Why No Currency Crisis

The historic financial crisis has taken a toll on every country, every market, and every investor. The innocent have been punished alongside the guilty. There is no play book for policy makers to consult for anything outside the bare essentials. Provide ample liquidity. Use both monetary and fiscal policy levers. Prevent a total collapse of the financial system at all cost. As Federal Reserve Chairman Bernanke put it, just like there is no atheist in a fox hole, there are no ideologues in a crisis. Policy makers have to innovate. And innovate they have. We have all observed the innovations have increased the state’s realm of activities. Yet one key part of the capital markets that the state has by and large has refrained from entering directly is the foreign exchange market. It begs the question: why, so far at least, has there not really a currency crisis?

G20 Early Post-Mortem

The G20 issued a statement that threw its collective weight—accounting for almost nine-tenths of the world’s GDP—behind pro-growth and pro-trade policies. The attendees broadly agreed to take additional fiscal and monetary measures and pledged not to impose new trade barriers. This is the most that could have reasonably expected.

CNBC: Trading Block

Bretton Woods Redux: The Real Bridge to Nowhere

Don’t heed the hype. This weekend’s G20 Summit will not, and cannot live up the hopes that a new financial architecture will be unveiled. It will likely be little more than a photo opportunity for the political class to demonstrate to their people that they are doing some about the global crisis.

Socialism or National Socialism?

Governments in numerous countries, especially in the high income countries, have responded to the current acute financial crisis by extending their role in the economy in ways that have not been seen in at least a couple of generations and in magnitude that appears unprecedented. Many observers, and not just unrepentant ideologues, are worried that capitalist practices and institutions are being abandoned in favor of socialism.