEC,  you were there at the beginning. What’s the key lesson that you would suggest for say, OPEC, for the next 50 years.

SY Unfortunately OPEC could have been in a much better situation and position if they did not mismanage oil, but they did it, but this is politics, if you are a ruler, you need more money for your country.

JD: So you are suggesting that they overproduced at different stages over the last 50years?

SY: Not only over produce, sometimes under-produced and they raised the price, anything which can give them a high price of oil they do it.

JD: And that’s a miscalculation long term

SY: Oh yes, oh yes.

JD: Can I say it has been a real honour to sit down with you a real pleasure.

SY: Thank you sir

Note. To see the video of the interview, please click here.

Source:  http://www.bi-me.com/main.php?c=3&cg=4&t=1&id=48966

Friday, October 11, 2013

RR - Forgotten History of Domestic Debt

2010, Carmen M. Reinhart, Kenneth S. Rogoff

There is a rich scholarly literature on sovereign default on external debt. Comparatively little is known about sovereign defaults on domestic debt. Even today, cross-country data on domestic public debt remains curiously exotic, particularly prior to the 1980s. We have filled this gap in the literature by compiling a database on central government public debt (external and domestic). The data span 1914 to 2007 for most countries, reaching back into the nineteenth century for many. Our findings on debt sustainability, sovereign defaults, the temptation to inflate, and the hierarchy of creditors only scratch the surface of what the domestic public debt data can reveal. First, domestic debt is big -- for the 64 countries for which we have long time series, domestic debt accounts for almost two-thirds of total public debt. For most of the sample, this debt carries a market interest rate (except for the financial repression era between WWII and financial liberalization). Second, the data go a long ways toward explaining the puzzle of why countries so often default on their external debts at seemingly low debt thresholds. Third, domestic debt has largely been ignored in the vast empirical work on inflation. In fact, domestic debt (a significant portion of which is long term and non-indexed) is often much larger than the monetary base in the run-up to high inflation episodes. Last, the widely-held view that domestic residents are strictly junior to external creditors does not find broad support.

Source: http://www.learningace.com/doc/697948/3d6c3bc2ca4c8f81f6b3aeebe02a47a9/forgotten_history_of_domestic_debt

Other link: http://www.nber.org/papers/w13946

Tuesday, October 8, 2013

IMF - Ch.Lagarde - 3 vids

Press Conference: Conclusion of United States Article IV Consultation

(30:45)  June 14, 2013
IMF Managing Director Christine Lagarde Speaks at GW

IMF chief Lagarde on the debt ceiling, bank liquidity and paths to economic growth Fast Forward
( 14:48)

BIS - The evolution of the Basel Committee -

Stefan Ingves
Chairman, Basel Committee on Banking Supervision and Governor, Sveriges Riksbank

Welcome and keynote address at a symposium to mark 25 years of the Basel Capital Accord 25 years of international financial regulation: Challenges and opportunities Basel, 26 September 2013

"...The Basel Committee and its activities have changed almost beyond recognition since its establishment in 1974, or even since 1988 when the first Accord was agreed. I doubt whether the founding Governors really foresaw what the Committee would eventually become: not just an international standard setter, but also one that now conducts peer reviews of members’ compliance with their agreements. Indeed, if they had, I suspect that a few of them might have been against the Committee’s establishment in the first place!..."

Source: http://www.bis.org/speeches/sp130926.htm

Full doc: www.bis.org/speeches/sp130926.pdf

Monday, September 2, 2013


Irwing Fisher´s commitee: http://www.bis.org/ifc/index.htm

Source - origins (IFC Bulletins - 1994 to 1998): http://www.bis.org/list/ifcbulletins/from_01011994/index.htm

Nov 1997 - No 1
- First meeting of the Irving Fisher Committee on Central Bank Statistics, Istanbul, August 1997
- Minutes of the Administrative Meetings, Istanbul, 20 and 21 August 1997

