Monthly Archives: October 2009

This post by Martin Wolf in the Financial Times’ Economists’ Forum lists suggestions for further reading on China’s economic growth and Mervyn King.  

This post by Martin Wolf in the Financial Times’ Economists’ Forum shows the effects of quantitative easing.  

From the FT:
King calls for the breakup of banks
Chris Giles
Darling responds to King’s bank speech Chris Giles FT video

Elsewhere:
Mervyn King’s speech in full
Bank of England
Volcker fails to sell a bank strategy NY Times
The consensus on big banks begins to move The Baseline Scenario
Mervyn King calls for banks to split as public finances take record hit The Times

 

Pinn illustration

A year ago, at the height of the financial panic, the world yearned for a profitable and confident financial sector. It now has what it wants, but hates it. As joblessness soars and the hopes of hundreds of millions of people are blighted, the financial sector’s survivors are thriving. Even bonuses are back. Policymakers have made a Faustian bargain. Success feels like failure. 

From FT:

Time for the ECB to get serious about the overvalued euro – Willem Buiter 

From the FT:

Goodbye, Macroeconomics – Eli Noam 

By Roger E. A. Farmer

According to a widely-held consensus view, the world is slowly emerging from the Great Recession of 2008. Growth in China is projected to top 8 per cent in 2009. Australia raised the interest rate on the Australian dollar last week and the US and UK economies are showing signs that unemployment growth has slowed even though the unemployment rates in both countries are very high. Sometime soon, perhaps in the spring of 2010, perhaps earlier, the Fed, the European Central Bank, and the Bank of England are likely to respond to the perceived global recovery by reducing the sizes of their balance sheets and raising interest rates on overnight loans. 

By Andrew Sheng and Michael Pomerleano

The national authorities and the international community should be commended for the speed of action taken to stop the spread of the financial crisis. To protect the financial system from the deflation in asset bubbles, the public sector has essentially guaranteed all deposits, rescued systemically important institutions, made large liquidity injections and brought interest rates to zero or near zero under a zero interest rate policy. Almost all systemically important central banks entered into ZIRP under emergency conditions at the same time.

But the polices adopted to combat the crisis are creating their own problems. In the medium term, the treatment may be as expensive as the crisis. 

It is the season of dollar panic. These panic-mongers are varied: gold bugs, fiscal hawks and many others agree that the dollar, the dominant currency since the first world war, is on its death bed. Hyperinflationary collapse is in store. Does this make sense? No. All the same, the dollar-based global monetary system is defective. It would be good to start building alternative arrangements. 

From the FT:

Neil Dennis: Sterling declines after inflation hits 5-year low