The Debate on the International Monetary System

Keynes’ original proposal envisaged a global bank (the International Clearing Union or ICU), which would issue its own currency (bancor), based on the value of 30 representative commodities including gold, exchangeable against national currencies at fixed rates. All trade accounts would be measured in bancor, while each country would maintain a bancor account vis-à-vis the ICU (expected to be balanced within a small margin), and also have an overdraft allowance vis-à-vis the ICU. When countries experienced large trade deficits (more than half of the bancor overdraft allowance), they would pay interest on their accounts, undergo economic adjustments (possibly also capital controls) and devalue their currencies. Conversely, countries with large trade surpluses would also be subject to a similar charge and required to appreciate their exchange rates. This mechanism would bring in a smooth symmetry of adjustments across countries and avoid global imbalances.

Interesting new staff position paper from the Fund.

Book recommendations

Logicomix: An Epic Search for Truth
Apostolos Doxiadis

SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance
-Steven D. Levitt, Stephen J. Dubner

What the Dog Saw: And Other Adventures
-Malcolm Gladwell

The Big Questions: Tackling the Problems of Philosophy with Ideas from Mathematics, Economics and Physics
-Steven Landsburg

The Predictioneer’s Game: Using the Logic of Brazen Self-Interest to See and Shape the Future.

The Storm: The World Economic Crisis and what it means

The Storm: The World Economic Crisis and what it means by Vince Cable

The Great Depression Surge of September 2008

via Google Trends

For Discussion: What's the reason for the search surge in the latter half of 2008.

The Myth of the Rational Market

Justin Fox Sees Need to Open OTC Derivatives Markets

Capitalism 3.0

Capitalism 3.0- Dani Rodrik lecture

Book recommendation

The Fat Tail- The Power of Political Knowledge for Strategic Investing
Ian Bremmer and Preston Keat

Related podcast by Ian Bremmer

Robert Engle lecture

Risky Business Managing Portfolios in Volatile Times

The Return of Depression Economics?

Lords of Finance

Ahamed Advises Central Bankers to Be Imaginative
April 20 (Bloomberg) -- Liaquat Ahamed, chief investment officer at Charter Atlantic Corp. talks with Bloomberg's Tom Keene about his book, ``Lords of Finance: The Bankers Who Broke the World,'' and central banks' monetary policies.

Krugman on the Economy

East Asia Economic Update- Eas Asia Saves the World

East Asia & Pacific Update - Battling the forces of global recession;

-Prospects for recovery among the developed countries are uncertain.
-Over the medium term, the countries of developing East Asia can achieve high rates of economic expansion in a slowly growing world economy to the extent they are able to extract more growth from domestic demand, boost competitiveness, penetrate new markets, and further improve the attractiveness of the region as a key destination for foreign investment.

Related;

comparing the 1997-98 Asian financial crisis and the current crisis

Podcast of the Day- Mohammed El-Erian

Pimco's El-Erian Says to Take Investment Risk Incrementally ;

“This is not the time for a pedal-to-the-metal approach to investing,” he said in an interview on Bloomberg Radio today. “We are going toward a highly derisked and slimmed-down financial system, which means there will be less credit available for the economy as a whole.”

El-Erian, 50, said he expects more government regulation, less available credit and an “age of thrift” for the world.

“There will be a lot more caution,” El-Erian said.

Related;
'Setback for All' if Financial Turmoil Slows Globalization

When Markets Collide: Investment Strategies for the Age of Global Economic Change

Discussion on the book at Foray TV


Dealing with Global Fluidity

Demystifying the Hype

A Crisis to Remember

Essential task for G20 leaders is a cinema trip to see 'A Beautiful Mind'
Mohamed A El-Erian and Mike Spence

Let's help innocent bystanders says Calvo

Calvo Says IMF Funding `Key' From G-20 Meeting
Guillermo Calvo, a professor of economics at Columbia University, talks with Bloomberg's Tom Keene about Mexico's request for a $47 billion International Monetary Fund loan, the role of the IMF and the World Bank, and central bank polices in emerging markets.

