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7281. The Banking Crisis: Causes, Consequences and Remedies

Author:
Paul De Grauwe
Publication Date:
11-2008
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The paradigm that financial markets are efficient has provided the intellectual backbone for the deregulation of the banking sector since the 1980s, allowing universal banks to be fully involved in financial markets, and investment banks to become involved in traditional banking. There is now overwhelming evidence that financial markets are not efficient. Bubbles and crashes are an endemic feature of financial markets in capitalist countries. Thus, as a result of deregulation, the balance sheets of universal banks became fully exposed to these bubbles and crashes, undermining the stability of the banking system. The Basel approach to stabilise the banking system has as an implicit assumption that financial markets are efficient, allowing us to model the risks universal banks take and to compute the required capital ratios that will minimise this risk. I argue that this approach is unworkable because the risks that matter for universal banks are tail risks, associated with bubbles and crashes. These cannot be quantified. As a result, there is only one way out, and that is to return to narrow banking, a model that emerged after the previous large-scale banking crisis of the 1930s but that was discarded during the 1980s and 1990s under the influence of the efficient market paradigm.
Topic:
Economics, Markets, and Financial Crisis
Political Geography:
Europe

7282. On the way to Copenhagen via Poznań: Preliminary thinking about a post-2012 climate deal

Author:
Noriko Fujiwara
Publication Date:
11-2008
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
The annual climate change conference (COP14/CMP4) will take place in Poznań, 1–12 December 2008. This Policy Brief aims at providing a brief assessment of where we are on the road from Bali to Copenhagen, thinking ahead of Poznań in relation to the current negotiating environment and exploring the possible nature of an agreed outcome to be reached in Copenhagen at the end of 2009.
Topic:
Climate Change, Environment, and Treaties and Agreements
Political Geography:
Europe and Bali

7283. Country Economic Forecasts: China

Publication Date:
12-2008
Content Type:
Policy Brief
Institution:
Oxford Economics
Abstract:
A turn in the domestic investment cycle has been coupled with a dramatic slowdown in external demand, leaving China weathering storms on both fronts. But with the government announcing an unprecedented fiscal package and with fewer structural problems to contend with than in earlier downturns, China is likely to fare better than in previous domestically-driven slowdowns such as in the early-1980s and 1990s.
Topic:
Development, Economics, Markets, and Financial Crisis
Political Geography:
China

7284. Country Economic Forecasts: Germany

Publication Date:
12-2008
Content Type:
Policy Brief
Institution:
Oxford Economics
Abstract:
Germany appears to be slipping deeper into recession. The latest industrial figures are alarming: production fell 2.1% in October and orders were down 17.3%. If output remained at current levels to year-end, then Q4 would be down 3.2% on Q3, but the situation is deteriorating. The manufacturing PMI is below 40 and the expectations component of the Ifo is at its lowest level since the first oil crisis in the early 1970s. Key to the rapid decline has been an abrupt halt to investment, both in Germany and globally. Investment in machinery and equipment had stalled in Q3 and domestic orders of capital goods then dropped 6% in both October and November. Business investment will fall by over 4% in 2009. But exports have also seen a rapid decline, having fallen in both Q2 and Q3, while export expectations are near all-time lows. Export volumes are expected to drop next year, despite the depreciation of the euro. We have slashed our growth forecasts, with GDP now likely to fall by at least 1% in Q4. And we now do not expect the economy to emerge from recession until 2009H2 and for the economy to shrink by over 2% in 2009 overall – the biggest drop in over 60 years. Rapidly declining oil prices and an extended recession mean inflation could fall close to zero by next summer. Inflation has already slowed to 1.4% in November from a peak of 3.1% in July.
Topic:
Economics and Financial Crisis
Political Geography:
Europe and Germany

