The London summit of 1933 marked the moment at which co-operative efforts to manage the Great Depression collapsed. The summit of the Group of 20 countries, in the same city, on April 2, must turn out quite differently. That may seem a simple task. It is not. The usual platitudinous communiqué would be a catastrophe. Read more
By Enrico Perotti and Javier Suarez
Securitisation was meant to reduce risk by spreading it, but in practice it created risk via regulatory arbitrage.
Banks placed long-term assets in boxes sustained by short-term wholesale funding, but with the backup of their credit lines in case of trouble. They kept a significant amount of risk, while reducing their own capital.
When subprime mortgages were repriced, the house of cards fell apart. Read more
By Patrick Honohan
Perhaps it was inevitable that this month’s announcement of the Irish government’s bank recapitalisation package was a bit of a damp squib.
What the government, and the public, look for comes down to two things: a resumed flow of credit, and the banks financially restored to the point where they can stand on their own two feet and are not going to be a continuing burden on, or threat to, public finances. Read more
By Moritz Schularick
Over the past decade, China and other emerging markets accumulated foreign currency reserves to insure against the economic and political vagaries of financial globalisation. They were wise to do so. Countries with larger reserves are weathering the storm relatively better than those who have bought less insurance. Read more