The current financial crisis has not only traumatized the financial system in the United States but has sent shockwaves across the globe.
Furthermore, the financial crisis has given rise to a new bout of "transatlantic sniping," according to the New York Times. German Finance Minister Peer Steinbrück stated yesterday that "the financial market crisis is above all an American problem," and "the US will lose its status as the superpower of the world financial system." European banks and sovereign wealth funds will have an increased role in a multipolar financial world.
Despite tensions, transatlantic discussion will remain an important part of the story, and the need for international cooperation is now undeniable in the face of the current crisis.
The Issues:
Clear and specific policies will be needed to solve the problems. Here are some expert opinions concerning the broad issues facing policy makers today:
1. Should the US Secretary of the Treasury Paulson have broad authority?
- Dean Baker, co-director of the Center for Economic and Policy Research in Washington, argues that to put $700 billion into the hands of Henry Paulson is a mistake. He says that Paulson is "a guy who totally missed this [the financial crisis], and has been wrong about almost everything."
- Carsten Meier of the Kiel Institute for the World Economy (IfW) notes that such a package would effectively let those responsible for the crisis "off the hook." Furthermore, Meier argues that by doing so, the US government is hindering the financial reforms truly needed.
- William H. Gross, the chief investment officer of the investment fund PIMCO, is more optimistic: Because assets will be sold at bargain prices, the Treasury (and anyone else who decides to get onboard) could eventually reap a 10 to 15 percent yield after all is said and done.
2. Should the EU contribute to a rescue package?
- European economic experts, such as Stefan Kooths of the German Institute for Economic Research (DIW) and Diemo Dietrich from the Halle Institute for Economic Research (IWH), argue that Europe should not have to bear the burden of America's poor economic choices. As the US government calls on European countries to help in the Wall Street rescue package, experts seem to agree that this is a flawed course, sending the wrong signal to those who caused the crisis in the first place.
- Like several other governments, Germany has now refused to chip into Paulson's $700 billion plan to salvage several institutions.
- John Bruton, the EU ambassador to the US, disagrees: "The main goal in present circumstances should be to spread the cost as widely and as thinly as possible. In that way, costs can be absorbed and panic avoided. Other countries, apart from the US, may also have to take a hand in the work."
3. How to reform financial regulation reform to prevent future crises?
- Adam Posen notes that while deregulation might have gone too far, that was not the only problem: regulators were not enforcing the regulations that were already in place. The global nature of today's market calls for global financial standards. Posen admits, however, that it is not yet clear how to accomplish such a task and, like Steinbrück recently claimed, the US position to help coordinate and set global standards has been notably weakened.
- Jeffrey Garten, former US Undersecretary of Commerce for International Trade and professor at the Yale School of Management, is calling for the formation of a Global Monetary Authority. He contends that the "current global institutional apparatus is woefully incapable of overseeing the financial system that is evolving."
Dear members of atlantic-community.org,
These are just some of the questions facing policy makers today. Others include: Is the Paulson plan an effective response to the financial crisis in the US? How large a role should governments play in the private sector? Should the world devise more regulatory standards, and if so, how? To
what degree can greater transparency and regulation prevent another
crisis? Has the US truly lost its status as the global financial leader? Is this the dawn of global financial multipolarity?
We encourage you to publish and comment on this pressing, transatlantic issue.
The floor, as always, is yours.
- 16
September 27, 2008
Jeff Hathor
We embrace global economics with a plan to outsource jobs to China and India and replace those jobs with next level or new technology jobs. We follow the first part of the plan (outsourcing jobs) fully, and then only partially follow the second part of the plan (Create new technology jobs).
Please see www.engfuture.com for The rest of the second part of the plan.
Namely: Expanding into new areas of technology where we already have a super foundation ready to advance and at the same time already have and interest and a need to expand into these areas. Something extreme is needed. Why? Because according to the Federal Reserve Bank: Half the money in the USA changes hands each day under normal business or economic situations. Obviously people without jobs cannot exchange money so the machine slows or stops due to some missing gears as we are now experiencing.
In many ways Europe has created the modern economics both by promoting international shipping and trade long ago, and more recently by inventing modern machinery and electronics (radios, telephones and computers). Need I also mention that Europe also invented Honest business practices even to the point of a Handshake with ones word as binding. Certainly there is room for modifying plans along the way, yet every plan must be followed through with or a new plan made.
Question: Is paying off institutions just chasing the Effects and not dealing with the cause which is not enough jobs? Would we be better off using the money to fund some super projects or ignore the cause and have this same situation re-occur in another 1 to 4 years?