Ideas - Origins and Developments of Irving Fisher’s Compensated Dollar Plan

Origins and Developments of Irving Fisher’s Compensated Dollar Plan

"In 1911, Fisher published The Purchasing Power of Money. In chapter 13 of the first edition and in an appendix in the second section of 1913, he introduced a rule to maintain the level of prices stable, called the “compensated dollar”. According to this rule, the legal definition of money is changed. In other words, the weight in gold of the dollar is modified once a month in order to impede the price changes on a basket of goods. According to Fisher, this plan will offer stability in the purchasing power of money. He sought after to find an alternative system to the price fix system under the Gold Standard. He wanted to introduce a dollar fixed in his purchasing power, but variable in its metallic weight. In this paper we will focus on Fisher’s analysis on the stability of money value and his position in the debate on the compensated dollar from 1909 to 1922. We will study the anticipations of Fisher’s compensated dollar, the receptions and evolutions of Fisher’s project, the gold exchange standard and the algebraic evidence. We also study the debate links to the question if the compensated dollar plan match or not with the quantity theory of money. We ends with the analysis of the gold price and elasticity of gold net supply, and we explain the relation between the Yellowbacks and the varying price of the gold reserve..."

Source: http://ideas.repec.org/p/ner/dauphi/urnhdl123456789-10190.html

File: http://basepub.dauphine.fr/xmlui/bitstream/123456789/10190

Cato Institute - Can Monetary Disequilibrium Be Eliminated

Leland B. Yeager and Robert L. Greenfield

Source: http://www.google.de/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&ved=0CCwQFjAA&url=http%3A%2F%2Fwww.cato.org%2Fsites%2Fcato.org%2Ffiles%2Fserials%2Ffiles%2Fcato-journal%2F1989%2F11%2Fcj9n2-8.pdf&ei=VkAkUvGfMsbOtAaml4DQCA&usg=AFQjCNFkAH33W7PrDxxnlMWBusAM2MDRAQ&bvm=bv.51495398,d.d2k

Don Patinkin - Irving Fisher and His Compensated Dollar Plan

Federal Reserve Bank of Richmond Economic Quarterly

"This is a story that illustrates the interrelationship between economic history and economic thought: more precisely, between monetary history and monetary thought. So let me begin with a very brief discussion of the relevant history.
In 1879, the United States returned to the gold standard from which it had departed at the time of the Civil War. This took place in a period in which “a combination of events, including a slowing of the rate of increase of the world’s stock of gold, the adoption of the gold standard by a widening circle of countries, and a rapid increase in aggregate economic output, produced a secular decline ˙.. in the world price level measured in gold˙...” (Friedman and Schwartz 1963, p. 91; for further details, see Friedman 1990, and Laidler 1991, pp. 49–50). The specific situation thus generated in the United States was described by Irving Fisher (1913c, p. 27) in the following words: “For a quarter of a century—from 1873 to 1896—the dollar increased in purchasing power and caused a prolonged depression of trade, culminating in the political upheaval which led to the free silver campaign of 1896, when the remedy proposed was worse than the disease.” This was, of course, the campaign which climaxed with William J. Bryan’s famous “cross of gold” speech in the presidential election of 1896. Fisher’s view of this campaign reflected the fact that it called for the unlimited coinage of silver at a mint price far higher than its market value, a policy that would have led to a tremendous increase in the quantity of money and the consequent generation of strong inflationary pressures..."


"More stress should be laid, however, than Professor Fisher does, on
the fact that the plan can work out its results only through its effects on
the quantity of coined gold ˙... The consequences on prices [of an increase
in the gold content of the dollar] will be precisely the same as those of diminished
production or limited coinage. Professor Fisher seems to expect a
closer connection. His analysis implies, almost states in terms, that prices will
accommodate themselves at once or very promptly to the bullion equivalent
of the coined dollar; that as the bullion required for the dollar increases, prices
will fall quasi-automatically in proportion; and that as the bullion equivalent
lessens, prices will be correspondingly affected at once. Now, no one has stated
more clearly and explicitly than Professor Fisher himself, in his Purchasing
Power of Money, the grounds for maintaining that the connection between the
bullion equivalent in the coined dollar and prices will work out its effects
solely through changes in quantity. He has shown that the connection between
the quantity of coined money and general prices is by no means a close one.
It is not only loose and uncertain, but we are much in the dark concerning
the degree of looseness and uncertainty. Economists should be very chary of
prediction in such matters, and Professor Fisher makes predictions which the
event might greatly falsify. (1913, pp. 402–3; italics in original) "


