Secondary Sources: Greenspan, Globalization, Regulation, Food Prices
WSJ.COM
A roundup of economic news from around the Web.
# Greenspan Interview: Former Federal Reserve Chairman Alan Greenspan tells Bloomberg that we're in a "pale" recession. "Greenspan said that continued stagnation for the rest of this year may be the best the U.S. can hope for and might even be the most likely outcome. 'That's certainly the most benevolent scenario,' he said. 'It's not all that far from being the most probable.' ? 'We're in a recession,' he said. 'But this is an awfully pale recession at the moment. The declines in employment have not been as big as you'd expect to see.' ? 'Until there are stabilized prices of homes, and I think they have a good way to go down, you still have prospective losses' for financial companies and investors. 'It's too soon to tell' if the worst of the credit crunch is over, he added."
# Promoting Globalization:Lawrence Summers writes in the Financial Times that the U.S. needs a new strategy to promote globalization. "First, the U.S. should take the lead in promoting global co-operation in the international tax arena. There has been a race to the bottom in the taxation of corporate income as nations lower their rates to entice business to issue more debt and invest in their jurisdictions. Closely related is the problem of tax havens that seek to lure wealthy citizens with promises that they can avoid paying taxes altogether on large parts of their fortunes. It might be inevitable that globalization leads to some increases in inequality; it is not necessary that it also compromise the possibility of progressive taxation. Second, an increased focus of international economic diplomacy should be to prevent harmful regulatory competition."
# Regulation:Alan Blinder, writing for the New York Times, looks at what reforms should look link in response to the mortgage crisis. "An inordinate share of the dodgiest mortgages granted in recent years originated outside the banking system. They were marketed aggressively, sometimes unscrupulously, by mortgage brokers who were effectively unregulated; we have now lived to regret that arrangement. The need for a federal mortgage regulator — including a suitability standard for mortgage brokers — is painfully obvious. Next, we should resist calls to scrap the 'originate to distribute' model, wherein banks originate mortgages, which are then packaged into mortgage pools and turned into mortgage-backed securities that are sold to investors around the world." However, Paul Krugman writes in the Times that the will to reform may be fading. "Cross your fingers, knock on wood: it?s possible, though by no means certain, that the worst of the financial crisis is over. That?s the good news. The bad news is that as markets stabilize, chances for fundamental financial reform may be slipping away. As a result, the next crisis will probably be worse than this one."
# Food Prices:Paul Collier responds in Comments to a column posted last week at the Financial Times by Martin Wolf about the runup in food prices. "Why have food prices rocketed? Paradoxically, this squeeze on the poorest has come about as a result of the success of globalization in reducing world poverty. As China develops, helped by its massive exports to our markets, millions of Chinese households have started to eat better. Better means not just more food but more meat, the new luxury. But to produce a kilo of meat takes six kilos of grain. Livestock reared for meat to be consumed in Asia are now eating the grain that would previously have been eaten by the African poor. So what is the remedy? The best solution to a problem is often not closely related to its cause (a proposition that that might be recognized in the climate change debate). China?s long march to prosperity is something to celebrate. The remedy to high food prices is to increase food supply, something that is entirely feasible. The most realistic way to raise global supply is to replicate the Brazilian model of large, technologically sophisticated agro-companies supplying for the world market." blogs.wsj.com |
