Comments on: Exchange Rates: There is a Better Way http://www.thomaspalley.com/?p=90 Economics for Democratic and Open Societies Thu, 09 Sep 2010 20:07:52 +0000 http://wordpress.org/?v=2.6 By: s http://www.thomaspalley.com/?p=90#comment-74753 s Tue, 27 Nov 2007 18:08:53 +0000 http://www.thomaspalley.com/?p=90#comment-74753 how about something simpler than a "managed" regime. How about flexible exchange rates and letting the amrket work instead of the US subsiding foreign mercantilism. Yeas some of this stuff is actually doesn;t need the ten page spreadsheet to solve the obvious. models are great in the abstract as is economics. So I guess the bottom line here is that now we have no choice but to make a bad tradeoff given we have offshored our industrial base. Looks like that financial services advanatage is not so much...it was abstract 18th century economic theories that got us here. why don;t we start with some new thinking...instead of retrograde solutions that did nothing but compound the problem. how about something simpler than a “managed” regime. How about flexible exchange rates and letting the amrket work instead of the US subsiding foreign mercantilism. Yeas some of this stuff is actually doesn;t need the ten page spreadsheet to solve the obvious. models are great in the abstract as is economics. So I guess the bottom line here is that now we have no choice but to make a bad tradeoff given we have offshored our industrial base. Looks like that financial services advanatage is not so much…it was abstract 18th century economic theories that got us here. why don;t we start with some new thinking…instead of retrograde solutions that did nothing but compound the problem.

]]> By: Marie Duggan http://www.thomaspalley.com/?p=90#comment-70958 Marie Duggan Fri, 02 Nov 2007 15:32:17 +0000 http://www.thomaspalley.com/?p=90#comment-70958 It seems that many Asian countries decided after the 1997-98 currency crisis that going to the IMF was something they must never do again, as IMF bailouts required forfeiting sovereignty over economic decisions. I'm thinking here of the IMF forcing Korea to break the government-industry link behind the Chaebols as a condition of getting a loan. Thus, the lesson was that if you want to have an economic policy different from that which the US would approve of, then you must stockpile reserves so that you will never again have to beg. So stockpiling reserves--and the undervalued currency that creates the stockpile--then became the key to economic sovereignty. Thus, while I like your argument very much, it seems that the world is actually moving in a different direction--the impetus is not toward rectifying imbalances, but rather the lesson learned from recent history is that imbalance (I'm thinking the Asian surpluses) is essential. It seems that many Asian countries decided after the 1997-98 currency crisis that going to the IMF was something they must never do again, as IMF bailouts required forfeiting sovereignty over economic decisions. I’m thinking here of the IMF forcing Korea to break the government-industry link behind the Chaebols as a condition of getting a loan. Thus, the lesson was that if you want to have an economic policy different from that which the US would approve of, then you must stockpile reserves so that you will never again have to beg. So stockpiling reserves–and the undervalued currency that creates the stockpile–then became the key to economic sovereignty. Thus, while I like your argument very much, it seems that the world is actually moving in a different direction–the impetus is not toward rectifying imbalances, but rather the lesson learned from recent history is that imbalance (I’m thinking the Asian surpluses) is essential.

]]> By: euroscot http://www.thomaspalley.com/?p=90#comment-70841 euroscot Thu, 01 Nov 2007 17:46:35 +0000 http://www.thomaspalley.com/?p=90#comment-70841 "The immediate need is for a coordinated global re-alignment of exchange rates that begins to smoothly unwind existing imbalances. . . China’s participation is key as it has large trade surpluses with both the U.S. and Europe. . . Finally, markets must believe this realignment it will hold." Huge compromises will surely be needed if the world's politicians are to agree a common set of values that somehow redirect the market. An indication of the gulf in thinking between East and West was apparent yesterday in the World Economic Forum's report on global competitiveness. The United States was ranked best in the world, according to a formula devised at a university in the US. Many were surprised. The London Times reports: - The top rank for the US came despite nagging concerns over America’s huge budget and trade deficits and the faltering dollar. The [WEF] said that the status of the US as a global economic leader was bolstered by the efficiency of its markets, the sophistication of its business community and the “impressive capacity for technological innovation that exists within a first-rate system of universities and research centres”. The FT reports: - For all the awe that their economies create, China and India rank 34th and 48th respectively in the World Economic Forum's global competitiveness index. Their low ranking reflects the need for these economies to improve many aspects of their markets and average living standards before they can be compared with advanced economies. - China needs to improve its higher education, financial markets and training, while India, falling slightly down this year's league, is plagued by macroeconomic instability, poor health and education systems and low labour market efficiency. “The immediate need is for a coordinated global re-alignment of exchange rates that begins to smoothly unwind existing imbalances. . . China’s participation is key as it has large trade surpluses with both the U.S. and Europe. . . Finally, markets must believe this realignment it will hold.”

Huge compromises will surely be needed if the world’s politicians are to agree a common set of values that somehow redirect the market. An indication of the gulf in thinking between East and West was apparent yesterday in the World Economic Forum’s report on global competitiveness. The United States was ranked best in the world, according to a formula devised at a university in the US. Many were surprised.

The London Times reports:

- The top rank for the US came despite nagging concerns over America’s huge budget and trade deficits and the faltering dollar. The [WEF] said that the status of the US as a global economic leader was bolstered by the efficiency of its markets, the sophistication of its business community and the “impressive capacity for technological innovation that exists within a first-rate system of universities and research centres”.

The FT reports:

- For all the awe that their economies create, China and India rank 34th and 48th respectively in the World Economic Forum’s global competitiveness index. Their low ranking reflects the need for these economies to improve many aspects of their markets and average living standards before they can be compared with advanced economies.

- China needs to improve its higher education, financial markets and training, while India, falling slightly down this year’s league, is plagued by macroeconomic instability, poor health and education systems and low labour market efficiency.

]]> By: Peter http://www.thomaspalley.com/?p=90#comment-70700 Peter Wed, 31 Oct 2007 19:40:50 +0000 http://www.thomaspalley.com/?p=90#comment-70700 I agree with your article could fiscal policy be used to control the economy instead of monetary policy. I have disliked the idea of inflation targeting for a long time as it is obviously going to create huge levels of private debt. I agree with your article could fiscal policy be used to control the economy instead of monetary policy. I have disliked the idea of inflation targeting for a long time as it is obviously going to create huge levels of private debt.

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