Monthly Archives: September 2009

By Michael Pomerleano

I was in Chicago last week to participate in the 12th Annual International Banking Conference sponsored by the Federal Reserve Bank of Chicago and the World Bank. The answer to the question posed — have the rules of the global financial game really changed? — is a resounding no.

This was my first week back in the US after being away for three years, and the conference gave me an opportunity to gauge the state of the debate there. Compared to my two years at the Bank of International Settlements in Basel and my year at the Bank of Israel, the openness of the debate and the quality of the discussions in Chicago were refreshing. However, in the US — the epicentre of the crisis and the country that is supposed to lead the world toward reform and out of the crisis — I expected a far more forceful articulation of remedial measures. 

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The FT has a new series on the future of investment. But what, I wonder, is the future of finance itself? Who is confident that the financial system now emerging from the crisis is safer, or better at servicing the public’s needs, than the one that went into it? The answer has to be: few people. The question is how to remedy this dire situation. 

From the FT:

Martin Wolf: This time will never be different 

Has Vince Cable, much-praised Treasury spokesman of the Liberal Democrats and vindicated Jeremiah of the UK’s property bubble, produced a “batty idea”? Even the FT thinks so. But the batty Lib Dem idea is not Mr Cable’s “mansion tax”, but replacing council tax with a local income tax. Taxation of property should be heavier, not lighter. But it should also be less regressive. That is why the mansion tax is the germ of an excellent idea. 

By Roman Frydman and Michael D. Goldberg

Confidence seems to be returning to markets almost everywhere, but the debates about what caused the worst crisis since the Great Depression show no sign of letting up. Instead, the spotlight has shifted from bankers, financial engineers and regulators to economists and their theories. This is not a moment too soon. These theories continue to shape the debate about fiscal stimulus, financial reform, and, more broadly, the future of capitalism, which means that they remain a danger to all concerned. 

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China has had a good crisis. That became obvious at the “summer Davos” of the World Economic Forum, in Dalian, less than two weeks ago. Chinese confidence was palpable. But so was anxiety. The giant has survived the shock. But its recovery is driven by a surge in credit and fixed investment. In the longer term, China needs to rebalance its economy, by increasing consumption. It is time for the Chinese to enjoy themselves more. How unpleasant can that be? 

Richard Robb of Columbia University writes in the Financial Times about the importance of Lehman’s collapse.  

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“If the price of oil stabilises, I believe we can weather the financial crisis at limited cost in terms of real activity.” Thus did Olivier Blanchard, newly appointed head of the International Monetary Fund’s research department, describe the prospects ahead on September 2 2008. He was swiftly proved wrong. 

This post, from the Financial Times’ Economists’ Forum, shows