Robin Harding has an excellent article in the FT this morning in which he says:
The world is doomed to an endless cycle of bubble, financial crisis and currency collapse. Get used to it. At least, that is what the world's central bankers — who gathered in all their wonky majesty last week for the Federal Reserve Bank of Kansas City's annual conference in Jackson Hole, Wyoming — seem to expect.
All their discussion of the international financial system was marked by a fatalist acceptance of the status quo. Despite the success of unconventional monetary policy and recent big upgrades to financial regulation, we still have no way to tackle imbalances in the global economy, and that means new crises in the future.
The choice is this: impose capital controls or let the Fed run your economy.The shrugging acceptance of this gloomy analysis in Jackson Hole was striking, especially at a time when capital is fleeing the emerging world — pulling down exchange rates — as the Fed ponders a tapering of its asset purchases from $85bn a month. At a minimum, that threatens developing countries with higher inflation and higher interest rates; those that enjoyed the capital inflows a bit too much, such as India and Indonesia, could suffer something worse.
India is already in crisis. I do not think it will be alone. Yet again we are going to see the world's poorest people supporting the failure of the wealthiest unless something is done.
I support the idea of capital controls: I think every state should have them in their armoury as a necessary and indeed essential tool that ensures that they have some sovereignty over their currency and economy. I also accept the risks that they create, which as Harding suggests are real and which are based on parochialism (no better portrayed than by the actions of the US Fed). But as Harding says:
But [this] is not the only choice. Five years ago, after the collapse of Lehman Brothers, there was appetite and momentum for a new kind of international financial system. That appetite is gone — but we desperately need to get it back.
The flaws in the international financial system are old and profound, and they defeat any effort to work around them. Chief among them is the lack of a mechanism to force any country with a current account surplus to reduce it. Huge imbalances — such as the Chinese surplus that sent a flood of capital into the US and helped create the financial crisis — can therefore develop and persist.
A reliable backstop is impossible when the international system relies on a national currency — the US dollar — as its reserve asset. Only the Fed makes dollars. In a crisis, there are never enough of them — a shortage that will only get worse as the world economy grows relative to the US — even if the problem for emerging markets right now is too many of them.
The answer is what John Maynard Keynes proposed in the 1930s: an international reserve asset, rules for pricing national currencies against it, and penalties for countries that run a persistent surplus. After the financial crisis there was a flood of proposals along these lines from the UN, from the economist Joseph Stiglitz, and even from the governor of the People's Bank of China. None has gone anywhere.
Even the most basic first step towards that goal — boosting the IMF's resources and handing more voting power to emerging markets so they can rely on it in time of need — has stalled in the US Congress.
Such a step, coupled with capital controls, would and could work to create the stability the world craves.
Why haven't we got it? Because central bankers can't embrace it.
We need Courageous politicians to do that. Am I whistling in the wind?
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Syria.
US troops deployed clandestinely in Syria.
Russia:
“the Russians advised western nations that the Syrians will be armed with weapons never before seen in the middle east, but they have warned that any military confrontation in the region could potentially go nuclear”
An ideal solution to the present economic disaster and the forthcoming world economic collapse: War.
I fear so
“weapons never before seen in the middle east”. I wonder what they’re talking about here.
A major war has been on the cards for a long time, but I fear that what we are seeing in Syria is only a precursor. The real target for the West is China. Zbigniew Brzezinski in the Grand Chessboard, stated that the U.S. MUST dominate the Eurasian landmass if it is to retain its supremacy. To attain that it must ensure China and Russia are eliminated as rivals (Notice how the West has cozied up to India in the last few years). The wars we’ve seen in the last 10 years were just precursors to the “big one”, re-writing the middle-eastern map to more suit the West.
Candidly, I doubt that
Perhaps an even more pessimistic view?
http://www.lrb.co.uk/v35/n13/john-lanchester/are-we-having-fun-yet
Perhaps the real reason for war is there’s a lot of stuff coming up in the near future Obama and Cameron’s sponsors don’t want to see in the papers. They’re creating a long series of good days in which to bury what would be (for them) very bad news indeed and the hell with the consequences. More cocaine-driven policy I’d think. I imagine this is the banksters’ version of a scorched earth policy. If they can’t continue to milk it with impunity then they don’t want it to exist. I wonder what it is that’s bubbling under, which potential revelations are scaring them so? Maybe it’s fear of all the gold they’ve oversold coming to light, that’s certainly working its way to the surface. We’ll have to wait and see and keep our eyes on the alternative news outlets as for sure there’ll be nothing genuinely revealing in the corporate-owned bank-indebted mainstream media.
You don’t mean the fractional-reserve gold holdings ?
A real bitch countries wanting their gold back, when they’ve sold it years ago!
http://www.zerohedge.com/article/guest-post-proof-gold-price-suppression
Perhaps the payments for the PPI rip off are what is fueling our economic recovery!
“I support the idea of capital controls: I think every state should have them in their armoury as a necessary and indeed essential tool that ensures that they have some sovereignty over their currency and economy”
But expressing sovereignty over their economy is fundamentally a selfish action…..one which you attack when the same sovereign nations use tax policy to gain an advantage through tax secrecy or competitive tax rates.
If a nation has a duty of care beyond its borders which overrides its own democratic will on tax haven behaviour (which you have stated many times it does) then surely it also has a duty of care not to distort other economies through Capital controls….
Frankly you can’t allow one selfish behaviour and not the other!
Maintaining the right of a state to collect tax or manage its economy is not a selfish act; it is the duty of a state to its citizens
A tax haven seeks to undermine the right of another state to tax. That’s an act of economic aggression
The two are wholly unrelated
Well I am sure that the Caymans would say its tax haven policy is just its right to manage its economy as a duty to its citizens whether or not it is aggressive to others….
But are you seriously saying that Capital controls are not an act of economic aggression?……after all capital controls would lower the trade of other states and restrict investment which then undermines the tax revenue.
If the US imposed capital controls on China or Japan you think that is not an act of economic aggression?….
It seems a very thin argument between the two behaviours.
I fundamentally disagree
Looks like another scandal looming……..
http://www.zerohedge.com/news/2013-08-28/are-fx-markets-rigged-london-closing-fix
Yet more rigging – why do they bother calling them markets anymore? This is a private club.
The central bankers like the politicians are absolutely useless. The solution involves the 0.1%, who have captured governments and the central banks taking a “long bath”.
I’m trying to stop myself imagining that there are members of that “illustrious” set calculating whether their losses would be less if an all out conflict developed Middle East!