Tag: Gordon Brown

Global Bubbles: The Geithner-Brown Split

There are two broad views on our newly resurgent global bubbles – the increase in asset prices in emerging markets, fuelled by capital inflows, with all the associated bells and whistles (including dollar depreciation).  These run-ups in stock market values and real estate prices are either benign or the beginnings of a major new malignancy.

The benign view, implicit in Secretary Geithner’s position at the G20 meeting last weekend, is most clearly articulated by Frederic (Ric) Mishkin, former member of the Fed’s Board of Governors and author of ” The Next Great Globalization: How Disadvantaged Nations Can Harness Their Financial Systems To Get Rich”, in the Financial Times this morning.

“The second category of bubble, what I call the ‘pure irrational exuberance bubble, is far less dangerous because it does not involve the cycle of leveraging against higher asset values.  Without a credit boom, the bursting of the bubble does not cause the financial system to seize up and so does much less damage”

In other words: keep monetary policy right where it is, and don’t worry about financial regulation. Continue reading “Global Bubbles: The Geithner-Brown Split”

Davos World Economic Forum: A Viewer’s Guide

The big annual economic meeting at Davos opens next week (Jan 28-Feb 1 are the official dates), and the discussion there – in both formal and informal interactions – is worth scouring for indications of the current situation around the world and where we all may be heading.

Given the likely composition of the main players this year – world corporate leaders and the non-US policy elite (with the new US policymakers stuck at home, doing real work; update: this is now confirmed by Bloomberg for Summers and Bair) – I would suggest viewers at home and on the ground keep watch for answers to the following.

  1. Are we on the same planet? It is not unheard of for Davos participants to appear as if they are living in their own bubble.  Watch for opulent parties and excessive consumption, particularly if the people involved have nominated themselves for any kind of government handout.  If you meet someone from Merrill, ask if their attendance fees came out of 4th quarter earnings – or if there is still more bad news to come. Continue reading “Davos World Economic Forum: A Viewer’s Guide”