kent nickell
Well-known member
The economy may seem to be getting better but it is essentially on life support.... Eventually govt stimuluses have to be withdrawn and interest rates have to go back up to market levels... (Central banks are intervening in major ways to keep pumping money in and to keep interest rates low). This is not a functioning global economy.. As the life support is gradually withdrawn as it must be eventually we will get a better picture of reality...
http://www.reuters.com/article/ousivMolt/idUSTRE58B0K620090912
Global economic crisis to continue: IMF chief
Sep 12, 2009
BERLIN (Reuters) - The global economic crisis will continue and countries must do more to adopt financial market regulations, International Monetary Fund Managing Director Dominique Strauss-Kahn told a German magazine on Saturday.
"The global economic crisis will continue, even if Germany and France had some good figures in the second quarter," Strauss-Kahn was quoted as saying in an advance copy of an article to be published in Der Spiegel on Sunday.
Strauss-Kahn said he wanted to see more action from nations to curb bankers' pay and tighten capital requirements in the banking sector.
"It is right to say that not enough has happened. I hope the Group of 20 meeting in Pittsburgh will bring new momentum," he said. Leaders of the G20 meet later this month to try to agree on measures to help stop a repeat of the financial crisis.
Strauss-Kahn said the lesson of the financial crisis was that the market economy needed rules to function.
"Without new rules, there will be a return to the old behavior," he said.
Governments needed to develop 'exit strategies' from the stimulus packages introduced to boost economies, said Strauss-Kahn, adding, however, that it was dangerous to think the crisis was already over.
"We need such "exit strategies." We are working on them, but I would disagree with any .... demand to think about implementing them now," he said.
Asked by the magazine how liquidity that had been pumped onto the markets would be withdrawn, Strauss-Kahn said a combination of higher interest rates and ending direct intervention of central banks would be needed.
He also said the IMF had sufficient resources for now but that if the body were to take on additional responsibilities to coordinate a financial safety net for countries in financial difficulty, it would need a further financial boost.
(Reporting by Madeline Chambers; Editing by Andy Bruce)
----------------------------
I agree with Stiglitz here although I think this comment was taken out of context...
""The Federal Reserve faces a ?quandary? in ending its monetary stimulus programs because doing so may drive up the cost of borrowing for the U.S. government, he said.
?The question then is who is going to finance the U.S. government,? Stiglitz said""
If the Fed raises interest rates it would be more difficult for the US govt to finance its debt but other countries would be more willing to lend to us. It will actually be difficult to find people to finance us if we keep rates too low... They won't be making enough money esp if they start viewing the US dollar as weak.... The comment also refers to 'monetization' of the debt where we are essentially printing money to finance ourselves....
http://www.bloomberg.com/apps/news?pid=20601087&sid=a7UTn7JFw1qk
Stiglitz Says Banking Problems Are Now Bigger Than Pre-Lehman
By Mark Deen and David Tweed
Sept. 14 (Bloomberg) -- Joseph Stiglitz, the Nobel Prize- winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.
?In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,? Stiglitz said in an interview yesterday in Paris. ?The problems are worse than they were in 2007 before the crisis.?
Stiglitz?s views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama?sStanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing ?excessively.? administration to curtail the size of banks, and Bank of Israel Governor
A year after the demise of Lehman forced the Treasury Department to spend billions to shore up the financial system, Bank of America Corp.?s assets have grown and Citigroup Inc. remains intact. In the U.K., Lloyds Banking Group Plc, 43 percent owned by the government, has taken over the activities of HBOS Plc, and in France BNP Paribas SA now owns the Belgian and Luxembourg banking assets of insurer Fortis.
While Obama wants to name some banks as ?systemically important? and subject them to stricter oversight, his plan wouldn?t force them to shrink or simplify their structure.
Stiglitz said the U.S. government is wary of challenging the financial industry because it is politically difficult, and that he hopes the Group of 20 leaders will cajole the U.S. into tougher action.
G-20 Steps
?We aren?t doing anything significant so far, and the banks are pushing back,? said Stiglitz, a Columbia University professor. ?The leaders of the G-20 will make some small steps forward, given the power of the banks? and ?any step forward is a move in the right direction.?
