"Leaders also reportedly proposed increasing to $500 billion the International Monetary Fund's financial resources for crisis management, in light of problems recapitalizing banks in Central and Eastern Europe. The IMF now has $250 billion in resources and already used $50 billion."Chancellor Merkel indicated that Berlin was willing to shore up the IMF as necessary.
2. P O Neill at Fistful of Euros reports that Belgrade is reportedly preparing to appeal to the IMF for a $2 billion program loan.
3. Brad Setser at Follow the Money reports that China provided, per his reading of the most recent TIC data, nearly $500 billion in financing to the US in 2008.
"That is a stunning sum. It should go without saying that I — like many in China — believe China now has more exposure to the US than is in its long-run interest."Well worth reading in full.
4. Shamim Adam and Seyoon Kim at Bloomberg report that Japan, China, South Korea and ASEAN agreed today to form a $120 billion pool of foreign-exchange reserves which contributing nations can use to defend their currencies, expanding the Chiang Mai Initiative which only allowed bi-lateral currency swaps. The new arrangement was first signaled in late January when anonymous Japanese finance ministry officials told the media they were scheduling an emergency meeting to do just that--see Daily Sources 1/30 #4.
"'There remains the need for more foreign exchange cooperation and coordination' to bolster regional stability, Asian Development Bank President Haruhiko Kuroda told the ministers in Phuket, according to the text of his speech obtained by Bloomberg News. 'A multi-lateralized and expanded Chiang Mai Initiative is a critical first step only if it is operationalized quickly.'"Some have argued that Beijing's decision to make the swap lines available in renminbi as opposed to the dollar is a first step in establishing the renminbi as a reserve currency in the Asia Pacific--see Daily Sources 2/6 #6.)
5. Former presidents of Brazil, Colombia, and Mexico, respectively, Fernando Henrique Cardoso, César Gaviria and Ernesto Zedillo, have an opinion piece in the Wall Street Journal today which outlines the conclusions of a panel the three chaired which were published two weeks ago in Rio. (for the story on the conference see Daily Sources 2/12 #5.) In short, the former presidents conclude that US drug policy exports instability to Latin and South America:
"The revision of US-inspired drug policies is urgent in light of the rising levels of violence and corruption associated with narcotics. The alarming power of the drug cartels is leading to a criminalization of politics and a politicization of crime. And the corruption of the judicial and political system is undermining the foundations of democracy in several Latin American countries."The bare outline of their proposal:
"In this spirit, we propose a paradigm shift in drug policies based on three guiding principles: Reduce the harm caused by drugs, decrease drug consumption through education, and aggressively combat organized crime. To translate this new paradigm into action we must start by changing the status of addicts from drug buyers in the illegal market to patients cared for by the public-health system."Specifically, they propose that the nations of the Western Hemisphere seriously consider the decriminalization of marijuana consumption. Well worth reading in full.
6. Thomas Erdbrink in the Washington Post reports that the Bushehr nuclear plant will begin test operations on Wednesday before fully commissioning later this year.
7. Mark McDonald at the New York Times reports that the Tamil Tigers announced today that they are willing to accept an internationally-brokered ceasefire if they were not required to surrender their arms. The government immediately rejected the offer.
"Government troops have cornered the principal group of rebel fighters in a small strip of land on the country’s northeastern coast. The government says the Tamil Tigers, fighting from their last remaining enclave, now control less than about 33 square miles.8. Eric Watkins at the Oil & Gas Journal reports that Russia's Vice-Premier Igor Sechin has indicated that Moscow is preparing to discuss a memorandum on cooperation with OPEC at the cartel's next meeting in March. Foreign minister Sergei Lavrov was also quoted as saying that it was critical to make the market "really stable and unsusceptible to sharp zigzag-like fluctuations that are in many ways triggered by speculative activity. Our interests are fully identical in this sphere. We'll continue coordinating our actions in a variety of formats." [Emphasis mine.] The two indicated that Moscow was not ready to join the organization, but foresaw taking an observer status while coordinating supply cuts.
Earlier this month, the United States, the European Union, Japan and Norway called on the Tamil Tigers to consider surrendering. They urged the rebels to disarm, accept a governmental amnesty and reformulate themselves as a political party."
9. Zainab Fattah and Haris Anwar at Bloomberg report that shares in Dubai's stock market "surged" after the UAE central bank bought $10 billion of Dubai bonds, "easing concern that the emirate’s companies will be unable to refinance debt." Worth reading in full.
10. Vandana Hari and Mriganka Jaipuriyar at Platts report that Vietnam has officially inaugurated its first refinery at Dung Quat, with a ceremony attended by the Prime Minister Sunday. The refinery has a throughput of 130 kb/d, was successfully fired up on February 9, and will initially run at 50% capacity, ramping up to 100% by the end of the year.
11. Lies Sahar at Platts reports that Chakib Khelil, oil minister of Algeria, told reporters that there was a strong possibility of a further OPEC supply cut come March 15. Khelil was quoted as saying:"
"We don't yet see the end of the crisis and we don't know when the [world economy] will stabilize. However, we do believe that demand will pick up around the summer and we will see prices recover also."12. Real Time Economics carries the full text of a joint statement of the Treasury, FDIC, OCC, OTS and the Federal Reserve today announcing that the Capital Assistance Program will begin Wednesday:
"Currently, the major U.S. banking institutions have capital in excess of the amounts required to be considered well capitalized. This program is designed to ensure that these major banking institutions have sufficient capital to perform their critical role in our financial system on an ongoing basis and can support economic recovery, even under an economic environment that is more challenging than is currently anticipated. The customers and the providers of capital and funding can be assured that as a result of this program participating banks will be able to move forward to provide the credit necessary for the stabilization and recovery of the U.S. economy. Because our economy functions better when financial institutions are well managed in the private sector, the strong presumption of the Capital Assistance Program is that banks should remain in private hands."Well worth reading in full.
13. Pedro Nicolaci da Costa and Juan Lagorio at Reuters reports that George Soros on Friday effectively said that the financial system has collapsed, that current market turbulence is greater than that seen in the Great Depression, and compared the current situation to the collapse of the Soviet Union. At the Columbia University dinner where Soros made his remarks, Paul Volcker said, "I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world."