Economy

Wednesday, August 25, 2010

Towards a New Economic Order?

The recent financial crisis has weakened the developed world economies, promoted “beggar-thy-neighbor” policies that benefited some nations at the expense of others and eroded support for continued globalization.

As the world recovers from the financial crisis, many governments have introduced measures to help economies rebound. While many of these are quick solutions, the fundamental structure of our economic order has to change, argues Jagadeesh Gokhale. He outlines a few reforms for long-term growth.

Friday, July 23, 2010

Leaving the euro: What’s in the box?

In Argentina, the devaluation caught people with pesos in their wallets, and the need for liquidity supported a steady demand for pesos all through the first quarter of 2002 when it depreciated by 300%. By contrast, a “new drachma” or a “new peseta” would need to create from scratch a demand for a currency born weaker by design. Could it work?

Rumours of Eurozone break-up are mounting. This column argues that exiting a strong currency for a weak one poses almost unthinkable challenges, from the redenomination of contracts and the imposition of bank restrictions to the restructuring of external debt and limiting of capital mobility.

Thursday, July 22, 2010

Data Underline Some Banks′ Dependency on ECB

The latest data from central banks underline how negative sentiment toward some European banks has become: Banks in Portugal, Ireland, Greece and—most of all—Spain increased their borrowings from the ECB to record levels in June as more institutions found their access to wholesale money markets barred.

Regulators Mull Early Release of Stress-Test Results. As the European Union prepares to prove to the world how solid its banks are, new data from around the euro area show that its weaker members' dependence on the European Central Bank has never been higher.

Monday, July 19, 2010

Bank Stress Tests: Too soon to write them off

Stress tests are certainly needed. Banks and transparency are not always a good combination. When a carmaker admits it has a hole in its balance-sheet, its factories are still there a week later; when a bank does so it usually suffers a devastating run. This is why regulators sometimes like to deal with dud banks in secret.

When America did public stress tests on its banks in 2009 they helped end the panic on Wall Street. The Federal Reserve opened banks’ books, imposed a consistent view about how bad losses might be and forced banks that lacked capital to raise more, with the taxpayer acting as a backstop investor.

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