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As Raghuram Rajan of the University of Chicago Booth School of Business and former chief economist of the International Monetary Fund notes in a thought-provoking new book, the underlying “fault lines” are still with us.
Martin Wolf July 13 2010
Halting the financial doomsday machine
The combination of state insurance (which protects creditors)
with limited liability (which protects shareholders) creates a financial doomsday machine.
Martin Wolf, FT April 21 2010
China and Germany unite to impose global deflation
Germany is in a supposedly irrevocable currency union with some of its principal customers. It now wants them to deflate their way to prosperity in a world of chronically weak aggregate demand.
I am beginning to wonder whether the open global economy is going to survive this crisis.
The eurozone may also be in some danger.
Martin Wolf, FT March 16 2010
Establishing the EMF would require a new treaty
We must note an even greater difficulty. The notion that the big threat is fiscal indiscipline is false.
Martin Wolf FT March 9 2010
Anybody who looks carefully at the world economy will recognise that
a degree of monetary and fiscal stimulus
unprecedented in peacetime is all that is prodding it along
The conventional wisdom is that it will also be possible to manage a smooth exit.
Nothing seems less likely. So let us consider the endgame, instead.
Martin Wolf, FT February 23 2010
The Greek government has promised to slash its fiscal deficit
from an estimated 12.7 per cent of gross domestic product last year to 3 per cent in 2012.
Is it plausible that this will happen? Not very.
But Greece is merely the canary in the fiscal coal mine.
Other eurozone members are also under pressure to slash fiscal deficits.
What might such pressure do to vulnerable members, to the eurozone and to the world economy?
Martin Wolf, January 19 2010
Finanskrisens problem löstes genom att socialisera riskerna och efterfrågan
Det behövs ”en uthållig ökning av den privata sektorns efterfrågan”
"alla länder kan inte samtidigt ha exportledd tillväxt"
Martin Wolf intervjuad i SvD/e24 av Johan Myrsten 2010-01-16
Japan’s experience strongly suggests that even sustained fiscal deficits, zero interest rates and quantitative easing will not lead to soaring inflation in post-bubble economies suffering from excess capacity and a balance-sheet overhang, such as the US.
It also suggests that unwinding from such excesses is a long-term process.
Martin Wolf, January 12 2010
Det räcker med att läsa Martin Wolf
Varför skall vi vanliga dödliga småtyckare anstränga oss, läsa fundera och skriva?
Rolf Englund blog 6/1 2010
The eurozone’s next decade will be tough
Many have argued that, within a currency union, current account deficits do not matter
any more than between Yorkshire and Lancashire.
They are wrong.
Martin Wolf January 5 2010
Arvind Subramanian argues that economics has redeemed itself by rescuing the world economy from the crisis. I agree, but only up to a point.
These extraordinary interventions have not returned the patient to health. They have merely prevented him from dying.
We now must heal five chronic conditions, instead of survive last year’s brutal heart attack.
Martin Wolf, December 29 2009
The rest of the world was inclined to believe that the west, whatever its faults, knew what it was doing, particularly where running a market economy was concerned. But then the teacher failed the examination.
Thirty years of surging growth in private sector leverage, in the balance sheets of the financial sector and in notional profitability of the financial sector in the US and other high-income countries has ended in calamity.
The emergence of massive global current account “imbalances” has proved highly destabilising.
Martin Wolf December 23 2009
Having accumulated $2,273bn in foreign currency reserves, China has kept its exchange rate down, to a degree unmatched in world economic history.
China has, as a result, distorted its own economy and that of the rest of the world.
Martin Wolf, FT December 8 2009
Barack Obama, president of the US, met Hu Jintao, president of the People’s Republic of China,
This, then, was an opportunity for Mr Obama to tell some brutal truths. I hope he did
Martin Wolf, FT November 17 2009
Victory in the cold war was a start as well as an ending
In the case of this crisis, the failure lies not so much with the market system as a whole,
but with defects in the world’s financial and monetary systems.
Marin Wolf, FT November 10 2009
Time for a debate on immigration
Martin Wolf
November 5 2009
Why it is still too early to start withdrawing stimulus
Two groups of thinkers reject this viewpoint.