Related;
Phoenix miracles in emerging markets: recovering without credit from systemic financial crises

A Master of Theory and Practice

Staggered Wage and Price Setting in Macroeconomics

Staggered prices in a utility-maximizing framework

One who saw the recession coming

Instead, the 81-year-old Taiwanese founder of the world's fourth-largest containerised shipping company started preparing for an economic downturn three years ago.

He had sensed then that a downturn was going to hit in a few years and that it would be a very bad one.

'I didn't have any special deduction, but I had a presentiment,' said the former seafarer in Hokkien at an interview on Monday.

He had also thought then that the shipping industry had massively over-ordered new ships and that there would be a capacity glut in time to come.

Dr Chang also rejected an offer of cooperation to build super-large container vessels from CMA, France's largest shipping conglomerate, last year.

'I asked (the CMA chairman), 'What will you do in bad times?' ' he recounted. It was a big risk to take, he said, adding that those who went into it were 'gua hang' or 'amateurs' lacking in understanding of the industry. The ultra-large container ships would be very difficult to fill in times of recession, he reckoned.

Many in the shipping industry, however, thought then that he was making a grave mistake in not building the very large ships that brought down unit costs.

Events since then show that he was right after all: The industry has slumped as a result of the global financial crisis that has hit consumption and manufacturing and therefore demand for transport of goods.

With great prudence, preparing for bad times during good ones, he has ensured that Evergreen, while adversely affected by the current downturn, is able to weather it without taking the drastic measure of retrenching any of its 18,000 employees or cutting their salaries, as many firms in Taiwan have done. He refuses to retrench because he believes in taking care of his employees' livelihood.

But he is not merely sitting out the downturn which he believes will last till 2012. He has plans to start building new ships next year or the year after next depending on the situation, in order to be ready for the upturn when it comes. He believes the best time to build ships is during a downturn when costs are low.

Despite the slump in global trade, he has started a new container shipping company here, the Evergreen Marine (Singapore), to take advantage of Singapore's standing as a flag of quality. It will initially have a fleet of 13 vessels re-registered from Panama and will have new ships added later.

Evergreen dealt a blow to Singapore in 2002 when it moved its regional transshipment business from Keppel to Tanjong Pelepas in Johor. Dr Chang said on Monday that he has no plans for expansion there.

At 81, he displays great spirit and vigour, which must have sustained him through his younger days when he struggled against great odds to build his shipping business. He had started out in 1968 with just one rickety second-hand vessel and little else apart from his strong business instincts, deep knowledge of the maritime industry from his days as a sailor, and his voracious reading.

In 40 years, he has developed Evergreen into a multibillion-dollar transport conglomerate that runs a gamut of transport and travel-related service companies including shipping, air and trucking services, port terminals, hotels and resorts.

Along the way, through sheer doggedness, he broke through the Far Eastern Freight Conference - a cartel of major shipping companies that closed down last year - to ply the Asia-Europe route successfully as an independent from 1979.

However, he eschewed beggar-thy-neighbour tactics and repaid more than fully kindness shown to him when he was most in need of it.

In his memoirs Tides Of Fortune, he recalled how a shipping agency boss lent him NT$100,000 (S$4,400) when he was facing cash-flow problems. He later invited this man, who had fallen on hard times, to join one of his firms as a shareholder and appointed him board chairman.

It is this sense that one has to lead a life of moral integrity that motivated him to start a magazine to promote traditional Chinese values at a time when he thought Taiwanese society morally degenerate.

The monthly Morals magazine started publication in January last year. Through stories of good deeds, generous acts and inspiring events written in simple Chinese and illustrated by cartoons, it hopes to transmit moral values to young and old Taiwanese. The 12-page, paperback-size magazine is handy to carry around. There are no advertisements. The Chang Yung-fa Foundation foots the bill for publishing the magazine and postage, which last year exceeded NT$10 million.

Distributed free through subscription, it was meant for Taiwanese and the first print run was just 20,000. But subscription quickly shot up to the current 220,000, with ethnic Chinese from all over the world also requesting copies. It was the response from overseas Chinese that gave Dr Chang the idea of raising awareness of the magazine among Chinese communities outside of Taiwan, beginning with Malaysia and Singapore.

