The world & the financial crisis II

Related posts e.g. U.S. economy and bailout measures and on Wednesday-Night.com

Amidst much talk of the need to reform the Bretton Woods Agreement. George Monbiot provides solid background and defends Lord Keynes (“John Maynard Keynes had the answer to the crisis we’re now facing; but it was blocked and then forgotten.”) in Clearing up this mess

(Breitbart.com)Worst of financial crisis yet to come: IMF chief economist – just when we all thought everything was hunky dory, Mr. Blanchard tells us that the global financial crisis is set to worsen and that the situation will not improve until 2010. No wonder it’s referred to as the dismal science.
20 November
The deflation index
ONLY a few months ago, inflation was the main concern of central banks as the price of oil and other commodities soared. Deflation was not only unthinkable but rarely mentioned in the press.
Putin Vows to Fight Economic Collapse in Russia
In a keynote speech to the governing party congress, Mr. Putin announced tax cuts to stimulate the economy and increased spending on social programs. With the steep fall in the price of oil, the economy has slowed significantly in recent months, and the Russian stock market has plummeted.
16 November
The G20 meeting in Washington, DC, did not fix global finance. But it brought more than empty rhetoric
The leaders of the world’s 20 biggest rich and emerging economies, who had gathered in Washington, DC, on Saturday November 15th, did not remake global finance as some of them had promised. Nor, as others had hoped, did they come up with a detailed set of co-ordinated fiscal measures to counter the deepening global downturn (although they did talk of using fiscal measures “to rapid effect”). Nonetheless, the five-page communiqué contained more than just diplomatic blather.
(FT) The G20 nations will meet again by next April – a sign that this body, and not the narrower Group of Seven industrialised nations, will play the leading role during the crisis and probably beyond.
15 November
World leaders agree on plan to fight recession
(Financial Post) WASHINGTON — World leaders on Saturday backed a rapid response to the global economic crisis, agreeing on the need for measures to kick-start growth, better financial market regulation and more say for emerging countries. Summit agrees to global oversight of banks
14 November
(Foreign Policy Morning Brief) Hopes could not be much lower for the Group of 20 summit that begins tomorrow in Washington.
… with Bush’s political capital approaching zero, President-elect Barack Obama playing his cards close to the chest, and policymakers at odds on what to do, it will be surprising if much of substance is decided this weekend.  “A lot of people are talking about ‘Bretton Woods II,’ IMF chairman Dominique Strauss-Kahn cautions, “The words sound nice but we are not going to create a new international treaty.”
At a minimum, Mark Landler of the New York Times says, the summit will clarify “how completely the crisis is reshaping the economic map — rendering obsolete the old club of Western powers that fashioned the financial pillars of the post-World War II era.”
Experts set low threshold of ‘do no harm’ for G20
WASHINGTON (MarketWatch) — Do no harm. That is bottom-line request from economists and policy experts to the global leaders who will gather in Washington this weekend to discuss the economic crisis.
The Group of 20: A Primer – an extremely useful reminder to all who are confused by the various G+pick-a-number.
13 November
Q&A: John Kirton
Is this the group to save the international economy?
To gauge the effectiveness of this group and what might be expected from this first meeting of G20 leaders, CBCNews.ca spoke with John Kirton, director of the G20 research group at the University of Toronto
Insight: ‘Bretton Woods Two’?
A deep-seated global crisis is often a chance to redraw the map, reflecting shifts in the balance of power in different ways.
First, the crisis can confirm or nudge ahead trends which seem to be happening anyway – like the shift of power from Western to emerging Eastern players.
Second, it can put flesh on reforms already in the air – like plans to overhaul the international financial architecture to be discussed at this weekend’s summit being hosted by President Bush in Washington.
And third, there are the instinctive emergency reactions, supposedly temporary, but which can end up reshaping the global chessboard for years to come
11 November
Obama won’t attend financial summit
President-elect Barack Obama will not attend the Bush administration’s global financial summit this weekend … “in a phrase you’ll hear in exceedingly large numbers of times between now and the 20th of January, there’s only one president at a time.”
Emerging Markets are Victims of their Own Success
A sharp slowdown in global economic growth in 2009 is no longer in doubt. What is still uncertain, however, is the magnitude of the slowdown. World financial markets are already discounting a sharp fall in GDP growth in the fourth quarter of this year, extending through to end-2009, but the single-biggest threat to the global economic outlook is the expected dramatic contraction in US household balance sheets over the next few years in what is likely to be by far the largest consumer retrenchment since the second world war. US household debt growth almost stalled in the second quarter of this year and in the three months to September may have been negative for the first time in the post-war era. Global Emerging Markets Special Feature November 2008
The Bretton Woods sequel will flop
(FT) 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.
The first reason for this is that the global financial crisis – bad as it is – is hardly the second world war. The war destroyed the established order and so the statesmen who drew up the postwar institutions had a blank piece of paper on which to doodle.
Second, there is not enough time. The original Bretton Woods conference benefited from two years of preparation, not two weeks.
Third – and rather important – the countries that are meeting in Washington this weekend disagree. The Europeans, who adore all forms of international governance, are pushing for new global regulators for the international financial system. The Americans and Chinese – more jealous of their national sovereignty – are more cautious.
Finally, unlike at the original Bretton Woods, the US has neither the power nor the inclination to impose a new set of arrangements on the rest of the world.
9 November
China Unveils $586 Billion Economic Stimulus Plan
In a bold move aimed at bolstering its economy, China announced plans to spend billions on a wide array of infrastructure and social welfare projects including constructing new railways, subways, airports and rebuilding communities devastated by the earthquake in southwest China in May.
