Daniel McDowell

For more than three years, China has been gradually implementing a plan to internationalize the yuan, with a central element being to increase its role in China’s cross-border trade settlement. With these efforts already showing dramatic results, China is now poised to further promote the yuan’s use in global trade settlement by extending yuan-denominated loans to the other BRICS nations. more

In the wake of last week's G-20 Summit in Cannes, France, a number of commentators have suggested that the lack of a U.S. response to Europe's debt crisis is a clear sign of American decline. To support the "decline narrative," some have trotted out financial crises from the 1990s, when the U.S. led the way in bailing out Mexico and East Asian countries. Yet, on two counts, the analysis is flawed. more

It's happening again. International credit markets are showing signs of strain; economic growth around the world is stalling; and there are growing fears the global economy could slip back into a recession. Last Friday, the G-7 finance ministers met in Marseille, France.  Despite calls from the International Monetary Fund for the group to "act now -- and act boldly," the summit ended without any plan of action.

The International Monetary Fund is in an unexpected state of flux. In the coming weeks, a highly political process will unfold behind the scenes as the Europeans wrangle with a group of emboldened emerging-market countries for the fund's top slot. If the U.S. is shrewd, it will lobby for a bargain that will leave the Europeans in control for now, but that paves the way for meaningful change in the near future. more

In the wake of the global financial crisis, the world's emerging economies have finally achieved initial victories in their long-running campaigns to reform the structures of global financial governance. Via the newly empowered G-20, the emerging economies have won public acknowledgment of the need for capital controls and have pushed through a redistribution in voting power at the International Monetary Fund. These are significant achievements for the Global South, but their ultimate effects lie in the details.
more

Throughout the G-20 finance ministers meeting last weekend, murmurs were heard about the role of the dollar and the need to reform the global monetary system. This is nothing new, as several economies have expressed an interest in demoting the dollar since the global financial crisis broke out in 2008. But despite the chorus of calls for monetary-system overhaul, the prospects for meaningful change are dim.
more

Over the weekend, G-20 finance ministers met in Paris to discuss steps on how to address persistent global current account imbalances that some fear could send the global economy back into recession. In the end, the group reached consensus on a list of legitimate "imbalance indicators" by which each economy may be judged. Yet, as achievements go, this agreement is about as insignificant as they come. more

The Federal Reserve's decision to extend temporary credit lines to five foreign central banks -- including the European Central Bank -- that were initially scheduled to expire in January suggests that the Fed isn't counting on 2011 to be free of international financial distress, and that it remains prepared to throw its resources behind any potential financial stabilization effort for Europe. more

Last week, China reported that over the past year, consumer prices had risen 5.1 percent. While prices have been creeping up in China for months now, the report grabbed international attention, and for good reason. As the world's factory and its second-largest economy, China's inflation rate has serious consequences for the global economy and domestic stability. more

China and Russia announced they will no longer use the dollar to conduct their bilateral trade, but instead will use their domestic currencies, the yuan and ruble, to do so. Some doomsayers have depicted this move as yet another sign of the dollar's imminent decline, but a closer look suggests the deal will have more of a symbolic impact than any tangible economic or geopolitical effects. more

By the close of the G-20 summit in Seoul, the U.S. succeeded in getting the Chinese to acknowledge that global trade imbalances, largely a consequence of the sizeable U.S. trade deficit with China, were problematic for the global economy, but failed in getting Beijing to do anything about it.  This result says less about the G-20's ability to coordinate policy than it does about the changing distribution of global power. more

This week's G-20 leaders' summit in Seoul is likely to be more tense and contentious than any of its predecessors. This is especially true when it comes to the ongoing economic prize-fight between the G-20's two juggernauts, the U.S. and China. Unlike previous summits, where China largely bit its tongue in the face of Washington's accusations, Beijing seems willing to go on the offensive this go-round. more

The Basel Committee on Banking Supervision announced a new agreement, informally referred to as Basel III, that represents the most significant set of international financial regulations to emerge since the onset of the global financial crisis. Yet, to succeed, Basel III depends entirely on national governments voluntarily following through on the new standards, threatening the nascent agreement's prospects.
more

Beijing announced last month that it was unpegging its currency from the dollar and implementing a more flexible exchange rate system. With more than a month of this new regime in the books, American politicians are unimpressed with the yuan's appreciation against the dollar. But examples from the recent past reveal that patience outperforms bluster when it comes to addressing Beijing's currency policy. more

With last year's swine flu scare already a distant memory, the risk of a new epidemic is spreading across Europe. This time the fears have to do with the debt contagion facing Europe's PIIGS: Portugal, Ireland, Italy, Greece and Spain. With each of these countries carrying high debt-to-GDP ratios, financial markets are growing increasingly skeptical that Greece's debt crisis will be successfully quarantined within its borders. more

Despite early cooperation to address the global liquidity shortfall, the G-20 has made little progress in the area of financial regulation. Given the trauma that the entire world economy has suffered, in part due to a lack of such regulation, one would think more headway would have been made by now. A closer look, however, reveals a litany of factors making coordination points difficult to locate and trickier to maintain.
more

As current president of the G-20, South Korea has been busy promoting an apparently novel solution to the global trade imbalances that helped pave the way for the recent international financial crisis: an international currency swap regime. But how would such an arrangement work, and could it actually help correct current imbalances? As important, is there any chance this idea will get off the ground? more

Greece's massive debt has shaken market confidence in the euro and led to a volatile month in the common currency's exchange rate. Feeling increasing pressure to intervene, European policymakers have been forced to weigh what is best for the euro against what public opinion will tolerate. For now, none of the choices are appealing, which leaves both sides playing a game of financial "chicken."
more

A G-7 meeting in Canada next month looks increasingly likely to be a forum for discussing remedies for global currency imbalances, with a focus on China's undervalued yuan. But instead of trying to influence China's exchange rate through tough talk and diplomacy, a better strategy might be simply to do nothing, because Beijing will probably decide to revalue the yuan on its own. more

Low interest rates have become something of a staple at the U.S. Federal Reserve in recent years. Early last month, though, the U.S. central bank took its "cheap dollar" policy to another level by committing to near-zero interest rates for the foreseeable future. While the Fed's decision has its roots in domestic economic goals, U.S. monetary policy does not just affect the American economy. more