Financial Architecture

Argentina: beware of Blitzer bearing best practices

FT’s Alphaville blog has over the last few years done a great job (the pari passu saga series) in following the complex meanderings of the dispute between Argentina (under Cristina Kirchner’s Presidency) and Paul Singer’s Vulture Funds.  

But on 22nd January, Alphaville gave a guest slot to a piece by Charles Blitzer, ex-IMFer and now a sovereign debt consultant, entitled "Best practices to resolve Argentina’s debt dispute"  without disclosing that Blitzer is no neutral expert observer here.  He has form - he is on record siding against Argentina and with the vulture funds in their dispute.

Central bank policy rates and the real economy

A letter by PRIME's Director Ann Pettifor, published in the Financial Times last Thursday (10 December), discusses central bank policy rates and the real economy. 

In her letter Ann argues that Larry Summers is right to point out how few tools central bankers have to “delay and ultimately contain the next recession”. (FT, 6 December, 2015). "We share his pessimism. However his analysis of the so-called 'neutral rate of interest being lower in the future than in the past' is based on the flawed notion of a 'growing relative abundance of savings relative to investment'”. 

China has exposed the fatal flaws in our liberal economic order

How can we make sense of volatile global stock markets? Economists explained this week’s dramatic falls by pinning responsibility on China. They are at pains to assure us this is not 2008 all over again. I beg to disagree.

Even though data is not reliable, it appears that China is slowing down. By 2009, the Chinese authorities were embracing the Western economic model that had just brought down much of Western capitalism. 

Central Banking, State Capitalism, and the Future of the Monetary System

The role of commercial and central banks in the process of providing credit may seem to be clearly understood by economists, bankers, and policymakers. But there are common misunderstandings about money creation, equilibrium, public money, central banks, and interest rates. The outlook for the global monetary system is not overly optimistic in the absence of overcoming these misunderstandings and altering the philosophies of bankers.

Twenty Two Days that Changed the World

In this carefully researched book, Ed Conway tells a gripping human tale about the July 1944 Bretton Woods Conference - “the biggest battle of the Second World War – fought behind closed doors”. He provides remarkable insights into the personal, geopolitical and intellectual dynamics that played out that summer within the confines of the Mount Washington Hotel, nestled within New Hampshire’s Bretton Woods.

The new BRICS Bank - force for progress or cause for concern?

For many years various officials of governments in African, Asian and Latin American have urged the creation of a "development" bank that they would control.  On Tuesday 15 July hopes became reality in Forteleza, Brazil, with the formal creation of the New Development Bank by the leaders of the so-called BRICS group of countries (Brazil, Russia, India, China and South Africa.

Reuniting the monetary union: a proposal to counter the eurozone’s imbalances

Almost four years after the beginning of the euro crisis, we have managed to avert a collapse, but not to foster a steady recovery. For too long we relied on a diet of austerity as the only possible cure. But the treatment turned out to be ineffective, and even harmful, because it was based on the wrong diagnosis. Public debts were blamed, budgets were slashed, the recession deepened. Only recently has expert opinion acknowledged that public debts are, if anything, just part of a broader and different problem: foreign debts.

Understanding and confronting financialisation

The rise of finance during the last four decades is the most prominent feature of contemporary capitalism. Finance has grown enormously in terms of assets and profits, its markets and institutions have become global, its concerns dictate economic policy, its influence shapes the political process. Non-financial enterprises may borrow less from banks, but engage in financial activities to earn profits. Finance has also permeated the lives of individuals and households in unprecedented ways. Private financial institutions now determine the choices made by millions in housing, education, and health, and even influence the ethics, morality and customs of everyday life. Contemporary capitalism can rightly be called ‘financialised’.

We can end the despotism of finance, at a price

After the 2008 global financial crisis and panic, the international banking system very nearly collapsed. In the days after Lehman Brothers failed, panic prevailed. ATMs were on the very brink of denying punters access to their own money. A prominent international banker advised his wife to withdraw all their funds from the banking system.

Mr Carney, you cannot fly to “Planet Croesus”

On the 24th October, 2013 Mark Carney, the new governor of the Bank of England, made a plea for the UK to reclaim its place “at the heart of a renewed globalisation. Such engagement would be timely” he said, “because globalisation itself is under siege.”

The Eurozone crisis: what way forward?

The simple truth unpalatable to Eurozone authorities is that small peripheral EU economies and even big economies like Spain and Italy, are victims, not designers of the liberalised financial architecture that was built way back in 1992, repeating earlier twentieth century failed experiments that led to financial crisis, immiseration and war. 

Resolving Sovereign Debt Crises within a Framework of Justice

The Financial Times reports today that in the light of “messy” negotiations around Argentina’s debt, calls have been revived for a bankruptcy regime for nations. For many years I have worked closely with Professor Kunibert Raffer of the University of Vienna, to promote just such a regime: the ‘Raffer Proposal’ - a fair and just framework for the resolution of sovereign debt crises. This is what we called for in the journal of the Carnegie Council for Ethics in International Affairs, back in September, 2003

ECB member tells France, you can’t change anything; Greece, out you go if you try

Jörg Asmussen, German Member of the Executive Board of the European Central Bank (ECB), today (8th May) gave an interview to the business newspaper Handelsblatt in which he went out of his way to make clear that the ECB will ignore any election results which go against existing ECB policy. Prime has translated his key messages to France and Greece following Sunday's elections, in view of their public interest. His message to President Hollande:

The terrifying intentions of Eurozone technocrats

As the world economy fails to recover, and instead threatens to implode we are now witness to political and social developments in Europe that are deeply alarming, even if inevitable. It is important that we understand and prepare for the implications of recent events. The good news is that both politicians and official policymakers at the OECD and EU are finally forced to recognise the scale of the economic disaster that threatens social and political stability 1. The bad news is this has not led to any better understanding of the crisis, or to an admission of its causes.

This is Plan B - the New Statesman

The New Statesman has included a contribution from Ann Pettifor this week’s edition. The cover of the magazine declares: “Austerity has failed. Inside nine of the world’s top economists tell the Chancellor how to save Britain. This is Plan B.” The following is Ann's unedited version...

The Euro must die, just as did the Gold Standard

The fundamental omission from Michael's argument below (countering our argument that Greece should restore the Drachma) is the finance sector. More importantly,the global financial architecture. The severe economic crisis affecting much of the world has at root cause financial liberalisation/de-regulation and its consequence: dear, yet easy money created by the private financial sector. The only genuine solution to the crisis must involve a large-scale reversal of liberalisation.