Some people may find it strange that the Defense Department, which helped create the internet, is having so much trouble securing its networks. Those people have not seen this mind-numbing, 2-foot-long chart, outlining the 193 documents that govern the activities of the Pentagon’s geek squads.
Developed by the DASD CIIA (that’s the Deputy Assistant Secretary of Defense for Cyber, Identity & Information Assurance), the goal of the chart is to “capture the tremendous breadth of applicable policies, some of which many IA practitioners may not even be aware, in a helpful organizational scheme.”
Obviously, operating networks for the millions of people who make up the world’s largest military is no simple task: The financial, legal, organizational and technical issues are nothing short of staggering. On the other hand, the hackers trying to break into those networks don’t have to check 193 different policy documents before they launch their malware. It’s hard not to think that gives the attackers an edge.
China Fends Off Pressure on Yuan, Keeps Gradual Gain
By Ye Xie and Mark Deen
(Updates with Zhou’s comments on unemployment from first paragraph. See {GMEET <GO>} for more on the IMF meetings.)
Oct. 11 (Bloomberg) -- China countered mounting pressure from major trading partners for a stronger yuan as central bank Governor Zhou Xiaochuan highlighted a domestic unemployment rate he estimated at more than 9 percent.
A “very fast” appreciation probably wouldn’t bring balance to the world economy, Zhou said yesterday in the U.S. capital. China’s central bank is balancing inflation, growth, fiscal policy, the international balance of payments and the “sensitive issue” of unemployment, he said.
Debate about competitive devaluations dominated meetings of finance ministers and central bankers gathered for meetings at the International Monetary Fund. China faces demands from Western nations to let the yuan rise more quickly at a time when the U.S. is trying to trim its trade deficit and European nations are trying to stem an outflow of manufacturing jobs.
Billionaire investor George Soros called for China to let its currency appreciate by 10 percent a year against the dollar to help address the global economic imbalance, saying a failure to act on the currency would mean “the current system is liable to break down and other countries will be driven to capital control.” Soros made the comments in an interview with Emerging Markets magazine.
‘Nasty Proposals’
For the Chinese government, any such action would be economically and politically difficult. Punitive measures on China to push for a faster appreciation are “nasty proposals,” Li Daokui, an adviser to the People’s Bank of China, said in Washington. The Chinese currency has risen “pretty fast” in recent months, he said.
China aims to cut its trade surplus to less than 4 percent of gross domestic product within five years, from 11 percent in 2007 and 5.8 percent in 2009, said Deputy Governor Yi Gang.
“We are committed to a more flexible exchange regime,” Yi said. “A more flexible, market-based, managed floating regime is better for China and is better for the rest of the world. But the approach is probably a gradual one.”
Yi said criticism of China is undeserved because the government in Beijing has allowed the yuan to appreciate more than 20 percent in the past five years.
Global governments tasked the IMF with calming the recent outbreak of tensions over currencies amid signs they are already triggering a protectionist backlash.
Interest Rates
China is in no “hurry” to reduce overall inflation and will focus on pushing down housing prices to strengthen the economic recovery, Zhou also said in Washington. It may take two years for the inflation rate to fall below 3 percent, from a 22- month high of 3.5 percent in August, he said
“Since the fiscal and monetary expansion has already got into effect, we cannot be very hurry to get inflation under control,” said Zhou, speaking in English. “We have a medium- term plan. I hope this medium-term plan is credible.”
Zhou’s comments buttressed economists’ median forecast in a Bloomberg news survey last month for the central bank to keep benchmark rates on hold this year. To rein in growth in money supply, the PBOC has ordered lenders to set aside more cash as reserves and targeted a 22 percent reduction in new loans this year.
While China reported an urban unemployment rate of 4.2 percent at the end of June, that number excludes millions of migrant workers.
Zhou said that the overall jobless rate is more than 9 percent; “always something around that, but after the financial crisis it becomes a more sensitive issue.”
Premier Wen Jiabao said Sept. 22 that excessive gains by the yuan could lead to “major social upheaval” in China as factories went bankrupt and migrant workers returned to the countryside.
Dollar Falls Toward 8-Month Low on Prospects of More Fed Easing
By Ron Harui
Oct. 11 (Bloomberg) -- The dollar fell toward an eight- month low against the euro on speculation that Federal Reserve policy makers will signal this week their willingness to buy more government debt to support economic growth.
The greenback touched a 15-year low versus the yen before tomorrow’s release of the Fed’s Sept. 21 policy meeting minutes and after a U.S. report last week showed job cuts were bigger than expected. The euro strengthened against 12 of 16 major counterparts as Asian stocks and commodities rose, underpinning demand for riskier investments. Australia’s dollar strengthened toward the highest level since it began trading freely in 1983 after home-loan approvals climbed for a second-straight month.
“The dollar is likely to continue to fall over the coming months as the Fed provides increasing dollar liquidity, although its weakness will be tempered by the fact that a lot of this is already priced into the currency,” said Mitul Kotecha, Hong Kong-based head of global foreign-exchange strategy at Credit Agricole CIB in Hong Kong.
