The Bretton Woods sequel will flop

November 11th, 2008 1:23am

I blame it all on Dean Acheson. The long-dead American statesman was a big figure at the original Bretton Woods conference in 1944 and later helped invent Nato. Acheson gave his memoirs the modest title Present at the Creation and, in so doing, he inadvertently fed the grandiose fantasies of the leaders of the Group of 20 leading economies who will assemble in Washington next weekend. Perhaps they too can achieve near God-like status by reordering the institutions of the world?

Some of the leaders who are heading for Washington are surprisingly frank about the fun they are having. Nicolas Sarkozy, France’s dynamic president, has congratulated himself on his “luck” in having the chance to remake the global financial system. Gordon Brown, Britain’s prime minister, has visibly revelled in the idea that he is a global intellectual leader.

But like most sequels, Bretton Woods II is not going to be nearly as good as the original. The first conference gave birth to the World Bank and the International Monetary Fund. Its successor will be duller and less consequential.

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Postcards from the edge

October 27th, 2008 6:54pm

Every time I leave my house, I am on the look-out for signs of economic collapse. Empty restaurants, closing-down sales, middle-class men in casual clothes picking up their kids from school.

This may sound ghoulish. But frankly, I think the conversations I am having these days are less disorientating than they were three weeks ago. Back then - with the financial system on the point of collapse - I had a serious discussion with my wife about whether to pull all our money out of the bank. And how exactly how would you buy Krugerrands? Now, the conversations are much more mundane and centre around relatively hum-drum topics like, will we lose our jobs?.

But not all the signs on my personal recession-watch are pointing down. People are gossiping that half the hedge funds in London are in danger of closure. But on Friday I had lunch at Automat in Mayfair in the heart of hedge-fund land. The restaurant was full. We couldn’t get a table until 1.30. Lots of the clientele were in hedge-fund uniform: well-cut suit, open-necked shirt, deep tan. I tried to eavesdrop on neighbouring tables. And I did hear one guy confide to his lunch companion - “Sometimes I think I’m going insane.” But we all feel like that sometimes; even when the economy is growing. Continue reading "Postcards from the edge"

The crisis is redefining our leaders

October 14th, 2008 1:16am

If Monday’s market rally really does signal a turning point in the global financial crisis, the world will hail an improbable saviour. Step forward Gordon Brown, Britain’s gloomy prime minister.

Until the crisis struck, the conventional wisdom was that Mr Brown was a tragic-comic figure: a man who had desperately wanted to be prime minister, but had proved hopelessly unfitted to the task.

But the Brown bail-out plan has been seized upon, not just in Britain – but around the world. Last Friday Paul Krugman, the new Nobel laureate for economics, praised the British government for “showing the kind of clear thinking that has been all too scarce in America”. He wrote: “The United States and Europe should just say: ‘Yes, prime minister.’ The British plan isn’t perfect, but … it offers by far the best available template for a broader rescue effort.”

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Conservatism overshoots its limit

October 7th, 2008 1:56am

The market for ideas – like the market for shares – always overshoots. Ideas become fashionable and get pushed to their logical conclusion and beyond, as their backers succumb to “irrational exuberance”. Then comes the crash.

What we are experiencing now is the bust that has followed the 30-year bull run in conservative ideas that began with the Thatcher-Reagan revolution of 1979-80.

You can get a sense of how quickly the intellectual atmosphere has changed by picking up a copy of Alan Greenspan’s The Age of Turbulence, which was published last year. Mr Greenspan, head of the Federal Reserve from 1987 until 2006, heaped praise on the magic of financial markets and decried the foolishness of those who called for more regulation: “Why do we wish to inhibit the pollinating bees of Wall Street?” he asked rhetorically. Why indeed?

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Is America the next Argentina?

September 26th, 2008 4:13pm

I arrived at the World Economic Forum in Tianjin a couple of hours ago. Tianjin, a couple of hours up the road from Beijing, is a modest little place - just 11.2m inhabitants.

Being a loyal company man, one of the first things I did was to log onto the FT website to get the latest on the great meltdown. I thought the most eloquent single fact was that a story headlining the “biggest bank failure in US history” (Washington Mutual) was only the third headline. Headlines four and five were also fairly eye-popping - the German finance minister calling the end of America’s days as a financial superpower, and the withdrawal of billions of dollars from Morgan Stanley.

My ooohing-and-aahing, as I read these stories in the forum’s internet cafe, was audible enough to attract a small crowd. A woman reading over my shoulder announced - “I recognise this. I am Argentinian. And this is just like Argentina.” She added that she had got used to Americans coming over to her country and giving advice about how to solve the latest financial crisis. “But now, I’ve got some advice for them. Make sure you don’t have too much money in any one bank. And take out a lot of cash and keep it in your house.”

No doubt I will hear all sorts of other useful advice when the formal sessions get underway tomorrow.