7285. Country Economic Forecasts: Brazil

Publication Date:
12-2008
Content Type:
Policy Brief
Institution:
Oxford Economics
Abstract:
In sharp contrast to many emergers, Brazil was still growing very robustly in Q3. But the intensification of the global crisis, and its numerous repercussions – many of which were unforeseen – since September has been so great that it has stopped the economy in its tracks. The clearest sign of this is that annual import growth, which had been growing at close to 60% mid-year, dropped to only 9.2% in November. This is an indication of the extent to which previously soaring domestic demand growth, particularly investment, has slowed. Export volumes were already weakening in Q3 and the major deterioration in the global background since then is expected to lead to exports falling by nearly 3% in 2009 as a whole. This, together with the much lower commodity prices than firms will have budgeted for and the global fall in business confidence, will cause investment to shrink in 2009 after 15% growth in 2008. Consumer spending growth is also forecast to slow significantly but should at least stay positive, helped by an expected moderation in inflation. Meanwhile, given its healthy fiscal position, the government is likely to step up its spending. Overall, GDP growth is now forecast to slow to 1.3% in 2009. Although scope for the central bank to cut interest rates remains constrained by the weak BRL and 6%+ inflation, the rapid pace of the slowdown in both Brazil and the rest of the world may lead to a substantial reduction in underlying inflation pressures. This could pave the way for interest rate cuts to start in early-2009.
Topic:
Economics, Markets, and Financial Crisis
Political Geography:
Latin America

7286. The Defense Monitor, Volume XXXVII - November/December 2008

Publication Date:
12-2008
Content Type:
Policy Brief
Institution:
Center for Defense Information
Abstract:
In their January 2007 Op-Ed , George Shultz, William Perry, Sam Nunn and Henry Kissinger advocated "A World Free of Nuclear Weapons." To imagine a world without nuclear weapons means that the United States and the other nuclear powers can find a way to get rid of them. In other words: "Getting to zero." But, how to reach "zero" is usually where the debate stalemates. With characteristic candor, Shultz himself admits he doesn't know how to get to zero, and doubts if his colleagues do.
Topic:
Security, Defense Policy, and Arms Control and Proliferation
Political Geography:
United States

7287. The Defense Monitor, Volume XXXVII, No. 5 - September/October 2008

Publication Date:
10-2008
Content Type:
Policy Brief
Institution:
Center for Defense Information
Abstract:
In early 2001, the Pentagon anticipated an approximate budget of $900 billion for the Navy and Marines for the period 2001 to 2009. Not counting $95 billion subsequently received for the wars in Iraq and Afghanistan, the Navy/Marine Corps "base" (nonwar) budget was increased by $174 billion to $1.074 trillion. The data used for these calculations are displayed in the table on this page.
Topic:
Defense Policy, Arms Control and Proliferation, War, and Maritime Commerce
Political Geography:
Afghanistan and Iraq

7288. Defense Monitor, Volume XXXVII, No. 3 - May/June 2008

Publication Date:
05-2008
Content Type:
Policy Brief
Institution:
Center for Defense Information
Abstract:
On July 1, 2008 when France assumes the European Union (EU) presidency for six months, one of French President Nicolas Sarkozy's top priorities will be the European Security and Defense Policy (ESDP). According to Le Monde, Sarkozy is planning a "Saint-Malo (B)" – a reference to the Anglo- French declaration signed on Dec. 4, 1998, relaunching movement towards an EU defense capacity, and leading eventually to the birth of ESDP.
Topic:
Security, Defense Policy, Arms Control and Proliferation, War, and Counterinsurgency
Political Geography:
Europe and France

7289. Defense Monitor, Vol. XXXVII, No. 2 - March/April 2008

Publication Date:
04-2008
Content Type:
Policy Brief
Institution:
Center for Defense Information
Abstract:
The new 2009 defense budget has just been released. The more you look into the numbers, the more things become unclear, very unclear. Most of the numbers that have been released are inaccurate or incomplete, or both. Other numbers will change as the year progresses, but we do not know if they will go up or down.
Topic:
Security, Defense Policy, Arms Control and Proliferation, Debt, Nuclear Weapons, and Weapons of Mass Destruction

7290. Defense Monitor, Vol. XXXVII, No. 1 -January/February 2008

Publication Date:
01-2008
Content Type:
Policy Brief
Institution:
Center for Defense Information
Abstract:
Until Dec. 27, the "success" of U.S. President George Bush's defiant rejection of the American public's repudiation of his Iraq and Afghanistan war policies – evidenced by the November 2006 congressional election – looked to be the most significant aspect of major armed conflicts around the world during 2007.
Topic:
Conflict Resolution, Security, Defense Policy, and Arms Control and Proliferation
Political Geography:
Afghanistan, United States, Iraq, and America