-Shipping boss saw the recession coming

Smart entrepreneurs hold key to bubble prediction?

Colbert's word on the Dow

The Colbert Report	Mon - Thurs 11:30pm / 10:30c
The Word - Fine Line
comedycentral.com
Colbert Report Full Episodes Political Humor NASA Name Contest

Assorted

Rodrik: Simon Johnson's Morality tale;

Finance needs to be cut down to size. What the U.S. needs is what the IMF would have told any country...

Stiglitz: Obama's Ersatz Capitalism

A quick guide to the G-20 summit

One Economics, Many Recipes

Snapping ropes and breaking bricks

Macroegonomics

How Not To Convince People You Are Capable Of Having An Internal "Devaluation"

Obama’s Nobel Headache

Can We Trust the World Bank to be a Knowledge Bank?

Podcasts

Wyplosz Sees G-20 Agreeing to Add More Money to IMF

Shiller Says U.S. Housing Prices Back to Pre-Bubble Levels

Phelps Says U.S. Needs Banks Dedicated to Businesses

Shiller Says Failure of GM Would Shock Confidence
Robert Shiller, chief economist at MacroMarkets LLC and an economics professor at Yale University, and George Akerlof, economist at the University of California, talk with Bloomberg's Tom Keene about their book, ``Animal Spirits: How Human Psychology Drives The Economy, and Why It Matters For Global Capitalism.''

Nobel Winners Lucas, Prescott Discuss Financial Crisis, Theory
(very highly recommended)

Eichengreen Sees Treasury `Overpaying' For Toxic Assets

OECD economist David Turner assesses the stimulus measures being taken by governments to kick-starts their economies.

Paper by Roubini, authorized by Timothy Geithner

A Balance Sheet Approach to Financial Crisis
Allen, Mark | Rosenberg, Christoph B. | Keller, Christian | Setser, Brad | Roubini, Nouriel

Carmageddon '09

The Daily Show With Jon Stewart	M - Th 11p / 10c
Carmageddon '09 - Lemon Aid
comedycentral.com
Daily Show Full Episodes Economic Crisis Political Humor

How Has India Been Hit By the Crisis?

14. The contagion of the crisis has spread to India through all the channels – the financial channel, the real channel, and importantly, as happens in all financial crises, the confidence channel.

15. Let us first look at the financial channel. India's financial markets - equity market, money market, forex market and credit market - had all come under pressure from a number of directions. First, as a consequence of the global liquidity squeeze, Indian corporates found their overseas financing drying up, forcing corporates to shift their credit demand to the domestic banking sector. Also, in their search for substitute financing, corporates withdrew their investments in domestic money market mutual funds (MFs); consequently, non-banking financial companies (NBFCs) where the MFs had invested a significant portion of their funds came under redemption pressure. This substitution of overseas financing by domestic financing brought both money markets and credit markets under pressure. Second, the forex market came under pressure because of reversal of capital flows as part of the global deleveraging process. Simultaneously, corporates were converting the funds raised locally into foreign currency to meet their external obligations. Both these factors put downward pressure on the rupee. Third, the Reserve Bank's intervention in the forex market to manage the volatility in the rupee further added to liquidity tightening.
16. Now let me turn to the real channel. Here, the transmission of the global cues to the domestic economy has been quite straight forward – through the slump in demand for exports. The United States, European Union and the Middle East, which account for three quarters of India's goods and services trade, are in a synchronized down turn. Services export growth is also likely to slow in the near term as the recession deepens and financial services firms – traditionally large users of outsourcing services – are restructured. Remittances from migrant workers too are likely to slow as the Middle East adjusts to lower crude prices and advanced economies go into a recession.

17. Beyond the financial and real channels of transmission as above, the crisis also spread through the confidence channel. In sharp contrast to global financial markets, which went into a seizure on account of a crisis of confidence, Indian financial markets continued to function in an orderly manner. Furthermore, our banks have continued to lend. However, the tightened global liquidity situation in the period immediately following the Lehman failure in mid-September 2008, coming as it did on top of a turn in the credit cycle, increased the risk aversion of the financial system and made some banks cautious about lending.

