Rob Johnson’s Favorite Read of the Year on World Financial Markets
Friday, 07/2/2010 - 9:30 am by Tim Price | One Comment
Rob Johnson, Roosevelt Institute Senior Fellow and Director of the Project on Global Finance, has a recommendation for everyone’s summer reading list: the Bank for International Settlements’ 80th Annual Report. You may not want to bring the 216-page document to the beach with you, but if you’ve worn out your copy of Twilight and you’re looking to expand your horizons, the report offers a comprehensive analysis of the state of world markets and what lies ahead for financial reform and fiscal policy.
The report begins with an overview of the causes of the financial crisis and notes that “by fighting the wrong battles or not fighting at all, weak regulators and supervisors allowed the build-up of enormous risk.” It argues that reform must be focused on three key tasks: “(i) reducing the systemic importance of financial institutions; (ii) minimising spillovers from an institution’s failure by ensuring that the costs of failure will be borne by the institution’s unsecured liability holders; and (iii) bringing all systemically relevant financial institutions and activities within the regulatory perimeter and keeping them there.”
It also notes that the economy has moved “from the emergency room to intensive care” in the last year, but warns that growth is still sluggish and recovery may be endangered by out-of-control deficits and unusually low interest rates. It recommends that policymakers focus more on the long term because “with a relatively short forecasting horizon, monetary policy could inadvertently accommodate or even contribute to the build-up of financial vulnerabilities.”
You can find the report on BIS.org or click here to read the PDF.
Agree with Rob. Always interesting to hear what the “central bankers’ bank” has to say. Of course, this year it’s no different. The report is replete with all the neo-liberal fallacies that are being used to undermine effective fiscal responses to the crisis. Here is another unelected body, which really is meant to be the central banker for the central banks, lecturing democratically elected governments about what they should be doing.
So even though their ostensible mandate is monetary policy, they have no compunction lecturing governments on fiscal policy and its multifold evils. And of course, we get the usual line about labour market ridigities, and the corresponding need to “deregulate” them, which in effect means winding back of welfare and pension entitlements and cut-backs in public services generally. Whatever we might think about these things they had nothing to do with the crisis and its severity. The argument the conservatives push is that if employment entitlements and protections were reduced significantly unempoyment would not have risen by as much as it has in various countries.
But for an insight into the mind of the people we are dealing with on the other side, the BIS annual report is invaluable.
Posted by Marshall Auerback | July 2nd, 2010 at 12:15 pm