The U.S. currency slid to $1.3973 per euro as of 6:45 a.m. in London from $1.3939 in New York on Oct. 8. It fell to $1.4029 on Oct. 7, the lowest level since Jan. 28. The dollar traded at 82.02 yen from 81.93 yen last week, after earlier reaching 81.39 yen, the weakest since April 1995. The euro advanced to 114.61 yen from 114.19 yen.
Australia’s currency rose 0.1 percent to 98.57 U.S. cents. It reached a record 99.18 cents on Oct. 7. Financial markets in Japan are closed for a holiday today.
U.S. Data, Fed
U.S. employers cut payrolls by 95,000 workers in September after a revised 57,000 decrease in August, Labor Department figures in Washington showed on Oct. 8. The median forecast of 87 economists surveyed by Bloomberg News called for a 5,000 drop. The unemployment rate unexpectedly held at 9.6 percent.
Fed Chairman Ben S. Bernanke said on Oct. 4 that the central bank’s first round of large-scale asset purchases aided the economy and that further quantitative easing, or QE, is likely to help more. New York Fed President William Dudley, who has voiced support for more government bond purchases, will speak in Washington later today.
“Since August, the Fed has been leaning towards more quantitative easing measures to underpin the weakened U.S. recovery,” Philip Wee, a senior currency economist in Singapore at DBS Group Holdings Ltd., wrote in a research note today. “We have downgraded the outlook for the dollar.”
DBS Cuts Forecasts
DBS lowered its year-end forecast for the dollar to trade at $1.40 per euro from $1.28 previously, and to be at 83 yen from 88 yen before, according to the note.
The euro traded near an eight-week high against the Swiss franc as the MSCI Asia Pacific excluding Japan Index gained 0.6 percent and the price of gold rose 0.5 percent.
“Risk-taking appetite may be positive, given higher equities and commodities,” said Yusuke Tanaka, a senior dealer at Mitsubishi UFJ Trust & Banking Corp. in Singapore. “This is probably a plus for the euro.”
Europe’s common currency was at 1.3432 Swiss francs from 1.3419 francs on Oct. 8, when it reached 1.3494 francs, the strongest since Aug. 13.
Gains in the yen were tempered on speculation that Japan will intervene to stem the appreciation of its currency.
Japanese Finance Minister Yoshihiko Noda said on Oct. 8 Group of Seven officials understand Japan’s position on the yen’s gains and agreed that excessive foreign-exchange movements are undesirable.
‘No Official Criticism’
“There was no official criticism of Japan’s decision to intervene in the foreign-exchange market by selling yen,” said Gareth Berry, a currency strategist at UBS AG in Singapore. “This increases the chance of a further round of intervention should the yen continue to appreciate.”
At the International Monetary Fund’s annual meeting in Washington over the weekend, governments tasked the agency with calming the recent outbreak of tensions over currencies amid signs they are already triggering a protectionist backlash. Officials including U.S. Treasury Secretary Timothy F. Geithner and Egyptian Finance Minister Youssef Boutros-Ghali said the lender should outline how countries can expand their economies without damaging those of other nations.
Australia’s dollar gained for a fifth day versus its U.S. counterpart on prospects the nation’s central bank will raise its benchmark interest rate next month.
Australian home-loan approvals rose 1 percent in August from a month earlier, the statistics bureau said today, matching the median estimate of economists surveyed by Bloomberg News.
“The market is very keen to take the Aussie higher,” said Khoon Goh, head of market economics at ANZ National Bank Ltd. in Wellington. “The rhetoric is certainly pointing toward providing more stimulus for the U.S. economy and that’s why the market is pricing in a decent probability of QE2, putting the U.S. dollar under downward pressure.”
Benchmark interest rates are 4.5 percent in Australia and 3 percent in New Zealand, compared with as low as zero in Japan and the U.S., attracting investors to the South Pacific nations’ assets. The risk in such trades is that currency market moves will erase profits.
--With assistance from Candice Zachariahs in Sydney. Editors: Garfield Reynolds, Rocky Swift
Soros Says U.S. Economy Needs More Fiscal Stimulus, Not Deficit Reduction
By Rebecca Christie and Ye Xie
Billionaire investor George Soros said the U.S. economy should pursue more fiscal stimulus instead of joining international efforts to reduce budget deficits.
Soros said spending cuts are the “wrong consensus” in the current economic environment. He said the global economy is still not at equilibrium, even though financial markets are functioning again, and U.S. fiscal restraint is limiting the recovery.
“It threatens to push the global economy into a much longer-lasting stagnation than would be necessary,” Soros, chairman of Soros Fund Management LLC, said in a forum at the International Monetary Fund’s annual meetings. The U.S. has been “driven to quantitative easing because the political debate has been won basically by the Republicans, who argue for balancing the budget and no more stimulus.”
The U.S. is using this weekend’s meetings to call for the IMF to take a more active role in promoting global rebalancing and in rebuking countries that undervalue their currencies. The initiative is aimed at China, which has limited the yuan’s rise to about 2 percent since agreeing in June to allow appreciation.
