Comments on: A Bretton Woods II worthy of the name http://www.globaldashboard.org/2008/11/13/bretton-woods-2/ Global risks and how to respond to them, edited by Alex Evans and David Steven Sat, 11 Feb 2012 13:49:12 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: paolo raffone - The CIPI Foundation http://www.globaldashboard.org/2008/11/13/bretton-woods-2/comment-page-1/#comment-5141 paolo raffone - The CIPI Foundation Fri, 14 Nov 2008 00:59:28 +0000 http://www.globaldashboard.org/?p=2728#comment-5141 The 2008 crisis hits two targets: - The monetary system, particularly the floating exchange rate mechanism - The financial market, particularly the creative valuation methods On the side of the international monetary system, the 2008 financial crisis hides intense geopolitics manoeuvres that are intended to create the conditions for a new world order to emerge. Hence, a new international monetary system should be established creating some regulations for the floating of major world currencies. Most probably, it will not see any more the predominance of one currency on all the others. On the side of the financial market, the 2008 crisis is virulently correcting the asymmetry of the market. It is deleveraging the stock values back to the early 1980s. In other terms, the market is purging the system and clearing out the creative valuation of stocks. However painful the financial and economic consequences may be, the geopolitical implications hurt the most all Western governments. Albeit the horrific financial data pounded daily by the media, economics fundamentals appear to be at odds with such data. The analysis hints on the responsibility of politics and media in leveraging on the current crisis. While governments are struggling to re-assert some sort of “imperial” sovereignty in the market, the globalized system has largely bypassed them. The nomadic attribute of capital does not change the requirements for market efficiency and return on investments. The current violent deleveraging and disinvestment in the financial markets confirms this attitude. The analysis argues that governments squabbling with markets over regulations risk making more damages than profits. Instead, global regulatory systems should be set to prevent and repress financial piracy as well as unworthy management conducts of financial actors. The benevolent treatment to commercial and central bankers so far is sending the wrong signal to both shareholders and stakeholders. The correlation between economic and financial data with geopolitics endeavours suggests that no long-term economic and financial solution can be implemented without first re-defining a sustainable geopolitical environment. Today time is not ripe to change the 1944-45 balance of world powers. Sooner rather than later it will be possible to tackle this critical issue and to found a more inclusive international governance system, though establishing a new world order. However, it is of paramount importance that the debate and the diplomatic negotiations resume as soon as possible around the reform of the Security Council of the United Nations. The WTO model may prove useful also to reform the IMF and the World Bank systems. This would probably spare the world new geopolitical tensions and armed conflicts. Politics first! In order to see beyond the numbers it is necessary to set aside the temper on the ongoing crisis. Financials appear to be at odds with economic fundamentals. The media obsessive spam of financial data and demand driven negative reports are shadowing the economic reality. Haunting the economic life with the ghost of the 1930s is dramatically wrong. For instance, the industrial production sloped 47% in 1930 while in August 2008 it was up 4.5%. Similarly, the GDP is currently stagnating or in slight regression while in the 1930s dropped 30%. US unemployment rate was 25% in 1930 while today is about 6.1%. Economics first! It should be acknowledged that the globalization and the market are well alive while the states and the governments are struggling to re-assert some sort of “imperial” sovereignty in a system that has largely bypassed them. The nomadic attribute of capital in the globalized world does not change the requirements for market efficiency and return on investments. The current violent deleveraging and disinvestment in the financial markets confirms this attitude. Governments squabbling with markets over regulations risk making more damages than profits. Instead, global regulatory systems should be set to prevent and repress financial piracy as well as unworthy management conducts of financial actors. The benevolent treatment to commercial and central bankers so far is sending the wrong signal to both shareholders and stakeholders. Market first! The 2008 crisis hits two targets:

- The monetary system, particularly the floating exchange rate mechanism
- The financial market, particularly the creative valuation methods

On the side of the international monetary system, the 2008 financial crisis hides intense geopolitics manoeuvres that are intended to create the conditions for a new world order to emerge. Hence, a new international monetary system should be established creating some regulations for the floating of major world currencies. Most probably, it will not see any more the predominance of one currency on all the others.

On the side of the financial market, the 2008 crisis is virulently correcting the asymmetry of the market. It is deleveraging the stock values back to the early 1980s. In other terms, the market is purging the system and clearing out the creative valuation of stocks. However painful the financial and economic consequences may be, the geopolitical implications hurt the most all Western governments.

Albeit the horrific financial data pounded daily by the media, economics fundamentals appear to be at odds with such data. The analysis hints on the responsibility of politics and media in leveraging on the current crisis.

While governments are struggling to re-assert some sort of “imperial” sovereignty in the market, the globalized system has largely bypassed them. The nomadic attribute of capital does not change the requirements for market efficiency and return on investments. The current violent deleveraging and disinvestment in the financial markets confirms this attitude. The analysis argues that governments squabbling with markets over regulations risk making more damages than profits. Instead, global regulatory systems should be set to prevent and repress financial piracy as well as unworthy management conducts of financial actors. The benevolent treatment to commercial and central bankers so far is sending the wrong signal to both shareholders and stakeholders.

The correlation between economic and financial data with geopolitics endeavours suggests that no long-term economic and financial solution can be implemented without first re-defining a sustainable geopolitical environment. Today time is not ripe to change the 1944-45 balance of world powers. Sooner rather than later it will be possible to tackle this critical issue and to found a more inclusive international governance system, though establishing a new world order. However, it is of paramount importance that the debate and the diplomatic negotiations resume as soon as possible around the reform of the Security Council of the United Nations. The WTO model may prove useful also to reform the IMF and the World Bank systems. This would probably spare the world new geopolitical tensions and armed conflicts.
Politics first!

In order to see beyond the numbers it is necessary to set aside the temper on the ongoing crisis. Financials appear to be at odds with economic fundamentals. The media obsessive spam of financial data and demand driven negative reports are shadowing the economic reality. Haunting the economic life with the ghost of the 1930s is dramatically wrong. For instance, the industrial production sloped 47% in 1930 while in August 2008 it was up 4.5%. Similarly, the GDP is currently stagnating or in slight regression while in the 1930s dropped 30%. US unemployment rate was 25% in 1930 while today is about 6.1%.
Economics first!

It should be acknowledged that the globalization and the market are well alive while the states and the governments are struggling to re-assert some sort of “imperial” sovereignty in a system that has largely bypassed them. The nomadic attribute of capital in the globalized world does not change the requirements for market efficiency and return on investments. The current violent deleveraging and disinvestment in the financial markets confirms this attitude. Governments squabbling with markets over regulations risk making more damages than profits. Instead, global regulatory systems should be set to prevent and repress financial piracy as well as unworthy management conducts of financial actors. The benevolent treatment to commercial and central bankers so far is sending the wrong signal to both shareholders and stakeholders.
Market first!

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