18. The purport of the above explanation is to show how, despite not being part of the global financial sector problem, India has been affected by the crisis through the adverse feedback loops between external shocks and domestic vulnerabilities

See the entire speech

Also recommended Financial Sector Self Assessment ;

Housing Finance Companies
For the growing and important segment of housing finance companies, the CFSA has noted that having a National Housing Price Index and a Housing Starts Index is a priority.

Foreign Exchange Market
With the economy moving towards fuller capital account convertibility in a calibrated manner, focussed regulation and monitoring of the foreign exchange market assumes added importance. There is though a need to strengthen infrastructure, transparency and disclosure, and product range in the forex derivatives segment. Strengthening the trading infrastructure, market conduct, transparency of Over-the-counter (OTC) derivatives in the forex market, accounting and disclosures in line with international practices, including disclosures by non-bank corporates, needs to be done on a priority basis. The recent introduction of currency futures is a step in this direction.

Government Securities Market
The government securities market has witnessed significant transformation in its various facets: market-based price discovery, widening of the investor base, introduction of new instruments, establishment of primary dealers and electronic trading and settlement infrastructure. This is the outcome of persistent and high-quality reforms in developing the government securities market. Increased transparency and disclosures, gradual scaling down of mandated investments and development of newer instruments are some major areas which could be considered for further development. Regulatory incentives to increase the size of trading book could also be considered as a measure to further develop the government securities market.

Corporate Governance
In India, there is a comprehensive corporate governance framework in place for listed companies and the listing agreement forms an important pillar of corporate governance framework. There is a need to strengthen the corporate governance framework with regard to risk management in listed companies. Listed companies need to disclose the reasons for non-compliance with non-mandatory requirements. Steps need to be taken to protect the interests of shareholders, such as equitable treatment of all shareholders including minority shareholders and alternate methods of voting, which are convenient for shareholders and in which investor associations can play a constructive role. There is a need for strengthening the disclosure mechanism to bring about greater transparency in ownership structures and stringent penal action needs to be taken where such practices are unearthed. Penal provisions for fraudsters may be strengthened in corporate law by providing for disgorgement of gains and confiscation of assets. The corporate governance framework needs to evolve with the changing times and there is a parallel need to strengthen the corporate governance framework for unlisted companies.

Transparency in Monetary Policy
India is largely compliant with the IMF’s Code of Good Practices on Transparency in Monetary Policy. The roles, responsibilities and objectives of the Reserve Bank are well-defined. The Reserve Bank has explicit multiple objectives of monetary policy with changing relative emphasis. It also follows a multiple indicator approach, which has been reasonably effective. The present legislative framework provides enough room and manoeuvrability for the Reserve Bank to operate monetary policy in consonance with evolving needs and circumstances. The key element of the framework at present is the flexibility enjoyed by the Reserve Bank while going about its assigned task of maintaining the monetary stability of India. The main issues that have come out of the assessment of transparency in monetary policy pertain to the review of legislations with regard to the objectives of monetary policy, the issue of operational independence and accountability of the Reserve Bank and the separation of debt management from monetary management.

As far as the issue of operational independence of the central bank is concerned, the Reserve Bank enjoys independence vis-à-vis the executive arm of the state through conventions, agreements and MoUs in specific areas. The specification of procedures and reasons for the removal of the Governor/Deputy Governor as also for supersession of the Board could potentially lead to the loss of well-established de facto independence. Any modifications that might be required to strengthen monetary policy as also the regulatory framework might be carried out by necessary amendments to existing legislations as needed, which would not call for a fundamental review of legislations or an overhaul of the existing legal framework. The CFSA feels that an overhaul of legislation may not be appropriate at the current juncture.

Following the announcement in the Union Budget 2007-08, the Central Government is proceeding with the establishment of a Middle Office, as a prelude to setting up of a full-fledged Debt Management Office (DMO). While most members of the CFSA concurred with the proposal to set up a DMO, one member felt that the DMO should be an independent body. The Chairman, however, was personally of the view that the time is not ripe for the complete separation of debt management from the Reserve Bank at the current juncture.

