The Hamburg Fiasco C. P. Chandrasekhar

The summit of the leaders of G20 meetings that met in Hamburg early July was nothing short of a fiasco. Outside the meeting, the massive protest demonstration and the unwarranted aggression of a huge police force made clear that these leaders lacked legitimacy. Inside, all that could be achieved was a “unanimous” communique, in which in language rendered almost meaningless by diplomacy, the contrary opinions of the leaders, especially the differences between the US and the other 19, were spelt out. To the credit of the drafters of the declaration it must be said that they managed one half-truth at…

Bailout Bonanza C.P. Chandrasekhar

Ordered by Congress on the basis of the Frank-Dodd financial reform bill, the United Sates Federal Reserve recently dumped on its website details of around 21,000 lending transactions it undertook to deal with the crisis that engulfed the financial system and threatened a collapse comparable with the Great Depression. Through multiple programmes referred to with confusing acronyms, the Fed clearly launched a massive bailout. Besides facilities that provided credit on an overnight basis, the Fed implemented programmes such as: (i) the mortgage-backed securities (MBS) programme under which MBS could be exchanged for cash; (ii) the term auction facility that provided…

On the Dollar’s Decline C.P. Chandrasekhar

If time lags matter, news of the dollar’s demise as the world’s principal reserve currency is grossly exaggerated. That prediction has been periodically heard at least since the early 1970s when the United States brought the Bretton Woods arrangement to an end by breaking the link between dollar and gold. As is obvious, whatever else may be said of the role of the US in the world system, this expectation of the dollar’s displacement as the currency that is as good as gold has not materialised. This, however, is not to say that the dollar fulfils its role adequately or…

The Global Liquidity Paradox C.P. Chandrasekhar and Jayati Ghosh

One global fall-out of the sub-prime crisis in the US is a liquidity squeeze that central banks in the developed countries are attempting to counter by pumping liquidity into the system and reducing interest rates. This is indeed paradoxical, since the crisis in the first place was a result of an excessive build up of liquidity in the international system, leading to a synchronized boom in stock and real estate markets across the globe. Explaining the paradox requires understanding how the liquidity spiral occurs and how such liquidity is put to use by a liberalized and globalized financial system. Global_Liquidity…

The Global Divide: Inequality in the world economy Marc Lee

Inequality is a pressing issue in the global economy. This new report by the Canadian Centre for Policy Alternatives finds that inequality is extremely large and growing, both between and within countries. The World Bank and IMF have been significant contributors to the rise in global inequality. global_divide (Download the full text in PDF format)