A dangerous free-for-all
Next Saturday world leaders meet in Washington to discuss new rules for the global financial system (though little will be achieved with President-elect Obama absent). So far, thinking about this matter has scarcely got beyond calls for better banking regulation: a microeconomic issue that is doubtless important but misses the main economic plot. The Bretton Woods system of 1944 was set up to "promote a stable system of exchange rates". This system has gone. But any new agreement, will need to be equally ambitious in addressing the problem of exchange rates, because the prevailing "non-system" has played a major role in the wild credit boom that has led to the financial crisis.… Seguir leyendo »