G-20 leaders gather Sept. 24-25 in Pittsburgh and will consider ways of improving regulation of financial markets and in particular how to set tighter limits on remuneration for market operators. Under pressure from France and Germany, G-20 finance ministers earlier this month reached a preliminary accord that included proposals to reduce bonuses and linking compensation more closely to long-term performance.
?It?s an outrage,? especially ?in the U.S. where we poured so much money into the banks,? Stiglitz said. ?The administration seems very reluctant to do what is necessary. Yes they?ll do something, the question is: Will they do as much as required??
Global Economy
Stiglitz, former chief economist at the World Bank and member of the White House Council of Economic Advisers, said the world economy is ?far from being out of the woods? even if it has pulled back from the precipice it teetered on after the collapse of Lehman.
?We?re going into an extended period of weak economy, of economic malaise,? Stiglitz said. The U.S. will ?grow but not enough to offset the increase in the population,? he said, adding that ?if workers do not have income, it?s very hard to see how the U.S. will generate the demand that the world economy needs.?
The Federal Reserve faces a ?quandary? in ending its monetary stimulus programs because doing so may drive up the cost of borrowing for the U.S. government, he said.
?The question then is who is going to finance the U.S. government,? Stiglitz said.
Stiglitz gave the interview before presenting a report to French President Nicolas Sarkozy that urged world leaders to drop an obsession for focusing on gross domestic product in favor of broader measures of prosperity.
GDP?s Shortcomings
?GDP has increasingly become used as a measure of societal well being and changes in the structure of the economy and our society have made it increasingly poor one,? Stiglitz said.
Assessing government?s contribution to economic output, which ranges from 39 percent in the U.S. to 48 percent in France, is one of the shortcomings of the GDP model, as is its difficulty in estimating improvements in quality of products such as cars instead of just quantity, Stiglitz said.
Similarly, increased household debt may drive up output numbers, even though that doesn?t amount to a real increase in wealth, he added.
While Stiglitz doesn?t recommend dropping GDP altogether, he wants governments to consider such matters, along with issues of environmental sustainability, in policy making.
?Most governments make a fetish out of it. If you take one message out of our report, make it avoid GDP fetishism,? he said. ?The message is to encourage political leaders away from that.?
To contact the reporters on this story: Mark Deen in Paris at markdeen@bloomberg.netDavid Tweed in Paris at dtweed@bloomberg.net
http://www.reuters.com/article/ousivMolt/idUSTRE58B0K620090912
Global economic crisis to continue: IMF chief
Sep 12, 2009
BERLIN (Reuters) - The global economic crisis will continue and countries must do more to adopt financial market regulations, International Monetary Fund Managing Director Dominique Strauss-Kahn told a German magazine on Saturday.
"The global economic crisis will continue, even if Germany and France had some good figures in the second quarter," Strauss-Kahn was quoted as saying in an advance copy of an article to be published in Der Spiegel on Sunday.
Strauss-Kahn said he wanted to see more action from nations to curb bankers' pay and tighten capital requirements in the banking sector.
"It is right to say that not enough has happened. I hope the Group of 20 meeting in Pittsburgh will bring new momentum," he said. Leaders of the G20 meet later this month to try to agree on measures to help stop a repeat of the financial crisis.
Strauss-Kahn said the lesson of the financial crisis was that the market economy needed rules to function.
"Without new rules, there will be a return to the old behavior," he said.
Governments needed to develop 'exit strategies' from the stimulus packages introduced to boost economies, said Strauss-Kahn, adding, however, that it was dangerous to think the crisis was already over.
"We need such "exit strategies." We are working on them, but I would disagree with any .... demand to think about implementing them now," he said.
Asked by the magazine how liquidity that had been pumped onto the markets would be withdrawn, Strauss-Kahn said a combination of higher interest rates and ending direct intervention of central banks would be needed.
He also said the IMF had sufficient resources for now but that if the body were to take on additional responsibilities to coordinate a financial safety net for countries in financial difficulty, it would need a further financial boost.
(Reporting by Madeline Chambers; Editing by Andy Bruce)
----------------------------
I agree with Stiglitz here although I think this comment was taken out of context...
""The Federal Reserve faces a ?quandary? in ending its monetary stimulus programs because doing so may drive up the cost of borrowing for the U.S. government, he said.
