Professor: Drop Crisis States from Euro

Uutiset

Professor of Economics Vesa Kanniainen of the University of Helsinki says that eurozone crisis economies should be allowed to go into debt restructuring. Kanniainen adds that Greece and Portugal should be dropped from the common currency.

Interviewed on YLE TV's breakfast chat show on Thursday, he also said that a strong devaluation of the euro as well as the recapitalisation and nationalisation of German, French and Spanish banks are essential moves in this situation.

Only after these measures have been taken would Kanniainen advise giving EU structural support to crisis-stricken countries.

According to the LSE-educated professor, the permanent stability mechanism that is now being established is unfounded and should be abandoned.

The outgoing Finnish Parliament's working group on Portugal is discussing the support package on Thursday morning.

China Proposes to Cut Two-Thirds of USD Holdings

GatewayPundit

Thanks Barack…
Chinese officials this week proposed to cut two-thirds of USD holdings.

China has decided to serve the world another surprise. Following last week’s announcement by PBoC Governor Zhou (Where’s Waldo) Xiaochuan that the country’s excessive stockpile of USD reserves has to be urgently diversified, today we get a sense of just how big the upcoming Chinese defection from the “buy US debt” Nash equilibrium will be. Not surprisingly, China appears to be getting ready to cut its USD reserves by roughly the amount of dollars that was recently printed by the Fed, or $2 trilion or so. And to think that this comes just as news that the Japanese pension fund will soon be dumping who knows what. So, once again, how about that “end of QE” again?

From Xinhua:

China’s foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.

And as if the public sector making it all too clear what is about to happen was not enough, here is the private one as well:

China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.

The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

Willem Buiter warns of massive dollar collapse

The long-held assumption that US assets - particularly government bonds - are a safe haven will soon be overturned as investors lose their patience with the world's biggest economy, according to Willem Buiter.

Professor Buiter, a former Monetary Policy Committee member who is now at the London School of Economics, said this increasing disenchantment would result in an exodus of foreign cash from the US.

The warning comes despite the dollar having strengthened significantly against other major currencies, including sterling and the euro, after hitting historic lows last year. It will reignite fears about the currency's prospects, as well as sparking fears about the sustainability of President-Elect Barack Obama's mooted plans for a Keynesian-style increase in public spending to pull the US out of recession. Full Article