Economic solutions from the “private sector”
Josh Brown, aka the Reformed Broker, had a great post this week. The gist of it was this:
the fact that the world may be crumbling is not a valid reason to halt important work – it might even be a reason to push harder.
If you’ve been following this blog or the Finance Addict Twitter feed then you will have ready plenty arguments of why all’s not quite well in the world economy, let alone in Europe. And there’s more.
Here is Reuters quoting Sean Darby, a Hong Kong-based chief global equity strategist for the investment bank Jefferies:
“I cannot find an economy at the moment where there’s a natural pro-growth policy. There isn’t one.”
Meanwhile Chris Giles of the Financial Times cheered us up with news of a “policy paralysis”:
[...] Bob Zoellick, the outgoing president of the World Bank, said the world was facing a very dangerous moment. “If people don’t come to the fundamental decisions, first at a national level, but work it out internationally, very bad things could happen.”
The FT/Brookings Tiger index showed world growth stalling after an initial rapid recovery from the 2008-09 economic crisis. Growth in the US was slowing, much of Europe is in recession, China’s growth outlook has weakened, the reform processes in India have stalled and other large emerging economies have slowed dramatically.
Prof Prasad said: “The engines of world growth are running out of steam while the trailing wagons are going off the rails. Emerging market economies are facing sharp slowdowns in growth while many advanced economies slip into recession”.
Fear is getting the upper hand in the world economy, and you don’t need to understand George Soros’ thoughts on reflexivity to get why such pessimistic sentiment – though understandable — will only make things worse.
But it also does no good to lull ourselves into fairytales in which things magically get better with no exertion on our own part. So let’s look at an example of a few folks deciding to take matters into their own hands.
On June 6 Sheila Bair, the former head of the FDIC, announced that enough is enough. Working with a group of distinguished public sector veterans, academics and private sector experts, Bair has formed a Systemic Risk Oversight Council to look over the shoulder of those whose job it is to oversee systemic risk in the first place. Bair and others like Simon Johnson from MIT, former Senator Bill Bradley and former Treasury Secretary Paul Volcker have created a watchdog for the watchdog. The New York Times has Bair’s take on how the official regulatory efforts are going thus far:
In many areas, Ms. Bair said, “nothing has been finalized. F.S.O.C. [the Financial Stability Oversight Council authorized by Dodd-Frank] is M.I.A. O.F.R. [Office of Financial Research] is barely functional. The Volcker Rule is mired in controversy. Securitization reform is stalled. They haven’t even proposed new bank capital rules. The public is becoming cynical about whether the regulators can do anything right, which is undermining support for reforms.”
Bair and her cohorts seem to believe the old adage: “If you want something right, you’ve got to do it yourself.” Best of luck to them, to us and to anyone who realizes it’s now time to step up to the plate.
Category: Solutions
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reformedbroker