Soros said China deserves a stronger voice at the IMF as the fund deliberates how to give emerging-market nations a bigger share of board seats and voting rights.
“China is a part of the IMF, but it’s more or less a passive part, because it doesn’t have enough voice and is not sufficiently drawn into the deliberations,” Soros said. “A lot depends on how this is going to work out.” Corruption, Governance
Soros said China ought to join international efforts to reduce corruption and improve governance in poor countries, especially those with natural resources that could be contributing to prosperity. He said China’s decision to stay out of many international initiatives could be destabilizing if widely adopted.
“China in particular feels much more comfortable with bilateral relations” and “what I call state capitalism as opposed to international capitalism,” Soros said. “As long as China is the only one following that course, it actually derives very substantial benefits, advantages from that. But if everybody does it, it’s the end of the multilateral system.”
On the subject of international bank regulation, Soros said there is not yet a solution to the problems caused by financial institutions that are “too big to fail.” These firms are currently backed by an “implicit guarantee” from regulators, who now bear increased responsibility to make sure that protection won’t be used, he said. To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
Fast yuan revaluation no panacea - China's Zhou
International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn (L) talks to Governor of People's Bank of China Zhou Xiaochuan at the beginning of the International Monetary and Financial Committee (IMFC) meeting at the IMF headquarters building in Washington October 9, 2010.
Credit: Reuters/Yuri Gripas
By Kristina Cooke and Paul Eckert
WASHINGTON | Sun Oct 10, 2010 11:59pm BST
WASHINGTON (Reuters) - Demands that China rapidly revalue its yuan currency are akin to seeking a magic cure to a problem that requires a slow-working, herbal remedy, the country's central bank governor, Zhou Xiaochuan, said on Sunday.
Beijing realizes it must raise the value of its currency, but the strength of the yuan depends on carefully gauging economic fundamentals like inflation, growth and employment, said Zhou, the head of the People's Bank of China.
"China would like to use more gradual ways to realise a balance between domestic and external demand," he said, repeating the message he drove home at the weekend's International Monetary Fund meetings.
Zhou, speaking to a seminar on the sidelines of the IMF gathering, used a metaphor of the differences in medical practices in the East and West to highlight the challenges faced in addressing the currency debate that has pitted the United States and other industrialized countries against China.
"In China, a lot of people believe in Chinese doctors. In Western countries, they believe in Western-trained doctors," he said.
The currency debate is like a contest between "pills that solve your problem overnight" and Chinese-style treatments of "10 herbs put together ... that solve the problem not overnight, but maybe in one month or two months," Zhou said.
The often jovial Zhou and his deputies pushed back at the IMF meetings against a chorus of pressure for China to let the yuan rise further and more rapidly than the roughly 2 percent gains seen since June 19, when Beijing loosened the yuan's peg to the U.S. dollar.
Many U.S. lawmakers, labour unions and manufacturing groups believe China deliberately keeps the yuan, also called the renminbi, undervalued to keep Chinese exporters in business.
The U.S. House of Representatives last month stepped up pressure on China to let the yuan rise more quickly, passing a bill just weeks before U.S. congressional elections on November 2 that would provide new muscle to combat undervalued currencies by allowing the imposition of tariffs on goods.
Zhou earlier told reporters during the IMF meetings he believed the currency issue might "gradually fade out along with the recovery" of Western economies and job markets.
"For China, we have a package to enhance the internal demand including ... consumption, social security system reform, new investments in the rural areas," he said.
These measures, he told reporters, show "that China sincerely wants to bring the current account surplus down to a reasonable level."
On Sunday, Zhou seemed to suggest there was more potential for agreement as major advanced and emerging countries prepare for the Group of 20 ministerial and summit meetings in South Korea in coming weeks.
"It seems (there's) not very much difference between emerging markets, including China, and industrialized countries. What I see is everybody is emphasizing that the global imbalance is something that we need to deal with," he said. He noted the differences over whether rebalancing should be achieved via exchange rates or by other means to boost internal demand in countries with trade surpluses and differences over the pace at which rebalancing should occur.
China faces trade-offs between its economic fundamentals and trade surpluses, Zhou said. "It is quite a complicated art to perform, but if we successfully keep low inflation... the yuan is going to be stronger," he said.
NEW YORK (TheStreet) -- The pound-dollar currency pair (GBP-USD) is preparing to return to 1.5996, its Aug. 8 high, after it wiped out last week's marginal losses this week and closed higher Friday.
A penetration of 1.5996 will resume the pound-dollar's short-term uptrend toward 1.6274, its Jan. 24 high. Conversely, support comes in at the 1.5713 level, where a reversal of roles is likely.
However, if that level gives way, additional lower prices should occur toward the 1.5502 level, where a violation will allow for further downside pressure toward 1.5295, the Sept. 7 low.
A break there will expose 1.5122, the July 21 low, and then 1.5000, the currency pair's psychological level. Overall, the pound-dollar currency pair now looks as though it will eventually recapture the 1.5996/1.6016 level now that it has recovered strongly.
