Friday, October 10, 2008

What the world needs now...

this weekend in fact co-ordinated international action.

As Krugman puts it in today's column entitled Moment of Truth:

"Why do we need international cooperation? Because we have a globalized financial system."

Why this weekend? Because there happen to be two big meetings taking place in Washington: a meeting of top financial officials from the major advanced nations on Friday, then the annual International Monetary Fund/World Bank meeting Saturday and Sunday."

He adds:

"You may think that things can’t get any worse — but they can, and if nothing is done in the next few days, they will."

What is likely is all governments undertaking to buy into private banks if needed in order to inject capital (as Gordon Brown did in the UK) - including ours.

Yes, ours - led by the political party that more than a decade ago part-privatised the Commonwealth Bank, but this is no time for irony.

The creation of some sort of worldwide central bank is not out of the question - the IMF might take on the role. The functioning of the global financial system is and always was too important to be left in no-one's hands.

The folks at have produced an excellent instant 38-page collection of essays about what should be done. I recommend you download it, print it, and take it home to read on the weekend.

If you want some optimism there is Laurence J. Kotlikoff in the Wall Street Journal:

"Global markets have not been reassured by the coordinated interest rate cuts of several central banks or by recent congressional action, but they should be. Our bet is that financial markets will return to normal in short order and that the U.S. economy will squeak by with a moderate recession."

Other worthwhile reading: (HT: Greg Mankiw)

Vernon Smith
David Leonhardt
Nouriel Roubini
Robert Shiller
Nicholas Bloom

And some light relief (via the BBC)

US debt clock runs out of digits

"The US government's debts have ballooned so badly the National Debt Clock in New York has run out of digits to record the spiralling figure.

The digital counter marks the national debt level, but when that passed the $10 trillion point last month, the sign could not display the full amount."