One argues that the economy is always in equilibrium.
Both the guilty and the innocent must suffer
Martin Wolf, FT September 8 2009
In contemporary banks, leverage of 30 to one is normal.
Higher leverage is not rare.
Reform of regulation has to start by altering incentives
Banks central activity is creating and trading assets of uncertain value, while their liabilities are, as we have been reminded, guaranteed by the state.
This is a licence to gamble with taxpayers’ money. The mystery is that crises erupt so rarely.
Martin Wolf, Financial Times, June 23 2009
What gave the Great Depression its name was a brutal decline over three years.
This time the world is applying the lessons taken from that event by John Maynard Keynes and Milton Friedman, the two most influential economists of the 20th century.
The policy response suggests that the disaster will not be repeated.
Martin Wolf, Financial Times, June 16 2009
Did inflation targeting fail?
Central banks have mostly escaped blame for the crisis.
How can it have gone so wrong? Also about The Taylor Rule
Martin Wolf, Financial Times, May 5 2009
What is needed is both a large increase in aggregate demand and
a shift in its distribution, away from chronic deficit countries, towards surplus ones.
Unless and until surplus countries recognise that this cannot continue,
no durable escape from the crisis will be achieved.
Martin Wolf, Financial Times March 31 2009
This is not a true market mechanism, because the government is subsidising the risk-bearing.
Prices may not prove low enough to entice buyers or high enough to satisfy sellers.
Martin Wolf, Financial Times March 24 2009
The scheme may improve the dire state of banks’ trading books.
This cannot be a bad thing, can it?
Well, yes, it can, if it gets in the way of more fundamental solutions,
because almost nobody – certainly not the Treasury – thinks this scheme will end the chronic under-capitalisation of US finance.
Indeed, it might make clearer how much further the assets held on longer-term banking books need to be written down.
The new plan seems to make sense if and only if the principal problem is illiquidity.
Two contrasting views have been held on what ails the financial system.
The first is that this is essentially a panic.
The second is that this is a problem of insolvency.
Martin Wolf, Financial Times 10/2 2009
The statement that systemic breakdowns are surprisingly rare
in the free-wheeling Anglo-Saxon model is false.
Martin Wolf February 9, 2009
Finally, there is inflation.
If central banks and governments are aggressive enough, they can generate inflation, which will lower the debt burden.
But they will imperil – if not terminate – the experiment with unbacked fiat (or man-made) money that started in 1971.
Martin Wolf, Financial Times January 27 2009
Keynes offers us the best way to think about the financial crisis
Martin Wolf, Financial Times, December 23 2008
Highly recommended
This is the endgame for the global imbalances
If the surplus countries do not expand domestic demand relative to potential output, the open world economy may even break down.
As in the 1930s, this is now a real danger.
Martin Wolf, Financial Times, December 2 2008
One might not expect much from economists, but one would surely expect them to warn us of a crisis on this scale.
Speech given by Martin Wolf, chief economics commentator, at the FT’s annual economists’ drinks party in London
Financial Times, 27/11 2008
These are historic times.
Collapse of an asset price bubble and consequent disintegration of the credit mechanism
More pressing than discretionary fiscal action is getting the banks to lend.
Martin Wolf, Financial Times 30/10 2008
Informed observers suggest an additional $1,500bn in capital might be needed.
So double this and assume it all comes from the state:
it would still “only” be 10 per cent of US and European GDP
Martin Wolf, Financial Times October 14 2008
As John Maynard Keynes is alleged to have said: “When the facts change, I change my mind. What do you do, sir?”
It took me a while – arguably, too long – to realise the full dangers.
Maybe it was errors at the US Treasury, particularly the decision to let Lehman fail, that triggered today’s panic.
Martin Wolf, FT, October 7 2008
The fundamental problem with the Paulson scheme is that it is neither a necessary nor an efficient solution.
It is not necessary, because the Federal Reserve is able to manage illiquidity through its many lender-of-last resort operations.
It is not efficient, because it can only deal with insolvency by buying bad assets at far above their true value, thereby guaranteeing big losses for taxpayers and providing an open-ended bail-out to the most irresponsible investors.
