Wednesday, September 02, 2009
' Fixing Gloabl Finance' by Martin Wolf
Finance rests on promises - which, by their very nature, can be broken ! Above all, the recipients of the promises know that, they can be broken ! This makes financial system vulnerable to changes in expectatins about an inherently uncertain future......... Governments are always essential players in any set of financial promises, even if they themselves have not made them ! They provide the institutions that help make certain that, promises re kept, and they can intervene to ensure that they cannot be kept !
The debts they incur and the money they issue are the basis for any set of financial contracts.
Trust in foreign governments is often limited, since outsiders know that, such a government is not accountable to them ! It is particularly limited in the governments of emergining market economies, whifch tend to be more corrupt, more inefficeint, and often more populist than those of the high-income countries.........
The macroeconomic question is - how adjustment of the global balance of payments might occur. A key issue is the time horizon, since that is likely to have an important impact on the needed changes in real ( and nominal) exchange rates, the slower adjustment, the smaller these changes will need to be. But a deeper set of questions must be addressed : whether there exists a set of policy changes and developments, that would allow a liberal global financial system to tranfer capital to emerging market economies without participating in large scale crises.
From ' Fixing Global Finance' by Martin Wolf
The debts they incur and the money they issue are the basis for any set of financial contracts.
Trust in foreign governments is often limited, since outsiders know that, such a government is not accountable to them ! It is particularly limited in the governments of emergining market economies, whifch tend to be more corrupt, more inefficeint, and often more populist than those of the high-income countries.........
The macroeconomic question is - how adjustment of the global balance of payments might occur. A key issue is the time horizon, since that is likely to have an important impact on the needed changes in real ( and nominal) exchange rates, the slower adjustment, the smaller these changes will need to be. But a deeper set of questions must be addressed : whether there exists a set of policy changes and developments, that would allow a liberal global financial system to tranfer capital to emerging market economies without participating in large scale crises.
From ' Fixing Global Finance' by Martin Wolf
