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China attacks dollar’s dominance

China attacks dollar’s dominance By George Parker and Guy Dinmore in L’Aquila, Krishna Guha in Washington and Justine Lau in Hong Kong

Published: July 9 2009 19:03 | Last updated: July 9 2009 19:03

China has launched its highest-profile criticism of the dominant role of the US dollar as a global reserve currency at a meeting of the world’s bigg
est economies.

Dai Bingguo, Chinese state councilor, raised the issue on Thursday when he joined the leaders of four other emerging economies for talks with the leaders of the Group of Eight industrialised nations – including US President Barack Obama – in the earthquake-damaged Italian town of L’Aquila.
The remarks, in front of Mr Obama, caused concern among western leaders, some of whom fear that even discussion of long-term currency issues could unsettle markets and undercut economic recovery.

Gordon Brown, Britain’s prime minister, said he did not remember Mr Dai making the remarks. But he said the focus should be on moving the world out of recession.

“We don’t want to give the impression that big change is around the corner and the present arrangements will be destabilized,” said Mr Brown.

”We should have a better system for reserve currency issuance and regulation, so that we can maintain relative stability of major reserve currencies exchange rates and promote a diversified and rational international reserve currency system,” said Mr Dai, according to the Chinese foreign ministry.

While he did not name the dollar, Mr Dai was unequivocal in calling for the world to diversify the reserve currency system and aim at relatively stable exchange rates among leading currencies.
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L.A. commercial real estate owners struggling, report says

A research firm finds that 263 properties valued at $4.5 billion are in default, foreclosure or bankruptcy. That figure is 133% higher than in January.
By W.J. Hennigan
July 9, 2009
Los Angeles commercial real estate continues to spiral downward, according to a report released Wednesday by Real Capital Analytics Inc.

The New York-based real estate research firm found that Los Angeles had $4.5 billion in troujavascript:void(0)bled commercial properties at the end of June.
In all, 263 properties are in default, foreclosure or bankruptcy, the firm reported. At the beginning of the year there were 113, a 133% increase.

Don Walker, senior vice president of Irvine-based John Burns Real Estate Consulting, said the large numbers weren't very surprising.

He points to the skyrocketing unemployment rate, which now stands at 11.5%, and consumers' current tendency to rein in discretionary spending, as contributing factors to the downturn in the market.

Walker said the worst may be yet to come, because commercial real estate numbers traditionally lag behind residential. "We might be in the early stages of decline," he said. "I don't expect a turnaround until consumers regain confidence and the jobless numbers stop mounting."

But things could be worse, said Dan Fasulo, RCA managing director of research. Compared with the national picture, Los Angeles is faring well.

"Los Angeles has held up better than its peers," Fasulo said. "For example, you couldn't give away a commercial property in the Midwest right now."

Nationally, RCA found 5,315 troubled commercial properties valued at more than $108 billion.

The report lists hotels and retail properties as the most "problematic sectors" and goes on to note the bankruptcy filings by mall owner General Growth Properties Inc. and hotel chain Extended Stay America Inc. The report said the lack of available credit is causing properties to fall into default across the country and among every investor type.

"Excess leverage is endemic to every type of investor, all of which are facing difficulties refinancing mortgages as they come due," the study said.

The figures released Wednesday are preliminary, the report said.


While Talking About Keynesian Stimulus, Feds Are Really Just Giving Money to the Big Boys

As noted previously, China experts say that the Chinese government has been blowing a huge bubble (and see this).

But the government is apparently going to switch off the bubble-blowing machine.

China expert Michael Pettis writes:

Today bank stocks were down, on rumors that the very high and clearly unsustainable loan growth rates would soon come to an end.

And the BBC writes:

It comes as the government looks to tighten its monetary policy to prevent the risk of asset bubbles, loan defaults and rapid inflation.

Meanwhile, the Chinese city of Hangzhou has started tightening mortgage lending terms, ahead of any changes to monetary and credit policies by the national government.

The signs that China may ditch its loose monetary policy dragged down bank stocks in Hong Kong and Shanghai on Wednesday.
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