2014年11月24日月曜日

The pros and cons of a SWIFT response

Financial sanctions
The pros and cons of a SWIFT response
Blocking rogue states’ access to the world’s financial-messaging network is a potent measure, but it carries long-term risks

l   SWIFT = the electronic financial-messaging system of the Society for Worldwide Interbank Financial Telecommunication. It provides a template that helps international transfers flow smoothly and be tracked.
l   The network’s very usefulness means it is increasingly being cast in a new role, as a tool of international sanctions
2012
Iranian banks
EU
Nuclear suspicious
2014
Russian banks
EU (Britain/Poland)
Invasion of Ukraine
2015~
Israel Banks?
Taiwanese Banks?
Pro-Palestinian Group
China
Palestine Conflicts
China vs. Taiwan
l   If the sanction is imposed, more than 90% of transactions involving Russian banks cross borders would stop. Foreign firms that do business in Russia would suffer.

Pros:
l   It is one of the effective sanctions for rogue states.
l   It provides useful information against terrorism. Though terrorists know that SWIFT is monitored by spooks, they still use it: they know it bring risks, but sometimes they have no obvious alternatives.
Cons:
l   It could come to be seen as an instrument of foreign policy, thereby weakening its neutrality. (Above examples)
l   It could lead to the creation of a rival. Russia’s central bank is working to develop an alternative network.
l   It might interfere with attempts to track the finances of Islamic State.

Discussion:
l   Which side do you prefer to stand for and why?
l   Should SWIFT impose sanction on Russian banks according to EU request?

l   Do you know other examples that have the same kind of problem?

2014年11月3日月曜日

The world's biggest economic problem

The world's biggest economic problem
Deflation in the euro zone is all too close and extremely dangerous.

I picked up this article is because the title is sensational. It states deflation as "the biggest" or "extremely" dangerous problem. Why does the Economist think so? We have to understand the risk of “deflation”.

l   The logic of the article is clear as usual. In the former section, it points out the risk of deflation in Europe. Overall inflation rate of the euro zone has slipped to zero and this deflation poses far greater risk to the region and the world. The euro zone is now on the verge of tipping into its recession. In the latter section, it presents prescriptions to the issue.
l   This time, I would like to rather focus on the former section which mention why deflation is dangerous for us. This article explains the danger in a short sentence; if people and firms expect prices to fall, they stop spending, and as demand sinks, loan default rise. Do you really understand the danger? For me, not yet.

(1) What kind of image do you have on "deflation"?
I don't want to discuss this academically. Whatever answer is possible. Deflation is Positive / Negative / Nothing, etc. If you have some keywords or image in your mind, please share them. My definition is that money values up as time goes by. It means money becomes attractive increasingly.

(2) What will happen when the economy is in deflation?
The article mentions that Japan fell into deflation in the late 90's and is still struggling. People in the world have a strong interest in Japan's case. What do you answer when someone asks you about life in deflation?

(3) Why does deflation harm the economy destructively?

The economist thinks deflation is dangerous because of its chain-reacting negative effects. But price of goods is decided relatively so price fluctuation seems to lead no bad effects. Can you explain why in your words?