By Carlo Jaeger
“The facts, ma’am, just the facts”: these words, attributed to the detective Joe Friday in the American 1950s crime series Dragnet, resonate in today’s eurozone crisis. Will anybody help Angela Merkel, German chancellor and a trained physicist with a sharp analytical mind, to get hold of the facts blurred by this misguided eurozone debate? Or must we wait for François Hollande, Socialist challenger for the French presidency, a European with hyper-sober realism, to grasp the facts his country’s president, Nicolas Sarkozy, has so far ignored?
The Copenhagen summit on climate change is going to fall short. Does this matter? Yes and no: yes, because the case for action is so strong; no, because the likely agreement would be inadequate. Tackling climate change will be hard. It is crucial that we achieve the goal effectively and efficiently. The likely further delays should be used to achieve just that.
Barack Obama, president of the US, met Hu Jintao, president of the People’s Republic of China, for a private meeting on Tuesday. The agenda was long, covering the world economy, climate change and non-proliferation of nuclear weapons. The last two are the most important, over the long run. But the first is the most urgent. If we do not achieve a healthy global economic recovery, hope of a co-operative relationship is likely to prove vain. Yet such a recovery is far from ensured. Worse, some of what is now happening – particularly China’s decision to depreciate the renminbi along with the dollar – makes healthy recovery less likely.
By Alan Greenspan
The rise in global stock prices from early March to mid-June is arguably the primary cause of the surprising positive turn in the economic environment. The $12,000bn of newly created corporate equity value has added significantly to the capital buffer that supports the debt issued by financial and non-financial companies. Corporate debt, as a consequence, has been upgraded and yields have fallen. Previously capital-strapped companies have been able to raise considerable debt and equity in recent months. Market fears of bank insolvency, particularly, have been assuaged.
By Joseph Stiglitz and Nicholas Stern
We face two crises: a deep global financial crisis, caused by inadequate management of risk in the financial sector; and an even deeper climate crisis, the effects of which may seem more distant but will be determined by the actions we take now.
By Susan Schadler
The debate about how to prevent future crises focuses largely on improving financial sector regulation. Few ideas have surfaced for strengthening institutional capacity to prevent macroeconomic policy faults, a key factor underlying the current crisis. Here, politicians seem to be settling for more of the same – “firm surveillance” by the International Monetary Fund. Clear thinking on a fresh start is needed.
First, some history. After 25 years of an essentially rules-based international macroeconomic order (fixed but adjustable exchange rates), the post-Bretton Woods system abandoned rules. Instead, flexible exchange rates (initially adopted by large countries and gradually by many others) were expected to put market pressure on countries with unsustainable policies. IMF surveillance -annual assessments of each member’s macroeconomic policies – was to buttress market discipline, especially when countries impeded market forces or markets sent wrong signals.
by Willem Buiter
From a cyclical perspective, things look bad for Europe, the US and most of the global economy. My contribution to summer cheer is to note that longer-term local and global economic prospects are likely to be worse than expected. So welcome to boom and bust. Welcome to subdued long-term growth prospects.
Something has changed in the debate on man-made climate change: the US is engaged. But its engagement – or at least the engagement of President George W. Bush – is neither enthusiastic nor unconditional. In particular, at discussions among the heads of governments of the Group of Eight leading countries in Japan, Mr Bush stressed that China and India had to participate. In this, he was right: it will be impossible to tackle the problem without the participation of leading emerging countries. The question is on what terms they do so.