Balloons explode, don’t they?

It is amazing that so soon after having witnessed what disasters comes from having empowered credit agencies to put up their AAA signs showing the roads to no risk-lands Arvind Subramanian and John Williamson dare to recommend setting up zones for asset prices. “Dear I don’t think we should buy our house here because it has a 343 bubble rating. Perhaps I should look for a job in Toledo?”, “Put the puritans in charge of the punchbowl”, February 12.

There is nothing wrong for a central banker to keep an eye on assets prices such as houses to decide on monetary policies but if he wants to make any official use of it he should first make sure he does not own a house so as to be free of any conflict of interest but, more importantly, he needs to remember that bubbles, even though they might hurt when they explode, have a role to play in taking human and economic development forward.

A world without bubbles gets to be closer to a world without illusions.

End of story…now what?

Sir how sad that the Washington Consensus is just a mythical phrase coined by John Williamson and not a document or a statue because, if it was, we could at least burn or topple it just to get over it, once and for all, and save us so much unnecessary obsessed rambling about how malicious it was, even though most of us agree that whether the recipes in that consensus worked or not had mostly to do with what ingredients were used, who cooked and how the cooking was done.

In “The Fund faces up to the competition” David Rothkopf, October 22, sort of gleefully talks about the IMF having soften their conditions for helping out, without reflecting on the possible fact that they now are just prescribing painkillers instead of remedies, because they, like all, have run out of answers.

The alternatives that Rothkopf seems to favour as he says that “Mr. Chávez distributed four times as much aid in South America” are plain ludicrous since the source of that help is the higher price that has to be paid for oil; and for countries like Honduras and Nicaragua no aid comes even close to being as significant as the remittances sent by their workers, from the US.

The Washington Consensus as interpreted and implemented did not work, at least so we think, end of story; and so now what?

The Basel Consensus on bank regulations has demonstratively really not worked, but there we have unfortunately not yet reached the phase of “end of story, now what?”