?The question then is who is going to finance the U.S. government,? Stiglitz said""
If the Fed raises interest rates it would be more difficult for the US govt to finance its debt but other countries would be more willing to lend to us. It will actually be difficult to find people to finance us if we keep rates too low... They won't be making enough money esp if they start viewing the US dollar as weak.... The comment also refers to 'monetization' of the debt where we are essentially printing money to finance ourselves....
http://www.bloomberg.com/apps/news?pid=20601087&sid=a7UTn7JFw1qk
Stiglitz Says Banking Problems Are Now Bigger Than Pre-Lehman
By Mark Deen and David Tweed
Sept. 14 (Bloomberg) -- Joseph Stiglitz, the Nobel Prize- winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.
?In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,? Stiglitz said in an interview yesterday in Paris. ?The problems are worse than they were in 2007 before the crisis.?
Stiglitz?s views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama?sStanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing ?excessively.? administration to curtail the size of banks, and Bank of Israel Governor
A year after the demise of Lehman forced the Treasury Department to spend billions to shore up the financial system, Bank of America Corp.?s assets have grown and Citigroup Inc. remains intact. In the U.K., Lloyds Banking Group Plc, 43 percent owned by the government, has taken over the activities of HBOS Plc, and in France BNP Paribas SA now owns the Belgian and Luxembourg banking assets of insurer Fortis.
While Obama wants to name some banks as ?systemically important? and subject them to stricter oversight, his plan wouldn?t force them to shrink or simplify their structure.
Stiglitz said the U.S. government is wary of challenging the financial industry because it is politically difficult, and that he hopes the Group of 20 leaders will cajole the U.S. into tougher action.
G-20 Steps
?We aren?t doing anything significant so far, and the banks are pushing back,? said Stiglitz, a Columbia University professor. ?The leaders of the G-20 will make some small steps forward, given the power of the banks? and ?any step forward is a move in the right direction.?
G-20 leaders gather Sept. 24-25 in Pittsburgh and will consider ways of improving regulation of financial markets and in particular how to set tighter limits on remuneration for market operators. Under pressure from France and Germany, G-20 finance ministers earlier this month reached a preliminary accord that included proposals to reduce bonuses and linking compensation more closely to long-term performance.
?It?s an outrage,? especially ?in the U.S. where we poured so much money into the banks,? Stiglitz said. ?The administration seems very reluctant to do what is necessary. Yes they?ll do something, the question is: Will they do as much as required??
Global Economy
Stiglitz, former chief economist at the World Bank and member of the White House Council of Economic Advisers, said the world economy is ?far from being out of the woods? even if it has pulled back from the precipice it teetered on after the collapse of Lehman.
?We?re going into an extended period of weak economy, of economic malaise,? Stiglitz said. The U.S. will ?grow but not enough to offset the increase in the population,? he said, adding that ?if workers do not have income, it?s very hard to see how the U.S. will generate the demand that the world economy needs.?
The Federal Reserve faces a ?quandary? in ending its monetary stimulus programs because doing so may drive up the cost of borrowing for the U.S. government, he said.
?The question then is who is going to finance the U.S. government,? Stiglitz said.
Stiglitz gave the interview before presenting a report to French President Nicolas Sarkozy that urged world leaders to drop an obsession for focusing on gross domestic product in favor of broader measures of prosperity.
GDP?s Shortcomings
?GDP has increasingly become used as a measure of societal well being and changes in the structure of the economy and our society have made it increasingly poor one,? Stiglitz said.
Assessing government?s contribution to economic output, which ranges from 39 percent in the U.S. to 48 percent in France, is one of the shortcomings of the GDP model, as is its difficulty in estimating improvements in quality of products such as cars instead of just quantity, Stiglitz said.
Similarly, increased household debt may drive up output numbers, even though that doesn?t amount to a real increase in wealth, he added.
While Stiglitz doesn?t recommend dropping GDP altogether, he wants governments to consider such matters, along with issues of environmental sustainability, in policy making.
?Most governments make a fetish out of it. If you take one message out of our report, make it avoid GDP fetishism,? he said. ?The message is to encourage political leaders away from that.?
To contact the reporters on this story: Mark Deen in Paris at markdeen@bloomberg.netDavid Tweed in Paris at dtweed@bloomberg.net