A New Bretton Woods

By: Ronald McKinnon

This is the beginning of a discussion series on new currency regimes. Ronald McKinnon argues that the four priorities for reform should be to stabilise exchange rates, reduce large trade imbalances, surpress carry trades, and reduce counterparty risk.

The need for concerted action

By: Jörg Bibow

What is presently dubbed Bretton Woods II is not a sustainable system.

The Euro Area's political constraints

By: Wolfgang Münchau

Not all policy solutions are possible in a monetary union. There are severely constitutional constraints.

Is the euro challenging the dollar's role as a global currency?

When the Euro was launched in 1999, there was much speculation among academics and policy makers about whether the euro could challenge, over even overtake, the dollar as an international currency. Toward the end 2006, the euro has indeed become a big international currency, but has so far failed to challenge the dollar’s predominance in the main categories that define it as the world’s premier currency.

It looks like they might really ban naked CDS

France, Germany and others are pressing for a fast-track resolution to clamp on derivatives trading; Papendreou says Obama is ready to discuss the issue at the next G20 summit; technical differences between France and German remain unresolved; according to one news report, the euro group/Ecofin is to make a declaration in support of an EMF next Monday; Axel Weber opposes the EMF plan as a detraction: it would be better to strengthen the stability pact; Christine Lagarde dismisses the EMF as “interesting” but not a priority issue; Fitch warns that France, UK and Spain may lose their tripple-A rating unless they step up consolidation; Deutsche Bank analysts are questioning whether government bond rates can continue to act as a risk-free benchmark; German conservative commentators are becoming increasingly paranoid and conspiratorial as euro area crisis progresses; Martin Wolf, meanwhile, argues that the only way for the euro area to become more German, is for Germany to become less so.

How not to select the ECB President

By: Francesco Giavazzi

Once again the procedure the Eurogroup is following in designating new members of the Governing Council of the European Central Bank is unlikely to select the candidates best suited for the job. This time, however, the damage could be more serious: on February 15 the Eurogroup—because of the way it decides--will de facto select two candidates, the vice-president and the President. Both will serve eight-year mandates: the first starting in July of this year, when the term of Lucas Papademos, the current vice-president expires; the second starting next year when the term of Jean Claude Trichet will also come to an end.

US health care reform - an unintended stimulus

By: Adam Posen

Health care reform legislation – the extension of health insurance to millions of uncovered Americans – will pass the US Congress in some form soon, despite the Democrats’ loss of a Senate seat Even if partial at best,this is a long overdue catch-up of American social justice in an essential area with the rest of the civilized world. It will be a huge triumph and hugely expensive. What gets overlooked is that it will also have the effect of being the second US fiscal stimulus package following the global crisis, with substantial effects on the rest of the world as a result.

The Botox Economy - Part II

By: Satyajit Das

From late 2008 onwards, Government intervention, on an unprecedented scale, has been a dominant factor in economic matters. Governments have spent aggressively, going into or increasing deficits, to increase demand within the economy to offset weak private sector consumption and investment. Central banks have maintained low interest rates, pumped liquidity into the financial system and "warehoused" toxic assets to support the financial system. In the U.S., Fed holdings of MBS reached around $1 trillion. The purchases provided much needed liquidity to banks and reduced potential write-down on these securities. They also helped keep interest rates low and maintained the supply of housing finance.

Crunch Time for China

By: Barry Eichengreen

Another year, another round of criticism of Chinese currency policy. Once more Beijing is being faulted for tethering the renminbi to the dollar. By keeping its exchange rate artificially low, China is enlarging its already enormous current account surplus. This beggars the rest of the world. It obstructs the process of global rebalancing.