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Monday, November 8

President Obama's visit to India: U.S. Treasury Secretary's speech at meeting organized by Confederation of Indian Industry

The Hindustan Times report on Geithner's speech emphasized the world picture while the Wall Street Journal's report focused on India. Readers who are focused on the war need to pay close attention to this financial stuff because as the WSJ reporter pointed out America's financial woes are part of the reason for Obama's visit to India -- the longest visit to any foreign country he's made since taking office. The United States is asking much of India, both on the economic and defense fronts.

Before I quote the reports here's some background from a November 8 Bloomberg summary of headlines:
>India’s more than 20 percent growth in earnings and slowing inflation will spur further gains in the nation’s equities after the benchmark stock index surged to a record, according to Franklin Templeton Investments.

> India’s decision to tighten limits on home loans is boosting confidence that regulators are addressing asset bubbles, cutting the cost to protect bank debt from default and supporting a rally in government bonds.
The summary also mentions that the fears of a looming "spat" at the G20 have been eased by the U.S. and China deciding to back away from the brink:
U.S. Treasury Secretary Timothy F. Geithner refrained from pushing for current-account targets while China softened its stance on the Federal Reserve’s quantitative easing days before a summit of the Group of 20.
I'm not entirely persuaded this means the G20 attendees won't be packing flak jackets in their suitcases. But between that news and a better than expected report last week on U.S. jobs, which has given a spark of hope in world financial markets that the USA could be turning the corner, the prospects have improved for at least a civil meeting of the G20. Me, I'd still pack my flak jacket to be on the safe side, but I must say that Geithner and Obama are doing everything but kissing babies as they attempt to smooth their arrival at the meeting.

Nov 8, The Hindustan Times:
US upbeat on trade balance

Amid worldwide concerns on protectionism and currency wars, US treasury secretary Timothy Geithner said on Monday he was confident that a consensus can be hammered out for a global trade “rebalancing plan” in the [two-day] G20 summit of elite economies that begins [on Thursday] in Seoul. ... The US has proposed a model that would allow the International Monetary Fund (IMF) to frame guidelines to set up an early warning system to distortions in global trade.

“I am very confident you are going to see very strong consensus on this basic framework,” Geithner told business leaders at a meeting organised by the Confederation of Indian Industry (CII) to mark US President Barack Obama's visit.

“What we have proposed is a framework which incorporates early warning indicators of large surpluses or deficits which can then be monitored,” Geithner said. He made it clear that the US would not press for imposing specific targets to address global trade imbalances.

“You can’t set quantitative targets for external balances — it makes no economic sense,” he said.

Geithner had written to G20 counterparts to change exchange rate policies in those nations that are running major trade surpluses. Though he did not mention nations, that is seen as targeting China....
November 8, The Wall Street Journal
Delhi Business Conference: Geithner’s Thumbs-Up for IndiaBy Amol Sharma

U.S. Treasury Secretary Timothy Geithner praised what he called India’s “very careful, very pragmatic” approach to economic reforms and said the country’s plans to create a multi-billion dollar fund to raise long-term infrastructure financing could galvanize its broader debt markets.

Speaking to Indian and U.S. business leaders Monday shortly before President Barack Obama was scheduled to deliver a speech in India’s parliament, Mr. Geithner said India has a highly capable bureaucracy that’s trying to move forward economic reforms quickly.

“It will require more reforms in the financial sector and elsewhere to sustain that,” he said. That was a soft message compared to the refrain heard from some U.S. executives in recent days that India’s reform moves—which lately have consisted mostly of issuing “discussion papers” to jumpstart debate among stakeholders—are too tepid.

Mr. Geithner supported an idea Indian policymakers have been batting around: creating an infrastructure fund to bring long-term debt financing to India to support major projects like the construction of roads, airports, ports and power projects. He said that would also have the benefit of “catalyzing” India’s dormant corporate debt markets. “I think it’s a necessary part of India’s growth,” he said.

Mr. Geithner didn’t address who would be buying up all that long-term paper, since India hasn’t made reforms in pensions and insurance to facilitate greater institutional investment in secondary debt markets.

“We need more institutional demand for corporate bonds,” Naina Lal Kidwai, India country head of HSBC bank, said in an interview on the sidelines of the conference.

Mr. Geithner also addressed what has become a touchy subject in the Group of 20 inance ministers -— the U.S. government’s call for countries running large trade surpluses and deficits to make necessary adjustments in fiscal and exchange rate policy to come closer to equilibrium with trade partners.

The U.S. runs a large current account deficit, of course, and is trying to expand its exports in whatever ways it can. That’s part of what Mr. Obama’s trip to India is about.

Mr. Geithner said emerging economies in Asia and elsewhere are recovering faster from the global recession than more developed counterparts, and those who run major trade imbalances through, for example, artificially weak exchange rates, risk destabilizing the global economy and exacerbating trade tensions.

“If you allow large excess imbalances in the major economies to re-emerge,” growth will likely slow down, he said. “Balance matters a lot to the sustainability of (economic) expansion,” he said.

Mr. Geithner said that countries running trade deficits, like the U.S., can also make improvements such as trying to increase their domestic savings rates.

He said Mr. Obama’s trip to India, which was used to announce $10 billion in U.S. exports to India -- mostly sales of military and civilian aircraft and jet engines -- has helped “illustrate for people the tangible benefits that come with the rapid expansion of trade” between countries. The White House says those India deals will support more than 50,000 U.S. jobs. [...]


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