Martin Wolf, Financial Times, September 23 2008
Over the past few weeks three experiences have helped clear my mind on this crisis.
First, I reread Hyman Minsky’s masterpiece, Stabilizing an Unstable Economy.
Martin Wolf, Financial Times, September 16 2008
It is now almost a year since the US subprime crisis went global.
It has, in all likelihood, not even passed the end of its beginning.
The creditworthiness of the US government cannot be taken for granted.
Martin Wolf, Financial Times, July 15 2008
Bank for International Settlements annual report
“How,” asks the report, “could a huge shadow banking system emerge without provoking clear statements of official concern?”
How, indeed?
How big are the risks now? The answer is: very large.
As I argued in a speech at a BIS conference last week...
Martin Wolf, Financial Times, July 1 2008
How to see world economy through two crises
Martin Wolf, Financial Times, June 24, 2008
How imbalances led to credit crunch and inflation
Martin Wolf, Financial Times, June 17, 2008
How well can an economy long characterised by soaring house prices, exploding debt and a dynamic financial sector adjust to a new world?
Martin Wolf, Financial Times May 1 2008
How do we persuade citizens that the rise of the emerging countries, the brightest story of our era, is to be welcomed, rather than resented or even resisted,
when what they experience is financial disarray, falling house prices, recession and soaring costs of essential commodities?
Martin Wolf, Financial Times, April 22 2008
First, anybody who thinks it is a duty of the state to help keep housing expensive is crazy;
second, policymakers should respond only to clear market failures; and,
third, with a floating exchange rate and an independent central bank, the UK can weather the storm if it keeps its head.
Martin Wolf, Financial Times April 17 2008
Fed bailout of Bear Stearns
Remember Friday March 14 2008
it was the day the dream of global free-market capitalism died.
Martin Wolf, Financial Times, March 26 2008
The financial system is a subsidiary of the state.
A creditworthy government can and will mount a rescue.
That is both the advantage – and the drawback – of contemporary financial
capitalism.
Martin Wolf, Financial Times February 26 2008
Highly recommended
America’s economy risks mother of all meltdowns
The connection between the bursting of the housing bubble and the fragility of the financial system
has created huge dangers, for the US and the rest of the world.
Martin Wolf, Financial Times, February 19 2008
In times of panic, grown-ups keep their nerve.
In a financial crisis, central banks must be the grown-ups.
Martin Wolf
Is the 2007 US Sub-Prime Financial Crisis so Different?
(Different from the Debt Crisis of the 80's?)
Martin Wolf, FT January 8 2008
These are historic moments for the world economy.
First and most important, what is happening in credit markets today is a huge blow to the credibility of the Anglo-Saxon model of transactions-orientated financial capitalism.
A mixture of crony capitalism and gross incompetence has been on display in the core financial markets of New York and London.
Martin Wolf, FT 12/12 2007
The central bank helicopters are planning a co-ordinated drop of liquidity on troubled market waters.
One point is clear: central banks must be pretty worried to take such a joint action.
Martin Wolf. FT December 12 2007 18:01
The public sector subsidises the banks risk-taking. It does so because banks provide a utility.
What the banks give in return, however, is gung-ho speculation.
Martin Wolf, FT November 27 2007
Sverige bör, liksom England, hålla sig utanför euron så länge som möjligt.
Det säger Martin Wolf, biträdande chefredaktör på Financial Times
Ekonominyheterna 4/12 2006
Let us call a spade a spade.
The blame for the vulnerability of Northern Rock lies with its management
Would it not be better to let mismanaged institutions go under, while protecting small depositors effectively?
Answer: yes, it would.
Martin Wolf, Financial Times November 15 2007
Questions and answers on the debt crisis
Martin Wolf, September 5 2007
If holders of the dollar conclude it is no longer a secure store of value
they will dump both the currency and assets dependent on its future value.
If that were to happen, the Fed would confront a dreadful dilemma
– whether or not to cut rates as the dollar plunged and long-term interest rates soared.
