RTgovernment – a commentary on current and future trends in monetary policy

Date: 20 Apr 2015 Comments:0

Chris WilliamsThis blog is intended to encourage thought, debate and action by governments, authorities and other stakeholders on ways to improve financial flows for populations and economic groupings.

The RTgovernment blog is produced by Christopher Williams and the RTpay team, whose experience is mainly in international payments including foreign exchange risk assessment, transaction processing, tax evasion reduction and the development of better alternatives to cash.

While we are not attached to any particular political party or ideology, we have a specific interest in seeking to assist the under-privileged, particularly those denied basic banking services and access to cost-effective money transfers.
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May 7th, 2015 – a poor (s)election

Date: 25 Apr 2015 Comments:0

Things can change, but the likely result is 1/3 each of voters choosing the two main parties and the further 1/3 selecting one of the rest. So, not a ringing endorsement of anyone, even if everyone was voting. When you take into account 40% of the electorate will not vote, it suggests we will have a Prime Minister chosen by just 20% of the total.

There appears to be only one winner, namely Nicola Sturgeon who may attract up to 50% of the Scottish vote. While it will worry many in England and Wales, it cannot be disputed that she has earned a right to be taken very seriously. But what does this mean as to the options for Westminster, let alone how long will it be before she looks for another independence referendum?

The current logic is only an alliance between Labour, SNP and possibly PC or the LibDems, can have a working majority, given the deep mutual dislike between SNP and the Tories. The problem is multiplied if, as is supposed on today’s opinion polls, the Tories get first pick on forming a government, by being slightly the largest party in Westminster.
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The Euro – remedies or replacement?

Date: 21 Apr 2015 Comments:0

The crumbling euroThe latest Greek difficulty is the headline, but the underlying problem is with the Euro itself. The incompatibility of the German economic position and that of the Mediterranean countries requires settlement, not just by dismissing the Greek membership, but by correcting the valuation method for Germany.

It is hard to see any “Plan B” for the Euro, as famously noted as not existing, but a continuation of the joint currency can only be achieved if any one of several unlikely events occur:

  • There is a political agreement to centralize government of (at least) the Euro countries, including tax collection and control of the budget process. We have no sign of this being accepted in any country.
  • There is an agreement to centralize all current national debt into one long term, united liability. Whether this was solely for debts up to now, or was for an ongoing basis, it would be seen as rewarding the spendthrift governments to the detriment of the hard-working tax paying northern citizens – and, as such, most unlikely.
  • There is a method of price adjustment agreed whereby differing exchange rates are agreed to reflect the underlying economic positions of, in particular, Germany versus the rest. The upcharge for such exports by Germany would generate a tax revenue for the weaker EU countries, based on their imports and on need. There is no current likelihood that Germany would accept such a burden, particularly on non-EU sales, meaning it is a non-starter; but even if such a scheme were created, it would take a lot of control to avoid cheating in many respects.

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A potential solution for Greece, Argentina and other countries with large debt loads – and a new world order

Date: 20 Apr 2015 Comments:0

Eurozone - Plan BHeavily indebted countries around the world have had to face a number of different problems; in Europe, the Euro-based member states struggle with a currency that is over-valued for the weaker economies, while elsewhere Argentina in particular is having to deal with a local judge in USA who believes he can apply his hardline approach to transactions around the world.

The IMF and other international bodies, along with the German-led EU, have taken austerity to a new level, creating very high unemployment and fiscal problems for all indebted countries. This has resulted in some of the normal options being unavailable to national finance ministers, creating political uncertainty and a demand for radical change.
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Positive hedging as a necessary strategy for international business

Date: 20 Apr 2015 Comments:0

money transferThe violent movements in the currency markets of late, including the infamous Swiss franc separation from the Euro during regular business hours, have caused many trading and investment companies to suffer major hits to their balance sheets. Many have looked to update their hedging policies, but this can be difficult to apply when the investment is in developing countries with little forward market availability.

The general view is that markets are going to continue to be increasingly volatile. This trend will be exacerbated by the greater spread of currencies that are becoming important, as Asia and Africa increase their market share. While some companies are looking at pulling back more into their domestic markets because of these risks, but that is hardly going to inspire shareholder confidence in the management.
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