ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Avinash PersaudSubscribe to Avinash Persaud

Dangers of Unbounded Capitalism

One of the best books on the global financial crisis, Crashed by Adam Tooze slays the idea that the policy response was about the technical ability of brave officials and not bare political choices. This point, augmented with stories of deep financial integration between China, Europe and the United States, is a devastatingly insightful description but not a prescription. Although Tooze says that the story is a perennial one of instability of capitalism, he neglects history and the relatively successful way the world responded in Bretton Woods, when unstable capitalism last engulfed us in crisis.

Beyond the Rhetoric on Climate Change

In the climate change debate, a number of industrialised governments and multilateral development organisations push for greater use of risk finance products and financial innovation in general. But, insurance is no solution to climate change because it is no solution to risks that are rising in time and correlation. It is merely a way of getting the victims of climate change to pay for it themselves and not the contributors.

That Sinking Feeling

The United States (US) is sinking. It is what happens to a country when it blames everyone else for its ailments. The problem is that when the biggest boat in the water sinks, it pulls others down with it. This is not, therefore, time for the rest of the world to indulge in Schadenfreude over the...

The Corruption of Economics

Twilight of the Money Gods: Economics as a Religion and How It All Went Wrong by John Rapley, London: Simon and Schuster, 2017; pp 468, £20.

Strange and Worrying International Market Liquidity

There seems to be a rise in illusory liquidity in international markets, which appears to be plentiful in quiet times, but vanishes at other times. “Flash crashes” are more frequent. Reforms that have made banks safer have contributed to this, leading to a withdrawal of short-term market participants, and causing long-term investors to act short term. There seems to be a trade-off between day-to-day liquidity and what I call “systemic liquidity.”

Delinking Housing Cycles, Banking Crises, and Recession

The nexus of housing boom-busts, banking crises, and economic cycles is not unique to the last crisis and has been increasingly present in each of the major banking crises since the break-up of Bretton Woods in the early 1970s. Housing is a politically charged issue. A safer housing market, via planned fiscal intervention to steady supply, would do more to make the financial system safer than all of the other recent initiatives put together. Cheaper finance without cheaper homes only deepens housing inequality.

Dampening the Global Risk Appetite Cycle

International capital flows come in only two modes: feast or famine. The policy response to both situations has been primarily via exchange and capital controls--both have their consequences. Macro-prudential tools may represent a more flexible, less discriminatory alternative to capital controls. These tools of macroeconomic policy, though already in place, are not used as they should be, that is, to directly address the risk-appetite cycle of international capital.

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