Knowing and Making

Loved this headline: Bernanke Beats Schumacher in Korea as Brains Finish First . I don't really know what else to say about it. I'll post something more intelligent tomorrow.

Well, that was exciting. There was a perceptible atmosphere in London the last couple of days: for some people the feeling was of tension over protests and potential riots, but for me it was a sense of excitement, apprehension and respect for the will of world leaders and the debates taking place in Westminster and Docklands. The newspapers have spoken of little else and the TV broadcasts switched seamlessly from one mode to the next: prescription, speculation, rumour, announcement and into analysis all in 48 hours. I share the general feeling of most commentators that the results are a positive step. I have no way to estimate how much difference they will make to the elusive feeling of confidence which the world economy desperately wants. But let’s look at the individual elements and see if they should give people good reasons to improve their expectations of the future. First, new funding: $500 billion in new cash for the IMF . Upside : this should reduce fear of contagion and help p...

I am hopeful about the results of the G20 summit today. A few months ago, I hypothesised that political leaders were deliberately driving economic confidence off a cliff so that we'd enter the recession sharply, in the hope of a fast bounce. Once recovery starts (in whatever form) I believe it will continue and accelerate. So many aspects of economic performance and perception are self-fulfilling. Stockmarket valuations are based on predictions of future returns. A recovery that starts now instead of next year and runs at 3.2% instead of 1.5% for a couple of years will create about 10% more total return than the counterfactual. If investors believe that's going to be the scenario, stocks today will be worth 10% more. This will increase the profits and capitalisation of financial companies, possibly saving some from bankruptcy and certainly allowing them to lend more. This in turn will boost industrial activity, employing more people and leading to exactly the potential recovery...

I am very curious why, at the G20 summit, there are 29 people at the table . The WTO, UN, IMF and World Bank are not members of course, but the EU is, and that's still 25. I thought inflation was not supposed to be a danger this year. Update : missmarketcrash has a nicer version of the table layout on her blog. She is much more aesthetically aware than I (or Sky). However, whoever has put this display together has renamed our Prime Minister as "The Rt Hon Brown MP". Everyone else gets both their names (or all five, in the case of the Brazilian President). Also an intriguing note on diplomatic protocol (endlessly fascinating, isn't it?): Mirek Topolanek is first the President of the European Council and only in brackets is he Prime Minister of the Czech Republic. Would this have happened if recent Czech political events had gone differently?

Robert Peston is revisiting the argument for the Bank of England buying shares in private companies - proposed by me in December and (the slightly more eminent) Roger Farmer in January. He points out that the Hong Kong government did this in the late 1990s, during the Asian financial crisis, and succeeded in both supporting the market and making a big profit when they resold the stakes a couple of years later. Stephanie Flanders has a good piece about Tim Geithner's position and particularly about the IMF and other possibilities for fiscal burden-sharing between G20 countries. Meanwhile Paul Mason has an excellent summary of the issues to be dealt with by the G20 conference in a few weeks: Far from the emergence of a harmonised and increasingly unified world economy [globalisation] has produced a lopsided and malformed structure that is now falling apart. The low paid worker in Detroit cannot buy his new pair of trainers unless the low paid worker in Shenzhen a) makes them, b) d...