Triple Crisis Blog has invited readers’ questions in advance of the April 24-25 IMF/World Bank meetings in Washingon. See all of the questions and answers here. A reader asked:
Q: What is the role of the EU in the changing economic environment of the world?
Grabel: A couple of triple crisis entries have dealt with the EU and its relevance for the development community. See, e.g., here, here, here and here.
Triple Crisis Blog has invited readers’ questions in advance of the April 24-25 IMF/World Bank meetings in Washingon. See all of the questions and answers here. A reader asked:
Q: The IMF and the World Bank claim that the only way to deal with the current crisis is through further liberalization. Aren’t globalization and free trade what caused poverty and global warming in the first place?
Gallagher: I’m not sure that these two institutions claim that “the only way” to deal with the crisis is through further liberalization. The IMF has just called for a levy on bank balance sheets and has cautiously endorsed capital controls to stem inflows of speculative capital. They also called for fiscal stimuli a year ago.
Triple Crisis Blog has invited readers’ questions in advance of the April 24-25 IMF/World Bank meetings in Washingon. See all of the questions and answers here. A reader asked:
Q: The Financial Transfer Tax (FTT) has received a lot of notice in Europe but few mainstream economists in the US are engaging the issue. Is the FTT a realistic option and is it feasible? How could it be implemented? Is the IMF likely to include it in the paper they are preparing for the G20 on options to pay for the economic crisis?
Grabel: Many progressive economists and civil society organizations have come out in favor of a FTT. For example, on this blog, see discussion and references to studies of FTTs, and also see the discussion of a recent study of a FTT referenced in the Bretton Woods Update.
Triple Crisis Blog has invited readers’ questions in advance of the April 24-25 IMF/World Bank meetings in Washingon. See all of the questions and answers here. A reader asked:
Q: Would financial reforms that seek to de-link services and overturn Volcker’s rule present an opportunity for banks in emerging countries who still follow these principles to overtake their more established northern counterparts?
Vernengo: The preliminary question to be asked would be why banks in the developed world have an edge in the first place. Credit creation and international trade in different periods have been for the most part denominated in a single national currency that functions as world money. The pound had that role during the Gold Standard and the dollar since World War II. The advantage of financial institutions in the hegemonic country derives from the fact that they lend in the world currency, and have access to a risk free asset (domestic government bonds) and a lender of last resort that can act on a global basis.
Triple Crisis Blog has invited readers’ questions in advance of the April 24-25 IMF/World Bank meetings in Washingon. See all of the questions and answers here. A reader asked:
Q: Would financial reforms that seek to de-link services and overturn Volcker’s rule present an opportunity for banks in emerging countries who still follow these principles to overtake their more established northern counterparts?
Vernengo: The preliminary question to be asked would be why banks in the developed world have an edge in the first place. Credit creation and international trade in different periods have been for the most part denominated in a single national currency that functions as world money. The pound had that role during the Gold Standard and the dollar since World War II. The advantage of financial institutions in the hegemonic country derives from the fact that they lend in the world currency, and have access to a risk free asset (domestic government bonds) and a lender of last resort that can act on a global basis.
Triple Crisis Blog has invited readers’ questions in advance of the April 24-25 IMF/World Bank meetings in Washingon. See all of the questions and answers here. A reader asked:
Q: Absolute poverty and increasing inequality remain serious issues in spite of WB/IMF development loans, even in countries with high economic growth. What reforms would you suggest to ensure that aid actually reaches the people who are suffering? How can these organizations take steps to move away from the ideology of neo-liberalism towards developing scientifically-based economic policies that are pro-poor? How can the Bretton Woods Institutions best measure implementation of pro-poor government policies?
Triple Crisis co-chairs sat down this month to discuss the rationale for the Triple Crisis blog and for Kevin Gallagher to ask Jayati Ghosh for insights on US financial regulatory reform, IMF reform, and the G-20 from a development perspective…
Triple Crisis Blog has invited readers’ questions in advance of the April 24-25 IMF/World Bank meetings in Washingon. A reader asked:
Q: There has been a lot of discussion recently about the over-valuation of the Chinese currency. How do we know how much it is overvalued? What would the implications be for US and Chinese workers if the government were to decide to devalue it?
NADAL: There is a debate on whether the Chinese yuan is over or undervaluated. The American Manufacturing Association sets the undervaluation of the yuan at 40%. But the Federal Reserve argues that the yuan appreciated 16% between June 2008 and February 2009. According to the Bank of International Settlements (BIS) in Basle the yuan appreciated between February 2007 and January 2010 the yuan appreciated by 10.7% while the US dollar lost 8% of its value.
Triple Crisis Blog has invited readers’ questions in advance of the April 24-25 IMF/World Bank meetings in Washingon. A reader asked:
Q: What will be the impact of the economic crisis on the financial literacy of the Developing Countries?
Grabel: It may well be that financial literacy in developing countries improves as a consequence of the economic crisis. This may be due to the experiences of rich countries, where it turns out that levels of financial literacy were quite low.
Certainly there are many structural reasons why corporations, municipal governments, and households deployed exotic, opaque and highly risky financing strategies and instruments in the run up to the crisis. And we know that credit rating agencies understood the risks of these instruments and financing strategies to much less of an extent than we would have imagined prior to the crisis. Thus, we may see a reduction in the developing world of enthusiasm for replicating the financial models of the rich countries. This would be a kind of silver lining associated with the current crisis.
Let me put the positive up front. Professor Herman Daly and his colleagues in the school of ecological economics (SEE) have made important contributions to the study of sustainability and have increased awareness on the relations between economics and the environment. But there are serious problems with their approach that will hamper the future development of SEE. This is why I want to raise a couple of critical issues. What follows is a discussion on value theory that may sound old fashioned, but it needs to be brought out if we want to move ahead with a more meaningful discussion on economic forces and the environment.
According to Daly and colleagues, the fundamental problem with mainstream economic theory is its inability to analyze physical flows in economic systems. The story line is that conventional economic theory relies on the fallacy of a circular flow of commodities in a system in which natural resources are not finite. The flows are expressed in abstract or monetary units and can therefore be expanded indefinitely. According to Daly, from this flawed beginning of “money fetishism” economics erroneously concludes that physical quantities are also amenable to infinite growth.