Spotlight G-20: Revamp the International Monetary System

Aldo Caliari, Guest Blogger
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

In the last few years the global economy has faced dangerous increases in exchange rate volatility. Global imbalances, after receding temporarily, are again on the rise.

These problems are certainly not new, but the currency tensions have rarely been so high since the fall of the Bretton Woods system in 1971. Countries are engaging in competitive devaluations to capture a higher share of diminishing export markets. The need for a monetary stimulus by the US –however necessary that stimulus is— threatens to further undermine the effectiveness of developing countries’ tools to keep their currencies in check.

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Spotlight G-20: We Need an International Commodity Reserve Currency

Leanne Ussher
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

At the recent G20 meeting of finance ministers in Seoul, Timothy Geithner was right to put forward a proposal that asks countries to cap their current account surplus, but the manner in which he suggested such goals be achieved offered little incentive for surplus countries to commit to such restrictions. This is why solutions for global imbalances put forth by luminaries such as John Maynard Keynes and Nicholas Kaldor were grand plans to change the system.

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Spotlight G-20: Unpopular Sarkozy Gets it Right on Financial Transactions Taxes in G-20

Sarah Anderson, Guest Blogger
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

Nicolas Sarkozy has taken a lot of well-deserved heat for his austerity measures.  But I have to hand it to the French President for one thing – he’s stood tough in his push to increase taxes on the financial sector.

Despite an icy response from the U.S. Treasury Department, Sarkozy and German Chancellor Angela Merkel have continued to push for a G-20 agreement on financial transactions taxes (FTTs, or what many in the United States call “financial speculation taxes”).

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Spotlight G-20: For the Must-Do List: Retire the Dysfunctional Key Currency System

Jane D’Arista, Guest Blogger
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

The most recent development in the blame-game over international payments imbalances is what the Brazilian finance minister has termed “currency wars”.  The US shares his concern about competitive devaluations in the sense that it blames trade balances on currency manipulation by surplus countries, pointing to China’s refusal to allow market forces to influence the value of the yuan.  As Secretary Timothy Geithner argued before the October meeting of G-20 finance ministers and central bankers in South Korea, this gives China a “huge” short-term advantage that is unfair to all its trading partners. Meanwhile, other countries see the 10 percent decline in the dollar against major currencies from June to October as the primary cause of currency tensions and Brazil’s central bank governor views the Federal Reserve’s prospective quantitative easing as a form of intervention that will create “serious distortions”.

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US Elections: The Deficit Hawks Have Already Won

Jeff Madrick

Austerity economics has won in Europe. But there is a mythology traveling around that the U.S., at least, has retained the Keynesian orientation that helped cut short an economy spiraling downward into full-fledged depression. Not so. The deficit hawks have also largely won in the U.S.  The announcement last week that GDP grew at an annual rate of 2 percent only brings the point home: the U.S. needs a serious fiscal injection quickly.  But it is not going to get it.

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Spotlight G-20: Why Capital Controls Are Not All Bad

Ilene Grabel and Ha-Joon Chang, from Financial Times
Part of a Triple Crisis series leading up to the Nov. 11-12 G-20 meetings.

Last Monday, Triple Crisis contributor Ilene Grabel co-authored the following piece for the Financial Times with noted author Ha-Joon Chang, building on an FT-hosted debate that included an earlier contribution by Triple Crisis blogger Kevin P. Gallagher. They urge the leaders of the G-20 economies to acknowledge the need for a new international financial architecture in the wake of the global financial crisis and the widespread adoption of currency controls in the developing world at their upcoming summit in Seoul, on November 11-12. Their piece kicks off the Triple Crisis Blog’s “Spotlight: G-20” series. Starting today and running through the G-20’s crucial meetings, we will feature daily pieces from Triple Crisis bloggers and guest contributors on the key issues that need to be addressed at the upcoming summit.

Was it really just over a decade ago that the International Monetary Fund and investors howled when Malaysia imposed capital controls in response to the Asian financial crisis? We ask because suddenly those times seem so distant. Today, the IMF is not just sitting on its hands as country after country resurrects capital controls, but is actually going so far as to promote their use. What about the investors whose freedoms are eclipsed by the new controls? Well, their enthusiasm for foreign lending and investing has not been damped in the least. So what is going on here? In our view, nothing short of the most significant transformation in global financial management of the past 30 years.

Read full article at Financial Times

Read more capital controls from Triple Crisis and at the Global Development and Environment Institute.

Understanding Instability: Mandelbrot, Fractals, and Financial Crises

Alejandro Nadal

Lightning in the sky does not follow a straight line. The irregular patterns in a cauliflower or the capricious forms of a tree’s branch are a challenge to the clean geometric figures we learn in school. Neither the straight lines, nor the smooth curves of that geometry exist in nature. But after the wonderful work of Benoit Mandelbrot it is now possible to get closer to a theory of the manifold wrinkles and rough surfaces that are the stuff of our universe. And our economies.

Ten days ago this great mathematician, the creator of fractal geometry and other wonders closely related to chaos theory, passed away.

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Renewing the International Renewable Energy Agency (IRENA)

Adil Najam

The excitement that had marked the creation of the International Renewable Energy Agency (IRENA) in early 2009 – to act “as the global voice for renewable energies” – dissipated fast in the last year and a half. Indeed, for those few who followed what was happening at the agency, feelings of crisis and panic set in fairly early and in recent weeks had turned into a distinct sense of foreboding and desperation. One hopes that this is finally about to change as new excitement has been injected into IRENA after the resignation of its beleaguered founding Director General – Helene Pelosse from France – and the appointment of Kenyan development economist and seasoned UN official Adnan Amin as her replacement.

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Climate Negotiations: Clouds over Cancún?

Miquel Muñoz, Guest Blogger

In the last weeks, two hurricanes have threatened Cancún. Hurricane Paula veered east, hurricane Richard southwest, both sparing the resort city and venue for the upcoming UN Climate Change Conference (COP 16). If this post was about the last COP in Copenhagen, the headlines would be unmistakable: “Hurricane Threatens Climate Negotiations.” For Cancún, conversely, a better analogy can be found in Copenhagen’s winter weather: grey and overcast. This would fittingly describe the level of expectations for Cancún.

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