The Washington meeting of the Heads of State to take place shortly reflects recognition of the need for international cooperation in the regulation of financial institutions and markets. There has been international cooperation in recent months, mainly among the major central banks, notably the coordinated interest-rate cuts that took place recently, and the provision of dollar financing by the Federal Reserve to the European Central Bank, which needed dollars to relend to European banks that could not obtain them commercially.
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We are entering in different phase in stock market weakness, one that gives me some cause for optimism. I believe that in recent weeks what we have witnessed is a transition from “liquidity fear” to “recession fear” or for the more technical, from liquidity risk to credit risk. It may be hard to notice the difference. Both forces are bad for stock markets in general. But they have a different impact on individual stocks and therein lies the opportunity for opportunistic investors who don’t mind a bare-knuckle ride in search of superior returns.
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Everyday, as a matter of urgency, central banks and governments are fighting against the fire. An amazing blow to confidence has burst within the most sophisticated financial system which has ever been experienced. Before smoke and dust fall down, it is wise to investigate the ways out on which governments should drive the players of this drama in order to contain damages and speed up reconstruction.
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The 1980s have seen the 2nd wave of economic globalization of modern history. It should not end like the first during the 19th century. Economic crises and wars often keep pace. The first energy shock of 1973, the start of the economic reforms in China at the end of the 1970s then in India and finally the fall of the Berlin Wall in 1989, gradually led to a huge transformation of the world economy. The idea to gather a G7 or even the G8 under the current format is clearly unsuitable when we see clouds accumulating on emerging countries, China and India included.
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In the wake of the tragic Sichuan earthquake, something big is astir in China. It was not just the earth that shook on this peaceful afternoon of May 12, 2008. Society and political world moved as well. Future historians may well remember this month as a watershed moment. The time has come for us to take note and change course in our understanding of China. This is probably one of the most important tasks in front of us when we map out our future decades. The stakes could not be higher.
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The ‘fiscal package’ passed on 21 August 2007 (known in France under its acronym ‘TEPA’) was sold by the new government as an important tool to bolster confidence and thus make reforms easier. Since then, it has become the main target of the government critics in the French political debate. When the project was made public, we had concluded that, from a strict economic angle, the fiscal side of the first reforms announced by PM Francois Fillon was ‘an unnecessary fiscal stimulus without long-term merits’. Real life has confirmed this diagnosis: the ‘fiscal shock’ was based on flawed economics, namely that fiscal stimulus generate high growth returns, and proved counter-productive in the French political debate. Yet, the new government’s fiscal policy is not as negative as some critics are saying, and it is not too late to re-design it so that budget decisions would support structural reforms.
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Over the last two decades, many of us have felt the gradual and expanding involvement of technological information and the internet in our lives. However, more often than not, we fail to appreciate the subtle and pervasive implications these developments may have for the ways we think and behave. The accumulation of information, from the growing expansion of the trivial to the serious aspects of life that are recorded in databases (e.g. financial, medical or legal records, online habits) and the increasing sophistication of computer technology converge to confer to data and information a new and interesting role in the lives of people and the functioning of institutions. Information is not any longer confined within the world of computer-based experts.
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