By Kevin P. Gallagher
Clear and consistent proposals toward crisis recovery and prevention are needed at the International Monetary Fund upcoming annual meetings. Unfortunately, the IMF has been sending mixed messages over the past two months on the subject of capital controls.
From Martin Wolf’s Exchange
One of the most interesting set of questions to arise out of the Greek crisis in the eurozone is whether – and, if so, what – institutional changes are needed to make it easier to manage disarray of this kind.
Some would argue that there is really no problem. When countries within the eurozone get into difficulty, they are supposed to look after themselves. The European Central Bank should continue to look at the performance of the economy as a whole. Meanwhile, given the “no bail-out” provisions of the treaty, each country must be on its own. If a country cannot raise the money it needs to finance its government, it has no choice but to raise taxes, cut spending and, in extremis, restructure its debt. The latter is likely to mean a deep recession, not least because the private sector is likely to be badly affected by a sovereign default. This would be particularly true for the financial sector.
An open letter from Laurence Kotlikoff of Boston University to Lord Turner,
Dear Adair,
I listened to your terrific talk at the Soros conference. I could focus on the eloquence, fantastic delivery and numerous deep insights, but let me make a couple of comments that may be of actual value at the margin. Take them from where they emanate – real friendship and respect.
It seems that you are questioning yourself. On the one hand, you are saying it’s critical to consider radical solutions. On the other hand, you are saying, “Too radical, too fast, is too dangerous. If we move to real safely, we may need to take decades.”
By Roger E. A Farmer
Anyone who thinks that the 2008 financial crisis is a new and unusual event on the world stage should read Walter Bagehot’s book, Lombard Street, written in 1873. Bagehot was editor-in-chief of The Economist magazine and the son-in-law of its founder James Wilson. He literally wrote the book on central banking.
From now on comments on my columns will be appended to the columns themselves. My columns will no longer appear on the Economists’ Forum. We will however continue to publish articles on the Economists’ Forum from other contributors and this week you will be able to read entries on India and on the financial crisis.
I have a new site on ft.com — Martin Wolf’s Exchange — in which I will open discussion on a topic that I am thinking about. My aim will be to elicit views of readers. I will give my own response to the question I have raised, before posting the next issue for discussion. The first post is on Austrian economics, and you can read it here.
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