8 November
World Bank Sees Crisis Crimping Trade
(WSJ) Gloomy prospects for global trade are part of a darker overall outlook for the world economy, which the World Bank will release next week, Mr. Zoellick said.
World business leaders warn of more financial pain
(AP) DUBAI, United Arab Emirates: [participants at a regional meeting of the World Economic Forum] in Dubai on Saturday warned the world to brace for even more painful economic times ahead, but said the victory of U.S. President-elect Barack Obama offers hope for fresh leadership at a crucial time for the global economy.
The financial crisis that began with bad U.S. home loans is now moving from the banking sector into wide swaths of the global economy — costing millions of jobs, forcing working families to cut back and driving once-mighty companies into bankruptcy.
(WSJ) At G-20 Summit, Emerging Nations Seek More Input
SAO PAULO, Brazil — Brazil’s president on Saturday demanded that major reforms of the international financial system include strong input from large emerging nations and said the collapse of modern banking structures is victimizing the world’s poor.
Those who have the least stand to lose the most from a credit crunch that has slammed businesses from Brazil to China, President Luiz Inacio Lula da Silva told finance ministers and central bank presidents from the world’s 20 major economies, who gathered in Sao Paulo ahead of a Nov. 15 summit in Washington.
Stunned Icelanders Struggle After Economy’s Fall
The loss in Iceland after its economic collapse goes beyond the personal, shattering a proud country’s sense of itself.
It is not as if Reykjavik, where about two-thirds of the country’s 300,000 people live, is filled with bread lines or homeless shanties or looters smashing store windows. But this city, until recently the center of one of the world’s fastest economic booms, is now the unhappy site of one of its great crashes. It is impossible to meet anyone here who has not been profoundly affected by the financial crisis.
EU agrees plans for finance summit
7 November
Emerging nations look to gain clout at G20 meeting
SAO PAULO, Nov 7 (Reuters) – Finance officials from the world’s top emerging markets convene in Brazil’s economic capital on Friday, kicking off a Group of 20 meeting that could help lay the groundwork for an overhaul of the global financial system to give a greater voice to developing nations.
With the United States and Europe reeling from the global financial crisis and credit crunch, robust emerging economies like the so-called BRIC countries of Brazil, Russia, India and China are looking to play a bigger role on the world stage.
But the diverse interests of these countries could make it difficult to find common ground and forge a broad consensus on how to better regulate financial markets and reshape international forums like the Group of Eight, an exclusive club of the world’s richest nations.
Finance ministers and central bankers at the three-day G20 meeting in Sao Paulo will look to build on a summit of the Asia-Pacific Economic Cooperation forum that ended on Thursday in Peru, where officials from 21 Pacific Rim economies urged coordinated action to restore failing capital markets.
Any progress at the G20 gathering and a subsequent meeting of the Bank of International Settlements on Monday in Sao Paulo could serve as a blueprint for a G20 heads of state summit in Washington on Nov. 14-15, which is being billed as a chance to redesign the global financial architecture.
“Expectations for Sao Paulo are high,” said John Kirton, director of the G20 Research Group at the University of Toronto. “But the Washington meeting has come up so fast that even if there were a common BRIC position to be had, and it’s not obvious what it would be, they really haven’t had time to talk and find out what it is.”
(Al Jazeera) European Union leaders have reached a “pretty detailed common position” to take to an international summit in Washington [on November 15] on the financial crisis, Nicolas Sarkozy, the French president, has said. EU leaders had gathered in Brussels to agree a line on how to tackle global economic problems and improve the world’s financial system.
6 November
UK ‘faces worst of global recession’
The UK will suffer most as the financial crisis causes the world’s rich economies to shrink for the first time since the second world war, according to the International Monetary Fund. The UK saw by far the sharpest downward revision and the worst projected recession in the rich world, the 2009 forecast being cut 1.2 percentage points to a fall of 1.3 per cent.
1 November
Specter of Deflation Lurks as Global Demand Drops
(NYT) As dozens of countries slip deeper into financial distress, a new threat may be gathering force within the American economy — the prospect that goods will pile up waiting for buyers and prices will fall, suffocating fresh investment and worsening joblessness for months or even years.
With economies around the globe weakening, demand for oil, copper, grains and other commodities has diminished, bringing down prices of these raw materials. But prices have yet to decline noticeably for most goods and services, with one conspicuous exception — houses. Still, reduced demand is beginning to soften prices for a few products, like furniture and bedding, which are down slightly since the beginning of 2007, according to government data. Prices are also falling for some appliances, tools and hardware.
1 November
The IMF’s new scheme to help emerging economies weather financial turmoil
(The Economist) Under the “short-term liquidity facility” (SLF), approved on Wednesday October 29th, qualifying countries will be eligible for a loan at short notice of up to 500% of their IMF quota, the maximum amount a country is obliged to provide to the IMF. The three-month loans will come with a minimum of conditions relating to economic policy; they are also intended to be made available with a rapidity not usually associated with the organisation.
All this is music to the ears of those, including many within the IMF, who have been arguing that the Fund needs to match its lending to changing global circumstances. The new facility goes some way towards addressing an obvious shortcoming in the IMF’s arsenal of lending instruments.
31 October
UBS: Likely Buyers of AIG Assets Face Capital Snags
(Money News) Potential buyers of American International Group Inc’s assets are facing capital pressures due to the deterioration in the credit and equity markets, analysts at UBS said as they downgraded the stock to “neutral” from “buy.”
“That’s a meaningful risk at this point,” said Nouriel Roubini, an economist at New York University’s Stern School of Business, who forecast the financial crisis well in advance and has been warning of deflation for months.
A look at noteworthy articles from the business journals