Monthly Archives: August 2009

Bolstering financial stability regulation

August 28, 2009 2:52 pm by Financial Times

By Masahiro Kawai and Michael Pomerleano

In a previous article in the Economists’ Forum, we expressed skepticism about the capacity of the Financial Stability Board to implement sound international financial stability regulatory architecture. We concluded that the prospects were more promising on the domestic front; this led to a discussion on creating a financial stability regulator at the national level.

The Obama administration has proposed that the Federal Reserve should become the overseer of financial stability in the US. The central bank would gain power to monitor risks across the financial system and sweeping authority to examine any firm that could threaten financial stability. The nation’s biggest and most interconnected firms would be subject to heightened oversight.

Continue reading: “Bolstering financial stability regulation”

Posted in Central banks, Crisis, Economics, Federal Reserve, Fiscal policy, Monetary policy, Regulation |

Further reading

August 26, 2009 6:34 pm by Financial Times

Economist’s View: The Dangers Ahead for Bernanke

The Baseline Scenario: Which Bernanke? Whose bubble?

The FT: Towards the next peak

Posted in Federal Reserve |

China’s stimulus shows the problem of success

August 26, 2009 2:01 am by Financial Times

By Yu Yongding

Ingram Pinn illustration

China has rebounded from the global slump with vigour. In the second quarter, its official figures showed year-on-year gross domestic product growth of 7.9 per cent. Those who doubt the quality of China’s macroeconomic statistics can check its physical statistics: in June, electricity production increased 5.2 per cent, reversing the falls of the previous eight months. It is almost certain that China’s GDP will grow more than 8 per cent this year.

Continue reading: “China’s stimulus shows the problem of success”

Posted in Capitalism, China, Crisis, World trade |

Further reading

August 25, 2009 6:03 pm by Financial Times

From the FT:

Stephen Roach: The case against Bernanke

Mohamed El-Erian: Bernanke’s four-point to-do list

Keir Martin: Magic and the myth of the rational market

Elsewhere:

The Economist: Bringing back Bernanke

Economic Principals: Horizon-scanning

Naked Capitalism: Volcker wants to regulate money market funds like banks

Posted in Economics |

Rating agencies vs. investment banks: Who’s minding the shop?

August 25, 2009 5:11 pm by Financial Times

By Marc Flandreau

Our research shows investment banks are no longer selective when they underwrite emerging market debts. This is because responsibility for certification has been outsourced to rating agencies, leading to the emergence of a market for securities than is riskier than previous counterparts.

The debate on the responsibility of rating agencies for failing to see the making of the sub-prime crisis and even contributing to it through their behaviour neglects one important aspect of the matter which I came across with colleagues.

Continue reading: “Rating agencies vs. investment banks: Who’s minding the shop?”

Posted in Banks, Crisis, Regulation |

How the EU could stop the global crisis becoming a European problem

August 23, 2009 1:58 pm by Financial Times

By Andre Sapir

Imagine the US was facing the current crisis with the following situation: only 30 of its 50 states belong to the dollar area; most of the southern states are outside the dollar area and so is New York, home of the US financial centre; the seat of the US government is in Washington, but dollar area chairman Ben Bernanke operates from Pittsburgh and secretary Tim Geithner is mainly governor of Vermont, one of the smallest US states, with a population of roughly half a million.

Absurd? Yet this is exactly what the European Union looks like, with only 16 of its 27 member states belonging to the euro area; most of the eastern states and the UK, home of the EU financial centre, outside the euro area; the seat of the EU institutions in Brussels, but ECB president Jean-Claude Trichet operating from Frankfurt and Eurogroup chairman Jean-Claude Juncker mainly the prime minister of Luxembourg.

Continue reading: “How the EU could stop the global crisis becoming a European problem”

Posted in Eurozone, Fiscal policy, IMF, Regulation |

Why we need to regulate the banks sooner, not later

August 19, 2009 1:26 am by Financial Times

by Kenneth Rogoff

Pinn illustration

When in doubt, bail it out,” is the policy mantra 11 months after the September 2008 collapse of Lehman Brothers. With the global economy tentatively emerging from recession, and investors salivating over the remaining banks’ apparent return to profitability, some are beginning to ask: “Did we really need to suffer so much?”

Continue reading: “Why we need to regulate the banks sooner, not later”

Posted in Aid, Banks, Central banks, Credit squeeze, Crisis |

Further reading

August 14, 2009 11:52 am by Financial Times

From the FT:

Data raise hopes for eurozone recovery France and Germany return to growth

How to release the next boom New growth drivers will emerge, says George Magnus

Elsewhere:

Debtor’s revolt A widespread debt revulsion? Naked Capitalism

When insolvent banks are worth billions We’re nowhere near the point at which you can judge the health of a bank by looking at its share price Felix Salmon

China rising, Rent-seeking version The reason to worry about China  has  little to do with external balances.  It’s about productivity and rent-seeking The Baseline Scenario

Posted in Banks, China, Crisis, Eurozone |

Liquidity traps and the credit crunch

August 13, 2009 11:25 am by Financial Times

By Ronald McKinnon

The global credit crunch which began in 2007 but became acute in 2008, originated from the collapse in the bubble in US house prices and, to a lesser extent, in European ones.

Unsurprisingly, the declining home values made people feel poorer, so consumption spending fell. This fall in aggregate demand in the US and Europe reduced demand for imports and caused a parallel slump in the rest of the world, including in emerging markets.

Continue reading: “Liquidity traps and the credit crunch”

Posted in Banks, Central banks, Credit squeeze, Federal Reserve, Keynesianism, TARP |

Central banks must time a ‘good exit’

August 12, 2009 1:42 am by Financial Times

by Randall Kroszner

Pinn illustration

Leaving a financial crisis is like leaving an awkward social gathering: a good exit is essential. In 1936-37, the Federal Reserve made a colossal mistake in its “exit strategy”. This time round it is crucial that central banks get their timing right.

Continue reading: “Central banks must time a ‘good exit’”

Posted in Central banks, Crisis, Regulation |
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