In his keynote speech to the 9th Bank for International Settlements (BIS) annual conference, Baron Alexandre Lamfalussy, former General Manager of the BIS and Former President of the European Monetary Institute, began from the standpoint that the crash and its immediate aftermath have thrown up “well identified problems for the central banking community which are unlikely to go away – even if we manage to extricate ourselves from our current predicament.”
On June 24-25 2010, the Bank for International Settlements (BIS) held its 9th Annual Conference in Lucerne, with the theme being “The future of central banking”. Why this theme? As Stephen Cecchetti, Economic Advisor and Head of Monetary and Economic Department, BIS, noted in his introductory remarks to the conference, no central banker can be unaware that the global crash of 2008 happened on their watch:
Any company that is a heavy user of power, a category that includes the vast majority of manufacturing companies as well as transport and logistics firms, seems to be facing a future where the cost of energy just keeps rising. Even the large scale offshore wind and marine renewable energy projects now in the planning stage do not look as if they are going to drive current prices down, rather the reverse, since alternative energy will need price support for a good few years yet.
Perhaps as little as five years ago the Chinese were gathering an unenviable reputation for themselves as neo-colonialists, charging around Africa buying everything that wasn’t nailed down or state owned, with, so it is said, palpably little regard for the fate or prospects of the locals. That was not exactly a sustainable way of doing business and the penny seems to have dropped in Beijing, which appears to be approaching the task of building relations with Latin America from a rather more mature and thoughtful perspective.
The scale of the foreign exchange (FX) dealing market is enormous and growing. According to an article in the Quarterly Review of the Bank for International Settlements(BIS), the market grew 20% from 2007 to the end of 2010, to the point where it now regularly trades over $4 trillion a day. This was actually a slowdown in the FX market’s growth caused by the global crash. It grew 70% in the three years prior to the crash, and it is now picking up speed again.
When President Clinton went to Colombia in 2000, the country was a failed state, with the government in charge of less than one third of the country. Drug lords and rebels, including the notoriously violent FARC, controlled the rest of the land. In just over a decade the country has gone from bust to boom and has even managed to turn around a hugely bad-tempered relationship with its neighbour, Venezuela, which was having a severe dampening effect on trade between the two countries, and even teetered from time to time on the brink of descending into outright military conflict.
We recently attended the National Congress on Health Insurance Reform in Washington, D.C. One of our favorite presentations was delivered by the always entertaining and informative Uwe Reinhardt, Professor of Political Economy at Princeton. Reinhardt explained how the U.S.'s inability to implement reforms to the healthcare system that would meaningfully slow cost growth boils down to a failure to understand basic math.
It has been said many times that the debt levels being racked up by some governments are simply not sustainable. This anxiety, after all, is the prime and only justification for the swingeing round of public sector spending cuts the UK Coalition Government is currently imposing, and it lies at the heart of the austerity measures being promoted in European countries such as Greece and Spain.
China has enjoyed two decades of 10% growth and this has caused some in the West to speculate that perhaps command capitalism, run by an authoritarian central government, is not such a bad thing. After all, the new found appetite for re-regulating the financial sector and for stimulating the economy with billions in new public debt has little to do with laissez faire capitalism.
Michael Lewis, author of The Big Short: Inside the Doomsday Machine and Liar's Poker, has invented a new journalistic genre. It’s called “financial disaster travel journalism” and involves Lewis visiting various bombed out European countries and doing an old-fashioned thing that many journalists seem to have forgotten about - reporting.