Transparency in Financial Policies
The Reserve Bank, SEBI and IRDA are compliant with the relevant standards in transparency in financial policies. Any move to institutionalise the High Level Coordination Committee for Financial Markets (HLCCFM) could prove to be counter-productive as it could reduce flexibility in the formulation of financial policies; however, the present information-sharing mechanism could be improved.

Fiscal Transparency
The major area of concern arising out of the assessment of fiscal transparency is in the reporting of off-budget items, like oil bonds, and the need to have an additional augmented fiscal deficit measure to capture these items. Likewise, any move towards accrual-based accounting should also be attempted in a gradual manner.

Go for Narrow Banking says Edmund Phelps

Phelps Says U.S. Needs Banks Dedicated to Businesses -podcast


Related;
6th Annual Conference: Emerging from the Financial Crisis

A summary of the conference

Ned Phelps of Columbia and Robert Shiller of Yale took up the issue of the housing market, with Phelps arguing that banks should be financing productive business endeavors rather than creating real estate bubbles. Shiller felt it was time to take steps to democratize finance by making professional financial advice more accessible and providing homeowners with simple risk management tools, such as clearly priced mortgage contracts.

John Kay finally on Bloomberg talking heads!

Assorted on Financial Crisis

The Financial Crisis: Where Do We Go From Here? (October 13, 2008)

Nouriel Roubini, Brad W. Setser and Benn Steil


Crisis in Financial Markets (December 15, 2008)

Panelists include Joseph Stiglitz, Richard Robb, and Christian Deseglise; moderated by Jose Antonio Ocampo

One winner from the Financial Crisis

For years, he has been a manic host of everything from small dinner parties to big bashes. The soirees are more crowded of late, attracting everyone from members of the hedge-fund set to a former Miss Ukraine and propelling the bachelor economist onto the tabloid gossip pages. (He has become a New York Post regular, and CNBC often plays disco music when he appears on the air.)

Roubini’s partying side may have remained below the media radar but for his energetic use of Facebook. He kept his profile on the social-networking site open to the general public until a few months ago, something more privacy-minded users typically choose not to do. On his profile, he said he was single and interested in meeting women, and he posted photos of himself hamming it up with females who look two or three decades younger than he is.

Among Roubini’s Facebook friends is Sarah Austin, a pretty blond who is featured in a black minidress on the website she runs, Pop17.com, which posts interviews with internet “personalities.” Austin says she received an unsolicited email from Roubini last fall—complete with links to articles about himself—praising her site and inviting her to a party. She has yet to take him up on the invitation, but the two are now regular correspondents. She assumes he approached her because he wanted to be written up on her website—­and also because, she says, “I fit the criteria for his loft parties. There are a lot of women.”

Roubini’s Facebook presence brought the media-gossip blog Gawker into the Roubini story last fall. In a post called “The Secret Pleasures of Dr. Doom,” Nick Denton, the site’s founder, flagged what he saw as a disconnect between Roubini’s “gloomy public image” and “his playboy lifestyle”: “The 50-year-old Iranian-Jewish economist is a ­promiscuous Facebook friend who draws a cosmopolitan crowd to the frequent parties at his Tribeca loft—an apartment with walls indented with plaster vulvas, incidentally.”...

Still, at the party I attended, occasional whispers could be heard among the guests: “Where are the vaginas?” Such chatter notwithstanding, the gathering was a friendly and civilized affair—no inappropriate behavior, not even a preponderance of booze; mostly scattered wine bottles and bubbly water. “I’m a serious professional economist. I live in New York and have a social life,” Roubini says. “I have book parties and social dinners. And, you know, people will take pictures of you with your friends, and there are some attractive women. It doesn’t mean I go out with them. They’re my friends. I have nothing to hide.” When I send him a thank-you email, I can’t resist adding, “If you ask me, the deep mystery at the center of your life is why you would want to subject your apartment to that sort of abuse.” He quickly wrote back, “I do not subject my apt. to abuse. It is nice to have friends over, and I have a housekeeper that cleans up everything afterward.”

-The Prime of Mr. Nouriel Roubini

Not related;
Why beautiful people are more intelligent

Part of the Thai Stimulus

More about Stimulus Policies of other countries