Martin Wolf, Financial Times 26/9 2007
Central banks should not rescue fools
Martin Wolf, Financial Times, August 29 2007
The Fed can indeed be accused of being a serial bubble-blower.
But this is not because it has been managed by incompetents.
It is because it has been managed by competent people responding to exceptional circumstances.
Martin Wolf, August 22 2007
Fear makes a welcome return
This is not new. It is as old as financial capitalism itself.
The late Hyman Minsky, who taught at the University of California, Berkeley, laid down the canonical model.
Martin Wolf, Financial Times 15/8 2007
Posterity will regard the economic performance we are now witnessing as a golden age.
It will also know, although we do not, how long this era lasts.
Martin Wolf, FT, 2/5 2007
The G7 should, instead, be replaced by a multilateral body that can address such issues more effectively.
Martin Wolf FT 30/5 2007
Globalisation
How to promote employment while protecting the low-paid
The Globalization of Labor, IMF World Economic Outlook
Martin Wolf, FT, April 11 2007
Equities look overvalued,
but where is the turning point?
Martin Wolf, Financial Times, March 7, 2007
Sven Rydenfelt-föreläsning
Martin Wolf om varför globaliseringen fungerar
Timbro 19/1 2005
För åttonde gången anordnade Timbro en föreläsning för att hylla Sven Rydenfelts långa och framgångsrika kamp för de liberala värdena. Bland tidigare föreläsare kan nämnas Per Ahlmark och Deepak Lal. Till årets föreläsning var Martin Wolf inbjuden. Inför tvåhundrafemtio åhörare talade han om globaliseringens framgångar.
Sven Rydenfelt - Sven Rydenfelt om EMU
Book review:
The Writing on the Wall: China and the West in the 21st Century by Will Hutton
Hutton takes on the most important political and economic story of our time. He has also produced a thought-provoking, wide-ranging and largely correct analysis.
The book advances five fundamental and, in my view, fundamentally correct propositions.
First, for all its manifest achievements, the Chinese attempt to marry a communist party-state with the market is unsustainable.
Martin Wolf 4/2 2007
Can 1.5m people be wrong? Yes, they can.
In a representative democracy, the government can also ignore them. It should do so.
Road pricing is not only a good idea, but an inevitable one.
Martin Wolf, Financial Times 16/2 2007
Why America will need some elements of a welfare state
Martin Wolf, Financial Times, 14/2 2007
The more persuasive is this “liquidity” story, the more plausible it becomes that the correction is going to be more painful than conventional wisdom believes.
Commenting on Wolfgang Münchau and Lawrence Summers
Martin Wolf, FT 10/1 2007
UK housing boom will end, but how
Will it end with a bang or a whimper? That is indeed the big question.
Martin Wolf, FT 24/11 2006
Why have markets reached their exposed position? The answer is that success breeds excess.
This is the argument of a fascinating new paper from William White, economic adviser to the Bank for International Settlements.
Martin Wolf, Financial Times 24/5 2006
Let dollar fall or risk global disorder
Is it possible to reduce the US deficit substantially without exchange-rate changes. The answer is that it would be possible, but catastrophic for all participants, because it would demand a deep US recession
Martin Wolf, Financial Times, May 9 2006
Why should we remain concerned about global imbalances? The answer is that they are undesirable, cannot continue indefinitely and the longer they last, the bigger and more painful the adjustment will be.
What is undesirable ought to change. What is unsustainable will change. What is dangerous must change. Yet, if the world is to avoid a serious recession, adjustment must start in the surplus countries.
Martin Wolf, Financial Times 29/3 2006
As two distinguished financial economists, John Campbell of Harvard and Robert Shiller of Yale, have shown,
returns demonstrate “negative serial correlation”.*
They revert to average valuations.
Martin Wolf, Financial Times 22/3 2006
What could go wrong and, more important, whether the risks of its doing so are adequately priced. They are not.
On a cyclically adjusted basis, the US stock market is as highly valued as in any period of the past 120 years, except the late 1920s and the late 1990s.
Martin Wolf 3/1 2006
The late Herbert Stein is famous for saying that what can’t go on forever, won’t.
This then is a world of strong growth.
