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« A use for deconstructionism, finally | Main | Why do I think this is really bad news? »

November 06, 2008

Comments

dave

Nonsense from the tower, it would never work, and is an affront to national sovereignty. A G8, with Russia out and China in, will function just fine. A global regulator will be as functional and effective as the UN. What a clusterf*ck of an idea!

robertdfeinman

The US spends about $1 trillion per year on militarism just to ensure that it doesn't have to take orders from anyone.

All schemes for international cooperation fail because they lack an enforcement mechanism. When strong countries give in to such bodies (such as recent WTO rulings) then it is because they don't think the costs are worth fighting about.

However when issues of "national security", i.e. oil supplies, are at risk then bombing states back to the stone age is seen as an entirely appropriate course of action.

Chris.Fournier

Typical American black and white thinking, either a supranational regulator and global financial markets or no supranational regulator and no global financial markets. Do you Americans know that there are same shades of grey, too?

Per Kurowski

Before agreeing on global regulators lets agree on some global rules and regulations.

ACM

Do you think this agency would be really independent?

Where would the money come from? Donors would have no influence?

I doubt... Let's look at the world today, the UN is not truly independent from donor pressures. Breton Woods agencies 'no comments'. WTO, well I have mix feeling about there results and impartiality.

If you say the world needs a new regulatory standard such as Basel 2, maybe we can create a Basel 3 standard incorporating some Sarbanes-Oxley ingredients to it... I guess that makes more sense! However, if the new standards are not respected throughout fiscal paradises such as the Cayman Islands, Luxemburg, Monaco, than it would make no difference anyway. Because what caused this crises to begin with where "bogus" funds incorporated on those places repacking "bad loans" and re-selling "not so bad (?)" papers to respectable firms and funds.

Please correct me if I'm wrong Prof. Rodrik...

Capital gains and capitalism are the best options we have so far. But, international regulations will be useless unless respected an implemented worldwide with no exceptions (for Foreign Tax Havens).

ACM

Do you think this agency would be really independent?

Where would the money come from? Donors would have no influence?

I doubt... Let's look at the world today, the UN is not truly independent from donor pressures. Breton Woods agencies 'no comments'. WTO, well I have mix feeling about there results and impartiality.

If you say the world needs a new regulatory standard such as Basel 2, maybe we can create a Basel 3 standard incorporating some Sarbanes-Oxley ingredients to it... I guess that makes more sense! However, if the new standards are not respected throughout fiscal paradises such as the Cayman Islands, Luxemburg, Monaco, than it would make no difference anyway. Because what caused this crises to begin with where "bogus" funds incorporated on those places repacking "bad loans" and re-selling "not so bad (?)" papers to respectable firms and funds.

Please correct me if I'm wrong Prof. Rodrik...

Capital gains and capitalism are the best options we have so far. But, international regulations will be useless unless respected an implemented worldwide with no exceptions (for Foreign Tax Havens).

undeconstructed Marxist

TOBIN TAX!!!!

gappy

Both statements:

1. If we want a truly global financial system, we need to acquiesce in a global regulator and a global lender of last resort.

2. If we do not want the latter, we cannot have an integrated global financial system, so we must acquiesce in--gasp!--capital controls.

are wildly unwarranted. Please think twice before posting.

Tord Steiro

Just a question, Dr. Rodrik:

Wouldn't a new goldstandard be an alternative to a global regulator?

I would like to see some real pro/con analysis of the two options. They are both imperfect, to say the least, and they both have to compete with a system of capital controls.

Roger Chittum

Like the others, I'm willing to do anything to save the system--except change.

Richard Hoogesteger

You are clearly correct. High information costs have caused and will continue to cause global financial markets to fail without some sort of international regulator. The argument however applies to other types of market failure as well. In your June tenth post you observed that globalization can involve violation of labor rights as well. In fact a recent U.S. state department report claimed that increasing global trade is making slavery worse in three major countries profiting from increased trade: China, Brazil and India. This in spite of the fact that the governments of two of those countries, China and India, are trying to stop it. Globalization can if not properly regulated promote market failure just as easily as increased efficiencies

Rahul Deodhar

That means "big money" can play the world economies one against the other - for their gain - till such time that there is a global regulator.

Global regulator is inevitable - the current system is far too globalised to backtrack and far less globalised to have one regulator (political idiocy is primary cause). So till such time - its time to make hay!

Nathan Smith

I doubt capital controls will be feasible. For one thing, how do capital controls fit with trade? Suppose I'm shipping widgets from Mexico to the US, and there are capital controls so that capital isn't supposed to flow from Mexico to the US. I just under-charge for widgets and voila!-- capital is transferred. As online payments etc. get more and more sophisticated, the mobility of capital is probably irreversible.

Don't we already *have* a global financial system, without a global regulator or a global lender of last resort? How can it not be possible, if we already have it? Perhaps it's not a "truly" global capital system, whatever that means. But for all its occasional crises, I think the system we have now is likely to be better than either (a) a global financial regulator, or (b) capital controls.

Joe S.

I just wanted to join the other commenters: this is a false bipolar choice. Sovereignty and unity are not the only alternatives. There is always confederation. It sometimes works--see Switzerland. Uh, that's where Basel is, too, come to think of it.

Richard H. Serlin

Pro

We do need this to a substantial extent. Nobel Prize Winning Economist Paul Krugman made a very good case for this, accessible to laypeople, in his 2000 book, "The Return of Depression Economics".

Given how amazingly the Republicans have brought us to the brink of another depression by returning us to the same policies that caused them in the past, Krugman is releasing a new, expanded and updated version of the book this December.

Nathan Smith

"Given how amazingly the Republicans have brought us to the brink of another depression by returning us to the same policies that caused them in the past..."

It's not that common that you see a statement as diametrically wrong as this.

The truth is the exact opposite. Hoover and Bush are opposite poles of the policymaking spectrum.

When the technology- and cheap money-driven stock market bubble of the 1920s popped, Hoover tried to balance the budget and the Fed contracted the money supply.

When the 1990s bubble popped, the Bush administration ran huge deficits, keeping taxes and low and raising spending. At the same time, the Fed cut interest rates steeply. Thanks to these aggressively Keynesian policies, the popping of the 1990s bubble led to only a slight recession. And within a couple of years, US spending was helping to fuel a huge global boom, in which every region of the world grew faster than in the 1990s and the world economy as a whole grew at rates not seen for decades.

However, the price of that Keynesian stimulus seems to have been to fuel other distortions in the economy, especially in housing, where rising prices fueled loose lending practices and speculative homebuying. The caption for the grim financial picture of the past couple of years perhaps ought to be "What's wrong with Keynesian stimulus."

Richard H. Serlin

To Nathan Smith:

What I meant in this case was the Republican deregulation. I agree that today's Republicans are not at all fiscally tight like those of Hoover's era, and no one's willing to risk non-active monetary policy, for extremely good reason, including a striking history of experience.

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