"Under the “indefinite-reserve” system the only inflow and outflow of
[gold] certificates would be through the deposit and withdrawal of gold, just
as at present; whereas under the “definite-reserve” system there would be,
in addition, an inflow and outflow of certificates through special issues or
cancellations to keep the total outstanding volume of certificates in tune with
the gold reserve ˙...
The “definite” system would act more promptly to stabilize the price
level than would the “indefinite,” because, for one reason, the change in the
circulation would be more prompt. The instant any change in the dollar’s
weight is made there is a change in the number of dollars of the reserve, and
the volume of certificates is readjusted to this changed reserve immediately.
Under the “indefinite” system, on the other hand, the circulation would be
affected somewhat more slowly and only as the flow of gold deposits and
withdrawals became changed. (ibid., pp. 129–31)"



"In the extensive literature on price stabilization that has developed since the early 1980s, there are frequent references to Fisher’s compensated dollar plan, and to his 1920 Stabilizing the Dollar in particular. But sometimes this name is taken in vain. Thus Philip Cagan’s 1987 paper on “A Compensated Dollar: Better or More Likely than Gold” suggests (inter alia) preserving the purchasing power of money, not by stabilizing the price level, but by issuing indexed money (i.e., money whose nominal value changes equiproportionately with the price index), which would become “the primary medium of exchange” (ibid., p. 272). As I have, however, shown elsewhere (Patinkin 1993, pp. 122–24), and as illustrated by the Israeli experience of the early 1980s, an economy whose money supply is mostly indexed will generate a frictionless inflationary process, which will accordingly continue indefinitely at indeterminate rates..."

Source: http://www.google.de/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&ved=0CDQQFjAB&url=http%3A%2F%2Fwww.richmondfed.org%2Fpublications%2Fresearch%2Feconomic_quarterly%2F1993%2Fsummer%2Fpdf%2Fpatinkin.pdf&ei=tT0kUsKlNcretAa_loHIAQ&usg=AFQjCNEbCoF_qdRQdOZociBv285AUfzyZA&bvm=bv.51495398,d.d2k

J.Tobin - Neoclassical Theory in America: J. B. Clark and Fisher

Neoclassical Theory in America: J. B. Clark and Fisher, James Tobin, September 1985

"The intellectual breakthroughs that mark the neoclassical revolution in economic analysis occurred in Europe around 1870. The next two decades witnessed lively debates in which the new theory more or less absorbed or was absorbed in the classical tradition that preceded and provoked it. In the 1890s, according to Joseph A. Schumpeter (1954, p. 754) there emerged "a large expanse of common ground and ... a feeling of repose, both of which created, in the superficial observer, an impression of finality -- the finality of a Greek temple that spreads its perfect lines against a cloudless sky." Of course the temple was by no means complete. Its building and decoration continue to this day, even while its faithful throngs worship within. American economists were not present at the creation. To a considerable extent they built their own edifice independently, designing some new architecture in the process. They participated actively in the international controversies and syntheses of the period 1870-1914. At least two Americans were prominent builders of the "temple," John Bates Clark and Irving Fisher. They and others brought neoclassical theory into American journals, classrooms, and textbooks, and its analytical tools into the kits of researchers and practitioners. Eventually, for better or worse, their paradigm would dominate economic science in this country. This paper discusses their contribution..."


Source: http://cowles.econ.yale.edu/P/ab/a07/a0776.htm

Friday, August 30, 2013

Alan Greenspan on Gold Standard (video)

Uploaded on Dec 29, 2007
Alan Greenspan talks about monetary policy and the gold standard in an interview.

Source: http://www.youtube.com/watch?v=z5MVsm2cpc0

Post-Election: The Fiscal Cliff and Beyond - Alan Greenspan and Paul Volcker speak with Pete Peterson (video)

Former Fed chairmen Alan Greenspan and Paul Volcker speak with Pete Peterson on the "Consequences of Inaction" segment from the Peterson Foundation's "Post-Election: The Fiscal Cliff and Beyond" event. Recorded November 16, 2012 in Washington, DC.

Source: http://www.youtube.com/watch?v=L8UgQU8xAUY&feature=youtu.be