Martin Wolf, Finacial Times 21/12 2005
Dear Ben, Congratulations on your nomination as chairman of the Federal Reserve
Do not believe for a moment that targeting inflation is all there is to being a successful Fed chairman
You will need to react strongly to low probability, high cost dangers.
Martin Wolf, Financial Times, October 26 2005
It is little wonder that Mr Greenspan has become an almost legendary figure. Yet how good has his performance been and what lessons does his tenure bequeath?
Mr Volcker had to crush inflation. Mr Greenspan had merely to keep the show on the road.
Another reason for questioning the unique sagacity of the chairman is that low inflation has broken out all over the world.
Surprisingly for a man once known as a gold bug and disciple of Ayn Rand’s libertarian philosophy, Mr Greenspan has emerged as the policymaker closest in spirit to Maynard Keynes.
Martin Wolf, Financial Times, 19/10 2005
It cannot go on forever. The question is how and when it will stop
There are risks of a much more abrupt reversal, triggered by a big increase in protectionism in the US, a sudden decline in the world's demand for US assets or, more probably, both together. This could generate a sharp slowdown in the US and the rest of the world, possibly even a world recession.
We do know that the explosive increase in US current account deficits cannot continue indefinitely. It is possible that a smooth adjustment will indeed occur. It is also quite likely that the ultimate adjustment will be both swift and brutal.
Martin Wolf, Financial Times 8/10 2005
The IEA argues that remaining oil reserves could cover only 70 years
at the average annual consumption between 2003 and 2030.
Martin Wolf, Financial Times, 22/6 2005
As Maurice Obstfeld of the University of California at Berkeley and Kenneth Rogoff of Harvard note,
a big reduction in the US current account deficit that does not include sizeable exchange rate and macroeconomic adjustments in Asia
would impose a devastating shock on the already troubled eurozone.
Martin Wolf, Financial Times, June 29 2005
The rejection of the constitutional treaty by the voters of France and the Netherlands gives the European Union a chance to reconsider its future.
Those in charge should realise that they have made a mistake.
Their hope was for an EU that was more efficient and more democratic. But there is a conflict between these two objectives.
Now it is possible to embark on a new journey that recognises this truth.
Martin Wolf Financial Times June 15 2005
Strange things are happening in the world economy: falling interest rates on long-term securities, declining spreads between returns on safe and riskier assets, large fiscal deficits and huge global current account “imbalances” should not, in normal circumstances, coincide. So what is going on?
The answer, in a nutshell, is a global excess of desired savings against the background of weak investment, low inflation and ever more integrated economies.
To understand the present we need to go back to the 1930s. The “paradox of thrift” was the most counterintuitive and, to the classically trained economist, morally, theoretically and practically objectionable idea in John Maynard Keynes’ General Theory of Employment, Interest and Money, published in 1936, in response to the Great Depression.
Martin Wolf Financial Times June 13 2005
It is essential for the UK to avoid joining the eurozone, which looks quite as dysfunctional as prescient(perceptive, cautious, foresighted) critics feared,
About a recent book from the Institute of Economic Affairs: Should Britain Leave the EU? An Economic Analysis of a Troubled Relationship, Patrick Minford and others
Martin Wolf, FT 3/6 2005
Embrace diversity and decentralisation. That is the conclusion
The countries of Europe are different. They cannot be shoe-horned into a single political process.
The French, for example, want to keep their high-cost, high-regulation leviathan. Let them do so. The UK has, rightly, chosen a different path.
Martin Wolf Financial Times 3/6 2005
Let us think the unthinkable:
Could the eurozone disintegrate?
The answer is yes.
If /Italy/ fails to rise to the challenge it confronts, a default or even a forced withdrawal
from the eurozone is perfectly conceivable.
Martin Wolf Financial Times 25/5 2005
The new constitution, with its nonsense about a "social union", makes the wrong choices.
Within an integrated labour market it is impossible for one region to offer much better benefits than others without generating a ruinously costly inflow of benefit seekers.
That is what happened to New York in the 1970s.
This is why welfare states must work at the level of the entire labour market.
