Prieur’s readings (June 25, 2009)
This post provides links to a number of thought-provoking articles I have read over the past few days that you may also find of interest.
• Barry Eichengreen and Kevin O’Rourke: A tale of two depressions, June 4, 2009.
This is an update of the authors’ 6 April 2009 column comparing today’s global crisis to the Great Depression. World industrial production, trade, and stock markets are diving faster now than during 1929-30. Fortunately, the policy response to date is much better. The update shows that trade and stock markets have shown some improvement without reversing the overall conclusion – today’s crisis is at least as bad as the Great Depression.
• Martin Wolf (Financial Times): Reform of regulation has to start by altering incentives, June 24, 2009.
Bubbles and crises cannot be eliminated from capitalism. Yet it is hard to believe the risks run by institutions had nothing to do with incentives. The unpleasant truth is that incentives for risky behaviour are, if anything, even bigger than before the crisis.
• Irwin Stelzer (Times Online): The Obama light touch will be a bit heavy handed, June 20, 2009.
The US is not the UK. So the first thing to keep in mind when appraising President Barack Obama’s new regulatory scheme for the financial sector is that it is merely the administration’s wish list, with Congress yet to be heard from. The second is that the blurb on the jacket of an Obama oeuvre – in this case his Guide to Light-handed Regulation – is never an accurate description of its contents.
• Gretchen Morgenson (The New York Times): Too big to fail, or too big to handle?, June 20, 2009.
• Carol Loomis (Fortune): Derivatives: The risk that still won’t go away, June 23, 2009.
Washington wants to step up regulation of these complex instruments, but new rules may not be enough to tame them.
• Robert Samuelson (The Washington Post): The US can’t deliver on all its promises, June 22, 2009.
Raised in an individualistic culture, Americans dislike the concept of the “welfare state” and do not use the term. But make no mistake, the United States has a welfare state, and its future is precarious. The true significance of General Motors’ bankruptcy lies more with this welfare state than with the battered condition of American capitalism.
• Frederic Mishkin (Financial Times): Why all regulatory roads lead to the Fed, June 23, 2009.
Given the importance of the financial stability goal and the fact that some institution must play the role of the systemic regulator, the Fed is the obvious choice.
• Paul Krugman (The New York Times): Health care showdown, June 22, 2009.
America’s political scene has changed immensely since the last time a Democratic president tried to reform health care. So has the health care picture: with costs soaring and insurance dwindling, nobody can now say with a straight face that the US health care system is OK. And if surveys like the New York Times/CBS News poll released last weekend are any indication, voters are ready for major change.
• Devesh Kapur (Financial Times): Academics have more to declare than their genius, June 24, 2009.
Many academics, particularly those from prestigious institutions, now have serious business interests and an array of financial ties to the very institutions that their studies address.
• David Pilling (Financial Times): Asia will struggle to escape its export trap, June 25, 2009.
Despite the dazzling retail emporia of its up-and-coming cities, the region has become more, not less, dependent on foreign demand.
• Gideon Rachman (Financial Times): What does it take to make a successful revolution?, June 23, 2009.
• Andrew Miller, a journalist at The Economist, has listed some of the factors and, here, Gideon Rachman adds some more. Every element on these lists, with two possible exceptions, is now present to some degree in Iran.
Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.