TripleCrisis

Mark Blyth

I like the Financial Times (FT) for two main reasons: it gives me all I need to know that day in about seven pages every morning, and the fact that its ‘sound.’ By ‘sound’ I mean that, unlike the Murdoch press, I can rely on the FT to tell me the truth since consistently lying to the global investor class is a losing business model. But one should remember that for the FT, as it is for the rest of us, it’s still the truth as they see it.

A week or so ago the FT published a piece that asked why, if social democracies are so nice, their crime fiction is so dark? It’s a fair point, and anyone sitting through the middle section of ‘The Girl With the Dragon Tattoo’ has probably asked the same question. I didn’t read the FT’s answer, but my own answer comes from being in Iceland last week; a trip that gave me an insight into intellectual capture that I didn’t really appreciate before: that some truths are harder to shake than others.

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Timothy A. Wise

The World Policy Journal, in its Spring 2011 issue, asked nine global experts – including Esther Duflo, Jomo K.S., and Triple Crisis blogger Timothy A. Wise, among others – to provide short answers to the journal’s “big question”: What policy fixes or new innovations are needed to sustain the global economic recovery? Wise’s answer – continue re-regulating global markets – follows. Read all the responses here.

The global economic collapse was caused in part by the deregulation of an increasingly complex global economy. Re-regulating the areas that failed most spectacularly will be critical to securing a sustainable recovery. Efforts to do so include the Dodd-Frank measures to regulate Wall Street, new rules to rein in commodity speculation, a revived global discussion of food reserves to address food-price volatility, and policies that allow countries to regulate capital inflows and outflows to prevent financial contagion. These approaches put public institutions back in charge, setting and enforcing the rules of the game for global markets.

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Gerald Epstein and Robert Pollin

Triple Crisis blogger Gerald Epstein co-authored the following working paper with PERI co-director Robert Pollin on three areas of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act where effective regulations can be established.

The Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010 is the most ambitious measure aimed at regulating U.S. financial markets since the Glass-Steagall Act was implemented in the midst of the 1930s Depression.  However, it remains an open question as to whether Dodd-Frank is capable of controlling the wide variety of hyper-speculative practices that produced the near total global financial collapse of 2008-09.  This is because the legislation mainly lays out a broad framework for a new financial regulatory system.  It leaves the details of implementation to ten different regulatory bodies in the U.S.  The lack of specificity in setting down new financial regulations was widely viewed as a victory for Wall Street, and equally, a defeat for proponents of a strong new regulatory system.

Read the full working paper at PERI.

Matías Vernengo

Central to the different views of conservative and progressive authors, with respect to the European crisis, is the question of causality relating the fiscal and external crises.  Although causality is a thorny issue, the empirical evidence may illuminate the matter.  The following graph (Fig. 1)  shows the evolution of unit labor costs in Germany, and the group of peripheral countries, sometimes referred by their acronym (PIIGS), that were hit by the crisis, or are close to that position.

It shows that while German unit labor costs remain essentially constant, increasing merely 6 percent, in all the other countries the increases were of the order of more than 30 percent.  This translates into significant real appreciation of the real exchange rate in the periphery of Europe.

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