If it isn’t totally broke, don’t tinker with it too much.
Sir Martin Wolf argues many reasons for “Why agreeing a new Bretton Woods is vital” November 4, but, given that one of the fundamental pillars of our whole financial system, namely the market’s confidence in the dollar, is in fairly good shape, if only perhaps because of lack of confidence in anything else, we should at least be very careful not to tinker too much with something that might not be that broken.
Of course there are some precautionary or corrective measures. Among these and in reference to when Wolf says “Keynes would be horrified that the world has let the genie of free capital flows out of the bottle” I have always considered that slowing down somewhat the capital movements around the world, with some type of there’s-no-need- to-so-much-rush-tax, would help us to avoid some of the stampedes and therefore benefit us all, in a systemic way.
We also should not forget that besides the financial system there are some other very serious unresolved issues that limit our current growth possibilities, like the environment and energy. Had for instance some emerging countries not accumulated reserves, and invested them in US public debt, and pushed instead their on the margin much more energy intensive domestic growth, we would perhaps have seen oil well over 200 dollar per barrel. In this respect, more than a new Bretton Wood, we need to decrease the consumption of oil in the developed countries, so as to open up the growth possibilities for the developing world that do not destabilize the whole world.
As to the huge foreign currency reserves of emerging countries let us not forget that the real danger with them is not so much their size but that they are controlled by so few government officials. Had these reserves belonged to many millions of citizens instead, it would then have been called capital flights, and they would have been pursued without clemency.
And then of course one of the most vital what to do’s, is to get to the bottom to why the world was not able to react when it knew or should easily have known, that things were heading in the wrong directions. In other words… where were Martin Wolf’s many influential economists when they were sorely needed?
Of course there are some precautionary or corrective measures. Among these and in reference to when Wolf says “Keynes would be horrified that the world has let the genie of free capital flows out of the bottle” I have always considered that slowing down somewhat the capital movements around the world, with some type of there’s-no-need- to-so-much-rush-tax, would help us to avoid some of the stampedes and therefore benefit us all, in a systemic way.
We also should not forget that besides the financial system there are some other very serious unresolved issues that limit our current growth possibilities, like the environment and energy. Had for instance some emerging countries not accumulated reserves, and invested them in US public debt, and pushed instead their on the margin much more energy intensive domestic growth, we would perhaps have seen oil well over 200 dollar per barrel. In this respect, more than a new Bretton Wood, we need to decrease the consumption of oil in the developed countries, so as to open up the growth possibilities for the developing world that do not destabilize the whole world.
As to the huge foreign currency reserves of emerging countries let us not forget that the real danger with them is not so much their size but that they are controlled by so few government officials. Had these reserves belonged to many millions of citizens instead, it would then have been called capital flights, and they would have been pursued without clemency.
And then of course one of the most vital what to do’s, is to get to the bottom to why the world was not able to react when it knew or should easily have known, that things were heading in the wrong directions. In other words… where were Martin Wolf’s many influential economists when they were sorely needed?
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