Martin Wolf Financial Times 6/4 2005
The growing external deficits of the world's "sole superpower" have put the global economy
on a path that is not merely unsustainable but also dangerously so.
US and Asian policymakers seem determined to take no decisive action in response.
This is understandable, but a big mistake.
Martin Wolf Financial Times December 8 2004
Few, if any, leaders are prepared to recognise a simple truth: neither European enlargement nor monetary union, for that matter, can succeed without far more flexible labour markets.
Back in 1990, we should remember, the then West Germany absorbed the former East Germany.
So what can be learnt from that experience?
Martin Wolf, Financial Times 30/3 2005
Very Important Article
To bring about a substantial reduction in the external deficit without a deep recession, the US needs a huge change in internal relative prices.
About Maurice Obstfeld and Kenneth Rogoff The Unsustainable US Current Account Position Revealed
Martin Wolf Financial Times 1/12 2004
Den 19 januari 2005 ger Martin Wolf den årliga Sven Rydenfelt-föreläsningen i Lund.
Läs mer hos Timbro.
Adjusting to the dollar's inevitable fall
Altering the path of the US external accounts, while sustaining global economic activity, is among the biggest challenges now confronting policymakers.
Martin Wolf Financial Times November 24 2004
America on the comfortable path to ruin
These two facts - the rest of the world's surplus output and the US goal of full employment - explain the global macro-economic picture
Martin Wolf, Financial Times, August 18 2004
America's dangerous deficit
Since the high and rising
US current account deficit is one of the most remarkable features of the world
economy, deciding whether it matters is of some significance
Martin Wolf, Financial Times August 24 2004
There are big medium-term risks ahead
Global
macroeconomic imbalances, the impact of a rising Asia, protectionism and
vulnerability to terrorist outrages
Martin Wolf 20/7 2004
A housing market collapse draws nearer
Martin Wolf, Financial Times 16/4
2004
Bubbles have three stages: expansionary; then contractionary; and,
finally, perhaps inflationary.
The world economy is now in the second stage.
That is why today's worry is deflation. But it is unlikely to stay there for
ever. Ultimately, efforts to ward off post-bubble deflation risk creating its
opposite.
Martin Wolf Financial Times 28/5 2003
The dollar, said John Connolly, treasury secretary
to Richard Nixon, "is our currency, but your problem".
Gerhard
Schröder, Germany's chancellor, knows what he meant
A world in which
macroeconomic health can be achieved only at the expense of ever greater
private and public debt accumulation in its biggest and richest economy is
unstable. It is also perverse.
Martin Wolf,
Financial Times 1/3 2004
Martin Wolf, A testing
year for the world
Financial Times, January 3, 2001-01-03
The first
test is for Alan Greenspan - The second test is of the “new economy”
- The third test is for the US stock market
Risking a hard
landing
Martin Wolf , Financial Times, December 6, 2000
Europe's constitutional dilemma
Martin Wolf, FT, July 4, 2000
Analysis of companies' net
worth suggests that Wall Street's high-flying stocks remain fundamentally
over-valued
From Marintin Wolf, FT, June 27, 2000
Growing too fast for
comfort
A rapid rise in productivity has raised the US growth rate but
brought with it an unsustainable level of demand
Martin Wolf, FT, 4 Apr
2000 Something remarkable is happening in the US economy.
To some it is a
bright "new economy". To others it is the bubble to end all bubbles.
US ECONOMY: Walking on
troubled waters
Martin Wolf, FT, January 12, 2000
Dear Mr
Greenspan, Congratulations on your renomination as chairman of the Federal
Reserve.
A
miraculous error
Martin Wolf, FT, September 29 1999
The Federal
Reserve inadvertently allowed unsustainable growth in the US,
but this
helped to offset the collapse of demand elsewhere and avoid deep world
recession
Martin Wolf: Threats of
depression
Financial Times 98-08-26
Martin Wolf on NAIRU, May, 1999
The
Risks and Rewards of EMU
Martin Wolf, Financial Times, May 26, 1999
German handicap
Martin Wolf, Financial Times, March 31, 1999
Few have realised the most
dangerous feature of Emu:
it has locked Germany into a seriously
uncompetitive real exchange rate